I used to be vehemently opposed to anti-inheritance laws but I've recently softened up a bit. Because the data shows that most wealthy people are first-generation rich anyway. (See: The Millionaire Next Door and also The Millionaire Mind for the data)
Someone who is really wealthy would've bestowed their children with immensely valuable lessons and experiences while they were growing up. And most of those children would already be on a path to their own success well before their wealthy parents die. After all, you'd expect most of them to become successful in their 30s and 40s while their parents are still alive. At which point any inheritance is simply a cherry on top, even if it's just 5% of the estate with the rest going back into charitable causes / society.
I understand the argument about how the wealthy who earned their wealth have the right to do what they want with it, but we already know that a lot of wealthy people end up adopting this mentality around giving away most of their wealth anyway. Like Gates, Buffett, etc. It seems like once you get into the real echelons of wealth you have a better understanding of why large public works projects are more noble than simply giving the entire estate to your offspring who are likely already going to be well-off by the time you keel over and die.
It depends on how you define "wealthy people" and also if you look at the most wealthy (in the US)
Sorry for the wall of text but this is an interesting look at the richest in America (spoiler: 60% inherited)
"In its just-released new report, United for a Fair Economy extends this baseball analogy to last year’s Forbes 400. UFE defines as “born in the batter’s box” those Forbes 400 rich who hail from poor to middle-class circumstances. Some had nothing growing up. Others had parents who ran small businesses.
About 95 percent of Americans, overall, currently live in these “batter’s box” situations. Just over a third, 35 percent, of the Forbes 400 come from these backgrounds.
Just over 3 percent of the Forbes 400, the United for a Fair Economy researchers found, have left no good paper trail on their actual economic backgrounds. Of the over 60 percent remaining, all grew up in substantial privilege.
Those “born on first base” — in upper-class families, with inheritances up to $1 million — make up 22 percent of the 400. On “second base,” households wealthy enough to run a business big enough to generate inheritances over $1 million, the new UFE study found another 11.5 percent.
On “third base,” with inherited wealth over $50 million, sit 7 percent of America’s 400 richest. Last but not least, the “born on home plate” crowd. These high-rollers, 21.25 percent of the total Forbes list, all inherited enough to “earn” their way into top 400 status."
I love the Millionaire next door as a book and it is great advice. But it, and The Millionaire Mind, are based on self-reported data. That is really useful, because you can learn good habits from it. But you have to be aware that there is a natural bias of people to downplay how much of their success comes from other people and how much is due to our own good works. Economists often look at the income of families from tax returns or census data. Neither is perfect. That's how you can get some people quoting studies that most millionaires are self made and some people quoting studies that most wealthy people got an inheritance. They are quoting different kinds of studies (and probably with different wealth cutoffs too btw).
For your personal habits and plans it is good to keep in mind that most millionaires are self made and you can be one too. For policy purposes, understand that wealthy people tend to have wealthy children.
My attitude towards this is starkly different to yours. Suppose the data showed the opposite - that most wealthy people had inherited the bulk of their wealth. For me this would be an argument in favour of anti-inheritance laws. An entire class of society would have an inherent, non-meritocratic advantage in life.
The children of rich people go to the best schools, have tutors, can afford to go to expensive universities without worrying about the cost, can afford to take unpaid internships, and have access to the capital to start their own ventures. All those things happen long before they inherit anything.
This is why I'm in favour of very high levels inheritance tax. It would encourage rich people not to hoard their money and instead spend it on things that keep the economy moving (people spending money is what creates jobs). People being rich is great, but only if they actually spend their money.
The other way for economies to keep moving is for poor people to borrow more, and we saw the long term effect of that in 2008.
I very much agree with you, with the caveat that one replaces "keep the economy moving" with "raise the quality of life for the worst-off in society". I find these measures don't always coincide although the first is admittedly easier to keep track of.
> Someone who is really wealthy would've bestowed their children with immensely valuable lessons and experiences while they were growing up.
Friend of mine works for a high wealth individual with children in their 20's. That's exactly what's going on. If they actually come to need to inherit a $100 million from their dad then they don't really deserve it.
It hardly matters. If you can still pull off financial shenanigans that Trump pere did- siphoning money into his childrens' bank accounts via accounting shenanigans, without triggering gift or inheritance taxes- then you can pass a large chunk of your wealth down before you die.
The fact that criminals exist (and that occasionally laws are not well enforced) does not mean we should just give up on making good laws. Rather it should inform how we design and enforce the laws.
Certainly. What needs to change wholesale is the attitude. If we enforced the existing laws assiduously, we'd be halfway to solving the problem. I am fatalistic towards attempts to fix this with laws and taxes because we can't even keep the IRS sufficiently funded to enforce the tax law as it stands. Without a complete turn-around in the incentives in Congress, there's really very little actual laws seem to do.
It's not that laws are sometimes not enforced, it's that there's an entire echelon of lawbreaking in which the law is hardly ever enforced. Nobody worries about going to jail for engineering complex tax schemes designed to shield themselves from billions in tax obligations.
Yeah, I wasn't even commenting on the fact that people try to get around laws. I was just commenting on the philosophy of why people shouldn't be so upset if an inheritance or estate tax is even much larger than what it currently is.
The framing of this headline bothers me. It implies the money always belonged to the children from the start. "Gave away" is also an interesting choice over "donated". At least in my mind, they conjure different thoughts. Donated implies a purpose, while "gave away" could mean that the money was lost needlessly.
