Income taxation and morality

[Martinus]

I wanted to start a discussion on this, as this has been bugging me for a few years now but it does not seem anyone (even socialists/leftists) tend to use this argument - and this is about taxation of different sources of income and ethics involved in judging such sources of income.

What I mean by that is this.

Let's assume in 2016, I earn $300,000.

$100,000 comes from my work/paycheck.
$100,000 comes from the rate of return on my capital (say, I am letting my properties, buying and selling shares etc.).
$100,000 comes from inheritance.

Now, I am willing to bet that in most legal systems I will pay the highest tax on the work/paycheck income, moderate tax on the capital income and the lowest (or no tax) on the inheritance.

Shouldn't this be exactly the opposite though? Surely, work of our own hands should be treated more preferentially than income that comes to me only by virtue of birth, which involves no actual effort on my part (with income from capital falling somewhere in the middle).

[Tamas]

Not this inheritance tax shit again. There is NOTHING turning everyone into the drones read about in 1984 than the idea of punitive inheritance taxes.

The ONLY moral tax is either an income tax OR a VAT, i.e. taking your income, and taxing it at one point in its existence.

The BS done where first you are taxed when its your income, then when you spend it, then some more when you spend it on some specific shit (like fuel), then once you earn interest after saving what's left of it, and then finally when you have enough of it all and crook up and leave it to your kid - well, that may be necessary to maintain modern states, but it is pretty far from fair and moral.

[Gups]

Cool, I get taxed extra on money I earn from working  so some trustafarian twat doesn't have to pay any tax on money his great uncle Albert inherited from his great aunt Petunia.

Well as long as that's the only moral way. 

[Martinus]

Not this inheritance tax shit again. There is NOTHING turning everyone into the drones read about in 1984 than the idea of punitive inheritance taxes.

The ONLY moral tax is either an income tax OR a VAT, i.e. taking your income, and taxing it at one point in its existence.

The BS done where first you are taxed when its your income, then when you spend it, then some more when you spend it on some specific shit (like fuel), then once you earn interest after saving what's left of it, and then finally when you have enough of it all and crook up and leave it to your kid - well, that may be necessary to maintain modern states, but it is pretty far from fair and moral.

The money you get paid for your work has been taxed already too. When I pay my cleaning lady, she is getting paid from the money I already paid tax on. The argument that it is somehow different with inheritance is spurious.

If my dad has $100 and in scenario one he pays me that money for some service I performed for him, and in scenario two he dies and I get this money for free, why should I pay more taxes in the former than in the latter case?

[The Minsky Moment]

What does morality have to do with it?

[Tamas]

Cool, I get taxed extra on money I earn from working  so some trustafarian twat doesn't have to pay any tax on money his great uncle Albert inherited from his great aunt Petunia.

Well as long as that's the only moral way.

You are looking at that money as if it materialised out of nothing when your trustafarian received it. It was already taxed when aunt Petunia got it so why not let her do whatever she wants with it.

Taxing that is the same idea as taxing pocket money you give to your kids. Or buying a round of beer for your mates.

[The Minsky Moment]

There is NOTHING turning everyone into the drones read about in 1984 than the idea of punitive inheritance taxes. \

What ??

[Gups]

Cool, I get taxed extra on money I earn from working  so some trustafarian twat doesn't have to pay any tax on money his great uncle Albert inherited from his great aunt Petunia.

Well as long as that's the only moral way.

You are looking at that money as if it materialised out of nothing when your trustafarian received it. It was already taxed when aunt Petunia got it so why not let her do whatever she wants with it.

Only if she earnt it. What if she got lucky when her farm land got planning permission for residential development?

[Martinus]

What does morality have to do with it?

Well, the way I see it taxation should at least not run contrary to general morality. That's why the sales tax on jewellery, cigarettes and booze is usually higher than one on food, children clothes and books.

[Tamas]

Not this inheritance tax shit again. There is NOTHING turning everyone into the drones read about in 1984 than the idea of punitive inheritance taxes.

The ONLY moral tax is either an income tax OR a VAT, i.e. taking your income, and taxing it at one point in its existence.

The BS done where first you are taxed when its your income, then when you spend it, then some more when you spend it on some specific shit (like fuel), then once you earn interest after saving what's left of it, and then finally when you have enough of it all and crook up and leave it to your kid - well, that may be necessary to maintain modern states, but it is pretty far from fair and moral.

