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Comment by arcticbull | Hacker News Reader

I'm very much on his side.

(1) Inherited dynastic wealth creates a plutocracy. I believe people of each generation should rise to the level of their abilities and not to the level of largesse of their families. Allowing people to hand down massive wealth is like playing monopoly where every square already has a hotel on it.

(2) The children didn't earn it, so they deserve it as much as anyone else. Inheriting it may adversely affect who they turn into as humans.

(3) I believe in a large social safety net so that those who cannot succeed don't have to die, but rather can live out their lives comfortably. Basic income, socialized medicine, education, etc.

This strikes a fair balance IMO. You earned the money, you created the value, you have to spend it in your lifetime. If you can't, the state will decide where it goes. The next generation will be looked after, and if they too are successful they can also enjoy the spoils. If not, they can live out their lives in comfort.

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I think this doesn't quite jive with human nature. People have a naturally strong drive to build something and give to their kids. If there's no legitimate way to do that, then people will find other ways (whether illegal or just less honest means) to pass the things they've built to their children.

Lots of things don’t jive with human nature, like not murdering/stealing/etc, and yet we create systems to change that in ourselves rather than surrendering to our base instincts. If it's better that way, then we can always use a similar approach. All I'm saying is that 'human nature' isn't always good, and I'd rather keep it out of the decisioning process.

Sounds like you'd really enjoy reading Francis Fukuyama's "The Origins of Political Order" <https://www.amazon.com/dp/B00457X7VI/>. He analyses how different cultures came to wrangle large states, showing how they all had to deal with the same issues although they dealt with them in different ways. The base issue is that the state has to replace the family as the strongest allegiance: a person holding office can't use that office to enrich their family, else eventually the state has nothing and warlord dynastic families result. So you get Janissaries (kidnapped Christian boys) as the elite fighting force in the Ottoman Empire, and the 11C (?) change in the Church that prevented priests from marrying (because they'd been enriching their families). Since I read the book, I can see that fundamental tension between state and family playing out everywhere. Highly recommended!

>> I think this doesn't quite jive with human nature. People have a naturally strong drive to build something and give to their kids.

Sure. Give something. But let a huge percentage of it be returned back to the society you got it from in the first place.

This type of policy is proven to be regressive because:

1) The really wealthy find loop holes.

2) It discourages saving and investment.

3) It encourages consumption and spending on frivolities.

Imagine if everybody would have to start from the ground up, we would rarely see any progress at all.

I like Bill Gates' approach, he gave his children some fortune and allegedly will donate the rest of it

> The really wealthy find loop holes.

Even the kid of this Tycoon ended up becoming the CEO of his father's company. What a coincidence!

He won't inherit wealth, but he already did inherit the means to become wealthy himself. Probably is by now.

> It discourages saving and investment.

It won't do so significantly for your average Joe. Rich people not hoarding their money can also arguably be good for the economy. Though I'm undecided on that issue.

> 1) The really wealthy find loop holes.

The really wealthy will always find loopholes in any system: that's not an excuse to do away with all societal structure or rule of law. No system can be perfect, but the idea is to strive to close such loopholes (even if this may be somewhat of an arms race—many things in life are)

> 2) It discourages saving and investment.

It discourages saving, but not investment (and only the latter has intrinsic societal benefit). One could argue it might skew investments more toward short term return, but I doubt this.

> 3) It encourages consumption and spending on frivolities.

Spending is generally framed as societal good and the definition of a "frivolity" is highly subjective.

However, if we do run with the subjective, I would argue that the biggest driver of frivolous spending is having a lot of (/too much) disposable income, which often stems from inheritance.

It's also often argued that inheriting does little to teach the "value" of money and as such encourages frivolity (though tbh I don't know how much I believe this).

> Imagine if everybody would have to start from the ground up, we would rarely see any progress at all.

Wow. Are you seriously proposing that only those who inherit riches can improve the world??? Or, worse yet, only those should have that opportunity???

> This type of policy is proven to be regressive

Define "proven" here. Where/when has this policy been implemented? What were the environmental factors?

In general, savings is investment, as an identity. An economy must save in order to invest for higher future standard of living.

Short term investment goals is precisely the problem. If one invests for a return only in their lifetime (for consumption), one can't make longer-term investments that have intergenerational benefits (consider the concept of investment broadly).

Only the state would be able to do that, so you'd better hope for a good state.

