
The estate tax is a bad tax say economists (2001) - todd8
http://friedmanletter.org
======
ihsw2
The estate tax has been nearly the best way of reducing wealth inequality,
second only to the income tax.

Like many wealthy individuals off of Hacker News, you more than likely have a
Roth IRA account that houses Vanguard mutual funds. John C Bogle (or Jack
Bogle), the founder of the Vanguard Group, has consistently and wholeheartedly
supported the estate tax as a time-tested means of reducing income inequality.
The estate tax has a deep and lengthy history stretching back centuries and
(unfortunately) there is a dearth of economic data pointing to it being
beneficial to society. It is nonetheless important to emphasize the mutual
respect and shared responsibility between the wealthy and non-wealthy.

I am by no means a rabid Communist but rather a right-leaning individual that
feels strongly about this subject -- there is most definitely precedent for
the estate tax's usefulness. The basis of the argument against the estate tax
is capital flight and that is just a weak red herring that ignores how
immobile most wealth is.

~~~
chimeracoder
> The estate tax has been nearly the best way of reducing wealth inequality,
> second only to the income tax.

That's an assertion that's often repeated axiomatically by non-economists, but
it's not borne out by the data. Aside from the fact that the estate tax raises
embarrassingly little revenue[0], the number of individuals who actually pay
the estate tax is pretty low. Furthermore, it's inherently a tax that doesn't
capture the true benefits of inherited wealth, and there's no way to to turn
death into a taxable event that does - even if you imposed an estate tax of
100%.

Friedman has written an entire book explaining why the estate tax is
inherently broken and unfixable. His criticisms of the estate tax are only
controversial politically; they are generally accepted by economists, even
those that don't advocate repealing the estate tax for other reasons.

> and there is a dearth of economic data pointing to it being only beneficial
> to society.

I'd agree that there's a dearth of economic data pointing to the benefits of
an estate tax.

[0] $19.3 billion, which is about half a percent of total federal revenue, and
not nearly enough to make a dent in wealth inequality

~~~
JumpCrisscross
> _the number of individuals who actually pay the estate tax is pretty low_

A paper published in 2000 "began with an aggregate time-series analysis, and
found that summary measures of the estate tax rate structure are generally
negatively correlated with the reported net worth of the top estates relative
to national wealth," which "is consistent with estate taxation reducing either
wealth accumulation or inducing avoidance, or both" [1].

The simplest strategy for avoiding the tax involves gifting. "A couple with
two children could divest itself of $1 million over a twenty-five year period
simply by taking advantage of the gift tax exclusion" [2]. That grows if the
couple contemplates gifts to grandchildren, spouses of children or
grandchildren, _et cetera_. Another involves the "diversion of profitable
investment opportunities" to heirs, _e.g._ by "arranging profitable business
deals and then bring[ing] their children in as coinvestors". Lending to
children at prevailing rates and guaranteeing their loans are related
strategies. More sophisticated techniques include "preferred stock
recapitalizations in closely held firms, installment sales, and life
insurance."

TL; DR The estate tax does little to reduce inequality.

On a more meta level, it is interesting to observe that for "several decades,
total revenues raised by estate and gift taxes have roughly equalled those
raised by excise taxes on alcohol and tobacco" [3]. The estate tax attracts
attention because of a fundamental disagreement, regarding taxes, in our
politics.

"Broadly speaking, the tension is one between a desire for structural tax
reform, which would move the tax system to- wards greater horizontal and
vertical equity, and a desire for tax provi- sions designed to stimulate
increased savings or capital formation. This tension produces a direct
conflict between the need to tax capital or the income from capital in order
to achieve a progressive tax burden and the perceived need to exempt capital
and capital income from tax in order to induce economic growth" [3].