The money you get paid for your work has been taxed already too. When I pay my cleaning lady, she is getting paid from the money I already paid tax on. The argument that it is somehow different with inheritance is spurious.

I was mainly referring to the idea that you were no doubt going for here, your fixation on a near-100% inheritance tax.

But even without that, inheritance tax, in the normal world, is usually a big burden for average families, where inheritance is one lousy property, and they have to cough up the sizeable money after its theoretical market value, especially when they don't want to sell it.

[viper37]

I wanted to start a discussion on this, as this has been bugging me for a few years now but it does not seem anyone (even socialists/leftists) tend to use this argument - and this is about taxation of different sources of income and ethics involved in judging such sources of income.

What I mean by that is this.

Let's assume in 2016, I earn $300,000.

$100,000 comes from my work/paycheck.
$100,000 comes from the rate of return on my capital (say, I am letting my properties, buying and selling shares etc.).
$100,000 comes from inheritance.

Now, I am willing to bet that in most legal systems I will pay the highest tax on the work/paycheck income, moderate tax on the capital income and the lowest (or no tax) on the inheritance.

Shouldn't this be exactly the opposite though? Surely, work of our own hands should be treated more preferentially than income that comes to me only by virtue of birth, which involves no actual effort on my part (with income from capital falling somewhere in the middle).

Inheritance income is not taxable in the hands of the receiver because it is taxed in the hands of the deceased, on the day of his death.
Should there be more tax on high fortunes, to avoid recreating a form of aristocracy?  Most likely.  Should we eliminate loopholes that let richer people avoid taxes, unlike the middle class?  Certainly!
Should you be taxed again at 50% of the money you receive?  No, absolutely not. 

[The Minsky Moment]

You are looking at that money as if it materialised out of nothing when your trustafarian received it. It was already taxed when aunt Petunia got it so why not let her do whatever she wants with it.

Every dollar of income I make is paid by business who previously paid tax on that money.  When I spend it at the store it gets taxed again, and it gets taxed again when the store pays its employees and suppliers and so on and so on.  The very structure of a system of taxation presumes that circulating flows of money and income will be subject to tax multiple times.

[grumbler]

LOL!  "The only moral taxes..." is the dumbest bumper-sticker idea ever.

People have a moral obligation to pay the taxes they owe.  taxes cannot be moral or immoral because they are not people, and it is people who have morals (maybe some animals as well, but that is controversial).

I agree with Marti that, from the standpoint of society, it makes the most sense to tax most highly the income from sources that are least distorted by taxes.  Inheritance pretty much tops that list, since dead people cannot change their behavior based on the taxes their estate must pay after death.  Gifts are second.  Earned income is last, because we want people to earn income by producing goods and services.

[Martinus]

Cool, I get taxed extra on money I earn from working  so some trustafarian twat doesn't have to pay any tax on money his great uncle Albert inherited from his great aunt Petunia.

Well as long as that's the only moral way.

You are looking at that money as if it materialised out of nothing when your trustafarian received it. It was already taxed when aunt Petunia got it so why not let her do whatever she wants with it.

Taxing that is the same idea as taxing pocket money you give to your kids. Or buying a round of beer for your mates.

It doesn't matter. The trustafarian is a different person - what taxes aunt Petunia paid on it is irrelevant.

As I said already, my firm has already been taxed on the money they pay me for my work. I am already taxed on the money I pay my cleaning lady for her work. This is not a good argument.

[Gups]

Not this inheritance tax shit again. There is NOTHING turning everyone into the drones read about in 1984 than the idea of punitive inheritance taxes.

The ONLY moral tax is either an income tax OR a VAT, i.e. taking your income, and taxing it at one point in its existence.

The BS done where first you are taxed when its your income, then when you spend it, then some more when you spend it on some specific shit (like fuel), then once you earn interest after saving what's left of it, and then finally when you have enough of it all and crook up and leave it to your kid - well, that may be necessary to maintain modern states, but it is pretty far from fair and moral.

The money you get paid for your work has been taxed already too. When I pay my cleaning lady, she is getting paid from the money I already paid tax on. The argument that it is somehow different with inheritance is spurious.

I was mainly referring to the idea that you were no doubt going for here, your fixation on a near-100% inheritance tax.

But even without that, inheritance tax, in the normal world, is usually a big burden for average families, where inheritance is one lousy property, and they have to cough up the sizeable money after its theoretical market value, especially when they don't want to sell it.

Defend your own position in post #2. It either stands or falls on its own merits not in relation to a straw man.