Hong Kong law approximately gives all personal effects to the spouse plus 50% of the cash, with the rest going to any children (unless there is a will that says otherwise)
If the parent died and a will wasn't found, the estate is handled via "laws of intestate succession." When a person dies intestate, or without a will, the laws of the state where they resided determine how their estate is distributed. According to these laws, specific family members, or heirs, typically have a right to inherit a share of the decedent's property.
This guy spelled out a will that directly went against the way how the general laws of the land would have normally given his estate to his heirs.
(1) Inherited dynastic wealth creates a plutocracy. I believe people of each generation should rise to the level of their abilities and not to the level of largesse of their families. Allowing people to hand down massive wealth is like playing monopoly where every square already has a hotel on it.
(2) The children didn't earn it, so they deserve it as much as anyone else. Inheriting it may adversely affect who they turn into as humans.
(3) I believe in a large social safety net so that those who cannot succeed don't have to die, but rather can live out their lives comfortably. Basic income, socialized medicine, education, etc.
This strikes a fair balance IMO. You earned the money, you created the value, you have to spend it in your lifetime. If you can't, the state will decide where it goes. The next generation will be looked after, and if they too are successful they can also enjoy the spoils. If not, they can live out their lives in comfort.
I think this doesn't quite jive with human nature. People have a naturally strong drive to build something and give to their kids. If there's no legitimate way to do that, then people will find other ways (whether illegal or just less honest means) to pass the things they've built to their children.
Sounds like you'd really enjoy reading Francis Fukuyama's "The Origins of Political Order" <https://www.amazon.com/dp/B00457X7VI/>. He analyses how different cultures came to wrangle large states, showing how they all had to deal with the same issues although they dealt with them in different ways. The base issue is that the state has to replace the family as the strongest allegiance: a person holding office can't use that office to enrich their family, else eventually the state has nothing and warlord dynastic families result. So you get Janissaries (kidnapped Christian boys) as the elite fighting force in the Ottoman Empire, and the 11C (?) change in the Church that prevented priests from marrying (because they'd been enriching their families). Since I read the book, I can see that fundamental tension between state and family playing out everywhere. Highly recommended!
Lots of things don’t jive with human nature, like not murdering/stealing/etc, and yet we create systems to change that in ourselves rather than surrendering to our base instincts. If it's better that way, then we can always use a similar approach. All I'm saying is that 'human nature' isn't always good, and I'd rather keep it out of the decisioning process.
The really wealthy will always find loopholes in any system: that's not an excuse to do away with all societal structure or rule of law. No system can be perfect, but the idea is to strive to close such loopholes (even if this may be somewhat of an arms race—many things in life are)
> 2) It discourages saving and investment.
It discourages saving, but not investment (and only the latter has intrinsic societal benefit). One could argue it might skew investments more toward short term return, but I doubt this.
> 3) It encourages consumption and spending on frivolities.
Spending is generally framed as societal good and the definition of a "frivolity" is highly subjective.
However, if we do run with the subjective, I would argue that the biggest driver of frivolous spending is having a lot of (/too much) disposable income, which often stems from inheritance.
It's also often argued that inheriting does little to teach the "value" of money and as such encourages frivolity (though tbh I don't know how much I believe this).
> Imagine if everybody would have to start from the ground up, we would rarely see any progress at all.
Wow. Are you seriously proposing that only those who inherit riches can improve the world??? Or, worse yet, only those should have that opportunity???
> This type of policy is proven to be regressive
Define "proven" here. Where/when has this policy been implemented? What were the environmental factors?
In general, savings is investment, as an identity. An economy must save in order to invest for higher future standard of living.
Short term investment goals is precisely the problem. If one invests for a return only in their lifetime (for consumption), one can't make longer-term investments that have intergenerational benefits (consider the concept of investment broadly).
Only the state would be able to do that, so you'd better hope for a good state.
Only the state is capable of intergenerational investment? There are a number of long-lived, fiscally successful private organizations that would beg to differ. Not everyone is hyper-focused on short-term yields, and as I see it the average politician is no more likely to take the long view and sacrifice their own present well-being for the benefit of future generations than anyone else.
> It discourages saving, but not investment (and only the latter has intrinsic societal benefit).
Not true. To begin with, what most people think of as "savings" is actually an investment—unless your savings take the form of cash stuffed in a mattress. An interest-bearing savings account is an investment, after all, even before we consider that larger sums would normally be held in money-market accounts or CDs. Even if you did keep your savings stuffed in a mattress, though, that saving still benefits others. You produced something of value and you're not spending the cash you received in return on things other people also want to buy. This reduces the supply of cash in circulation relative to the amount of goods available to be purchased and thus lowers prices for everyone else compared to what they would have had to pay if you'd chosen to spend the money. Normally in a healthy, growing economy this forbearance would be rewarded through appreciation of the purchasing power of the unspent cash over time—price deflation—but TPTB have decreed that price deflation is evil and must be avoided at all costs. (The key lesson here is that it's a really bad idea to treat any fiat currency as a store of value, since they can always make more and dilute your savings.)
>> 3) It encourages consumption and spending on frivolities.
> Spending is generally framed as societal good and the definition of a "frivolity" is highly subjective.
I'll grant that "frivolity" is subjective but consumption is pretty much the opposite of a societal good. It's not a bad thing, of course. Production without consumption would be pointless and wasteful. However, it's the process of production that provides value to others; consumption is just the opposite, claiming one's own personal share of what all the members of society have collectively produced.
> Are you seriously proposing that only those who inherit riches can improve the world???