[1]
[http://piketty.pse.ens.fr/files/KopczukSlemrod2001.pdf](http://piketty.pse.ens.fr/files/KopczukSlemrod2001.pdf)

[2]
[http://www.nber.org/chapters/c10931.pdf](http://www.nber.org/chapters/c10931.pdf)

[3]
[http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?artic...](http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=2630&context=fss_papers)

~~~
chimeracoder
> is consistent with estate taxation reducing either wealth accumulation or
> inducing avoidance, or both

That's correct - as per the very first point in the article, people structure
their assets to minimize their estate tax liability.

> On a more meta level, it is interesting to observe that for "several
> decades, total revenues raised by estate and gift taxes have roughly
> equalled those raised by excise taxes on alcohol and tobacco" [3]. The
> estate tax attracts attention because of a fundamental disagreement,
> regarding taxes, in our politics.

I'm not really sure why that's relevant? Unlike estates, we don't tax tobacco
because of a desire to generate revenue or reduce wealth inequality. Tobacco
taxes are actually _incredibly_ regressive: the burden of the taxes is almost
entirely paid for by the poor, so they _increase_ inequality. But we tax it
regardless, because we believe that the taxes contribute to a decrease in
smoking nationwide.

~~~
JumpCrisscross
> _I 'm not really sure why that's relevant?_

The author is contrasting the disparity in attention given two two relatively-
minor taxes with similar economic burdens.

> _we don 't tax tobacco because of a desire to generate revenue or reduce
> wealth inequality_

Tobacco taxes are _absolutely_ marketed as revenue raisers. They aren't
intended to reduce inequality, but another perceived societal ill--tobacco use
and nicotine addiction.

~~~
chimeracoder
> The author is contrasting the disparity in attention given two two
> relatively-minor taxes with similar economic burdens.

The economic burdens of the estate tax and the tobacco tax could hardly be
more different. One is explicitly targeted exclusively at the very wealthy,
and the other is effectively (though not explicitly) targeted at the poor.

> Tobacco taxes are absolutely marketed as revenue raisers

I'm not really interested in how they're marketed; I'm talking about the
economic policy-driven justifications for them.

> They aren't intended to reduce inequality, but another perceived societal
> ill--tobacco use and nicotine addiction.

That's the Pigovian tax argument, which again, is completely different from
the estate tax argument.

~~~
JumpCrisscross
> _we don 't tax tobacco because of a desire to generate revenue_

>> _I 'm not really interested in how they're marketed_

You're either being obtuse or didn't read my original comment and think I'm
disagreeing with you. If Policy A is marketed as way to do X, it was passed,
in part, as a reflection of a desire to do X.

------
skywhopper
First, this letter is nothing new, this should be marked with "(2001)".

As for the content, this letter gives no evidence of its claims, and simply
relies on the emotional power of the phrase "death should not be a taxable
event". It makes vague, unsupported assertions about the effect of the tax on
saving, the cost of enforcing and collecting the tax, the amount collected by
the tax, and the prevalence of avoiding the tax. Without actual numbers,
though, it's impossible to argue with effectively, which is exactly the point
of this rhetorical style.

The letter also falls into the narrowly hyper-rational trap of elevating vague
economic principles to the level of an absolute moral stance. Just because
some policy doesn't meet a completely artificial and oversimplified ideal of
economic efficiency doesn't mean it's definitely the wrong policy. The real
world is more complicated than an economic model.

Ultimately, the most important thing to understand is that this letter was a
political statement in support of George W Bush's proposed tax policy in 2001,
and not a serious argument. The content is no basis for a reasoned discussion
of estate tax policy; it's a propaganda piece.

~~~
chimeracoder
> As for the content, this letter gives no evidence of its claims

You're demanding a lot for a 325-word letter. The author of the letter has
written multiple books and papers on this topic in great detail. If you're
looking for formal analysis that supports the claims, that's the place to look
for it, not this letter.

------
dave_sullivan
Scroll down the page and a pop up from the "Family Business Coalition" asks to
sign up for their mailing list to help repeal the estate tax.

The main points they offer for why are `the estate tax wouldn't raise much
money anyway because estate planners have hid the money well` and `it's too
hard to enforce`.

Doesn't feel like a very nuanced argument.

~~~
tootie
Wasn't the estate tax repealed last week?

~~~
chimeracoder
> Wasn't the estate tax repealed last week?

No, it wasn't.

------
taeric
I find the claim at the outset almost laughable. That eliminating this tax
would see an increase in revenue. With word that for the one family this will
save them more than a billion... Yeah, not going to recup in indirect ways.

I'm not entirely against dynasties, but it does seem against original US ways.
This is definitely a return to policies that can allow a landed gentry.

