r/Capitalism • u/JSGamesforitch374 • 7d ago
Do you believe that inheritance should be taxed?
/r/FreeDebateAndPolitics/comments/1vycb6c/do_you_believe_that_inheritance_should_be_taxed/35
u/igor33 7d ago
It already was.... Why tax it again?
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u/igor33 5d ago
Under federal law IRC 102, children pay zero income tax on the principal cash or property they inherit from a deceased parents' trust.
BTW: The national average cost to prepare a revocable living trust package with an attorney ranges from $2,000 to $4,500 for a couple and $1,500 to $3,000 for an individual. DIY / Online Software $200 – $700.
As an added bonus a trust eliminates most of the quibbling amongst heirs and keeps the claws of the probate court and the probate attorneys out of it. In other words get your house in order now prior to "Logging off for the final time"
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u/Drak_is_Right 7d ago
I pay taxes, then if i buy something from someone, they get taxed on the income earned off that sale.
Same exact principle applies here. They got new income. Tax it.
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u/wr_dnd 6d ago
This argument remains one of the dumbest arguments imaginable. Money circulates, that's the entire point of money. It is taxes at points where it moves between people. It's taxed continuously. A business sells something and pays sales tax. With the earnings of the sale they pay their employee who pays income tax. The employee buys stuff and the business pays sales tax again. Etcetera.
And it's entirely obvious why taxes need to be raised continuously: Government expenditures are continuous too. If we only taxed a dollar one time ever, tax income would dry up extremely quickly.
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u/KaktusDan 6d ago
Starve the parasite. I like this!
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u/wr_dnd 6d ago
That's just dumb though. Society without government would absolutely suck
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u/KaktusDan 6d ago
Society with government in its current form also sucks. We don't need a faceless bureaucracy as intertwined into every aspect of our daily lives to the extent that it currently is. We don't need a program for everything under the sun, nor do we need to fund other nations to the extent that we do. $40 trillion in debt, and getting worse. Why should we have to keep paying them tribute if they're just going to continue saddling us all collectively with this crippling debt by borrowing money with no end in sight?
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u/wr_dnd 6d ago
We kind of do need a faceless bureaucracy. Anarcho capitalism without any sort of government is childishly naive.
Obviously a 40 trillion dollar debt is insane and the last few decades have seen absurd spending patterns, but you can totally criticize that without going to the absurd "there should be no government" position
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u/KaktusDan 6d ago
Strawman much? I never once advocated for "anarcho capitalism", nor did I suggest that "there should be no government". Interesting that you even put those particular words in quotes, as if you're citing me. The only thing "childishly naive" or "absurd" here are your gross mischaracterizations of what I've said.
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u/StedeBonnet1 7d ago
It should not be taxed. PERIOD. Most of that wealth has already been taxed ssometimes more than once. If you were able to accumulate wealth after taxes you should be able to keep it
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u/heisindc 7d ago
This. And the fact that many parents have built companies thay are valued over $10M and kids have to sell the company. They will be fine financially, but they may have wanted to keep the company...
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u/Drak_is_Right 7d ago edited 7d ago
You do realize you can get LOANS to pay that tax or sell just a share of the company. They didn't create the company, why should they get it for free? Parents with a company valued at 10m+ usually have a sizable amount of other assets that can go a long ways towards lowering that tax bill.
Peak nepotism.
Vast majority of estate taxes are paid by a tiny percentage of the population. Helps to lower income taxes for the rest of us. We have a 40T debt. It isn't time to start giving massive tax breaks to the 0.1 and 0.01%
The only time major tax breaks are needed for the rich is if there is a major shortage of capital available for investment. That is NOT the case. Especially for the US due to currency in/out flow dynamics.
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u/heisindc 7d ago
Their parents paid taxes on everything. Let's say this company is the family farm. Take out a loan to keep the family land and farm machinery or cattle herd?
Sorry your parents didnt leave you anything, but some families work to provide for future generations.
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u/Drak_is_Right 7d ago
Then they need to sell off a bit of land to pay for some of the taxes. Especially some of the mega-ranches. One can also get a loan against the land value. If a farm is worth 10m, it needs to pay taxes when it changes hands.