It is an objective fact that those few lone individuals who can claim to have lived their lives free of unearned gifts from their parents or other interested parties (apart from life itself, which is a major concession) have not been particularly successful at improving the world beyond the narrow scope of their own necessities. That's because they're spending their entire lives and all of their energies just trying to survive. Just having parents who take even the most basic care of you as you're growing up is a huge inheritance in its own right. More indirectly, we have the vast stores of knowledge left to us by previous generations as well as a huge amount of capital to amplify the productivity of our efforts. We tend to focus on mere differences in inherited material possessions, but in reality that pales in comparison to the vast riches gifted to even the poorest among us has by those who came before.
Even the kid of this Tycoon ended up becoming the CEO of his father's company. What a coincidence!
He won't inherit wealth, but he already did inherit the means to become wealthy himself. Probably is by now.
> It discourages saving and investment.
It won't do so significantly for your average Joe. Rich people not hoarding their money can also arguably be good for the economy. Though I'm undecided on that issue.
I like the spirit of the ideas, but yeah I gotta say it's a little extreme to me.
Forcing people to spend money in their life time is going to incentivize consumerism. So I was super rich, and you want me to be forced to spend rather than invest and pass down to the next generation, I'm either going to try to pass it down illegally, or spend on things like sports cars and yachts and watches and fine wines and michelin star restaurants. None of them is as valuable as keeping it invested. On top of that, I'd divest all my holdings (which, if I didn't diversify well, means asset value in general will drop whenever someone super rich dies, which also opens up the opportunity for speculation, but that's beside the point).
This also doesn't take in the account of sudden death. What if you suddenly died at 45, with a $1.5 million estate? So you never had the opportunity to enjoy it. This will incentivize people to be a lot more near-sighted and again reinforces consumerism.
You mentioned having it being taxed at 90%. I'd say that's probably good, but I'd go a step to the right and say 90% on anything that's over $2mil, since your argument is contingent on a very very strong social safety net, which I do not think the United States has, and I would say it's also debatable on how strong you want the social safety net to be.
I disagree with this viewpoint. At the end of the day wealth needs to be distributed to people in proportion with their ability to allocate it effectively towards the growth in the knowledge and capabilities of a society. In other words -- we want smart people that want to improve society to have lots of money.
Dynastic wealth needs to be paired with a code of ethics and training ... nothing inherently wrong with it.
> (2) The children didn't earn it, so they deserve it as much as anyone else. Inheriting it may adversely affect who they turn into as humans.
This goes against the idea that I should have the freedom to do whatever I want with my post-tax money. What if I decided I want to give my money to a bunch of random strangers on the street? Would you insist "they deserve it as much as anyone else"? It's an essential matter of freedom. Where do you draw the line? Would you say I can't donate too much to X charity, and must donate equally to all registered 501(c)(3) orgs?
What about me just going out and buying stuff? What if a super-rich person decided screw my kids, and chose to splurge everything they earned on incredibly-expensive vacations, cruises, food, hotels, etc. Are you going to attempt to use the force/violence of the state to prevent them from giving their money to whomever they want to give it to?
Reductio ad absurdum. The ultimate consequence of carrying your line of thought would be the appropriation of all income and wealth, a.k.a. communism -- which we know doesn't work very weell.
> (3) I believe in a large social safety net so that those who cannot succeed don't have to die, but rather can live out their lives comfortably. Basic income, socialized medicine, education, etc.
Ignoring the fact that every European country that does this has an absurd and shocking tax-as-a-percentage-of-GDP (it's nearly 50% in France) -- your "large social safety net" is only going to work in very wealthy countries (with high per-capita income). This wouldn't work in most middle/low-income countries, where annual incomes 30 to 40 times to lower than very-high-income countries. And my point being -- I think we should aspire to develop universal political principles -- not ones that break in certain economies, while barely-working (with extremely high taxes) in others.
> (1) ... Allowing people to hand down massive wealth
I don't really know what the solution is to this. I'd have to reflect more. What I can say it's unfair to completely take away something that someone truly worked to build/earn. Perhaps we could frame things to say that there is a moral limit to how much someone can "fairly"/"ethically" earn in their life, and anything above that limit, is society's to plunder. I don't know. I haven't found an idea that I find comfortable or confident supporting.
> This goes against the idea that I should have the freedom to do whatever I want with my post-tax money. What if I decided I want to give my money to a bunch of random strangers on the street? Would you insist "they deserve it as much as anyone else"? It's an essential matter of freedom. Where do you draw the line? Would you say I can't donate too much to X charity, and must donate equally to all registered 501(c)(3) orgs?
You don't have the freedom to do whatever you want with your post-tax money. That's constrained by law. You can't give it to someone else, for instance, in excess of $14K per year you have to pay a gift tax. You can't pass it on to your children without paying an estate tax. You can't open a brokerage account in a foreign country and buy assets there. You can't pay anyone on the OFAC list. The list goes on, and on, and on.
If you gave a stranger on the street <$14K sure. More than $14K prepare to pay the gift tax, which treats it as income. I don't draw the line, you're welcome to spend it anywhere. You just can't give it to your children as an estate.
> Ignoring the fact that every European country that does this has an absurd and shocking tax-as-a-percentage-of-GDP (it's nearly 50% in France).
The top marginal tax rate in California is over 50%.
> I don't really know what the solution is to this. I'd have to reflect more.
Force people to spend it or tax it at 90% when it's passed on.
> Force people to spend it or tax it at 90% when it's passed on.
Your whole line of thinking seems absurd to me. Why is it totally fine (by you) for someone to spend all their money on themselves, but not okay for them to gift it to someone? You're saying if it's a gift (or estate passed to children/spouse), tax it a second time at 90%. But if they spend it on fancy hotels, luxury cruises, etc. there's no double tax. This is absurd, and irrational.
