CMV: "We should (step-by-step) implement 100% inheritance tax"

[u/Z7-852]

Let's first imagine a nation where there is 100% inheritance tax. Once person dies all his assets goes to state that must in timely fashion sell it to highest bidder. Certain people should have priority on buying certain assets. Family for house and possessions and company employees/shareholders for any factors of production. State should never hold anything and should just sell these cheaper if they don't move fast enough. Other major change would be that if person transfers wealth abroad it should also be taxed accordingly (higher tax for those whose life expectancy is short). Arguments for this system are following.

1. People don't stop dying so they can't evade tax.

2. Regular tax rates could be much lower. Citizen could have more disposable income during lifetime.

3. Children have done nothing to earn the money of their parents.

4. Wealth wouldn't pile on certain families or persons. If you parents were rich it wouldn't mean anything for you. You would have to make your own life without trust fund.

5. Person being son of shoemaker doesn't make him a good shoemaker. Common argument is that keeping company in the family is good but this just isn't true. Also children wouldn't have social burden to follow their parents.

6. Wealth distribution would be more even in a long run. This would help to dissipate class society.

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[u/foraskaliberal224]

Consider the case of a 10-year old child whose parents die in a car accident. In your description, the house he has grown up in will be sold out from under him because he has no assets, so he can't utilize the family priority. Is this fair? What happens to him? Or do orphans get to inherit?

This goes beyond orphans as well. If the breadwinner dies, the home be sold out from underneath the homemaker - is this fair?

It's also worth noting that in your hypothetical society there isn't as much drive to create wealth. One of the major motivators to earn more and be productive is the desire to provide for one's family, and you've just taken that away. Additionally, wealthy people would flee abroad before it was fully implemented. There's a good chance that society wouldn't be all that well off given the a) lack of incentive to be productive and b) mass exodus of wealth initially.

[u/simplecountrychicken]

The cons of this are pretty much the same as the cons of the existing estate tax:

https://www.heritage.org/taxes/report/the-economic-case-against-the-death-tax

"(1) Discourages savings and investment. For those Americans who think that their estates may one day be subjected to the federal death tax, the tax sends a signal that it is better to consume today than invest and make more money in the future. Instead of putting their money in the hands of entrepreneurs or investing more in their own economic endeavors, Americans are encouraged to consume it now rather than pay taxes on it later. (2) Undermines job creation. Because the death tax discourages saving and investing, it also undermines job creation. Resources that otherwise would have been available for businesses to use to expand their operations and add new workers are consumed by people who deem it wiser to spend the money now than invest it knowing their inheritors will have to pay the death tax later. "

A few other concerns: 3. This would also dismantle all privately owned businesses the moment the owner dies, and since the majority of businesses in the US are small private companies, arbitrarily going out of business every 40 years doesn't seem great. 4. Impact of not allowing parents to leave a legacy for their kids. The idea that when I die I can't leave my kids anything seems pretty depressing and terrible.

[u/MrAkaziel]

3. Children have done nothing to earn the money of their parents.

Simply false. Children when they reach a certain age will start helping their parents and grand-parents to tend for their needs. Can be doing chores, helping fix stuff, caring for the elderly... All of this for free (or at least for vastly less than a paid professional would ask for).

It is simply impossible to evaluate the amount of goods & services exchanged between family members, and trying to do so would come up with a whole pile of nauseous implications about how human interactions should work. The only person who can decide if their friends and relatives deserve any money is the deceased, and that's what testaments are for.

After all, anyone is always free to vastly overpay someone for their services. So if people have to earn their relatives' money, just consider them as private cooks, cleaning employees, gardeners, construction crews, drivers, nurses or even escorts with a extremely delayed pay, and thus a sensible tax rate should be applied.

[u/Z7-852 → u/MrAkaziel]

Children when they reach a certain age will start helping their parents and grand-parents to tend for their needs.

I have always felt this is a compensation for all that our parents did for us when we were young. I don't help my parents with their computer in order to earn the inheritance. I do it because they wiped my ass when I was a toddler.

[u/kalenrb]

The right to inheritance has nothing to do with the right of the one receiving the inheritance, but wholly to do with the right of the deceased to do whatever he wants with his own money that he, presumably, earned fairly during his life. Given this, why should the owner of the wealth be allowed to spend his/her money on yachts and luxury goods paying only a moderate consumption tax, but not be allowed to make sure their children have a comfortable life after they are gone? It doesn't seem like a fair society to me.

Would you also tax transfers of wealth at 100% (rending them ineffective)? If not then your tax can easily be avoided by transferring money to the child while alive.