~~~
ng12
Well, depends on who you ask. Many founding fathers wanted only the wealthy to
be able to vote.

~~~
taeric
See my answer down thread. This doesn't seem contradictory to my claim.

Specifically, they set up policies to benefit themselves. They did not
establish their families as the royalty of America.

------
rayiner
I think this starts from a backwards premise. The question isn't whether the
government should tax inheritances, but whether the government should have a
mechanism for people to control property beyond death in the first place:
[https://www.economist.com/blogs/lexington/2010/10/estate_tax...](https://www.economist.com/blogs/lexington/2010/10/estate_tax_and_founding_fathers).

Simply having property escheat to the government at death would seem to
address the only real, non-moralistic argument raised by the letter: that the
estate tax is expensive to administer but doesn't raise much revenue. Of
course, people would probably arrange for inter-vivos transfers instead. That
would be fine, because such transfers would be taxable income to the recipient
(presumably, while we're getting rid of inheritance, we can get rid of what we
call "gift income" which is really just regular income).

There is precedent for it:

> Thomas Paine, like [Adam] Smith and Jefferson, made much of the idea that
> landed property itself was an affront to the natural right of each
> generation to the usufruct of the earth, and proposed a "ground rent" — in
> fact an inheritance tax — on property at the time it is conveyed at death,
> with the money so collected to be distributed to all citizens at age 21, "as
> a compensation in part, for the loss of his or her natural inheritance, by
> the introduction of the system of landed property."

There is a certain libertarian appeal to the idea of property rights ending at
death. Maybe there is a "natural right" to property. But surely there is no
"natural right" to have a whole apparatus of government dedicated to carrying
out the wishes of dead people.

------
whowouldathunk
_The estate tax is justified as a means of reducing the concentration of
wealth. However, the truly wealthy and their estate planners avoid the tax.
The low yield of the tax is a testament to the ineffectiveness of the tax as a
force for reshaping the distribution of wealth._

Of course, those recommending the repeal of the estate tax are also probably
of the opinion that wealth concentration is not a problem.

------
jannotti
Counter argument. [https://www.economist.com/news/leaders/21731626-case-
taxing-...](https://www.economist.com/news/leaders/21731626-case-taxing-
inherited-assets-strong-hated-tax-fair-one)

In my opinion, a wealth tax (of which estate tax is one example) is much
fairer than an income tax. It is somewhat difficult to levy, but I don't think
it's inherently more difficult than measuring income for income tax. It's just
that we've spent a century working on income monitoring laws and regulation.

~~~
DoofusOfDeath
I'm unable to find a satisfying definition of "fairness" when it comes to
taxation. So for now I try to think about a tax's likely consequences.

Honest question: Have you had more luck?

~~~
jannotti
Well, I'm not sure there's any definition that's going to come straight from
first principles, but I see a wealth tax as something closer to the way we tax
corporations, which is to tax "profit" not "revenue". A personal income tax is
more of a revenue tax - even if someone has to spend every dollar they make on
kids, health care, rent, etc - we still tax it. We try to fix this a little,
by offering deductions that we think make sense. But a wealth tax seems like a
more direct way to get at this idea. Levy a tax on the money that people are
able to accumulate, not on the money that flows through them.

------
bhickey
This letter is disingenuous in its argumentation.

> the earnings on the assets were taxed year after year

Given the stepped up basis upon death, gains accrued during life are _never_
taxed.

~~~
UncleMeat
Yep. The claim that the estate tax is a double tax has been a lie for decades.

------
trey-jones
I am not an expert - I appreciate and (without being an expert) mostly agree
with the comments that promote the estate tax as redistribution of wealth.
But:

It seems to me, as usual, that small business owners (their progeny, that is)
are the ones who get screwed by estate tax.

Full disclosure: I am not a small business owner, but my father has been for
nearly 30 years. I anticipate that my younger brother, who works in the family
business, will be more affected by this than I will be, so I consider myself
fairly objective here.

In our example, my parents are doing fine, but they are by no means a "wealth
center". My dad worked hard building the business. It took about 20 years for
him to see meaningful profit (it's manufacturing).

