Hacker News Reader

In France, the tax is not on the amount of restate but on the inherited income, ie each kid gets taxed on his share. So if there are n kids, the amount of tax paid is nT(K/n), not T(K). Since T is progressive (convex), nT(K/n) < T(K).

Given that the first 100k are not taxed and that there are three kids, only about 14 millions will be taxed at the 45% rate, not 20.

Note that we are talking about each kid making 6,67M€ (four centuries of minimum wage, three centuries of median wage).

If they earned their money through their labour instead of through their birth, they would actually be taxed more (IR + CSG + CRDS).

As for the grandkids, there are a bazillion ways to reduce the tax bill: life insurance is not inheritance-taxed, you can donate money to your kids before your death (about 300k€ per kid every 15 years before it’s taxed - if there are three kids, three grandkids per kid and everyone does a little tax planning you can give 9 grands kids * 300k€ * say give them money at 0, 15, 30, 45 and 60 yo that’s 13,5M€ originally from the grandma that won’t even count as inheritance, etc.).

> In France, the tax is not on the amount of restate but on the inherited income, ie each kid gets taxed on his share.

Yes but the "progressivity" is harsh. Anything over 500 K per kid is already at 30% of taxation and anything over 1.7m is at 45%.

Also for one grandma, the n for the number of kids tends to not tend towards infinity but more towards something like 2.

So although you're right that it's not 45% on 20 m EUR (actual painting seems to be worth a bit more than that but it's to simply) but it's close. Because with two kids and the 100 K EUR excluded, you're still quickly at insane brackets rates.

For one kid I have the actual rate (I now did the computation) at 43% (instead of 45%) and for two kids I have the actual rate at 41.6%.

I understand that you're technically right to talk about n kids but it's a bit disingenuous to talk about "progressivity" of the tax rate when the effective tax rate is likely going to be 41.6% or 43% instead of the 45% I took as a shortcut.

And at 90 years old sadly the inheritance planning ain't going to be very effective. Even her kids are likely already 65 to 70 y/o, so their own inheritance planning won't allow many donation every 15 years.

It's still very much:

(french IRS): "Thank you grandma!".

I think you will find the CAE note on inheritance taxation quite interesting: https://www.cae-eco.fr/staticfiles/pdf/cae-note069s.pdf. Note the the top 0.1% of individuals, who receive on average 13M€ over their lifetime -

Still, the untaxed 100K threshold is quite low, it's a shame that a lifetime of work is so heavily taxed. Especially given how the government is spending it...

My personal theory about this high inheritance tax is that it's real purpose is to keep people in a slave-like state in respect to big corporations and the state itself. Having too many people escape the rat race and thus having time to think for themselves or freedom to go elsewhere is seen as a real danger for those in power.

If you look at the effective inheritance tax rate (ie tax paid on actual money flow from dead people to inheritors), even the top 0.1% of all inheritance is around a 10% rate. See figure 2 in https://www.cae-eco.fr/staticfiles/pdf/cae-note069s.pdf. Note the the nominal tax rate is around 30% - the difference is because a lot of stuff is not taxed, or partially taxed.

I think the issue is that French inheritance taxation has both a very high facial rate and massive amounts of exemptions / loopholes. People that think they can grok the fiscal system in a few minutes look at the high nominal rates , not the loopholes.

I also live in a country like this and it manages to have a budget surplus, incredible public safety and social peace in spite of all that :) Which makes me feel most European taxation systems are just an engine of depriving middle class from ever being able to compete with the rich, not at all socially oriented.

I agree that income tax is a tax on the middle class. Poor people don’t have enough income to be taxed significantly, and rich people get most of their wealth from capital and have things like trusts and companies to shield themselves. OTOH, income distribution is insanely sharp on the high end, it’s actually ridiculous. The top 10% in France have twice the income of the 80-90%. It flattens somewhat below that, but the gap is nowhere near what people pay in income tax. The middle class is a squishy and juicy target and it supports most of the budget of the state, but income tax does not really work as a tool to keep them down compared to wealthier classes. And it’s not really needed anyway.