Only the state is capable of intergenerational investment? There are a number of long-lived, fiscally successful private organizations that would beg to differ. Not everyone is hyper-focused on short-term yields, and as I see it the average politician is no more likely to take the long view and sacrifice their own present well-being for the benefit of future generations than anyone else.

> It discourages saving, but not investment (and only the latter has intrinsic societal benefit).

Not true. To begin with, what most people think of as "savings" is actually an investment—unless your savings take the form of cash stuffed in a mattress. An interest-bearing savings account is an investment, after all, even before we consider that larger sums would normally be held in money-market accounts or CDs. Even if you did keep your savings stuffed in a mattress, though, that saving still benefits others. You produced something of value and you're not spending the cash you received in return on things other people also want to buy. This reduces the supply of cash in circulation relative to the amount of goods available to be purchased and thus lowers prices for everyone else compared to what they would have had to pay if you'd chosen to spend the money. Normally in a healthy, growing economy this forbearance would be rewarded through appreciation of the purchasing power of the unspent cash over time—price deflation—but TPTB have decreed that price deflation is evil and must be avoided at all costs. (The key lesson here is that it's a really bad idea to treat any fiat currency as a store of value, since they can always make more and dilute your savings.)

>> 3) It encourages consumption and spending on frivolities.

> Spending is generally framed as societal good and the definition of a "frivolity" is highly subjective.

I'll grant that "frivolity" is subjective but consumption is pretty much the opposite of a societal good. It's not a bad thing, of course. Production without consumption would be pointless and wasteful. However, it's the process of production that provides value to others; consumption is just the opposite, claiming one's own personal share of what all the members of society have collectively produced.

> Are you seriously proposing that only those who inherit riches can improve the world???

It is an objective fact that those few lone individuals who can claim to have lived their lives free of unearned gifts from their parents or other interested parties (apart from life itself, which is a major concession) have not been particularly successful at improving the world beyond the narrow scope of their own necessities. That's because they're spending their entire lives and all of their energies just trying to survive. Just having parents who take even the most basic care of you as you're growing up is a huge inheritance in its own right. More indirectly, we have the vast stores of knowledge left to us by previous generations as well as a huge amount of capital to amplify the productivity of our efforts. We tend to focus on mere differences in inherited material possessions, but in reality that pales in comparison to the vast riches gifted to even the poorest among us has by those who came before.

I like the spirit of the ideas, but yeah I gotta say it's a little extreme to me.

Forcing people to spend money in their life time is going to incentivize consumerism. So I was super rich, and you want me to be forced to spend rather than invest and pass down to the next generation, I'm either going to try to pass it down illegally, or spend on things like sports cars and yachts and watches and fine wines and michelin star restaurants. None of them is as valuable as keeping it invested. On top of that, I'd divest all my holdings (which, if I didn't diversify well, means asset value in general will drop whenever someone super rich dies, which also opens up the opportunity for speculation, but that's beside the point).

This also doesn't take in the account of sudden death. What if you suddenly died at 45, with a $1.5 million estate? So you never had the opportunity to enjoy it. This will incentivize people to be a lot more near-sighted and again reinforces consumerism.

You mentioned having it being taxed at 90%. I'd say that's probably good, but I'd go a step to the right and say 90% on anything that's over $2mil, since your argument is contingent on a very very strong social safety net, which I do not think the United States has, and I would say it's also debatable on how strong you want the social safety net to be.

Just my two cents.

>If you can't, the state will decide where it goes.

Presumably to the state I suppose.

I disagree with this viewpoint. At the end of the day wealth needs to be distributed to people in proportion with their ability to allocate it effectively towards the growth in the knowledge and capabilities of a society. In other words -- we want smart people that want to improve society to have lots of money.

Dynastic wealth needs to be paired with a code of ethics and training ... nothing inherently wrong with it.

> (2) The children didn't earn it, so they deserve it as much as anyone else. Inheriting it may adversely affect who they turn into as humans.

This goes against the idea that I should have the freedom to do whatever I want with my post-tax money. What if I decided I want to give my money to a bunch of random strangers on the street? Would you insist "they deserve it as much as anyone else"? It's an essential matter of freedom. Where do you draw the line? Would you say I can't donate too much to X charity, and must donate equally to all registered 501(c)(3) orgs?

What about me just going out and buying stuff? What if a super-rich person decided screw my kids, and chose to splurge everything they earned on incredibly-expensive vacations, cruises, food, hotels, etc. Are you going to attempt to use the force/violence of the state to prevent them from giving their money to whomever they want to give it to?

