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Debates Forum

  1. Donation rwingett
    Ming the Merciless
    12 Jun '09 14:53
    In a capitalist system economic competition amongst people is said to lead to a more prosperous nation. Accumulating wealth is seen as an incentive for industriousness. People who work hard should be rewarded for their efforts. Work hard enough and you could become rich. For the purposes of argument we will accept these claims at face value.

    It is also clear that a democratic system is pervaded with a certain egalitarian spirit. People are against the establishment of a permanent aristocracy. We cherish the notion that all people are created equal, with equal access to all the advantages of our economic and political system. Once again, we will take these arguments at face value.

    The problem is that most of the rich these days did not work for their fortunes. Most of their wealth is inherited. They were born (as the saying goes) with a silver spoon in their mouth. And they pass on that fortune to their offspring. Is this not the establishment of a permanent aristocracy in all but name? If people begin their lives from equal starting points then we may say that one has succeeded on one's merits, or failed. But how do we judge people if one is born into opulent wealth while another is born into a ghetto. The latter may succeed, but his chances are a mere fraction of he former.

    Would it not make sense, then, to have every generation reset to a common starting point as much as possible? This would provide everyone with equal opportunity. If a man then makes a great fortune, we could say he's done a good job in a fair system. Likewise if a man fails, we could more confidently point the finger at him instead of at the system.

    How would this be accomplished? Through a 100% estate tax. When someone dies, his entire estate would be taken into a common fund. Then when someone reaches 18 years of age, they would be paid a certain amount of money from that fund to start their life and get their new career rolling. Everyone would then truly have equal access and equal opportunity. People could still compete and still make fortunes or fail, but they would all begin from a common starting point. Their successes would be due to their own efforts and not due to their parent's. Then when they died their fortune would be placed into the fund for the next generation.

    Any takers?
  2. Standard member Fleabitten
    Love thy bobblehead
    12 Jun '09 15:10 / 1 edit
    Originally posted by rwingett
    In a capitalist system economic competition amongst people is said to lead to a more prosperous nation. Accumulating wealth is seen as an incentive for industriousness. People who work hard should be rewarded for their efforts. Work hard enough and you could become rich. For the purposes of argument we will accept these claims at face value.

    It is also hey died their fortune would be placed into the fund for the next generation.

    Any takers?
    The problem is that most of the rich these days did not work for their fortunes

    Please define 'rich' as you see it. Additionally, could it be substantiated that 'most' of those who are being defined as rich in your context did not work for their own fortunes? The fact that they were born into wealthy circumstances does not preclude the possibility that they've striven to create their own success.

    Would it not make sense, then, to have every generation reset to a common starting point as much as possible? This would provide everyone with equal opportunity. If a man then makes a great fortune, we could say he's done a good job in a fair system. Likewise if a man fails, we could more confidently point the finger at him instead of at the system.

    It's also possible that it would inhibit any incentive whatsoever to succeed beyond ensuring the needs of the current working generation. In other words, why would I work any harder to create a more comfortable future for my child if the state is simply going to deem that the success I've created is to be divvied up among the progeny of those who may not have worked as hard as I did?

    Per your original post, people who work hard should be rewarded for their efforts. Since we are taking this at face value, what if I deem being able to pass my wealth on to my child as one of the rewards for my efforts?
  3. Standard member sh76
    Civis Americanus Sum
    12 Jun '09 15:25
    I work a lot with the estate tax. I generally like the estate tax as an equitable way to generate revenue for the government. After all, between taxing people's incomes and taxing people's inheritance, there's something a bit more fair about the latter.

    There's also something to be said for the idea that just because a person makes a billion dollars doesn't mean that the person's descendants should be super rich forever.

    But a 100% estate tax would practically be grounds for armed revolution. People don't just work for themselves. They work for their children. Taking away the ability of people to work for their children is such a drastic changing of the structure of society that the thought makes me cringe.