> The top marginal tax rate in California is over 50%.
How is this relevant? Marginal tax rate is a different unrelated thing. I for one, support a marginal tax rate of at least 70% on very high incomes. I think the people making less than $100k should pay a near-zero income tax, and people making above, say $2 million, should be taxed at least 70%. (Or, even better, at 90%.) But I want to keep taxes zero or nearly-zero for the middle-class, especially for the poor. In a tax system like mine, the tax-as-a-percentage-of-GDP would remain fairly low. So your comment on the "top marginal tax rate in California" is absolutely irrelevant.
> You can't give it to someone else, for instance, in excess of $14K per year you have to pay a gift tax.
I'm well aware of the gift tax, and I support it (at the current rate). It was created to prevent people from circumventing the estate tax (which I also support at the current rate). Now, notwithstanding the fact that this also is irrelevant to the point I raised, I'll point out another error: you and a lot of people think the gift tax exclusion is the only things there is, and forget about the lifetime gift tax exemption. You have a lifetime gift tax exemption of $11.18 million, and an annual gift tax exclusion of $15K, as of 2018. Only after you've given away $11.18 million, does the annual $15K limit kick in.
> You can't open a brokerage account in a foreign country and buy assets there
This is patently not true. Plenty of countries let you open brokerage accounts without being a citizen or resident there. And US law doesn't prevent you from opening brokerage accounts abroad. (The FATCA has made it a PITA for foreign financial firms to deal with American clients, and they might turn you away; but for those who are not American, that's not an issue.)
> Your whole line of thinking seems absurd to me. Why is it totally fine (by you) for someone to spend all their money on themselves, but not okay for them to gift it to someone?
Yes. They earned it, they should benefit from it. Wealth is society's way of rewarding you for creating value to society. That reward shouldn't be transferrable (beyond some trivial quantity). If they don't want to spend it on themselves, they should return it to society. Think about it dispassionately; why does your child deserve your money? They didn't do anything other than be born, so you're basically rewarding them with a privileged lifestyle just for existing. You're choosing to privilege people because of the circumstances of their birth, and I'd hoped we as a people have moved beyond that. They should rise to the level of their ability on their own and be rewarded accordingly. If they can't they shouldn't obtain the benefits and lifestyle. Those who deserve it in the next generation should. IMO, of course.
> How is this relevant? Marginal tax rate is a different unrelated thing. I for one, support a marginal tax rate of at least 70% on very high incomes. I think the people making less than $100k should pay a near-zero income tax, and people making above, say $2 million, should be taxed at least 70%. (Or, even better, at 90%.)
Fine by me :)
> Only after you've given away $11.18 million, does the annual $15K limit kick in.
Indeed, I'd forgotten that. I think that should be eliminated.
> This is patently not true. Plenty of countries let you open brokerage accounts without being a citizen or resident there. And US law doesn't prevent you from opening brokerage accounts abroad. (The FATCA has made it a PITA for foreign financial firms to deal with American clients, and they might turn you away; but for those who are not American, that's not an issue.)
Those who aren't "US Persons," which includes anyone resident in the US -- even anyone a tax resident of the US in the current year. Regardless of nationality. This one isn't FATCA related, it's SEC regulation:
"Under Regulation S of the Securities Act 1933, the SEC prohibits – among other things – foreign financial institutions that are not registered and regulated in the US abroad from soliciting US residents as clients." [1]
FATCA is awful, but it's not responsible for this.
Yes, I'm well aware of that. I moved to the U.S. in 2007, and I'm not a citizen or a permanent resident yet (and not that close getting permanent residency either). Not because I don't want to become a US citizen, but because US immigration laws make it incredibly difficult to gain permanent residency if you're not family-sponsored and qualify for refuge/asylum. My presence in the US, per the IRS' Substantial Presence Test[1], makes me a "US person" and subjects me to the related taxes. I use the word "American"[2] in the sense defined by Jose Antonio Vargas[3]. He's written a great book[4] on the topic.
> the SEC prohibits – among other things – foreign financial institutions that are not registered and regulated in the US abroad from soliciting US residents as clients
This is a good thing, and this makes perfect sense. The SEC exists to protect US investors. If an unregulated nefarious company solicited US investors, that would expose them to potentially huge danger. There are enough bad-faith and Ponzi investment schemes cropping up, it's best to not expose Americans to soliciting from investment firms all around the word.
But -- as far as I'm aware -- nowhere does federal law or regulations (incl. SEC rules) state that a US person can't open a brokerage account abroad. Sure, a foreign brokerage can't advertise to you nor solicit you, but there's nothing preventing you from doing your research, and finding a brokerage abroad you like, and applying to open an account with them. (Of course, it'll depend on that country's rules and whether they allow non-citizen non-resident person to open brokerage accounts in their country, but in general, one could say a country loses nothing by receiving foreign direct investment, so would likely welcome it.)
> They didn't do anything other than be born, so you're basically rewarding them with a privileged lifestyle ...
Let's clarify who gets the proceeds from your hypothetical 90% tax. The citizens of the X country? I want to ask a rhetorical question at this point: why should the citizen of the X country be rewarded over another country? Because they were born there or have ancestry to the people who inhabited that land a long time ago? As per your argument, they didn't do anything to deserve it. Other than being born on X piece of soil. I've paid hundreds of thousands of dollars in taxes. The US has such horrid immigration laws that it's almost impossible for anyone to obtain permanent residency in this country outside family/DV/reugee+asylee routes. The fact that I've been here for over a decade legally, and have paid hundreds of thousands of dollars in taxes -- counts for nothing/nada/zilch under US immigration law. My freedom to live here could be stripped away easily if I lost my job. I'm years away from citizenship. So here's my question: wouldn't the right thing to do be to distribute all of the revenue equally to the whole world? Is that fine?
