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100% Inheritance Tax

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Brian LaSorsa Posted: Tue, Jun 22 2010 11:02 PM

I was having an argument with someone about the Inheritance Tax. I'll just refer to him as my 'opponent' for this discussion. So my opponent was saying that capitalism ends up not being fair in the long run because when wealthy people die, they pass along their fortune to their kids, who end up getting a head start in life. His main point was that the rich get richer and the poor get poorer. He just has these ideas in his head without really thinking things through, and he doesn't seem to understand more of the complex issues besides "but things won't be fair!", and simple ideas like that.

I tried explaining to him that, when you have a 100% inheritance tax, it doesn't really do anything to lower prices on the necessary commodities in life. Assuming that the person who is about the die can easily pay off their energy bills, buy groceries, and everything like that, the 100% inheritance tax will force them to simply spend money on luxuries that they don't need because they'll know that the money will simply go to the government if they don't use it up.

People forget that we aren't necessarily a society of individuals as much as we are a society of families. With a 0% inheritance tax, the "donor" of the money will feel no need to buy these luxuries. Instead, they will most likely give the money to the people in their family who are most needing of such funds. These funds will then be spent on everyday necessities, which could end up lowering the energy costs for everyone (of course, this is depending on the amount of money involved and all of the other variables).

My opponent in this argument isn't too... intelligent. Not to sound like I'm being rude, but he didn't really have anything that might make me change my opinion on this subject that I've been pretty sure about. However, I like having debates with people because it sharpens my own arguments.

That being said, can anyone on here think of arguments in favor of a 100% inheritance tax?

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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Naevius replied on Tue, Jun 22 2010 11:12 PM

I would "expose the gun in the room", as it were. Your opponent sounds like a real bleeding heart, and I don't think he realizes just what a 100% inheritance tax means: it means that he is pointing a gun at the rich man's face and demanding he surrender his money rather than passing it on to his chidlren, A good tactic to expose this would be the "Against Me" argument, which Stefan Molyneux talks about here

Edit: Just realizing that you asked for arguments in FAVOR, not OPPOSED to the 100% inheritance tax. My bad. I can't really think of any logical support for it considering it flies in the face of ethics.

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DanielMuff replied on Tue, Jun 22 2010 11:16 PM

 

His main point was that the rich get richer and the poor get poorer.

Plenty of rich people have gone bankrupt and plenty of poor people have gotten rich. Plenty of trust fund babies have blown their inhereted wealth.

"but things won't be fair!"

Fairness is subjective.

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William replied on Tue, Jun 22 2010 11:34 PM

Fairness is subjective.

Along with concepts of inheretence.  People could logically take anti-inhertence to insane levels.

"I am not an ego along with other egos, but the sole ego: I am unique. Hence my wants too are unique, and my deeds; in short, everything about me is unique" Max Stirner
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Thank you for sending that link, my friend! I really like the guy in that video. I hadn't heard of him before now.

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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marko331 replied on Wed, Jun 23 2010 1:16 AM

in the manner that it is proposed the 100% tax would make the rich slightly less rich, the middle class poor and trap the poor in poverty.  Why exactly?  the rich have money so they can use their money to find ways to transfer it to their family or foundations, trusts etc.  The middle class cant afford to do this as neither can the poor.  Therefore your friend is the evil upper class oppressor seeking to keep the poor poor and the rich rich due to thier own ignorance.

 

If however this would only apply to the rich then the rich would do as a above their would be waste of economic resources and the poor and the middle class would suffer from less investment.

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Clayton replied on Wed, Jun 23 2010 1:40 AM

I was having an argument with someone about the Inheritance Tax. I'll just refer to him as my 'opponent' for this discussion. So my opponent was saying that capitalism ends up not being fair in the long run because when wealthy people die, they pass along their fortune to their kids, who end up getting a head start in life. His main point was that the rich get richer and the poor get poorer. He just has these ideas in his head without really thinking things through, and he doesn't seem to understand more of the complex issues besides "but things won't be fair!", and simple ideas like that.

Being born blind isn't fair. Having your only child killed by a bear isn't fair. Being struck by a meteorite isn't fair. Dying of inoperable cancer isn't fair.

Of course, we shouldn't despair of justice simply because life isn't fair. But the point is that life can't be made fair so "fairness" is not a sensible ideal.

I tried explaining to him that, when you have a 100% inheritance tax, it doesn't really do anything to lower prices on the necessary commodities in life. Assuming that the person who is about the die can easily pay off their energy bills, buy groceries, and everything like that, the 100% inheritance tax will force them to simply spend money on luxuries that they don't need because they'll know that the money will simply go to the government if they don't use it up.

I think the moral problem is even more serious.

People forget that we aren't necessarily a society of individuals as much as we are a society of families. With a 0% inheritance tax, the "donor" of the money will feel no need to buy these luxuries. Instead, they will most likely give the money to the people in their family who are most needing of such funds. These funds will then be spent on everyday necessities, which could end up lowering the energy costs for everyone (of course, this is depending on the amount of money involved and all of the other variables).

Yes, the human family is culturally universal, that is, it is rooted in our biology. Wealth inheritance is part of human family behavior. This means that wealth inheritance is part of our biology. Fighting it is pointless and the motives of those who are supposedly "equalizing" society by expropriating family wealth for their own use are quite transparent and self-serving.

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marko331 replied on Wed, Jun 23 2010 1:45 AM

just for interest sake what sort of back ground would this person come from i.e. rich middle class maybe, historically look at some of the communist leaders historically they come from relatively well off communities.

