The Inheritance Tax Is Far Too Low

The apex families use a complex network of Trusts that outlive any of the beneficiaries and thus are not subject to an "inheritance tax".

This inheritance tax is nothing more than economic warfare by the globalist central banking cartels to disgorge the upper mid tear capitalist class who aren't big enough or careful enough to go through the complex tax loopholes the megawealthy are able to procure for themselves.

[1] https://investor.vanguard.com/mutual-funds/profile/performan...

Ah, yes - because of course we want people to spend all their money before they die instead of investing long-term for their children.

https://www.irs.gov/faqs/interest-dividends-other-types-of-i...

Without any estate planning, you would pay $0 in capital gains because the basis resets to FMV at the time of death and the sale would be taxed as regular income (37% marginal bracket on $1,000,000 sale).

By my reading, this doesn't seem like a giant tax break.

Edit: Totally wrong. $0 taxes owed because basis is stepped up and sale is NOT treated as income.

Meanwhile the reason for the step up in basis is that the alternative would make the property inalienable, because after several decades the majority of the value of the property is "gain" and then you never want to sell it because you'll lose so much value to tax. It makes it so people can't move even if it would be more efficient because the after-tax sale price isn't enough to buy a similar house somewhere else.

And all the basis reset is really doing in most cases is accounting for inflation. If your parents bought an asset for $100k in 1950, its nominal value would now be over a million dollars even if its real value is still exactly the same, but then the government wants to claim that 90% of the value is taxable income. Indexing the basis to inflation would fix this, but then the basis reset would be irrelevant or inconsequential in the large majority of cases and could still be justified as not costing very much at that point and being a convenience because you don't have to track down the original purchase price of an asset that has been in your family for decades.

The Federal budget, nor how many people move into/out of a definition, have anything to do with this topic. Discussing it won't add anything, nor does its existence undercut the problem raised in any meaningful way.

https://mkorostoff.github.io/1-pixel-wealth/

Federal income taxes on 60K is ~6K USD per year.

The F-35 costs ~30K per hour to fly.

It takes 5 median workers to fly an F-35 for an hour. And that’s doesn’t account for firing a 1000K missile.

A good comparison was made in the early weeks of the pandemic. Instead of "reopening the economy" and killing a quarter million people, we can distribute the same amount of economic activity by just staying home and seizing all the money from the Forbes 500. Even if we had to kill them to get it, that's still a 1000x reduction in deaths.

Isn't that a recipe for hyperinflation?

That is a loophole which is extremely hard to close.

In all smaller companies I know, at the end of the year, they try to spend as much of their profit as possible in a way that enabled growth the next year. They keep the profit low because it is being taxed.

For the state, both is fine - more profit leads to more tax, more growth also leads to more tax AND more employment, and better products due to research and so on.

Tax evasion and off shoring breaks this and the negative effect is far greater than the actual loss in tax. It breaks the system that incentives companies to invest in their futures rather than their shareholder's cashing out.

Then you think about, what happens when parents die in a car wreck to the kids? So maybe what you implement is some type of National Life Insurance federal program, geared towards minors or maybe more broadly across the population. Tweaks to Social Security survivor benefits, essentially.

There are also weird questions like, what happens to a company that's singularly owned by the newly deceased? It's sold to the highest bidder, even if it's company run by the whole family?

I don't actually favor this policy for the obvious reasons people will list. But I think it's an interesting question that gets to what it means to have something closer to equality of opportunity.

If everything above 10 million is taken as a death tax you can be sure no estates are going to be worth over 10 million publicly.

Moving money offshore is how companies avoid income tax. The way families avoid inheritance tax is employment.

Your family has a business. It's worth a hundred million dollars and makes five million dollars a year in profit. The five million dollars is going to be taxable income to somebody anyway, so you pay it to your kids as salary (a tax deduction for the parents/business), and most of the compensation is paid in the form of shares in the business. By the time the parents die the kids already own most or all of the business and what's left is below the threshold for inheritance tax.