So the problem as I see it is that my parents (like other small business
owners) have the majority of their "wealth" tied up in the business. So the
business would need to be dismantled in order to pay the estate tax, which
leaves my brother (also working hard) in a tight spot.

I'm sure that there are ways around this, and hopefully they are thinking
about that. I know that at some point there was a large life insurance policy
meant to cover the tax.

Sure, it's still redistribution of wealth, but us folks in the middle are the
ones that feel it. The top dogs will still pass most of it on.

~~~
ghouse
With a exemption on the first $22 million gifted to your brother by your
parents after the surviving spouse dies, I don't think this fits the
definition of "small" or "in the middle."

~~~
logfromblammo
Incorporate the business. The parents as the majority owners on the board
elect the brother as CEO. The brother appoints siblings to executive
positions. The executive salaries include stock grants.

The company then trades shares of stock for life annuities of equivalent
present value. Essentially, the company starts a pension plan for its owners.
As long as they still live, the parents take pension payments, in lieu of
dividends or distributions, and the kids gradually build up equity by
"working" in their executive positions. The pension benefit appears as a
liability on the balance sheet, depressing on paper the basis of the
privately-held company stock.

When the parents die, their beneficial interest in the form of the life
annuity is terminated immediately, without any intervention by an executor or
probate judge. That cash flow from the company is now freed up for dividends.
The value flies from the present value of the life annuity to the stock price
of the company that no longer has to pay it, just as the last breath leaves
the body, so fast that the taxman cannot catch it. The kids will realize a
capital gain if they ever sell their stock, and will see a rise in dividend
income going forward. This increase in wealth would be the same size as a
normal inheritance, but does not trigger taxation until they sell the stock,
and avoids estate taxes entirely. Income tax is paid quarterly.

This is fine. The estate tax earns the government no revenue. It served its
purpose by encouraging the elder generations to yield their power over the
family businesses _before_ they die.

------
sandworm101
"Death tax" is the best PR campaign ever. This is an inheritance tax. Nobody
is taxing death. They are taxing the post-death transfer of wealth. And why
complain? You will be dead. If you really want to avoid this tax, give away
your vast wealth while still alive.

I think we should apply a death tax only to dead people. A 100% tax on post-
death income to the estates of the dead. That should speed up the settlement
process.

~~~
alehul
Would that not sap people's motivation to work hard and innovate, if they were
unable to pass on the benefits to their children?

What if they provided a comfortable lifestyle for their children? Would that
just be taken away by the government upon the parent's death?

~~~
wott
"Children" are nowadays more than 50 years old when they inherit... Their life
and situation are already made and set, and their active life mostly behind
them.

~~~
sandworm101
The real danger in this pattern is that people do not inherit until they are
themselves retired or soon to be. My grandparents didn't die until my parents
were both in their 60s. Not getting an inheritance is pain for a young person
but they can live on. For someone planning on that money to fund a retirement,
someone who is about to stop working due to age anyway, not getting it is
life-altering.

------
unclenoriega
> Spend your money on riotous living – no tax; leave your money to your
> children – the tax collector gets paid first.

What about sales/excise/VAT taxes? This letter seems disingenuous at best.

~~~
pzone
1) We try to encourage saving and investment by collecting VAT instead of
taxing capital gains. It's the exact same logic and perfectly consistent.

2) Sales/excise/VAT taxes are still collected whether it's the parent or child
who is spending the money. It's symmetrical and doesn't treat one moment in
time or one generation differently than another.

------
outsideoflife
In the UK there is an equivalent 'inheritance tax'. It is a grossly unfair tax
in that it fails to tax the most wealthy. For instance the Grosvenor Estate of
the Duke of Westminster recently passed an estimated $59bn company and $16bn
in personal wealth to the next generation without paying any inheritance tax
at all. This is a achieved by structuring as a trust fund. Yes anyone _could_
start a trust fund, but not everyone can afford the professional fees.