> hey earned it, they should benefit from it.
What if they don't want to benefit from it, but rather want someone else to benefit from it? Why is that not okay? Spending money on oneself vs spending it on someone else -- where's the distinction? Perhaps they get great joy in giving the money to others. That's their choice. By the way, the only distinction between the two kinds of money transfers is that one's a donation/gift, while the other is a transaction involving the exchange of services/goods. What you want is to effectively ban gifts and donations. It seems like in your ideal world, all people (are forced to) engage in purely transactional relationships, and charity is non-existent/banned.
In summary, what I can say is: all of your ideas and arguments are truly shallow, poorly thought-out, logically inconsistent, and incoherent. While leaning heavily towards communistic tendencies, and an utter destruction of personal freedom / individual liberty.
Re: brokerages, no it doesn't say you can't open one, but good luck finding a foreign brokerage that'll open an account for you. I was denied by HSBC in Canada because while I'm a Canadian citizen I'm a US resident and that was the address they had on file. This is common corporate practice the world over. The letter of the law is irrelevant if nobody will play ball with you.
> So here's my question: wouldn't the right thing to do be to distribute all of the revenue equally to the whole world? Is that fine?
If you're still alive feel free to do so subject to the rules and regulations of your jurisdiction. If you die with an estate, it'll get handed out by the government of the place in which you were last resident. It's not that complicated, it's how it works right now, just with a higher rate and a lower exemption. I'm not exactly breaking ground here.
> In summary, what I can say is: all of your ideas and arguments are truly shallow, poorly thought-out, logically inconsistent, and incoherent. While leaning heavily towards communistic tendencies, and an utter destruction of personal freedom / individual liberty.
This entire block was logical fallacy, simply attacking me instead of the argument. This is a great way to lose a debate, so when you're having a consequential debate in your real life, I suggest you avoid this line of attack.
It's interesting that what I propose was the law of the land in the US for much of the 1900s. The US estate tax was between 70 and 80% from the early 1930s to the late 1980s. This included the entirety of the so-called "second red scare" (1947-1960). Clearly the neo-McCarthy-ites didn't consider this to be "communist" or an "utter destruction of freedom and liberty." During this same period the top marginal tax rate was between 80 and 95%. You'd think if it was classically "communist" leaning, that might have come up? This isn't meant to be an appeal to authority, nothing I've suggested furthers the Communist agenda of "advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs." I'm pro- wealth inequality and pro- income inequality so long as it's coupled with social mobility and people start out more or less from the same place in each generation. [1]
To quote Wikipedia, "free market supporters of the tax, including Adam Smith and the founding fathers would argue that people should be able to get to the top of the market through earning wealth, based on meritocratic competition, not through unearned, inherited handouts, which were central to the aristocratic systems they were opposed to." [1]
I posit to you that having generations start off on even footing is the definition of meritocracy and the American Way, and you're representing the post-1990s modern neo-con mentality. That's fine, and I don't think your arguments are "poorly thought-out and inconsistent" -- I just disagree with you.
It's shocking in a timeless sense. If I built a time machine, and traveled to the 1st century AD, and asked a random farmer in some random place on Earth how he felt about giving 50% of what he produced to the state, his reaction wouldn't differ much from a person alive today. That the French (or other Europeans) are acclimatized to nearly 50% of their country's GDP being taxed, doesn't really say much. Fact is, 50% is incredibly high -- even a little child would agree.
A farmer in the 1st century? They’re likely slaves or serfs, so I’d wager they’re giving 100% of what they make away, and to their master, not to the state. They’d be shocked at how much they would be allowed to keep.
“In 332 AD Emperor Constantine issued legislation that greatly restricted the rights of the coloni and tied them to the land. Some see these laws as the beginning of medieval serfdom in Europe.” [1]
Sounds like he did a good job raising his kids from early age. Kudos. Yes, he is still privileged, but it's not easy for parents to make this kind of choice for their children.
Not only did he believe this is for the greater good, but he must've had a strong conviction that his children would've been better off this way.
Even given they are growing up with all the privileges he can give his kids (and who wouldn't), what a great dad to say, and mean, that "it’s better not to lead a life that’s too comfortable in one go. You’ll treasure more if you gain things step by step.”
Andrew Carnegie did much the same, and wrote this about it, after first considering and dismissing passing your wealth on to your families or endowing it at your death:
There remains, then, only one mode of using great fortunes; but in this we have the true antidote for the temporary unequal distribution of wealth, the reconciliation of the rich and the poor—a reign of harmony—another ideal, differing, indeed, from that of the Communist in requiring only the further evolution of existing conditions, not the total overthrow of our civilization. It is founded upon the present most intense individualism, and the race is projected to put it in practice by degree whenever it pleases. Under its sway we shall have an ideal state, in which the surplus wealth of the few will become, in the best sense the property of the many, because administered for the common good, and this wealth, passing through the hands of the few, can be made a much more potent force for the elevation of our race than if it had been distributed in small sums to the people themselves. Even the poorest can be made to see this, and to agree that great sums gathered by some of their fellow-citizens and spent for public purposes, from which the masses reap the principal benefit, are more valuable to them than if scattered among them through the course of many years in trifling amounts through the course of many years.
I wish this type of thinking — caring about the development of the public and republic - was more common these days. Common culture, from the Kardashians to the “SV dream” and the President himself, sells the exact opposite.