There's a reason they say the only people who pay it are the ones who didn't plan ahead.

I'm exactly who this would bite in the ass. I have neither the know-how, nor the real money to spend on moving things around to hide it from taxation.

Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay.

I think the middle class will be just fine.

Is it not possible to imagine effective laws?

Near me is a Gilded Age estate, a magnificent place. My understanding is that with the introduction of income tax, the family was eventually forced to turn it over to be a nonprofit in the 1970's. So, if my understanding is right, even folks who were staggeringly wealthy were not able to completely defeat the cross-generational effect of the law.

So because the ultra-rich have found ways to skirt the laws, are you suggesting we just don't bother making the laws?

Surely this is a game of whack-a-mole, and it's in society's best interest to keep going after them.

Roughly 3/4 of the country lives paycheck-to-paycheck.

For most folks in the socioeconomic band you're mentioning, this is not something everyone knows and understands. Many times, they are already living paycheck to paycheck. It's hard to think about anything long term when you're in that cycle whether it's investing or even having the time (and energy) to educate themselves further on personal finance.

They're too far removed from how that wealth was achieved and don't understand it. See also: clogs to clogs in three generations.

The reality that you and other "bootstraps" people ignore is that there is a basic cost-of-living. People need to make rent, they need to pay medical expenses, etc. If your income doesn't rise above this cost-of-living (which is true for literally half of the US population) you don't have any small amounts of money to invest. A lot of long-term investment vehicles have costs for taking out money early, which is a significant risk if you might need that money for an emergency.

The wealthier you are, the more ways there are to increase your wealth and there is absolutely a floor under which you have no opportunities besides luck

Meanwhile, Donald Trump is born to great inherited wealth and manages to, on basis, generate terrible returns on it, and is still labeled “a success” and is still wealthy. In fact we installed extra safety nets to make sure that someone that rich couldn’t hit the pavement, and even built in a back-up job as president for them. That same person ends a family tree in generation 2 or 3.

The current exemption amounts are rediculous though. Something closer to $1M with inflation adjustment and a lein/payment plan option for illiquid assets such as the family business/farm would make a lot more sense.

Alternatively: starting with a lot of wealth allows you to allocate your time and resources to the accumulation of power and cultural influence, often without ever experiencing life as an average person. So you end up with super powerful people who never experienced the anxiety of waiting for payday or wondering about job security with a new baby on the way.

The corrupting influence of that -- even more than the opportunity cost of the wealth -- is a good reason for a wealth tax on the very, very, very wealthy. Would Trump be president if he didn't have a $400MM head start? Would the Koch brothers have been able to exert so much influence over state policy in places like Kansas if they didn't inherit their father's wealth? And, if so, would they have the same policy preferences and demeanors? Nothing is impossible, by I wager the odds are closer to zero than to one on both counts.

Run through this exercise: https://mkorostoff.github.io/1-pixel-wealth/

Then can you say it's a fiction that individuals have significant wealth? This is what people care about: "Are wealth gains being shared, or am I just working to pay my bills, not getting ahead, while making someone else rich."

I will and can retire now if I can't pass my wealth onto next generation.

Removing experienced productive people out of workforce would be silly economic policy.

I don't think this would even rank in my top 5 list of causes of social decay.

1) This assumes there are no tricks around inheriting assets that have unrealized gains, I don't know how this works in the US.

EDIT: fixed (?) asterisk. EDIT2: replaced asterisk with 1, cannot figure out how to escape it.

None of your business?

It's understandable that (grand)parents want to do right by their (grand)kids, and leaving them a pretty penny is a pretty thoughtful thing to do. But when this then has huge negative effects on society, it stops being a nice thing to do. Inherit for free up to a certain amount. Redistribute the rest.

Because it is their parent's wealth to do with as they please? Why does death suddenly mean all or some of what you have worked for now belongs to the state? Why do the rules change when it comes to children of an estate compared to a spouse? That spouse could be there as little as a few months by the way law works.

