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.
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.