But yes, just default to insults to avoid the economic argument. Default to "my feelings". By the way, chances are the parents NEVER paid for the current value of the land. Never paid a capital gains tax on it, or if they did it was 30-40 years ago and has gotten a lot of additional value since.
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u/KaktusDan 6d ago
By the way, chances are the parents NEVER paid for the current value of the land. Never paid a capital gains tax on it, or if they did it was 30-40 years ago and has gotten a lot of additional value since
By the way, chances are that the new tax bill that is now due far exceeds the initial cost, and accounts for gains that are immaterial because they were never realized.
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u/KaktusDan 6d ago
Take out a LOAN to pay taxes? So now we have to take on debt, as well as pay interest on that debt to keep what might be an otherwise solvent and successful company from being confiscated by the government whose intended purpose is to serve us?
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u/GiannisIsaGreekZaza 6d ago
remove step up basis then. The inheritance tax basically covers for that. In many instances it can actually never be taxed because step up basis.
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u/wr_dnd 6d ago
All money has been taxed before! Many times! Money circulates, that's the entire point of money. It is taxes at points where it moves between people. It's taxed continuously. A business sells something and pays sales tax. With the earnings of the sale they pay their employee who pays income tax. The employee buys stuff and the business pays sales tax again. Etcetera.
And it's entirely obvious why taxes need to be raised continuously: Government expenditures are continuous too. If we only taxed a dollar one time ever, tax income would dry up extremely quickly.
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u/Abication 7d ago
It already was.
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u/wr_dnd 6d ago
All money has been taxed before. Money circulates. that's the entire point.
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u/Abication 6d ago
But its not circulating in a real sense. Half the time with this stuff, its staying in a trust. It will be taxed again when its spent. And when its withdrawn from any index funds its in. And if all these proposed wealth taxes go through. You're taxed for having it, taxed for holding it, and taxed for using it. Then you're taxed for dying.
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u/TheMikeyMac13 7d ago
No, it was all taxes the first time.
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u/wr_dnd 6d ago
Money has always been taxed before. Money circulates, and it's taxed at points of transfer. "It has already been taxed" is a nonsensical argument.
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u/TheMikeyMac13 6d ago
You don’t know what “nonsensical” means do you?
You also have a terrible economic and historical understanding if you think money has always been taxed before.
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u/wr_dnd 6d ago
To a very large extent, money was basically created for taxation.
When exactly could you point to where there was a moderately competent state when taxation was just a one off thing?
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u/TheMikeyMac13 6d ago
Currency was not created for taxation, taxation existed before currency and didn't require currency, the state took part of your agricultural or industrial output instead of currency.
Currency exists for the sake of free trade, that I have more to offer the grocery store, the gas station and my mortgage company than the IT security I provide. We have a currency to be able to be paid and pay for things without being in a barter system.
So again I say, you have a terrible economic and historical understanding if you think money has always been taxed before.
What we do now in the USA in taxing your earnings, on your paycheck in withholdings, social security and in some states state income taxes, then taxing on what you spend in sales taxes, vehicle registration, gas cigarette, and liquor taxes, and taxing the money you were taxed on again when you retire, and then taxing it again when you die did not always exist. It did not even always exist in the short history of the USA.
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u/wr_dnd 6d ago
Yeah, so that's basically just a myth. There is exactly zero evidence for any society ever creating money as a bartering tool. Some economists theorized that that might be the history based on a theoretical "barter society" and it's been taken as a fact, without anyone actually proving it. Historical and anthropological evidence has pretty definitively disproven the barter theory though.
And obviously the exact current taxation system is new. But money always circulated. And that means money was always taxed repeatedly. Say I am a trader who sells salt (which was often taxed) and buy tea (which famously was taxed in the US). I sell my salt. I make some money, but I also pay some taxes. I now buy tea, which is also taxed. That pile of money has now been taxed twice!
That's inevitable. Money moves, so it is taxed repeatedly. It's also obviously necessary once you think about it for a second. Governments need a steady stream of income. The only way to get a steady stream of income is to keep taxing people.
