Income taxation and morality

[grumbler]

I believe that looking forward to inheriting considerable wealth (aka "having great expectations") can be an active detriment to proper individual moral and emotional development.  I've known kids who stood to inherit tens or hundreds of millions of dollars and they didn't give a rat's ass about education or making strong friends, because they were going to be rich and "leave all these losers behind."  I've also known a near-billionaire (could be a billionaire by now) who has told his kids he'll pay tuition, books, and a stipend for as long as they want to stay in school, but that they will inherit nothing, because he will give his estate to charity.  Those billionaire (+/-) kids are pretty much ordinary kids as far as ambition and interpersonal relationships go.

More seriously, this is argument by anecdote.  I could counter with anecdotes about kids of very wealthy people who do stand to inherit yet worked hard in school, are very down-to-earth etc. It really depends on the individual. If someone is a decent bloke and well-motivated to make something of themselves, the prospect of an inheritance isn't likely to change that.  And someone who is easily corrupted by money into indolence is going to have a tough time of it even w/o the money.

I am not sure what argument you are making here.  Are you agreeing that the prospect of inheriting great wealth cannot be a detriment to proper individual moral and emotional development, or agreeing with me that it can be?  It isn't argument by anecdote to point out a possibility and provide an example of that possibility coming true.

[The Minsky Moment]

Are you agreeing that the prospect of inheriting great wealth cannot be a detriment to proper individual moral and emotional development, or agreeing with me that it can be?

Lots of things are possible, it's possible that could be true (that it can be).

[The Minsky Moment]

This strikes me as the same kind of progression that Beebs laid out for why it is perfectly reasonable for the cops to search your bank account when they stop you for speeding. A series of seemingly reasonable steps taken for seeminglly reasonable reasons that leads somewhere ridiculous.

Not on topic but you should check out a case recently decided, United States v. Ganias.  Similar kind of logic employed, leading to the conclusion that is perfectly OK and reasonable for the government to seize vastly more material than a warrant allows, keep it for years and years, then go back and look at the part they were never supposed to collect in the first place and use it bring a criminal case.  Because, you know, computers.

You live in the Second Circuit - so may be of interest:

https://www.eff.org/files/2016/06/08/ganias_combined_opinion.pdf 

[alfred russel]

I do sort of think there is a middle class value judgment common in this type of discussions. "true virtue is through hard work and making your own way like I"m doing/trying to do! A kid knowing he is getting a multimillion trust fund won't push himself to work hard!" It is just taken for granted that jet setting around the world to do coke off of models tits in five star hotels is somehow less cool than working your ass off in a cube and sucking up to a loser boss.

[Martinus]

Tamas, my position was that it is immoral to tax work income more than inheritance. Probably, for utilitarian reasons, taxing all kinds of income at the same rate would be the best - thus removing the incentive to cheat.

How would that remove the incentive to cheat?  It would make it pointless to attempt to convert one form of income to another (at least for tax purposes), but there would still be plenty of incentive to cheat in other ways, by understating/hiding the amount of income or overstating/fabricating deductions.

Well, but this is a problem that always exists and somehow the system gets by nonetheless.

However, by taxing all income equally, you are removing the incentive to try to hide one type of income under the guise of another. Otoh, it is relatively easy to check that someone who did not have some money or asset now has it.

[Martinus]

If we assume that the overall taxation rate is a constant, then presumably if they tax you more at death, they are taxing you less at earning.

If you do not make that assumption, then we are not arguing about what kind of tax is better, but overall taxation levels, which is a completely different discussion.

Even if we assume that, one does probably not come from the other.

I guess it heavily depends on the country in question but I doubt anything but an obscenely high inheritance tax could compensate for any noticeable decrease in any earning-side taxes, unless you talk about replacing another minor tax with an inheritance tax.

And in that case, my previous argument stands: there are far better taxes in terms of their level of impact on citizens. For example, a tax on dividends (while still under my moral issues of double taxation, but whatever) is far more fair as it does not result in an unexpected and disproportionate financial strain for the non-privileged.

The moment you start using words like "fair" your argument is pretty toast. That is purely subjective.

And how is an inheritance tax "unexpected"? Are you thinking your parents will never die?