    To effect a 100% estate tax, you'd obviously have to outlaw gifts. Otherwise, people would simply gift away their assets before they die and avoid this confiscation (it's not a "tax" at all). Can you imagine a society where people are not allowed to give gifts to their children?
  4. Donation rwingett
    Ming the Merciless
    12 Jun '09 15:27
    Originally posted by Fleabitten
    [b]The problem is that most of the rich these days did not work for their fortunes

    Please define 'rich' as you see it. Additionally, could it be substantiated that 'most' of those who are being defined as rich in your context did not work for their own fortunes? The fact that they were born into wealthy circumstances does not preclude the possibi ...[text shortened]... I deem being able to pass my wealth on to my child as one of the rewards for my efforts?[/b]
    If someone did not work as hard as you, that is no reason to punish his children. The sins of the father shall not be visited upon the son. The child of the rich man and the child of the poor man deserve an equal chance to make their way in the world.

    It may be that there are some who would be discouraged by such an arrangement. But far more would be encouraged.
  5. Standard member Fleabitten
    Love thy bobblehead
    12 Jun '09 15:32 / 2 edits
    Originally posted by rwingett
    If someone did not work as hard as you, that is no reason to punish his children. The sins of the father shall not be visited upon the son. The child of the rich man and the child of the poor man deserve an equal chance to make their way in the world.

    It may be that there are some who would be discouraged by such an arrangement. But far more would be encouraged.
    True enough. I'll re-frame it. What if I consider the ability to disperse my wealth upon my passing as I see fit one of the rewards (per the original post) for my hard work?

    Edit: It might also be argued that I'm not the one punishing the children of those who did not work as hard as I did, their parents are.
  6. Donation rwingett
    Ming the Merciless
    12 Jun '09 15:35
    Originally posted by sh76
    I work a lot with the estate tax. I generally like the estate tax as an equitable way to generate revenue for the government. After all, between taxing people's incomes and taxing people's inheritance, there's something a bit more fair about the latter.

    There's also something to be said for the idea that just because a person makes a billion dollars doesn't ...[text shortened]... n you imagine a society where people are not allowed to give gifts to their children?
    Always with the negatives. Do you not think that an industrious populace could come up with solutions for these problems?

    The plan could be phased in slowly over a great number of years. Gifts could be taxed. Do I have to think of everything?

    Besides, by working hard you are providing for the whole next generation, not just your own.
  7. Standard member Palynka
    Upward Spiral
    12 Jun '09 15:38
    Originally posted by rwingett
    Any takers?
    Estate tax doesn't seem to be hard to get around, though. It's true that marginal changes in estate tax don't seem to make that much of a behavioural difference (as Poterba documented in the late 90s or early 00s), but I find it hard to believe that 100% tax rates would not have an impact.

    There are several economists who work on inequalities (like Piketty or Saez) who often propose certain forms of taxes on wealth holdings, which would be due every year and not just when you die. The main thrust of their idea is not exactly the same to yours, but it is similar, in the fact that wealth taxation has a different impact on social mobility than income taxation.
  8. Donation rwingett
    Ming the Merciless
    12 Jun '09 15:41
    Originally posted by Fleabitten
    True enough. I'll re-frame it. What if I consider the ability to disperse my wealth upon my passing as I see fit one of the rewards (per the original post) for my hard work?

    Edit: It might also be argued that I'm not the one punishing the children of those who did not work as hard as I did, their parents are.
    What if you considered not being taxed at all as being a 'fit' reward for your hard work? Obviously society is in a position to enforce its decisions upon its individual members. You don't have an option to not be taxed on philosophical grounds, why should you then be able to weasel out from my good and beneficent plan?

    I say once again that the sins of the father shall not be visited upon the son.
  9. Donation rwingett
    Ming the Merciless
    12 Jun '09 15:43
    Originally posted by Palynka
    Estate tax doesn't seem to be hard to get around, though. It's true that marginal changes in estate tax don't seem to make that much of a behavioural difference (as Poterba documented in the late 90s or early 00s), but I find it hard to believe that 100% tax rates would not have an impact.