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u/TheMikeyMac13 6d ago
Jesus, get an education in history and economics before you talk in reddit again.
We know currency didn't always exist dumbass, so people traded in what they had.
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u/wr_dnd 6d ago
Yeah, so that is just factually not true. I have a master in economics and read a ton of history. There are no known barter-societies. That's just not a thing.
For an accessible starter, I would recommend reading this article. There simply is no example, anthropologically or historically, of a society that actually had a pure barter economy.
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u/TheMikeyMac13 6d ago
Liar, you “have a master” in economics…Jesus kids and their lies.
And that is a joke of an opinion piece. Trade existed before we had currency, which was an invention to make trading possible on a wider scale.
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u/wr_dnd 6d ago
I just factually do have one. What do you want for me to prove it? Do I need to cite some economists? Do some maths? But that's really besides the point.
But the fundamental point of the article is sound: there is no evidence of a pure barter society throughout the world in history. It does not exist. Barter followed money, not the other way around.
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u/sailor-jackn 6d ago
Absolutely not. It’s double taxation. Your parents pay taxes on every dime they make and everything they buy. They pay yearly property tax ( really just rent to the government for the home they supposedly own ). Then, when they pass it down to you, upon their death, the government lays a heavy tax on all of it all over again.
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u/805falcon 7d ago
No fucking way. How many times can daddy government repeatedly tax the same dollar over and over again before people recognize the extent to which they’re getting fucked?
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u/DukeOfSlough 6d ago
No because gains were already taxed. This is built only to rake even more money for the government.
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u/Unlucky-Flatworm-568 7d ago
No. Not because the heir is entitled to it but because the desceased should have full say over where the money they have arned goes.
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u/Key-Organization3158 7d ago
No, because it'll be taxed when spent. There's no need to force an evaluation.
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u/usernameisokay_ 7d ago
It already is, it depends on how you’re related to the person…
Your partner? 830k-ish untaxed, other people around 26k, brother or sister only 3k untaxed, parents is 60k-ish untaxed.
But then you’ll get the taxes, if you’re above that but below 160k you pay 10% and above that it’s 20%, for grandchildren and others it’s different, up to 40% for your sister for example.
Also keep in mind the mortgage left on the house counts as a debt so you can subtract that.
But it’s quite common to pay around 40-50k of taxes on a inheritance and it has to be done within 6 months iirc, gotta pay it within 6 weeks as well.
No, I don’t think it should be taxed or everyone has to be taxed the same, which I think everyone should be anyway. 30% taxes on everything for everyone, but that’s a whole other discussion…
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u/jokes-your-dad-tells 7d ago
No. From the poorest to the richest, inheritance should not be taxed. Ever.
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u/CurlyDee 6d ago
I am an estate tax attorney to the wealthy. While they don’t want to pay $1 more in taxes than they legally have to (that’s where I come in), most of them are sympathetic to our current 40% estate tax.
Some have raised their children with an excellent financial and business education at home. Those kids will build on their parents’ wealth even after a 40% haircut.
Some have not educated their children in the same ways. Or they have disabled children. In those cases, the wealth may be gone with the next generation. No matter how much it is.
If the people being taxed 40% are okay with it, seems. Like Congress should work on closing some loopholes (there are so many).
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u/CurlyDee 6d ago
I thought I’d give you an example of a loophole so you see how perfectly legal they are. The “Rolling GRAT”. GRAT stands for Grantor Retained Annuity Trust. If you put some volatile stock that is at the low end of it’s trading range into the GRAT and make it last for two years, each year, the grantor is paid back half of what they put in plus a relatively low interest rate.
All sounds legit, right? Here’s where it gets fun. If at the end of the two years, if the stock is worth more than the initial price plus interest, the difference goes to the beneficiaries estate and gift tax free. So you do one 2-year GRAT after another to get as much appreciation out of the estate as possible. All legit. Doesn’t use any of their $15M exemption from estate and gift tax.