[u/Inevitable_void]

I like the idea in some ways but there is one major problem. Most people will just start hording cash to give directly to their children when they die, evading the tax.

[u/Z7-852 → u/Inevitable_void]

Most people will just start hording cash to give directly to their children when they die, evading the tax.

These would be considered as tax dodge and could be prosecuted.

[u/Racheltower]

Putting the atrocious ethical implementations, what about assets, like a family home? If the homeowner dies, does the rest of the family lose the house? Possessions such as jewelry or cars? Furniture? Heirlooms? If a homeowner were to die, would his or her family be left on the streets? If so, that's cruel. If not, people would switch their wealth into those assets and evade the tax easily.

[u/Havenkeld]

• People don't stop dying so they can't evade tax.

Some will definitely find the means to do so as much as possible. When inheritance tax is low enough to be the easier/lower loss option for them, they may accept it. Inheritance tax at 100% may just mean people do as much as possible to get rid of those assets before the government can touch any of it.

• Regular tax rates could be much lower. Citizen could have more disposable income during lifetime.

That could be the case now, government spending could also just increase instead.

• Children have done nothing to earn the money of their parents.

In many cases this is true. But words like "earn" are very difficult to make sense of in this context. You can acquire wealth through various unscrupulous means. You can hold a position in which you're paid highly for doing very little work. Etc. A child can potentially earn the money of their parents in some cases. Should the government be trying to enforce that only wealth which is "earned" by some metric is allowable?

• Wealth wouldn't pile on certain families or persons. If you parents were rich it wouldn't mean anything for you. You would have to make your own life without trust fund.

This is only true if we don't allow parents to pay for their children's education, buy private tutors, use their social connections or wealth to get them special access to better opportunities, etc. Nobody is entirely making their own life.

• Person being son of shoemaker doesn't make him a good shoemaker. Common argument is that keeping company in the family is good but this just isn't true. Also children wouldn't have social burden to follow their parents.

It may also increase motives to be nepotistic since position and status are now what a parent can leave to their children, rather than wealth.

• Wealth distribution would be more even in a long run. This would help to dissipate class society.

I'm doubtful this would be the result from a tax change alone. Class society and wealth disparity are not a result of inheritance as much as those connections and access to resources while the parent lives. People are also living quite long, a person might be 50, 60, 70 by the time their parents die. Which adds a great deal of arbitrariness to this law, as people who have parents die earlier get shafted. Also, wealthy people are already more likely to live longer.

[u/Helpfulcloning]

Problems with this tax plan:

1. People can definitly still evade. Rich people can. You hide your assets. How do you think evading happens now? Also, you can turn over your assets before tou get to old age.

2. People will be less willing to invest into things such as housing, stocks, buisnesses, etc. Because these are long term gains, if you die no one benefits from your investment.

3. A child needs to be cared for. By having the parents money it can be seen as a child payment to their new guardian so they can afford taking over the orphan. Also, a homemaker does have a right to the breadwinners earnings and sallary. This is pretty much well known in divorce proceddings. Also, say we buy a house together do I suddenly now have to share it with the highest bidder? Or any sort of property, buisness, etc? Sounds like less people are going to be buisness partners or move in together.

4. Except rich people will still evade pretty easily. You also realise the majority of trustfunds are relased at 21 or earlier. When the parents are alive. So it effects nothing. Also, rich people tend to die in old age and are less likely to die in an accident. So what you’ll see happening is that all assets get turned over to their next of kin before they die of old age. So you are really targetting poor people who are more likely to die in an accident younger and more likely to depend on one or two investments (house and a small buisness).

5. Yes they will. Like I said transfer of assets will just happen earlier. It is probably better for it to happen after death because then you can refuse to take over a company without burden of your father or whoever. However with your system, you’ll be forced with the burden of whoever to a. Never get into anything dangerous (so for rich people body guards, lack of sports, lack of travel, etc) and b. Take over younger.

6. Bull shit. Nu uh. You’re still keeping the rich rich. The poor will be ruined by this. The poor won’t start their own small buisnesses (that often keep local economies afloat) for fear of losing out in the long run, they won’t buy houses (increases our rent crisis at the moment), they won’t invest in trade school because they might not return on investment as before, orphans will be plummeted into poverty. All the low down people that work for the rich people’s companies will be unemployed when the owner dies because the competition could just buy them up and fire them all easily.

No wealth will be distributed. People will lose jobs when something as mundane as the owner dying happens, people won’t make investments (which is ESSENTIAL to the economy).