Reductio ad absurdum. The ultimate consequence of carrying your line of thought would be the appropriation of all income and wealth, a.k.a. communism -- which we know doesn't work very weell.

> (3) I believe in a large social safety net so that those who cannot succeed don't have to die, but rather can live out their lives comfortably. Basic income, socialized medicine, education, etc.

Ignoring the fact that every European country that does this has an absurd and shocking tax-as-a-percentage-of-GDP (it's nearly 50% in France) -- your "large social safety net" is only going to work in very wealthy countries (with high per-capita income). This wouldn't work in most middle/low-income countries, where annual incomes 30 to 40 times to lower than very-high-income countries. And my point being -- I think we should aspire to develop universal political principles -- not ones that break in certain economies, while barely-working (with extremely high taxes) in others.

> (1) ... Allowing people to hand down massive wealth

I don't really know what the solution is to this. I'd have to reflect more. What I can say it's unfair to completely take away something that someone truly worked to build/earn. Perhaps we could frame things to say that there is a moral limit to how much someone can "fairly"/"ethically" earn in their life, and anything above that limit, is society's to plunder. I don't know. I haven't found an idea that I find comfortable or confident supporting.

> absurd and shocking tax-as-a-percentage-of-GDP

Define absurd and shocking. Is it shocking to an American with a seemingly lower tax rate or to a European who has to pay these taxes every month?

It's shocking in a timeless sense. If I built a time machine, and traveled to the 1st century AD, and asked a random farmer in some random place on Earth how he felt about giving 50% of what he produced to the state, his reaction wouldn't differ much from a person alive today. That the French (or other Europeans) are acclimatized to nearly 50% of their country's GDP being taxed, doesn't really say much. Fact is, 50% is incredibly high -- even a little child would agree.

A farmer in the 1st century? They’re likely slaves or serfs, so I’d wager they’re giving 100% of what they make away, and to their master, not to the state. They’d be shocked at how much they would be allowed to keep.

“In 332 AD Emperor Constantine issued legislation that greatly restricted the rights of the coloni and tied them to the land. Some see these laws as the beginning of medieval serfdom in Europe.” [1]

Not everything was better in the past.

[1] https://en.m.wikipedia.org/wiki/History_of_serfdom

> This goes against the idea that I should have the freedom to do whatever I want with my post-tax money. What if I decided I want to give my money to a bunch of random strangers on the street? Would you insist "they deserve it as much as anyone else"? It's an essential matter of freedom. Where do you draw the line? Would you say I can't donate too much to X charity, and must donate equally to all registered 501(c)(3) orgs?

You don't have the freedom to do whatever you want with your post-tax money. That's constrained by law. You can't give it to someone else, for instance, in excess of $14K per year you have to pay a gift tax. You can't pass it on to your children without paying an estate tax. You can't open a brokerage account in a foreign country and buy assets there. You can't pay anyone on the OFAC list. The list goes on, and on, and on.

If you gave a stranger on the street <$14K sure. More than $14K prepare to pay the gift tax, which treats it as income. I don't draw the line, you're welcome to spend it anywhere. You just can't give it to your children as an estate.

> Ignoring the fact that every European country that does this has an absurd and shocking tax-as-a-percentage-of-GDP (it's nearly 50% in France).

The top marginal tax rate in California is over 50%.

> I don't really know what the solution is to this. I'd have to reflect more.

Force people to spend it or tax it at 90% when it's passed on.

> Force people to spend it or tax it at 90% when it's passed on.

Your whole line of thinking seems absurd to me. Why is it totally fine (by you) for someone to spend all their money on themselves, but not okay for them to gift it to someone? You're saying if it's a gift (or estate passed to children/spouse), tax it a second time at 90%. But if they spend it on fancy hotels, luxury cruises, etc. there's no double tax. This is absurd, and irrational.

> The top marginal tax rate in California is over 50%.

How is this relevant? Marginal tax rate is a different unrelated thing. I for one, support a marginal tax rate of at least 70% on very high incomes. I think the people making less than $100k should pay a near-zero income tax, and people making above, say $2 million, should be taxed at least 70%. (Or, even better, at 90%.) But I want to keep taxes zero or nearly-zero for the middle-class, especially for the poor. In a tax system like mine, the tax-as-a-percentage-of-GDP would remain fairly low. So your comment on the "top marginal tax rate in California" is absolutely irrelevant.