I'm sure a huge percentage of her fanbase has no idea who her father is or the massive role he played in a significant televised court case. Makes sense for her to follow in those footsteps if she's actually serious.
> A graduate of the London School of Economics and Political Science, Shih said he considers himself an average Hong Kong citizen.
and
> Shih’s advice to his peers? Be realistic.
> He aims to buy a two-bedroom apartment in a middle-class neighborhood in West Kowloon
The interwebs tell me that a 2-bedroom flat in west kowloon starts around 2 million USD. I'm sure it's realistic for Shih, I doubt it's realistic for the average HK citizen.
As a Hong Kong citizen, I can tell you 2 mil is a realistic number. The prices in this city is the top 3 in the world. More expensive than San Francisco. There are no longer any housing available less than half a million except for government housing which you have to wait over a decade. Half a million will buy you an apartment the size of a normal bedroom in SF.
because if you get a lot of cash, you, while still living, can make it do stuff in the world that you think needs to be done.
Carnegie, for example, decided that He Really Liked Libraries. So he built a lot of them.
Paul Allen decided that we were wasting everyone's time redoing basic science experiments, so he did a lot of them and put them all online for free forever.
Brian Acton and Jan Koum decided that free, secure messaging should be available to everyone, so they sunk $500M into Open Whisper Systems so it can be a nonprofit with a warchest.
In years past, people have made similar decicions like "there should be a really good hospital in this town, so i am building one", or whatnot.
Carnegie liked building libraries, but you will notice that a lot of those libraries got named after him.
He used his wealth to benefit society, but he also effectively set up a system that would stamp and preserve his name and legacy in history. His actions weren't exactly entirely selfless.
This seems to be a common goal for a lot of people once they become very rich. They ask themselves, "what do I do with all this money?", and then they discover that even rich people die... So they attempt to white wash any of their past wrong-doings, and paint themselves as heroes and leave behind a legacy where their name will live on even after they die.
The really hard questions are things like "are all of carnegie's depredations that he was responsible for while amassing his wealth in some sense 'worth it' if his wealth was subsequently spent on raising the standards for everyone? If so, by what metrics?"
If I ran a library that was given millions by a donor, even if they didn't ask for it I'd like to name the library after them. Instead of it just being called "Houston Public Library" or whatever, you can show how people choose to give back to communities and maybe inspire other people to contribute in ways they're capable of.
> Brian Acton and Jan Koum decided that free, secure messaging should be available to everyone, so they sunk $500M into Open Whisper Systems so it can be a nonprofit with a warchest.
A better question would be why would you leave anything material for your kids? A good eduction and guidance through life should suffice. The rest should be invested in good governance.
I'm leaving a large estate to my kids because they (and any kids they have) need something to fall back on if my investments in governance in their country of birth fail. Education and guidance aren't enough.
Like it or not, money does solve (or can simplify) a lot of problems in life . Providing a good education to your kids does not have to be mutually exclusive to leaving money behind. Why not do both?
They didn't earn it, and it may adversely affect who they turn into as people.
Why not give it to literally anyone else? Why not give your money to me when you die? I'm sure your gut said, obviously not, why would I do that? That's how I feel about inherited wealth.
I have thought that there would be no need to leave anything of significant monetary value to my kids. Either they are smart and they do not need that. Or they are dumb and they do not deserve that.
And if I could choose, I would highly prefer paying my taxes not from my income when I am alive, but from the estate I leave after I am dead. For some reason that is completely mindboggling to me, this preference seems to be quite rare...
What would prevent you from just spending / donating your whole estate before you passed and then paying zero taxes? Or is that a feature in your system?
Of course there are practical issues in paying all of my taxes from my estate, but I can still hope that I could pay a bit more of my taxes after my death and less while I live.
> why work so hard to earn so much in the first place?
Power.
A very comfortable lifestyle can be had for orders of magnitude less than $400M in wealth, so lifestyle isn't a motivation at that point.
Inheritances function kind of like insurance policies against an unpredictable future for your progeny. The more dangerous you think that future is for your children, the more likely you are to set aside as much as you can for them.
The father in this case seems to be confident that the future holds promise for his children, whether because he thinks they will get a fair chance, or because he raised them well, and that therefore they don't need a massive inheritance to live well.
Evolutionarily speaking, people should be motivated to protect their offspring and ensure their survival.
It strikes me as very odd (and stupid) for someone to give their own child nothing, but then essentially give a bunch of other families and their children $400 million.
I mean, at least give your own kid a leg up! Geez.
He likely is protecting his children's children by denying them obscene wealth. The problem isn't with the first generation born into great wealth it is the 2nd or 3rd who are far removed from the origin and the ways of thinking that created it they tend to get all sorts of deluded worldviews that ultimately lead to their and their families ruin. I've seen stats that assert 70%-90% of wealthy families lose their fortune over 2 generations. Falling wealth levels is likely a much greater existential threat than being born into one and maintaining.
It seems that there are "interesting" ways that you could have a lot of wealth, but shield your children from the negative effects. For example, let's say you drove mostly older cars, teaching your kids to maintain and repair them themselves. Or let's say you lived in a huge house, but you don't have a cleaning crew - the family works together to clean the house on Sundays. Everyone fights, no one quits. If you made it your goal, you should be able to decouple "instill a serious work ethic" from "we own assets worth millions or billions"
There are many things other than money that parents can give to children to ensure their survival - relationship, connection, power, status, good will, knowledge, education, wisdom, character, vision, etc. Money is just the medium for exchange. In this case the parent has exchanged the money with something intangible for his children, and as a last act, exchanged it for other intangibles.
