Income taxation and morality

[Berkut]

<snip much ranting and raving that does little to establish your credibility>

then you would know that a lot of parents work and keep bettering their lot in the hopes of offering an easier life for their descendants.

Taxing them at step 14 in that process is no more or less "moral" than taxing them at steps 1-13 of that process.

Taking 25% of my income so I have 25% less to leave to my kids is no more morally rational than taxing it at the point of my death.

There is no "moral" calculus here, just a practical one.

Forcefully removing that option is one of the least moral ways to coerce income for the state.

I like how everyone sprinkles in "force" and "coerce" into the discussion, even though it adds zero informational content to the debate. Seems so ominous!

But in your example they tax it at the point of your death in addition to taxing it when you earned it.

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.

And I am fully aware such double taxation is hard to avoid with the levels of spending a modern state needs, but that does not mean we should embrace the idea and push it.

Double/triple/quadruple taxation is a complete red herring. It is utterly meaningless in any discussion about how taxes ought to be collected, since it is trivially obvious that in a transaction based society (which our economy most certainly is) there is no way to ever avoid "double" taxation in any case.

The only argument to be made around how many times income is taxed and when is to make sure the tax policy is transparent enough that we actually understand what we are taxing, when, and how that impacts the overall economic health.

[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.

[Martinus]

And of course you have to make allowances for special situations - just as you do with payroll tax (which is why you have tax-free amount) - thus allowing for special treatment of minor children, non-working spouse etc.

But I am talking about a pure situation I mentioned in my OP - I am an adult, able person who is fully capable of earning my living. The money I get from my work is taxed at a higher rate than the money I get from renting out my spare flat which in turn is taxed at a higher rate than the money I would earn if my parents died. I don't think this is a fair system.

[Martinus]

For the record, I stand to approximately triple or quadruple my net worth upon the death of my parents, on which I will pay exactly 0 zloty of tax so you can't say I am acting here in personal interest.

[Tamas]

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.

[Tamas]

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.

Just so it is clear, since it seems totally impossible for me to discuss anything with you without you immediately launching what you think are personal attacks, I am just not going to continue setting you up.

[Berkut]

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...

[LaCroix]

do the non-privileged rely on inheritance?

[Tamas]

Alright, if special rulings are made to minimise the negative (wanted to avoid "unfair", because apparently it is frowned upon to discuss morals and peoples livelihoods in the same context ), then of course, there should be much less issues.

But then what's the point, beside making sure tax legislation is complicated, with the unavoidable abundance of backdoors and exemptions people with the means can use?

[The Minsky Moment]

The federal estate tax exemption is $5.45 million

[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.

Let's test how your system would work. This is tax revenue in the UK from a couple of years ago. NICS is effectively another form of income tax FYI.

Type of tax Revenue £ million
Income Tax 156,898
NICs 107,690
VAT 104,718
Corporation  Tax 39,274
Fuel duties 26,881
Alcohol taxes 19,986
Stamp Duty Land 9,273
Capital Gains 3,908
Inheritance tax 3,402
Shares 3,108
Insurance premium tax 3,014
Air passenger duty 3,013
Betting + gaming 2,098
Landfill Tax 1,189
Petroleum Revenue tax 1,118
Climate Change levy 1,068
Tax Credits -2,743
Total HMRC receipts 489,850

About half of revenue is in income tax.  About 20% is VAT.

If your system were adopted, we would have to double income tax (so there would be a 90% top rate and even low owners would pay 40% on income over £10K) or we would have to quintuple VAT to 100% which would have catastrophic consequences for both the economy and citizens.

[Berkut]

The federal estate tax exemption is $5.45 million

That is just ridiculous.

[Tamas]

do the non-privileged rely on inheritance?

I was talking about the situation where they would be hit with a sizeable inheritance tax. Check my example above.

I concede this issue is theoretical if there is a sufficiently complex law in place to protect these cases, but as Minsky pointed out, complex taxes are a problem in themselves.

[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.

Let's test how your system would work. This is tax revenue in the UK from a couple of years ago. NICS is effectively another form of income tax FYI.

Type of tax Revenue £ million
Income Tax 156,898
NICs 107,690
VAT 104,718
Corporation  Tax 39,274
Fuel duties 26,881
Alcohol taxes 19,986
Stamp Duty Land 9,273
Capital Gains 3,908
Inheritance tax 3,402
Shares 3,108
Insurance premium tax 3,014
Air passenger duty 3,013
Betting + gaming 2,098
Landfill Tax 1,189
Petroleum Revenue tax 1,118
Climate Change levy 1,068
Tax Credits -2,743
Total HMRC receipts 489,850

About half of revenue is in income tax.  About 20% is VAT.

If your system were adopted, we would have to double income tax (so there would be a 90% top rate and even low owners would pay 40% on income over £10K) or we would have to quintuple VAT to 100% which would have catastrophic consequences for both the economy and citizens.

well, that may be necessary to maintain modern states, but it is pretty far from fair and moral.

Which everyone seems to agree on, since they argue morality should be dropped from tax discussions.

[Gups]

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%.