> You can't give it to someone else, for instance, in excess of $14K per year you have to pay a gift tax.

I'm well aware of the gift tax, and I support it (at the current rate). It was created to prevent people from circumventing the estate tax (which I also support at the current rate). Now, notwithstanding the fact that this also is irrelevant to the point I raised, I'll point out another error: you and a lot of people think the gift tax exclusion is the only things there is, and forget about the lifetime gift tax exemption. You have a lifetime gift tax exemption of $11.18 million, and an annual gift tax exclusion of $15K, as of 2018. Only after you've given away $11.18 million, does the annual $15K limit kick in.

> You can't open a brokerage account in a foreign country and buy assets there

This is patently not true. Plenty of countries let you open brokerage accounts without being a citizen or resident there. And US law doesn't prevent you from opening brokerage accounts abroad. (The FATCA has made it a PITA for foreign financial firms to deal with American clients, and they might turn you away; but for those who are not American, that's not an issue.)

> Your whole line of thinking seems absurd to me. Why is it totally fine (by you) for someone to spend all their money on themselves, but not okay for them to gift it to someone?

Yes. They earned it, they should benefit from it. Wealth is society's way of rewarding you for creating value to society. That reward shouldn't be transferrable (beyond some trivial quantity). If they don't want to spend it on themselves, they should return it to society. Think about it dispassionately; why does your child deserve your money? They didn't do anything other than be born, so you're basically rewarding them with a privileged lifestyle just for existing. You're choosing to privilege people because of the circumstances of their birth, and I'd hoped we as a people have moved beyond that. They should rise to the level of their ability on their own and be rewarded accordingly. If they can't they shouldn't obtain the benefits and lifestyle. Those who deserve it in the next generation should. IMO, of course.

> How is this relevant? Marginal tax rate is a different unrelated thing. I for one, support a marginal tax rate of at least 70% on very high incomes. I think the people making less than $100k should pay a near-zero income tax, and people making above, say $2 million, should be taxed at least 70%. (Or, even better, at 90%.)

Fine by me :)

> Only after you've given away $11.18 million, does the annual $15K limit kick in.

Indeed, I'd forgotten that. I think that should be eliminated.

> This is patently not true. Plenty of countries let you open brokerage accounts without being a citizen or resident there. And US law doesn't prevent you from opening brokerage accounts abroad. (The FATCA has made it a PITA for foreign financial firms to deal with American clients, and they might turn you away; but for those who are not American, that's not an issue.)

Those who aren't "US Persons," which includes anyone resident in the US -- even anyone a tax resident of the US in the current year. Regardless of nationality. This one isn't FATCA related, it's SEC regulation:

"Under Regulation S of the Securities Act 1933, the SEC prohibits – among other things – foreign financial institutions that are not registered and regulated in the US abroad from soliciting US residents as clients." [1]

FATCA is awful, but it's not responsible for this.

[1] https://the-international-investor.com/investment-faq/us-res...

> anyone resident in the US

Yes, I'm well aware of that. I moved to the U.S. in 2007, and I'm not a citizen or a permanent resident yet (and not that close getting permanent residency either). Not because I don't want to become a US citizen, but because US immigration laws make it incredibly difficult to gain permanent residency if you're not family-sponsored and qualify for refuge/asylum. My presence in the US, per the IRS' Substantial Presence Test[1], makes me a "US person" and subjects me to the related taxes. I use the word "American"[2] in the sense defined by Jose Antonio Vargas[3]. He's written a great book[4] on the topic.

> the SEC prohibits – among other things – foreign financial institutions that are not registered and regulated in the US abroad from soliciting US residents as clients

This is a good thing, and this makes perfect sense. The SEC exists to protect US investors. If an unregulated nefarious company solicited US investors, that would expose them to potentially huge danger. There are enough bad-faith and Ponzi investment schemes cropping up, it's best to not expose Americans to soliciting from investment firms all around the word.

But -- as far as I'm aware -- nowhere does federal law or regulations (incl. SEC rules) state that a US person can't open a brokerage account abroad. Sure, a foreign brokerage can't advertise to you nor solicit you, but there's nothing preventing you from doing your research, and finding a brokerage abroad you like, and applying to open an account with them. (Of course, it'll depend on that country's rules and whether they allow non-citizen non-resident person to open brokerage accounts in their country, but in general, one could say a country loses nothing by receiving foreign direct investment, so would likely welcome it.)