Edit: Also human has evolved to utilize social systems to further their survival and dominance. It's no good to have all the money in the world while the system itself crumbles. This dad has the foresight to use his money to ensure the system his offspring living in will survive and thrive. There's a saying, "no eggs can survive a fallen bird nest."
Maybe the other families had less than his kid. Have you thought about that?
I'm pretty sure his kid has more than nothing. It wasn't sent to an orphanage to begin with. Having a good education and knowing the right people is often more valuable than some cash in the bank.
If your children are well educated and have connections, they already have a leg up. But whatever the reasons, if he's not worried about their ability to survive, then it makes sense to contribute to society.
When I use this term, I'm referring to the general theory of evolution, particularly in reference to survival of the fittest and natural selection. I'm also referring to the natural instincts that a lot of animals (and humans) tend to have, such as the instinct to save the life of their own offspring, even if it means putting their own lives at risk.
By that standard, evolutionarily speaking, he should have worked to maximize the number of children he had, as he had the means to provide for them. Or maybe he should have worked to fight climate change, as that could be a long-term threat to humanity's survival, which may include some of his descendents (and certainly some of the same traits he has).
Acting like what is "evolutionarily smart" isn't necessarily what's good. It can be, but that's not a strong basis for moral action.
Evolutionarily speaking we should be chasing animals in hunter-gatherer clans. The fact that we are slowly transcending the bounds of biological evolution should be celebrated: we have culture, art, and science now. And what we consider family (the ones we want to be happy) is slowly growing (with the occasional small step back). That guy ensured his kids had marvelous opportunities and is now trying to provide marvelous opportunities for other people in his "extended family". Jeez, how misanthropic or selfish do you have to be for this to not make you happy?
If you've parented well, you've given your kid a leg up whether you leave them money/property or not (though I intend to leave my children money/property). The connections they have from their father are likely non-negligible as well.
The son is still running the company. He received a great education and opportunities to work and challenge himself. He's gotten a lot and has appreciation for what he has.
If only there were some way for rich people to give away their money while they were still alive!
To be a little less snarky, this kind of simple prescription gets very, very complicated in practice. You really want to make it so that a lower-middle-class family whose primary breadwinner dies has to lose 100% of their assets? No? Okay, now we have exceptions to the 100% estate tax. What about spouses who outlive their partner? If I die, should my wife get kicked out of the house that we own jointly? If not, what happens when Joe Billionaire marries someone who he never gives any indication of regarding as a spouse right after his terminal cancer diagnosis, and she marries his son right after Joe's death? What if she marries Joe, immediately divorces him, his divorce settlement gives her the overwhelming majority of his assets, and the she marries his son and they immediately divorce and the settlement gives him the overwhelming majority of their assets?
What if Joe Billionaire starts foundations and those foundations employ his children? What if he starts a for-profit company that he owns 100% of the stock of, the company employs all his children and pays them $100M a year until the company runs out of money? At the end of his life, the government can take all the stock of the now-worthless company.
What if Joe Billionaire locates his assets in a different jurisdiction?
People (mostly) don't go to these extremes right now because they don't stand to lose hundreds of millions of dollars if they don't.
>You really want to make it so that a lower-middle-class family whose primary breadwinner dies has to lose 100% of their assets?
I'm talking about the estate tax we already have, where that family is already exempt:
>Because of these exemptions, it is estimated that only the largest 0.2% of estates in the U.S. will pay the tax.[7] For 2017, the exemption increased to $5.5 million. In 2018, the exemption doubled to $11.18 million per taxpayer due to the Tax Cuts and Jobs Act of 2017.
The rest of your examples aren't especially meaningful, the existence of loopholes doesn't mean we can't start with something simple and adjust it later. Those methods already exist and are used to dodge existing taxes, that doesn't mean taxes are a flawed concept.
>Sure, there are anecdotes galore. Everyone seems to know someone who has fled California to dodge its high taxes. But there’s no wholesale bolting of the rich.
>“Substantially more rich people are moving into California than moving out,” says Cristobal Young
>Florida, which ranked 39th in per capita income in 2017 according to the U.S. Census Bureau, gained the most income through migration. But Florida generally is considered an outlier, given its extremely attractive climate.
>“When Florida is excluded, there is virtually no tax migration,” the report states.
France tried a 75% tax on income over 1 million and it caused so many people and capital to flee that their economy stagnated and they actually lost tax revenue [0].
Even a 100% estate tax wouldn't do it, the disparities in opportunities (access to and expectation of education, social contacts, …) don't go away, nor do provisions set up during life (companies, trusts, …).
Do you mean non-genetic? There may be a measure of genes, but in the aggregate these will more likely be linked to nurture (access to food, healthcare, …) than nature.
Yeah, obviously "in the aggregate" everyone is average-looking and of average height. When looking at a single individual in a first world country genetics will be the primary determinant of their height and physical attractiveness.
I believe we live in a meritocracy, but don't think we should do that. I see no moral reason to do this. Inheriting money doesn't make any one else poorer.
If I'm wrong, why?
All this aside, I think it's great that this gentleman made this choice. I think it will do a lot more good this way, and might even make his son more successful (by avoiding trust-fund syndrome).
The process of acquiring a massive fortune does make some poorer (definitely in the relative sense), even as it makes some better off, that is, it drives inequality. Technology picks up some of the slack by raising the floor standard of living, but only if doing so is also profitable for the financier or seller of the technology, and never anything beyond that.
While that process may be necessary to incentivize innovation, it has societal costs, and it's not unreasonable to consider offsetting those costs by confronting the wealth gap directly.