It is socially oriented in the way that the middle class pay for the poor (which is great, I pay my share and am not complaining about that), but apparently national solidarity stops being a factor once you’re rich enough.

That is by design. My point is that "social state" does not exist for the benefit of the poor. Poor are just fodder. It exists to prevent middle class, through income taxation, from accumulating wealth and becoming rich and thus getting to be a competition to entrenched existing rich who are heirs of the people who became rich before social state came into existence.

America has enormous inequality but the society is fluid and vast majority of rich are first-generation rich and a good (but not too big) chunk of them even come from poor families. Europe has little inequality comparatively but on a flip side, it effectively has a caste system. Only people who break through it are foreigners who already arrived with cash.

And is your low-tax country doing better or worse (for society as a whole, not just for you) than France?

Wherever it is, I'll wager that the apple tart is not as good ...

> And is your low-tax country doing better or worse (for society as a whole, not just for you) than France?

Much, much, much better for everybody.

That doesn't seem possible, unless it's oil-rich.

From their other comments, it seems like it's actually tax-evasion-haven rich.

Super high income tax and extremely low wealth tax seems like a great recipe for some revolution.

An income tax marginal rate of 42 % doesn't seem super high in international comparison:

https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

Belgium tops that list at 79.5 % but even in the USA it can reach 51.6 %.

In 1975 the author Astrid Lindgren famously had a marginal rate of 102 % on her income tax in Sweden, so the more money she earned the less she had left after taxes...

http://ianangell.com/blog-entries/the-pomperipossa-effect/pa...

> Belgium tops that list at 79.5 % but even in the USA it can reach 51.6 %.

Yup in Belgium income rate can be as high as 50% (down from more than that but the max income rate is now "only" 505) but moreover if you're self-employed (without a company), you have in addition to these 50%, social taxes of 20%... Effectively putting you as high as 70%. So it's not as high as 79.5% anymore (I think the Wikipedia article is incorrect) but 69% sure.

And then on the 31% you manage to save, everything you buy has 21% VAT tax and if you still manage to save money, you'll have to pay at least 30% tax if you make any capital gains (more if they decide to add your capital gains to your income and for that the process is entirely arbitrary and anybody who says the contrary has no idea what it's talking about).

People have to understand I left my home country which was literally the one topping that Wikipedia link you gave about the most taxing countries in the world.

Fun story: one day a local IRS man came to my place and literally told me, after opening the "file" they had on me: "Had I opened your file before coming, I'd have realized there was no money to take" (because I had filed my taxes correctly). This made me stick to my stomach.

Then I googled the dude's name and, in addition to being an IRS agent, he was also on local voting lists, to be a local politicians, cumulating IRS agent pay and local politician job (of course on a socialist list).

So (quite a while ago now) I just gave Belgium the middle finger and left.

> Super high income tax and extremely low wealth tax seems like a great recipe for some revolution.

Country ranks 6th in the list of most happy country in the world (Switzerland is 4th).

Why would people want a revolution?

Maybe she used a trust and circumvented all of this, who knows?

What in the first world problems is this comment, even?

That's neither here nor there. It's the principle that matters. Theft doesn't become okay just because you're fleecing the rich.

What country are you from?

Estonia.

Honest question: how is lower inheritance tax and higher income tax a better situation?

It’s much more fair to tax inheritance, which is something you get just by chance, compared to income, which is something you have to work for. Low inheritance tax also leads to wealth concentration over generations, and worse inequality. This is compounded because rich people get a lot of their wealth from capital gains, which usually are not taxed as income, so income tax is in effect a tax on the middle class.

I don’t know enough about Estonia to comment on how well it works, but without more detail it sounds really bad.

Sweden also has zero tax for inheritance and gifts.

What is "fair" is subjective. Inheritance is only by chance if you consider family ties to have zero value. Building something over generations, for example a company or a farm, becomes difficult with high inheritance tax.