> They didn't do anything other than be born, so you're basically rewarding them with a privileged lifestyle ...

Let's clarify who gets the proceeds from your hypothetical 90% tax. The citizens of the X country? I want to ask a rhetorical question at this point: why should the citizen of the X country be rewarded over another country? Because they were born there or have ancestry to the people who inhabited that land a long time ago? As per your argument, they didn't do anything to deserve it. Other than being born on X piece of soil. I've paid hundreds of thousands of dollars in taxes. The US has such horrid immigration laws that it's almost impossible for anyone to obtain permanent residency in this country outside family/DV/reugee+asylee routes. The fact that I've been here for over a decade legally, and have paid hundreds of thousands of dollars in taxes -- counts for nothing/nada/zilch under US immigration law. My freedom to live here could be stripped away easily if I lost my job. I'm years away from citizenship. So here's my question: wouldn't the right thing to do be to distribute all of the revenue equally to the whole world? Is that fine?

> hey earned it, they should benefit from it.

What if they don't want to benefit from it, but rather want someone else to benefit from it? Why is that not okay? Spending money on oneself vs spending it on someone else -- where's the distinction? Perhaps they get great joy in giving the money to others. That's their choice. By the way, the only distinction between the two kinds of money transfers is that one's a donation/gift, while the other is a transaction involving the exchange of services/goods. What you want is to effectively ban gifts and donations. It seems like in your ideal world, all people (are forced to) engage in purely transactional relationships, and charity is non-existent/banned.

In summary, what I can say is: all of your ideas and arguments are truly shallow, poorly thought-out, logically inconsistent, and incoherent. While leaning heavily towards communistic tendencies, and an utter destruction of personal freedom / individual liberty.

[1] https://www.irs.gov/individuals/international-taxpayers/subs...

[2] https://defineamerican.com/

[3] https://en.wikipedia.org/wiki/Jose_Antonio_Vargas

[4] https://www.amazon.com/gp/product/B0776TSKBJ/

Re: brokerages, no it doesn't say you can't open one, but good luck finding a foreign brokerage that'll open an account for you. I was denied by HSBC in Canada because while I'm a Canadian citizen I'm a US resident and that was the address they had on file. This is common corporate practice the world over. The letter of the law is irrelevant if nobody will play ball with you.

> So here's my question: wouldn't the right thing to do be to distribute all of the revenue equally to the whole world? Is that fine?

If you're still alive feel free to do so subject to the rules and regulations of your jurisdiction. If you die with an estate, it'll get handed out by the government of the place in which you were last resident. It's not that complicated, it's how it works right now, just with a higher rate and a lower exemption. I'm not exactly breaking ground here.

> In summary, what I can say is: all of your ideas and arguments are truly shallow, poorly thought-out, logically inconsistent, and incoherent. While leaning heavily towards communistic tendencies, and an utter destruction of personal freedom / individual liberty.

This entire block was logical fallacy, simply attacking me instead of the argument. This is a great way to lose a debate, so when you're having a consequential debate in your real life, I suggest you avoid this line of attack.

It's interesting that what I propose was the law of the land in the US for much of the 1900s. The US estate tax was between 70 and 80% from the early 1930s to the late 1980s. This included the entirety of the so-called "second red scare" (1947-1960). Clearly the neo-McCarthy-ites didn't consider this to be "communist" or an "utter destruction of freedom and liberty." During this same period the top marginal tax rate was between 80 and 95%. You'd think if it was classically "communist" leaning, that might have come up? This isn't meant to be an appeal to authority, nothing I've suggested furthers the Communist agenda of "advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs." I'm pro- wealth inequality and pro- income inequality so long as it's coupled with social mobility and people start out more or less from the same place in each generation. [1]

To quote Wikipedia, "free market supporters of the tax, including Adam Smith and the founding fathers would argue that people should be able to get to the top of the market through earning wealth, based on meritocratic competition, not through unearned, inherited handouts, which were central to the aristocratic systems they were opposed to." [1]

I posit to you that having generations start off on even footing is the definition of meritocracy and the American Way, and you're representing the post-1990s modern neo-con mentality. That's fine, and I don't think your arguments are "poorly thought-out and inconsistent" -- I just disagree with you.

[1] https://en.wikipedia.org/wiki/Estate_tax_in_the_United_State...

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