Comment by ChuckNorris89 | Hacker News Reader

Comment by ChuckNorris89 | Hacker News Reader

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>the mechanism that prevents wealth inequality

False, this mechanism only prevents income inequality but not wealth inequality as existing wealth is not taxed much in Europe.

For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets.

So actually, in some European countries, while having low income inequality because of high income taxes, you end up with huge wealth inequality due to untaxed inheritances, assets and overvalued properties rolled over across multiple generations to the point where Germany's top 10% own two thirds of the country's wealth:

https://www.iamexpat.de/expat-info/german-expat-news/germany...

To level the playing field and reduce wealth inequality, a sound policy would be to tax income less and tax inheritances and assets more but fat chance of that ever happening as that would be a blow to the ruling class.

This comment makes the mistake of treating Europe like a country, which it is not.

> For example, inheritances, assets and properties are not taxed much in Europe (people scream double taxation if you propose that) but income is taxed substantially so you'll never be able to save enough to catch up to the upper classes who own assets.

In Ireland, apart from relatively small tax-free thresholds (€335,000 lifetime from parent to child, for example), gifts and inheritances are taxed at 33%.

In the UK, above its (similar) threshold, the rate is 40%.

The US Federal Estate tax rate is 40%, but with an enormous $11,580,000 estate threshold, which is orders of magnitude higher than Ireland or the UK.

Even though Ireland and the UK have some of the highest inheritance taxes in the world, the EU effective average is still ~14% - double the global average of ~7% and on par with the US, where added State taxes vary the average between 12% and 19%. Source: https://www.uhy.com/uk-imposes-highest-taxes-on-inheritance-...

>This comment makes the mistake of treating Europe like a country, which it is not.

Of course it's not, never said it was but cherry picking countries with larger inheritance tax is also a mistake as you can't choose where you pay your taxes as an EU resident. You pay them where your main residence is.

So on the other side of the spectrum you have Austria which has high income tax (because socialism and income equality) but basically no inheritance taxes, and taxes on assets are levied on their original purchase price so you end up having countless residents who earn small incomes but are sitting on millions of euros of wealth due to exploding real estate values but only pay 5 Euros tax per year as that's levied against the purchase price from 60 years ago when their grandparents bought it for pennies.

So you end up with huge wealth inequality where even people with good incomes pay high taxes and are priced out of the real estate market if they don't come from families of means.

I didn't cherry pick anything. I chose the UK and Ireland as they directly contradict your statement that:

> False, this mechanism only prevents income inequality but not wealth inequality as existing wealth is not taxed much in Europe.

The E.U. is home to both the highest and lowest inheritance taxes in the world, and averages very close to the US. I think this adequately refutes your statement that "existing wealth is not taxed much in Europe."

I play an economic simulation game. Every time I see an asset explode in price (inflation) I am thinking "I should get into this industry and produce the stuff that is going up in price". High housing prices are a strong demand signal, meaning more houses should be built. It's really unfortunate that it does not happen enough.

Because it's not the building the houses that's the tricky part, that is easy, it's the land that's expensive and difficult to obtain. That's what's appreciating since it's a finite amount, not the walls and roof sitting on it.

The problem with inheritance taxes is that there are some crazy people who believe that the tax rate should be 100%.

There is also the big issue that you can just transfer most of the wealth well before death.

If I were to suggest an inheritance tax it would not be significantly higher than 30% but it should have a generous tax exemption for at least $10 million.

However, I personally do believe not that this is an effective solution against wealth inequality because it is a very slow mechanism. It would make more sense to just raise capital gains taxes and decrease dividends taxes so that there is no longer a heavy skew towards wealth building in the first place.

You can still get returns but they have to be paid through a dividend which generally correlates with useful economic activity. You can't just flood the market with cheap money and then use the cheap money to pay dividends if you didn't earn the income in the first place.

Borrowing money doesn't increase the value of a company. It is neutral. If the company is spending that borrowed money on dividends then the company is losing value by exactly the amount that is paid out.

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