> Inheritance is only by chance if you consider family ties to have zero value.

Well, no. The family in which you are born is effectively random. You don’t do anything to be born from your parents. Family ties have quite a lot of value, but material profit from them is not something you deserve as an individual, in the sense that it’s not something you get from your own efforts or qualities.

> Building something over generations, for example a company or a farm, becomes difficult with high inheritance tax.

That is the red herring we see when politicians want to manipulate the middle class into supporting something that is actually harmful to them. Inheritance tax is progressive like income tax. We can have a system that optimises for medium-size companies and businesses but limits the emergence of larger ones. When we talk about wealth accumulation that is harmful to society, we talk about tens of millions and up. Think multinational companies, not local farms.

Sure, the story of the family farm or company that gets built over generation is nice. But these kinds are threatened by larger competitors that have more leverage, power, political connections (and so public subsidies), and tools to undercut them, not inheritance tax. They would be much better without these huge mega-farms we incentivise and that are impoverishing them. Same for small businesses in a different setting. A family business needs to be quite big to be threatened by inheritance taxes. But it just have to exist to be threatened by the huge companies that insufficient wealth redistribution helps thriving.

> Well, no. The family in which you are born is effectively random.

I've seen some screwed up ideas on what "random" means before, but... c'mon.

It's not random in any meaningful sense of the word. There are some uncomfortable truths that must be dealt with here, but to hide from them by saying that some arbitrary individual might've been born to a different family requires purely decadent levels of denialism.

> We can have a system that optimises for medium-size companies and businesses

We can't. Because even the tiniest businesses and farms are already multimillionaire levels. Medium-sized are far larger still. If you set these taxes to avoid harming those, the thresholds for taxes to be applicable would be so bizarrely high that we'd all laugh and shake our heads.

Inheritance taxes are tools designed to teach the middle class to not bother trying, because the lifetime it would take to accumulate enough wealth to set the grandkids up to do well will see it all taken by the state. They're harmful to the middle class, and not the billionaires.

The billionaires are still young enough to find some place or mechanism to avoid the inheritance tax. They're beyond it. It's the lesser folk that can't avoid it. But I guess it's not all bad, even if your great-grandchildren have crippling levels of student debt, at least they can sleep well at night knowing that it helped purchase JDAM bombs for Sudanese weddings.

Your birth is effectively random, but the inheritance might be very much intentional. Parents might choose to build something for generations to come rather than spending everything they earn on themselves.

> Inheritance tax is progressive like income tax. ... > Think multinational companies, not local farms. ... > A family business needs to be quite big to be threatened by inheritance taxes.

Depends on which country you're referring to. In Sweden before 2005 inheritance tax was a flat 30 % for any inheritance above $60k. Which meant that children would need to pay a lot of money in taxes just to keep the house they grew up in after their parents passed away.

Probably from Romania, but there's some notary tax on the % of the inheritance, which isn't an inheritance tax per se, but works as if it were. And you're supposed to pay health insurance and pensions on your capital gains, which kind of work like taxes would, too.

Luxembourg.

What happens in your country when you go the hospital and they figure out you have cancer. Does the state pay for the treatment or you go from millionaire to dead family weight overnight? :-)

Money is nice but passed a certain point, the real problems are rarely solved with more money.

European countries differentiate between income tax and social tax.

Health insurance is a social tax. There are other social taxes: pension tax, unemployment tax etc. Mostly these are fixed rate taxes (i.e. the tax rate is not income dependent). In some countries there is an upper bound on income that is taxed by social tax.

Only some differentiate. In Denmark there is no separate social tax. It's all the same tax.

Wrong: https://taxsummaries.pwc.com/denmark/individual/other-taxes

ATP is not a social tax. Its a pension fund. Also from that page:

The Danish social security system is financed primarily through ordinary tax revenue and only very limited social security contributions for employees and employers.

> What happens in your country when you go the hospital and they figure out you have cancer.

Public healthcare is one of the best in the world. I pay my social security taxes, which benefit everybody (including me).