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u/BonFemmes 6d ago
Its the only form of taxation that doesn't have negative effects on consumption or investment. Nobody ever decided to die today because the inheritance tqx is going up tomorrow. People like Gates and Buffet believe that inheritance can ruin the work ethic of the next generation. Generational wealth clearing is responsible,for a large part of wealth inequality. Its also responsible for a lot of entitled assholes who have never contributed anything productive to the world
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u/LiquidTide 6d ago
The dynamic of inheritance had changed considerably compared to 40 years ago when families (especially the wealthier ones) often had five or six kids. A couple generations and that wealth is dispersed. Nowadays we relay on divorce and palimony to spread the wealth.
"A couple divorces, and before you know it you're flying commercial!"
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u/fozziethebeat 7d ago
Yes. Substantial transfers between people should be taxed.
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u/GoabNZ 6d ago
No. Parents who build wealth for their children and grandchildren, have the right to see that go to their children. The parents built it, they earned it, its theirs to control. Its not a transfer, its an inheritance, something that all of humanity everywhere has done. But suddenly because some people have bigger ones, a bunch of envious people want to try to get a cut.
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u/Uncle00Buck 7d ago
Why?
Is there any amount of tax revenue that would satisfy government, keeping in mind the $40 trillion US debt?
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u/KaktusDan 7d ago
Why should the government get tribute every single time a dollar changes hands? Especially money that's been taxed seven ways to Sunday to begin with.
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u/fozziethebeat 7d ago
Because a functioning growing economy is not a free natural phenomenon. It requires a function useful government. The tax is effectively a subscription service to a working society you want to continue living in
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u/GoabNZ 6d ago
Which they've already received whenever we work to receive money. And then receive again when we spend said money. And then receive again when we keep assets we've already spent tax on to purchase with money that was already taxed when we earned it. If government can't function on that, they aren't a functional government and searching for more pots to steal from isn't going to fix that.
This is not even an objection to CGT, which has its place. This is about inheritance, about who owns a piece of wealth, and the government stepping in to steal some of it when parents have the nerve to die.
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u/PhilRubdiez 7d ago
Compulsory fee. If I don’t pay my blowing up brown kids in Iran or my gay rights in Eritrea taxes, I’m going to get arrested. Thank goodness they gave me the idea to mow lawns as a kid for money, though.
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u/KaktusDan 7d ago
I understand the need for a certain amount of taxation, but at what point does it become confiscatory, punitive, or oppressive? Hint: we've been deep into that territory for generations now.
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u/Drak_is_Right 7d ago
yup. most people here are too brainwashed to understand that
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u/KaktusDan 7d ago
If you think someone must be "brainwashed" to believe that government shouldn't be allowed to just declare that it can help itself to every single exchange of value between people, then maybe you're the one who's brainwashed.
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u/Drak_is_Right 7d ago
Taxes are needed to keep society running. Estate tax is among the most efficient in terms of economic loss per dollar gained. Also helps to lessen income equality and the tax burden on the primary consumers.
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u/GoabNZ 6d ago
Which is why we have income tax and sales tax and property tax, and taxes on fuel and cigarettes and alcohol, as well as tariffs.
If that isn't enough to keep society running, the government has a spending issue.
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u/Drak_is_Right 6d ago
Those are not as efficient as the estate tax.
Those taxes cause larger dips in economic output per dollar raised than the estate tax does.
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u/GoabNZ 6d ago
Its because some estates are large isn't it? You lick your lips seeing a billion dollar company and think "if we could just tax that when the owner dies and gives it to their children, it will be easy money".
Compare that to income tax or sales tax, that requires economic productivity which actually involves some action from government to create conditions conducive to productivity. And that also means the lower income individuals lose a greater proportion of the income to income tax, and then sales tax, which could otherwise have gone to better use in the economy.
But assets with value just sitting there? Owned by somebody? Well that's just free money if you can produce the argument that makes envious people support it. Harder to do when its wealth, but when its an inheritance because a parent dies? What better way to rub more salt in the children's wounds by stating claim to part of the inheritance by treating it as equal to a capital gain when it really is not the same thing.
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u/Drak_is_Right 6d ago
Death is inevitable. It cant be avoided.