[0]:[https://en.wikipedia.org/wiki/Grosvenor_Group](https://en.wikipedia.org/wiki/Grosvenor_Group)
[1]:[https://en.wikipedia.org/wiki/Hugh_Grosvenor,_7th_Duke_of_We...](https://en.wikipedia.org/wiki/Hugh_Grosvenor,_7th_Duke_of_Westminster)

------
nicolashahn
I proposed an alternate to the current estate tax here that I think is
relevant:
[https://news.ycombinator.com/item?id=15947957](https://news.ycombinator.com/item?id=15947957)
(ctrl-f "cap on inheritance")

"An exceptionally productive individual can generate billions, but then when
he dies the money goes to his heirs which may not have done anything to
deserve commanding that much wealth other than having been raised by (and
having the genetics of) the exceptionally productive individual, which is a
far cry from being exceptionally productive themselves.

My thought was to create a cap on inheritance. Enough so that the heirs would
be able to live a normal middle class life without working, but not be
disgustingly wealthy like the parent. ~$5 million seemed like enough to live
off interest for a lifetime. I don't think productivity would be
disincentivized too much by this, as the productive individuals still get to
use their wealth as long as they're living. It'd probably be pretty difficult
to plug all the loopholes but I think it's worth thinking about.

We could lighten some other taxes (income, property, whatever) for this
increased death tax such that the overall government tax income remains
roughly the same, to make the proposal more palatable. Overall, everyone keeps
more of their wealth, and the playing field is leveled and we're a bit closer
to an actual meritocracy."

------
tjpaudio
As part of my senior thesis years ago, I did an econometric model/analysis
that sought to explain inequality as proxied by difference between mean wages
of the bottom 90% of earners vs the top 10%. Times where the amount of estate
tax collected per capita was highest highly correlated with the lowest periods
of inequality by this measure. Trashing the concept of estate tax on the
premise that it is hard to enforce is a bad idea, we should focus our energy
on how to better implement it.

~~~
jtbayly
Was it correlation or causation?

------
hirundo
The kinds of businesses that generate enough of an estate to tax are the
successful ones. It is very common for such businesses to be sold or
liquidated in order to pay the estate tax. It is not easy to find new
investments that are equally successful. And the taxed part of the estate is
at least as likely to be used to suppress as to encourage economic growth.
Also, the reduced incentive to generate wealth for your offspring is not
insignificant. So I don't find it to be implausible that eliminating the
estate tax could increase tax revenue as successful business continue to
create wealth.

~~~
moosey
Then fix it so that it works the same way as many other countries that have
estate taxes and want to protect these businesses: The tax is imposed as a
debt against the business that is paid off over time.

Simple, and successful businesses survive it.

------
moomin
Observe that the letter is dumb from the beginning. “Riotous living: no tax”

Now a) have these people never heard of VAT? b) every last bartender, private
jet pilot, jazz musician, minder and hooker said wastrel interacts with pays
taxes. The truth is, the playboy billionaire is way better for the economy
than the upright citizen who sits at home on a pile of money.

And... the author knows this. He’s just hoping that cheap moralism will get
you to agree with him when actually it’s part of a programme of action where
he doesn’t disclose his actual motivations.

I said dumb at the start, dishonest would be more accurate.

------
RhysU
Imagine the limit of a $0 exemption for the US estate tax. What an
unbelievably unpopular and inconvenient thing. The middle class selling dead
parents houses to cover inheritance. Many small businesses dismantled.
Liquidating stock portfolios in poor market conditions. Those of any means
whatsoever would jump through hoops to avoid the harm and hassle. The burden
and overhead of the gifting and paperwork would consume excessive amounts of
time in what is not useful economic activity.

------
platz
Republicans reject the idea that inequality should be reduced via government
policy, because that would mean limiting an individuals freedoms, in service
of the group.

They reject this idea of "collective fairness" because individuals' rights are
much more important than the rights of the collective.

------
Morizero
This kind of argument from authority is well parodied by 'Project Steve', IMO:
[https://en.m.wikipedia.org/wiki/Project_Steve](https://en.m.wikipedia.org/wiki/Project_Steve)

------
logfromblammo
By far, the best investment Warren Buffett ever made was to let his kids know
that they would have to earn their own money.

Also, I'm now dying to know how many economists in total have an opinion on
estate taxation. They ought to know better than anyone else that sometimes
proportions are more significant than absolute values.