It has been taxed as it was earned and accumulated. When it gets spent it will be taxed as well. If it is the transfer of investments they will be taxed when the recipient uses them.

It is private property and we need to stop with the jealously angle being the primary motive of voiding that right. Oh I know, some will fire back with fairness well if it is not fair for the child of a person to receive their wealth in death how was it ever fair for the person to have it in the first place?

Got to love that article, lamenting that the funds about twenty three million are ONLY taxed at forty percent. Seriously why are they taxed at all.

As a result, the split between poor and rich will widen and widen. Until at some point, where the situation will implode or be unfavorable in some significant way. Hence, to have a stable system, the limitless accumulation of wealth should be reduced.

There should be inheritance, of course, and half of few million is still lot. However, this requires some progressively adapting tax percentages, based on the amount of inherited wealth.

― Upton Sinclair

“Men sooner forget the death of their father than the loss of their patrimony”

― Niccolò Machiavelli

The question is never about what the children think they deserve, it's entirely about what we as human beings work for. Most parents don't care about their own consumption, and instead work entirely for the well-being of their children. It doesn't matter what the children think. The argument is that it matters what the owner of that wealth thinks should happen to their own wealth, and that nuclear family values are deeply entrenched in society.

There are a number of arguments that you can make that the cost of inter-generational wealth and the benefits of taxing it far outweigh the familial considerations of wealth transfer (especially after a high enough dollar amount). But THOSE are the arguments that we need to be making.

If I knew he would not get it, or would get less than half of my savings/everything else, I would not work a single hour above what we need currently to live as we do, taking decreasing tax revenue for my country. Maybe I am biased as I also am set to receive some money when my parents die, but my grandfather immigrated, worked his ass off, built savings, returned here, started a business, built properties, my father inherited it, and works hard to keep them well so I inherit them, which I will do the same for my kid. What would be the point of my grandfather sacrificing a lot of his life away from his home if not to build a better future for his future generations?

I don't remember there ever being an inheritance tax on property left to ones spouse.

> kids of inventors

Inventions are protected by patent or by trade secret, not by copyright. Patents have short shelf lives compared to copyright, mostly because mickey mouse was copyrighted but not patented.

This is exactly it, what almost everyone fails to notice. If you look at other civilizations that do not impose income taxes, yet were successful, they did not have this entire mess that is the US taxation system. Islam dictates a "charity tax" called Zakat, that is calculated based on net worth, or produce (e.g. for farms and cattle). It is much, much easier system to calculate, and is strictly superior to whatever the US has going, as proof by how they have to keep revising the tax code and "closing loopholes", and proposing new taxes every time.

There are several factors at play here. The most important other factor is that the modern economic system is based on parasitic, and morally bankrupt practices, most important of which is interest/usury. Take these out and the wealth inequality gap will fix itself very quickly.

How about we take in more tax from the wealthy, regardless of their ethnic origins, and use that money to provide better social safety nets for the poorest who are also disproportionately minorities due to system and historical racism? You know, close the wealth gap, instead of further increasing it.

Or heck, if you're really serious about this then tax the wealthy and pay actual reparations.

It doesn't make any rational sense to pass a tax cut for the wealthiest in the name of "some of them could be minorities too!" It makes far more sense to tax all the wealthy, then help minority populations who would benefit more greatly.

The top 1%'s kids will have to survive without that third house or yacht, even if they're minorities.

Inheritance and Estate taxes don't kick in until over 1 million dollars or more and impact less than 2% of the population.

If you're the 2% of the population this applies to, you're probably already doing estate planning and can plan for a portion of the inheritance you're passing on to be immediately liquidated to pay taxes.

It's fascinating how much propaganda has shaped this debate. People with a few hundred thousand dollars in their 401(k) somehow got tricked into thinking the "Death Tax" had anything to do with them.

I think you're overestimating the degree to which they can "own" the charitable organization. No one is denying that Buffett's children will live very comfortable lives without having to lift a finger, but that should be neither surprising of nor prohibited to one of the world's richest people, who got there by helping rise the tide.