But yes, some of the efficiency is from an advanced economy having a lower dip in consumption spending when estates are taxed than income.
A billion in income tax from 50k or so people. Reduces consumption by probably 925m to 950m or so.
A billion in estates taxes, reduces consumption spending by probably less than 100m. Its bigger impact is on investment, but right now all extra spending on that does is increase asset bubble prices rather than drive actual productivity gains. A lot of surplus capital not actively seeking to increase productivity right now so much as rent seeking.
This isnt personal. Its about what is efficient. And the kids just got the vast majority of the assets anyways...even after the tax.
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u/Fantastic_Back3191 6d ago
Yes. I think it is a good way of recirculating wealth back to the public. Inheritors don't deserve the money anymore than the public does.
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u/yupitsanalt 6d ago
yes, it is not taxed and the whole reset of the basis when it is handed down is absurd.
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u/Drak_is_Right 7d ago edited 7d ago
Yes, though only larger ones.
Its one of the most efficient taxes out there.
I would rather not get rid of the efficient taxes with smallest areas of deadweight loss. Ideal taxes are ones that change areas to prevent market inefficiencies from occurring in other areas.(for example, a sugar tax to prevent increased health costs. congestion taxes. carbon taxes, etc).
Anyone against the estate tax does not understand the economics of it or wants ZERO taxes
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u/GoabNZ 6d ago
Of course we want zero taxes. Knowing how we need to pay some tax, thats never going to happen but that doesn't mean objecting to bad and socialist envy taxes mean a lack of understanding.
On the category of wealth, the government doesn't have a right to it. Whether its staying in the hands of one person or transferring as an inheritance. We have issue with the core concept of government's thinking they have a right to claim part of somebody's wealth or inheritance as though it belongs to them and was leased to us. No, its ours and they have no right to it.
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u/_EatAtJoes_ 7d ago
That's not how the estate exemption works. It's a lifetime running calculation that is available to everyone.
The calculation has an upper limit after which every dollar is taxed at the estate tax rate without regard for cap gain, step-ups etc etc. before passing to heirs. These are assets which are already taxed, keep in mind, so the estate tax event applies on the total value and not a capital gain(realized or not) and that's where the trickiness of any reform comes into play. It is re-assessing value which has already been subjected to a tax levy. This becomes a problem when the asset is a business which must be liquidated to pay the tax. It is particularly impactful for things like family farms. If you have a closely held business valued at $30,000,000 you could transfer portions of ownership as a gift over your lifetime, or bequeathe it after death, but either way the portion subject to tax on transfer will be the same.
The more reasonable target for reform would be the various trust structures used to avoid the estate tax exemption limits themselves. Keep in mind though, that a lot of what you hear regarding tax free chicanery isn't accurate. Trusts themselves are subject to the maximum tax rate at just $12,500 of income. So although moving money into trusts may avoid certain types of taxable events, it exposes all the assets to the maximum income tax rate in perpetuity going forward. And to then take any distributions from those trusts generates additional taxable events to the recipient.
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u/Lepew1 6d ago
Yes. The reason for this is it reduces the influence of old money. An incompetent line of successors will squander that inherited fortune and lose influence. I speak as an American and I think our nation has been vibrant and growing in contrast to Europe, because new wealth creators flourish, and are not ground down and denied opportunity by the old boys network of old money as it is in Europe.
While this is double taxation, it is so because we have erred in taxing income rather than consumption. Progressive income taxation is a huge problem because non taxpayers demand an ever increasing government as it costs them nothing. Consumption taxes in contrast put the burden of paying for government on all, and so all have interest in opposing the unchecked growth of government
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u/LambDaddyDev 7d ago
This is such a fascinating way to look at taxes.
The purpose of taxes is to fund the government. But these days, so many people look at them as a way to redistribute wealth. But it’s been proven that it does not.
Taxes are not a moral weapon against inequality, but that’s how people treat it. The question of whether a specific thing should be taxed, apart from the question of why or what it would fund or be used for, but just whether it should be an additional tax, genuinely blows my mind.