My own, not-an-economist opinion is that the estate tax is bad, only because
it waits until someone has died before making an intervention, then tries to
do too much, all at once, and probably too late to make a difference. The
letter is correct in that death should not be a taxable event. The tax should
probably be invoked every time wealth is transferred from an elder benefactor
to a younger, adult recipient, and defined such that all the trusts and
offshore accounts and sham business arrangements are transparent to the taxing
authority. If your "job" is to be an executive assistant to mommy or daddy,
and for that you earn six figures, then the taxing authority should be able to
determine the amount paid in excess of the median executive assistant and levy
the nepotism tax on that. The idea is not to make money, but to discourage
certain behaviors. If the rich people avoid the tax by employing their peers'
children instead of their own, that's fine; it gives those kids the
opportunity to work for a boss that won't cut them slack just to avoid
awkwardness at the holidays.

The estate tax isn't just a tax on a parent's hard work and success. It is a
tax on spoiled little rich kids, who never learned the value of actual _work_
in the economy, who then go on to own companies and control what people do in
them. It's a tax on being disconnected from the conditions experienced by
lower classes, wherein it is essential to _earn_ what you get, rather than
_accept_ whatever it is you think you deserve as your birthright.

I don't begrudge rich people their ability to provide additional opportunities
to their children. But when their children turn out to be aristocratic twits,
I also feel the desire to teach them the hard lessons that the rest of us
likely got much earlier in our lives, to perhaps make them better, more
empathetic people. And those are lessons best learned by _not_ having so much
money that self-discipline and self-sacrifice are never necessary. I get the
feeling that fewer people would be laid off by stack ranking or to shore up
quarterly results if those doing it had some inkling of what it means to be
the one laid off--the panic, the fear, the depression, the austerity, and
maybe even the irrational optimism.

~~~
RhysU
I look forward to you extending your argument to proposing a $0, not $11M,
exemption.

~~~
logfromblammo
A tax designed around my specific prejudice against the non-working scions of
rich parents would have to do something to incentivize the accumulation of
workplace experience. So I'd probably tie any exemption on it to earned
income. $0 just encourages avoidance of the tax entirely.

Ideally, everyone should get the experience of working a low-wage job for
unskilled labor between the ages of 16 and 21, and a job that barely makes
ends meet between 21 and 25. It teaches you the unmitigated constant panic of
being a responsible adult in the real world.

If you have already walked your mile in poor-people's shoes, and you then go
on to negatively affect other people's lives using your parents' money, then
at least it won't be because of ignorance.

So perhaps if you work at least 32 hours every week, your immediate exemption
is median individual/household income minus your earned gross income, with an
additional deferred exemption equal to your earned gross income, starting 7
years later and repeating every year until your death, but capped at 10 times
median income for your filing status.

As an example, here is the work history of a child of a very rich person--one
who has a perfect aversion to paying the rich-kid tax:

    
    
       Year   Age   Filing  Earned  Immediate  Deferred     Income  
          1    18   single    $15k       $17k        $0       $32k
          2    19   single    $16k       $16k        $0       $32k
          3    20   single    $17k       $15k        $0       $32k
          4    21   single    $18k       $14k        $0       $32k
          5    22   single    $20k       $12k        $0       $32k
          6    23   single    $45k         $0        $0       $45k
          7    24  married    $55k        $4k        $0       $59k
          8    25  married    $60k         $0      $15k       $75k
          9    26  married    $63k         $0      $31k       $94k
         10    27  married    $65k         $0      $48k      $113k
         11    28  married    $67k         $0      $66k      $133k
         12    29  married    $68k         $0      $86k      $154k
         13    30  married      $0         $0     $131k      $131k
         14    31  married      $0         $0     $186k      $186k
         15    32  married      $0         $0     $246k      $246k
         16    33  married      $0         $0     $309k      $309k
         17    34  married      $0         $0     $374k      $374k
         18    35  married      $0         $0     $441k      $441k
         19    36  married      $0         $0     $509k      $509k
      20-38 37-55  married      $0         $0  $509k/yr     $9671k
    

This is a reasonable model for someone who works wage labor before and while
attending university, then gets a white-collar job after graduation. Assuming
the parents are 25 years older than the kid, and will die at age 80, working
for 12 years allows tax-free transfer of a total of about $12M while the
parents still live. So that makes it easy to drop the exemption on any levied-
at-death inheritance tax to $0. The fortunate child never has to live at less
than the 50th percentile, yet still has a major incentive to work longer and
earn more on their own merits. In this instance, "retiring" at age 32 instead
of 30 would have likely capped the deferred exemption at $590k in year 21.

