Tax avoidance by the obscenely wealthy

[The Brain]

I don't see a problem that an aggressive estate tax solves, and I see problems that it would create.

[The Minsky Moment]

The main reason seems to be based on a notion of fairness. It seems more fair to strip away wealth that was (notionally at least) earned, when the person who has earned it is no longer around - they cant, as the saying goes, take it with them.

If you use the metaphor of taxation as "stripping away wealth" then its not clear to me why metaphorically looting a corpse is more "fair" then picking the pocket of the living.

But taxation in a free and democratic society isn't about stripping away wealth; its about a society deciding to collectively contribute private resources to public benefits.  And wealth is arguably a better proxy than income for the private benefit that is reaped from living in a stable and effective state that enforces the rule of law and provides physical security.

[Tonitrus]

How about we just get most wealthy people paying a significant estate tax, rather then trying for something that is totally impossible to get passed right now?

I probably should regret that my flippant remark has gotten so much serious play. 

[Malthus]

The main reason seems to be based on a notion of fairness. It seems more fair to strip away wealth that was (notionally at least) earned, when the person who has earned it is no longer around - they cant, as the saying goes, take it with them.

If you use the metaphor of taxation as "stripping away wealth" then its not clear to me why metaphorically looting a corpse is more "fair" then picking the pocket of the living.

But taxation in a free and democratic society isn't about stripping away wealth; its about a society deciding to collectively contribute private resources to public benefits.  And wealth is arguably a better proxy than income for the private benefit that is reaped from living in a stable and effective state that enforces the rule of law and provides physical security.

A corpse is, by definition, beyond worrying about what is in their pockets.

And yes, any system of taxation is about private payment for public good ... but the private payment is always gonna hurt. The issue is who is going to to feel that pain, and when.

[The Minsky Moment]

If an estate tax is a form of wealth tax - and cleary it is - then it's not obvious to me why the most rational way of imposing taxation on wealth is on the basis of the occurrence of an unpredictable event.  What not impose a wealth tax regularly every 10 years or every 5?  or why not every year? If the concept is sound, why not do it in a rational and systematic way.

One could counter that the likely targets of your wealth tax, with the wealth being mostly in the form of stock holdings, is that said imposition...or at least the level of impact it has...is also based on unpredictable events (namely, the stock price at any given time).

For example, you give Elon Musk a tax bill for 10% on his $100 billion-dollar Tesla stock value on 1 Jan 2022.  On 3 Jan 2022, his Tesla stock value crashes to $1 billion.  Ouch.

Good news for him on his 2022 tax take . . .

It's true wealth can fluctuate significantly from year to year; the same is also true for income. 

[The Brain]

I don't see a problem that an aggressive estate tax solves, and I see problems that it would create.

Addendum: the Swedish way appears better to me. Education and health care is available paid for by tax money, so getting a fair chance in life doesn't require wealthy parents. And there is no estate tax and no gift tax.

[alfred russel]

I've always thought there were good arguments in favour of it. The notion being that wealth 'ought' to be earned by the person earning it, not merely accumulated. Though the children of the wealthy would get a major boost nonetheless, having grown up with the benefits of having wealthy parents ... after all, given average lifespans, they would be teaching retirement age themselves by the time such a tax would affect their parents.

The main strike against it is the difficulty in preventing the wealthy from getting around it in various ways.

The ways of getting around it can be closed.  Tax tangible gifts over some small threshold as income, for instance.  You could buy your child a car, but not a house.

That limits the estate tax to be effectively the income tax rate.

If I was a billionaire I could hire my doofus son to be CEO of some corporation I really run and pay him $100 million a year for a few years. (or more nefariously pay him in a hard to value asset that we convince the tax man is worth $1 million but really worth $100 million)

[Barrister]

What if we had a much more agressive estate tax, but it was easily avoided by simply donating, tax free, large portions of your wealth to defined and vetted charities (like the Gates Foundation)?

Basically, if you don't want the government getting your shit, give it away to some humanist charity. If you don't....then Uncle Sam gets to decide what to do with it all.

Charities aren't well defined and aren't well vetted (consider the Trump Foundation).

And those charities can remain under a family's control for generations.  Those family members can be employees of the charity or foundation.  They can write off a bunch of different expenses (you know, your annual trip to Davos or whatever).

[Admiral Yi]

But taxation in a free and democratic society isn't about stripping away wealth; its about a society deciding to collectively contribute private resources to public benefits.  And wealth is arguably a better proxy than income for the private benefit that is reaped from living in a stable and effective state that enforces the rule of law and provides physical security.

Sure, it's two wolves and a sheep collectively deciding to contribute a sheep for the collective dinner.

[Malthus]

If an estate tax is a form of wealth tax - and cleary it is - then it's not obvious to me why the most rational way of imposing taxation on wealth is on the basis of the occurrence of an unpredictable event.  What not impose a wealth tax regularly every 10 years or every 5?  or why not every year? If the concept is sound, why not do it in a rational and systematic way.

The main reason seems to be based on a notion of fairness. It seems more fair to strip away wealth that was (notionally at least) earned, when the person who has earned it is no longer around - they cant, as the saying goes, take it with them.

Yeah I get the concept. I just think it would be terrible in practice and again it seems to me would be to make sure almost all the wealth of a country belongs to institutions with only scraps for people. I mean we already have that problem, this would just make it far worse.

I don't understand the point that the US lacks wealthy people. Allegedly, in the US, the top 10% of people held 70% of the wealth in the US ...

https://www.statista.com/statistics/299460/distribution-of-wealth-in-the-united-states/

I haven't seen a breakdown of wealth held by individuals versus institutions. Aren't institutions generally owned by individuals, through shares?

[alfred russel]

If an estate tax is a form of wealth tax - and cleary it is - then it's not obvious to me why the most rational way of imposing taxation on wealth is on the basis of the occurrence of an unpredictable event.  What not impose a wealth tax regularly every 10 years or every 5?  or why not every year? If the concept is sound, why not do it in a rational and systematic way.

A lot, if not most, of the super wealthy are going to have their wealth in the form of concentrated equity in specific companies. Jeff Bezos may be able to sell a few percentages of his Amazon stock every year, but for people that own privately held companies that isn't so easy. In those cases you may end up convincing people to sell out to larger companies in order to pay their tax bills...which is problematic from an economic perspective.

[Valmy]

I haven't seen a breakdown of wealth held by individuals versus institutions. Aren't institutions generally owned by individuals, through shares?

A technicality. The institutions control all that wealth. It is not so easy to just unload all your shares.

And what? The government is now going to control every corporation once all those shares get taxed away?

[Malthus]

I don't see a problem that an aggressive estate tax solves, and I see problems that it would create.

The issue is what kind of tax you want. Income, sales, tariffs on trade, or wealth?

All have problems.

[Valmy]

I don't see a problem that an aggressive estate tax solves, and I see problems that it would create.

The issue is what kind of tax you want. Income, sales, tariffs on trade, or wealth?

All have problems.

Sure. But we are talking about a 100% tax here. I am not against estate taxes at all, but just taking everything for some ideological sense of fairness strikes me as a disastrous idea.

[The Brain]

I don't see a problem that an aggressive estate tax solves, and I see problems that it would create.

The issue is what kind of tax you want. Income, sales, tariffs on trade, or wealth?

All have problems.

I'm not convinced that any taxes need to be aggressive.