Income taxation and morality

[grumbler]

I've never thought kids should be rewarded for their choice of parents.

You don't think parents should influence the lives of their kids?

Nice red herring! 

[grumbler]

God that near billionaire sounds like a douche.

He is. He spends nearly all his time as a volunteer coach for youth leagues and, now that his kids have moved out, lives in a small house.  Total douche.  Oh, and he inherited none of his money.  That's the douchiest thing.

[Berkut]

He spends nearly all his time as a volunteer coach for youth leagues and,

Hate him!

[The Brain]

I've never thought kids should be rewarded for their choice of parents.

You don't think parents should influence the lives of their kids?

Nice red herring! 

Why not answer the question? If for instance you strictly mean inheriting wealth just say so.

[grumbler]

I've never thought kids should be rewarded for their choice of parents.

You don't think parents should influence the lives of their kids?

Nice red herring! 

Why not answer the question? If for instance you strictly mean inheriting wealth just say so.

Because it is a stupid question unrelated to what I said.  You should answer your own question first.  I don't play the Yicratic game.

[Barrister]

This is going a little beyond the tax question, but to Tamas point about the moral need for parents to "make a better life for their kids" by, presumably, leaving them piles of cash...

I don't get it. I had a pretty tough childhood, and came from a very poor family. I certainly want better for my kids. But I think I've mostly achieved that not by thinking I am going to leave them a bunch of money, but by giving them a stable life where they have great opportunity for education and emotional development.

Honestly, by the time I am dead, their place in life will hopefully be largely set - not by me leaving them money, but by me giving them the tools necessary for them to create the kind of life they want through their own efforts.

I think whether I leave them $100 or $1,000,000 when I die will have very little impact on whether I think I have done right by them, or whether (I hope) they think I have done right by them. Indeed, from what I've seen from others, leaving your kids a bunch of money doesn't generally seem to have much positive impact on them as far as their personal happiness is concerned.

This x 100.

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.

I've never thought kids should be rewarded for their choice of parents.

YOur billionaire friend sounds like a great guy.  But shouldn't it be up to the parents to decide whether (or not) their kids inherit any money?

I think it's a red herring to think of it as the 'kids being rewarded', when it is better to look at it as 'the parents getting to decide what to do with their own money'.

[The Brain]

I've never thought kids should be rewarded for their choice of parents.

You don't think parents should influence the lives of their kids?

Nice red herring! 

Why not answer the question? If for instance you strictly mean inheriting wealth just say so.

Because it is a stupid question unrelated to what I said.  You should answer your own question first.  I don't play the Yicratic game.

Chillax. You said something you hadn't thought through and you got called on it. No reason to lash out.

[Ed Anger]

This is relevant to my interests.

[grumbler]

YOur billionaire friend sounds like a great guy.  But shouldn't it be up to the parents to decide whether (or not) their kids inherit any money?

I think it's a red herring to think of it as the 'kids being rewarded', when it is better to look at it as 'the parents getting to decide what to do with their own money'.

I think it's a red herring, when talking about taxes, to treat them as contrary to "X getting to do what they want with their own money."  All taxes reduce the ability of people to "decide what to do with their own money."  I am proposing that estate taxes are the best kinds of taxes, in that they have the least distorting impact on the ability of individuals to make the most sensible economic decisions.  Why?  Because he money in the estate doesn't belong to anyone, so no one is making any decisions to be distorted by the tax.

Now, it may be that there is some currently-unarticulated societal goal that is advanced by having higher taxes on income or sales or property or whatever in order to afford a non-confiscatory estate tax, but I haven't seen anyone advance it yet.  Minsky has a sort-of argument that estate taxes are too difficult to collect for the gain gotten out of them, but I'd need to see more info on that.  Other than that, the argument against confiscatory estate taxes seems to be "it's just bad, mkay?"

[grumbler]

Chillax. You said something you hadn't thought through and you got called on it. No reason to lash out.

  I note that you are avoiding answering your own question!  I guess that tell us all we need to know about the quality of the question.

[The Minsky Moment]

lives in a small house.

Nice big FU to the construction trades, right there.

[The Minsky Moment]

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.

[The Minsky Moment]

Minsky has a sort-of argument that estate taxes are too difficult to collect for the gain gotten out of them, but I'd need to see more info on that.  Other than that, the argument against confiscatory estate taxes seems to be "it's just bad, mkay?"

Estate tax revenue is in the $20 billion range, which is pretty small potatoes on the scale of the budget.  The way it exists now it is shot through with loopholes.   To give an example of how bonkers some of the rules are now - you can put a huge chunk of money into a charitable annuity trust.  The rules require that the trust pay out a certain rate of return to charity.  As long as you do that, it's exempt from estate tax.  But the rate of return is based on treasury rates and for the last few years has been around 1.5%.  If the trust has higher annual returns, the entirety of the excess can be distributed back to the heirs tax free.   This is one of the dodges the Walton family abused the hell out off to escape estate taxation.

That criticism applies to the tax as it currently exists on the federal level in the US.  I wouldn't say its generally true of all possible or actual estate taxes.

[Berkut]

Minsky has a sort-of argument that estate taxes are too difficult to collect for the gain gotten out of them, but I'd need to see more info on that.  Other than that, the argument against confiscatory estate taxes seems to be "it's just bad, mkay?"

Estate tax revenue is in the $20 billion range, which is pretty small potatoes on the scale of the budget.  The way it exists now it is shot through with loopholes.   To give an example of how bonkers some of the rules are now - you can put a huge chunk of money into a charitable annuity trust.  The rules require that the trust pay out a certain rate of return to charity.  As long as you do that, it's exempt from estate tax.  But the rate of return is based on treasury rates and for the last few years has been around 1.5%.  If the trust has higher annual returns, the entirety of the excess can be distributed back to the heirs tax free.   This is one of the dodges the Walton family abused the hell out off to escape estate taxation.

That criticism applies to the tax as it currently exists on the federal level in the US.  I wouldn't say its generally true of all possible or actual estate taxes.

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.

"You have to have a bigger exemption of estate taxes to save the family farm!"

OK. Raise exemption from some small amount to something larger.

"ZOMG family owned businesses are being destroyed by estate taxes! Why are you people so anti-small business???"

Oh dear. Raise the exemption for all these middle class business owners right away!

"You know, some family businesses might have a pretty high valuation, even if they aren't really all that profitable! Tax is theft! Raise the exemption some more!"

GO TEA PARTY! RAAR! Raise exemption some more!

"Hey, I noticed that we don't really generate much income from estate taxes, only some 0.1% of estates actually even pay anything. We should just get rid of it!"

Yeah, good point.

[dps]

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.