Even working at minimum-wage jobs for 40 years eventually caps the deferred
exemption amount.

------
KentGeek
Apparently an 11 million dollar exemption (soon to be >20 million) isn't
enough to satisfy these oligarchs - (not to mention that above that exemption,
we're still only talking a percentage, not the entire fortune).

------
urs2102
Is this an argument against the idea of estate tax or the implementation of
estate tax in the United States?

It reads likes the latter, but the more interesting discussion is regarding
the former.

~~~
chimeracoder
> Is this an argument against the idea of estate tax or the implementation of
> estate tax in the United States? It reads likes the latter, but the more
> interesting discussion is regarding the former.

The general consensus from economists opposes the estate tax. There are a few
aspects of its implementation that are particularly problematic, but there's
no way to implement an estate tax that doesn't ultimately either (a) lead to
these sorts of outcomes, or (b) defeat the entire point of an estate tax in
the first place.

The short letter might read like it's arguing against the implementation, but
if you're familiar with Friedman's work, he shows why estate taxes inherently
lead to such undesirable outcomes.

~~~
zimablue
Can you provide more sources from this? Friedman as far as I understand
economics represents an outlier in the free market US school of economics,
which I thought was on the retreat in recent years?

~~~
chimeracoder
> Friedman as far as I understand economics represents an outlier in the free
> market US school of economics

Not really, in the general case, but _definitely_ not on the topic of the
estate tax. It's actually quite hard to find rigorous economic analysis and
research that _defends_ the estate tax.

> I thought [the free market US school of economics] was on the retreat in
> recent years?

That's definitely not true. The current political tide is towards taxation and
regulation, but politics have very little to do with what economists agree on
(much to their chagrin), and politics is highly cyclical.

Also, I'm not sure why "US" is in there - it's not like free-market economics
is advocated particularly strongly by US economics compared to their foreign
counterparts. Again, politics and consensus among economists are not the same
thing.

------
lkrubner
The only appropriate death tax is 100%. The goal is not to raise money for the
government, the goal is to protect society from oligarchy. Most oligarchs come
from wealthy families -- that kind of vast wealth accumulates over the course
of generations.

So as to allow minor things, such as a house, to pass from parents to
children, a low level exemption is reasonable, so the tax does not touch the
poor or middle classes. Suppose the first $5 million are tax-free. That is
more generous than the current system, and since $5 million is too small an
amount to lead to oligarchy, it should not raise any concerns. But beyond $5
million, the appropriate tax should be 100% -- all of the wealth should go
back to the society from whence it came.

The money raised from such a tax can help give poor children something to
start with in life, and thus such a tax allows each child of each generation
to start off with roughly equal assets. Thus everyone's accomplishments in
life become truly their own, rather than being partly their own and partly
their ancestors. The over-reliance on ancestors is a sad state of affairs that
holds for many children of the wealthy.

~~~
walshemj
So you be happy for middle class JAMS (just about managing) to accept the
state stealing the parents or grand parents home on death.

~~~
rayiner
It's on thing to say that the government should intervene in the state of
nature to protect you from being dispossessed of property you've earned. It's
a step further to say that the government should intervene to maintain the
standard of living for your children after you can no longer do so by virtue
of your death. It's an expansion in the concept of property from a personal
right, to something that transcends the person.

~~~
walshemj
I am fairly sure the Magna Charter which is part of UK common law which US law
descends from explicitly has "the right of all free citizens to own and
inherit property"

The UNHCR also has Article 17(2) (2) No one shall be arbitrarily deprived of
his property

~~~
lkrubner
I don't know if you are joking, but the Magna Charter was a deal worked out
between a bunch of feudal lords and their king. It represents everything that
we are trying to get away from in the modern era.

As to UNHCR, obviously none of us would ever suggest taking someone's property
arbitrarily. What I am suggesting is a tax, which would work just like any
other tax, and would be just as lawful as every other tax that you pay.