    There are several economists who work on inequalities (like Pikett ...[text shortened]... the fact that wealth taxation has a different impact on social mobility than income taxation.
    I'm not irrevocably committed to a 100% rate. Let's say you counter with 50% and we close at 75%. Sound like a deal?
  10. Standard member sh76
    Civis Americanus Sum
    12 Jun '09 15:54 / 2 edits
    Originally posted by rwingett
    I'm not irrevocably committed to a 100% rate. Let's say you counter with 50% and we close at 75%. Sound like a deal?
    The current estate tax rate in the US is about 50% (45% federal and a progressive tax in most states that probably makes the total around 50% in most cases).

    The only thing is that on the federal level, the first $3.5m per person ($7m per couple with some minimal estate tax planning) is exempt.

    As of as recently as 10 years ago, the exemption amount was $675,000, making all moderately wealthy people subject to the estate tax.

    There is also a parallel gift tax with similar lifetime exemptions and annual gift tax exclusions for relatively small gifts.

    A massive cottage industry developed in the legal industry to help people plan around the estate tax; although the really rich cannot get around paying at least some estate tax. With the exemption as high as it is, only the very wealthy are now subject to the estate tax.

    Personally, I think a 50% estate tax is just fine. It generates revenue, but doesn't discourage people from working for their children. 75% is too high. I think the exemption should be lowered to, say, $2m per person/ $4m per couple.

    As an aside, nobody (or, almost nobody) is going to work hard to make money for "the next generation" of society in general.
  11. Standard member Fleabitten
    Love thy bobblehead
    12 Jun '09 15:55
    Originally posted by rwingett
    What if you considered not being taxed at all as being a 'fit' reward for your hard work? Obviously society is in a position to enforce its decisions upon its individual members. You don't have an option to not be taxed on philosophical grounds, why should you then be able to weasel out from my good and beneficent plan?
    I would consider not being taxed at all as ludicrous as being taxed at 100%. As the wealth earner, I should pay back a fair share to the society that granted me the opportunity to succeed. At the same time, the individual effort that lead to my success should be recognized in the form of allowing me to dispose of some portion my remaining wealth in the way that I see fit, whether that be in the form of humanitarian grants, an inheritance to my children, or both. Your "good and beneficient" plan equates to nothing more than government enforced charity.
  12. 12 Jun '09 16:07 / 1 edit
    There's this assumption that people who make more money do so by merely "working harder" -- even though there are legions of people at or near minimum wage who work incredibly hard at mind-numbing and-or dangerous jobs. While hard work is an important factor, a person's earnings depend a lot on one's level of skill (which in turn depend on education, experience, and inherent talent). And luck plays a big role, especially for those who become extremely wealthy - where so much depends on betting on the right business in the right industry at the right time.

    So I agree that there needs to be an estate tax. But what if the estate takes the form of a well-run family business? -- should this business have to be immediately sold to someone else after the original owner dies to cover the estate tax? This is a major issue that opponents of the estate tax raise. I would propose that estate taxes not be incurred until after a hard asset is sold - and there should be a way to amortize this tax so that it doesn't have to be paid all at once.
  13. Standard member Palynka
    Upward Spiral
    12 Jun '09 16:08
    Originally posted by rwingett
    I'm not irrevocably committed to a 100% rate. Let's say you counter with 50% and we close at 75%. Sound like a deal?
    I definitely would agree with a proposal to push it up significantly. I don't know the data well enough to make a policy recommendation on an exact value, though.

    Still, I find that taxation on wealth much more attractive because it is harder to get around and has similar benefits.
  14. Standard member sh76
    Civis Americanus Sum
    12 Jun '09 16:33 / 1 edit
    Originally posted by Palynka
    I definitely would agree with a proposal to push it up significantly. I don't know the data well enough to make a policy recommendation on an exact value, though.

    Still, I find that taxation on wealth much more attractive because it is harder to get around and has similar benefits.
    I think that any tax that doesn't affect me is attractive and any tax that does affect me is evil.

  15. 12 Jun '09 16:52
    Originally posted by sh76
    I think that any tax that doesn't affect me is attractive and any tax that does affect me is evil.

    leaving us with politicians de leon looking for the Fountain of Taxes that Don't Affect Anyone