Finally, most inheritance taxes are specifically designed to handle issues like property taxes on family homes and businesses. There is typically a very large floor under which there is no tax - I think in the US it is something obscenely high like a million or so.

Death and taxes are supposed to be the two things we can all count on - taxes on death ought to be pretty darn non-surprising, and should in fact be planned for...

And the argument that receiving a behest results in "an unexpected and disproportionate financial strain for the non-privileged" is ludicrous on the face of it; if receiving the behest would be too great an imposition, the heir could simply refuse the behest and have no strain whatsoever.

Admit it, grumbler, you wrote that post just to be able to use the word "behest".

[Martinus]

The federal estate tax exemption is $5.45 million

That is just ridiculous.

It really is.

It's £325,000 here. The rate is 40%.

That sounds excellent for Marty's billable hours

But even that rate strikes me as something people could manage. Marty would talk about just taking everything over a certain amount in the past.

Yeah but I changed my view on that.

[Martinus]

I think a wealth tax, especially one increasing somewhat at higher net worths is a sensible way to approach the issue. Since it applies to net worth, it's harder to avoid it using schemes and exemptions and a progressive version means that the accumulation of wealth at the bn+ level becomes harder, at least to maintain that level for the long term.

My problem with wealth tax is that it makes it more difficult to retire once you have hit the jackpot.

[Martinus]

I do sort of think there is a middle class value judgment common in this type of discussions. "true virtue is through hard work and making your own way like I"m doing/trying to do! A kid knowing he is getting a multimillion trust fund won't push himself to work hard!" It is just taken for granted that jet setting around the world to do coke off of models tits in five star hotels is somehow less cool than working your ass off in a cube and sucking up to a loser boss.

Nah, I consider poor hard working people to be highly immoral as they squander their once-in-the-lifetime gift of life on a shitty standard of living.

Sure, be my guest and spend all your money on models and drugs, but do so with money you earned yourself.

In other words, my dislike of inheritance is a part of my general hatred for family as a basic social unit and my desire to destroy it.

[Martinus]

Also, leaving inheritance to others is, generally, something that should be frowned upon.

Whether you believe that you have an immortal soul or we only get one life and it's oblivion after death, the only thing that counts is our experiences. So one should spend money one owns on enriching those experiences. Leaving money and assets to others, to inherit them on our death, essentially means you are trading your own experiences for someone else's. And refusing to develop oneself when given an opportunity to experience something is the only sin worth condemning. 

That's why I do not blame heirs who squander their parents' inheritance - that's the only sensible thing to do.

[grumbler]

I do sort of think there is a middle class value judgment common in this type of discussions. "true virtue is through hard work and making your own way like I"m doing/trying to do! A kid knowing he is getting a multimillion trust fund won't push himself to work hard!" It is just taken for granted that jet setting around the world to do coke off of models tits in five star hotels is somehow less cool than working your ass off in a cube and sucking up to a loser boss.

Some people may, indeed, share your middle-class moral judgement, but I base my stance on what I see as the overall benefit to society that comes from people producing as well as consuming.  Having more money chasing a set amount of goods and services leads to inflation.  That's not really a hard-and-fast rule, of course:  we don't look see youngsters or retired persons, for instance, as a social negative because they only consume.

Some day the average person will probably be mostly consuming, as automation makes work optional, so your value system will probably need adjustment.

But, mostly, I am talking about the least-distorting method of raising taxes.  There's no moral stance on my part there, either.  As I noted, there may be collection reasons why taxing estates is a bad idea.

[grumbler]

Admit it, grumbler, you wrote that post just to be able to use the word "behest".

[garbon]

Also, leaving inheritance to others is, generally, something that should be frowned upon.

Whether you believe that you have an immortal soul or we only get one life and it's oblivion after death, the only thing that counts is our experiences. So one should spend money one owns on enriching those experiences. Leaving money and assets to others, to inherit them on our death, essentially means you are trading your own experiences for someone else's. And refusing to develop oneself when given an opportunity to experience something is the only sin worth condemning. 

That's why I do not blame heirs who squander their parents' inheritance - that's the only sensible thing to do.

Yes, if one is inherently selfish.

[Razgovory]

Marty teaches us every day new ways to be repulsive.