But I would argue the concentration of extreme wealth in few hands actually hinders innovation, and therefore makes society poorer overall, because a great number of people who might otherwise contribute creatively to major societal problems instead must focus their efforts on daily survival.
Inequality stifles innovation because capialists have no reason to make production more efficient when labor is artificially cheap, as it is in Asia. Why build an automated factory to build the machines that build memory chips when little slave children can do the same thing for pennies? In this way, organized labor drives innovation under capitalism, because capitalists will seek to maintain and grow their profits in the face of rising labor prices.
> The process of acquiring a massive fortune does make some poorer (definitely in the relative sense)
This is my issue with the whole "wealth inequality" concept. It's just that: you have more money than I do. So what? Sure, I'd like more money, but I don't think it's the government's job to take your money and give it to me. I have never seen the issue with CEOs making tens of millions of dollars; they do a very singular job (in a well-run company).
> Technology picks up some of the slack by raising the floor standard of living, but only if doing so is also profitable for the financier or seller of the technology, and never anything beyond that.
You think the Gates Foundation operates on a for-profit basis? I think you are correct with respect to businesses, but would prefer non-profits pick up the slack for the very bottom of society, rather than the government.
> While that process may be necessary to incentivize innovation, it has societal costs, and it's not unreasonable to consider offsetting those costs by confronting the wealth gap directly.
I agree it has societal costs. How do you propose to directly address it? I don't think giving the government the power to take and distribute how it deems best is a good solution.
> the concentration of extreme wealth in few hands actually hinders innovation, and therefore makes society poorer overall, because a great number of people who might otherwise contribute creatively to major societal problems instead must focus their efforts on daily survival.
Though it does have problems, I think it also makes it easier in some ways. Angel investors can make it much easier to start a business, and certainly easier than if you had to pitch the middle class for two thousand dollars a piece.
I guess my overall issue is that I don't know of a better way. The best solution I can come up with to help is to stop the crony capitalist element, subsidies, etc.; where government picks winners and hands out contracts. I don't trust the government (particularly not the federal) to do most anything right, and I think if they are given more money (via, say, increased taxes), they will just waste it, likely signing more large, crony-ist government contracts in the process.
If there's a better solution, what might it be? I think if one is proposed, maybe it's best to test it on a state or local level first. I tend to start from a moral perspective: how can we morally justify taking money from others at gunpoint to make things "fairer"?
> how can we morally justify taking money from others at gunpoint to make things "fairer"?
How do we justify it for paying for our common defense (the military), theoretically blind justice (the court system), public roads and infrastructure, critical public health programs? The answer is that if we don't, there would be dire consequences. It's not so different for the consequences of high inequality, or as someone recently put it cheekily: the Hamptons are not defensible ground.
However, you appear to be conflating taxation as a method of raising government revenue with the question of whether a society should have have resource redistribution of any kind.
Can you propose an alternate mechanism for raising government revenue, other than by threat of seizing it?
Or perhaps you simply oppose governments raising revenue at all, and by consequence, the existence of government itself?
We have many contemporary examples of societies that lack the ability to centrally tax and raise revenue. What happens in these places is revenue still gets raised, but in a decentralized way, and usually with the threat of real violence.
how can we morally justify taking money from others at gunpoint to make things "fairer"?
Perhaps it depends how they got it. If they got it by "unfairly" taking it from their neighbour at gunpoint, can we morally justify taking it from them at gunpoint - perhaps in order to return it to that neighbour? If that seems like a fair action, if we can justify that, then the principle is established that sometimes it is morally justified, and we then need "only" identify those qualifying situations.
> If the got it by "unfairly" taking it from their neighbor at gunpoint, can we morally justify taking it from them at gunpoint - perhaps in order to return it to that neighbor?
We call those people robbers and do just that. Any one who takes money at gunpoint is such. I'm not sure if you were trying to make a different point, but we're pretty good at arresting violent criminals and punishing them.
The point I made is that sometimes it is morally correct to take things from a person at gunpoint, in the name of fairness. You suggested that it was morally unjustifiable to ever do so ("how can we morally justify taking money from others at gunpoint to make things "fairer"?")
I suggest, and you appear to agree, that sometimes it IS morally justifed to do so. The principle established, with both of us agreeing that sometimes it is morally justified to forcefully redistribute wealth, now it only falls to us to decide when we should do this forceful redistribution of wealth.
How are you defining "meritocracy"? To some people, it's so obvious that we don't live in one that your statement seems just utterly incredible. I can only conclude you and they must have different definitions of "meritocracy".
In the interests of not coming across as a passive-aggressive dickhead, I believe that the US and the UK (where I happen to live) are, to a large extent, meritocracies, and I think this is a bad thing that stunts (many) people's opportunities to excel and achieve. I suspect we have quite different working definitions of "meritocracy".
Someone who is really wealthy would've bestowed their children with immensely valuable lessons and experiences while they were growing up. And most of those children would already be on a path to their own success well before their wealthy parents die. After all, you'd expect most of them to become successful in their 30s and 40s while their parents are still alive. At which point any inheritance is simply a cherry on top, even if it's just 5% of the estate with the rest going back into charitable causes / society.
I understand the argument about how the wealthy who earned their wealth have the right to do what they want with it, but we already know that a lot of wealthy people end up adopting this mentality around giving away most of their wealth anyway. Like Gates, Buffett, etc. It seems like once you get into the real echelons of wealth you have a better understanding of why large public works projects are more noble than simply giving the entire estate to your offspring who are likely already going to be well-off by the time you keel over and die.