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Yeah, I was attempting to explain that it would not really help the poor at all. I mean, let's take this situation: say we have a really small society and only 10 wealthy families die at the end of the year who have extra money that is collected by the inheritance tax. Assuming that the money from these 10 families is cut into even pieces and is distributed equally amongst every single living citizen, I have to believe that the same people would end up rich as would have from simply being directly given the money from their 'grandparents' or whoever.

Sure, money may give you more opportunities, but I believe the key factor in every success story is a good upbringing. Some people are given endless opportunities in life and do nothing with them, while others may see one opportunity and take that road as far as they can. I think that if people stopped focusing on how much money they receive and simply do with what they have, we'd have a much more productive and competitive world with even more success stories.

And to the previous comment, I was meaning to have the 'donor' of the money be from a very rich family. But whether they are extremely wealthy or middle-class, that gets into another whole argument as to who can decide what is 'rich'. The fact that the highest federal income tax bracket starts at like $375,000 is astounding to me. I'm against progressive taxation in the first place, but if we're forced to have it this way for now, I think the top bracket should start at a much, much, much higher number. $375,000 really is not that much money to be making if you have a big family and things like that.

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marko331 replied on Wed, Jun 23 2010 1:49 AM

in a trully free market resources will move to the most efficent producers in todays current markets resources move towards those that can work the system to their advantage,

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How would you say that they work the system to their advantage?

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Clayton replied on Wed, Jun 23 2010 2:07 AM

@Brian: Lobbying, tax lawyers, wealth preservation consultants (i.e. ex-IRS employees), sweetheart deals with the good ol' boys, and so on.

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I kind of understand how those are some ways that people could play the system into their own hands, but then again those problems seem to have a root in the power of the politicians they lobby. Without all of the taxation and everything there wouldn't be any lobbying, or IRS for that matter.

And since these problems have their roots in that power, placing a 100% inheritance tax creates more bureaucracy than before and feeds into the root itself.

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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A 100% inheritance tax would prevent the poor from becoming wealthier. This is because wealth is usually built up inter-generationally. With 100% inheritance tax, you are hobbling the ability of the poor to advance.

Moreover, a 100% inheritance tax on only the "rich" (however you define the "rich") clearly must reduce investment. This is because the "rich" invest most of their wealth either directly (by purchasing more capital) or indirectly (by keeping more money in banks and buying more investment securities). A reduction in investment causes a reduction in the growth rate of the economy.

Thus, no defender of the poor can reasonably support a 100% inheritance tax.

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marko331 replied on Wed, Jun 23 2010 2:20 AM

As has been said previously the socialist is more often than not the enenmy of poor as they are least well equiped to defend themseleves from government and lack the means to escape from such a government.

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To everyone:

As I assumed, there have not been very many reasons for supporting a 100% inheritance tax at all. The problem with this is that, when I hear people argue for socialism and the redistribution of wealth, I can't seem to get even the most fundamental concepts through to their brains. And then I get so annoyed at their ignorance at the whole situation that I end up forgetting about it.

How do you guys go about teaching people these fundamental concepts if they don't seem to understand at first? I'm in college and barely anyone knows anything about politics, and whenever the ones who try to argue about politics, it's always about 'social' issues like gay marriage and things of the sort. The majority of Republicans in Congress are against gay marriage and other 'liberal' (for lack of a better word), so they automatically see the Democratic Party as the party of freedom. They see Republicans more as George Bush figures than Ron Paul figures.

What's the best way to introduce those who think they're Democrats into the real conservative/libertarian movement?

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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marko331 replied on Wed, Jun 23 2010 2:38 AM

mainly it is due to ideology and the idea that if they do XYZ that they can create a utopia where we all have a very high standard of living, the reason why they dont except even the most simplistic features of a free market is because free markets dont produce utopias and at the end of the day that is wat they seek.

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Sieben replied on Wed, Jun 23 2010 8:32 AM

Well, so here is a point that is never made about capitalism. It produces equality.

Why? Because of falling prices and rising real wages. If you compare Bill Gate's fortune to mine, you might think that is several million times richer than me. But does he eat a million times more food? Drive 10^6 as many cars? Have access to that much more media and information? More spare time? Does he have access to a better internet than I do? No.

There's less real inequality now than ever. Its just that as you move up in quality, costs quickly become exponentially higher. All technology follows this pattern. The highest end processors are in the thousands of dollars, while you can get one 80% the speed for half the price. So it would appear that the frat boy who spent $4000 of his parent's money on an alienware machine has a leg up on my $1000 dollar rig, but its so marginal it doesn't make any difference. He's not anywhere close to 4x better off than I am, yet relying on nominal prices for things would suggest this.

But socialists are also afraid that the rich will get ahead because they can buy the best education. Well derp. Free market = lowering education costs for everyone. Even super destitute poor people can get cheap loans, as competitive entrepreneurs try to make a buck by investing human capital. I would really love to see some socialist complain about the high price of textbooks while I link him this torrent with over 400 common math textbooks :P

The real issue here is that nothing is ever good enough for the left. If society can feed everyone, they'll start complaining about the schools. If education becomes relatively equal, they complain about health care... if they don't completely destroy capitalism, they will be eventually restricted to complaining about fair access to breast implants and fancy resturaunts. They have an unconstrained vision they want to fiat down everyone's throats so they can feel really enlightened.

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I think your second paragraph about Bill Gates' fortune is a really good argument. I never really thought to argue it in that manner for some reason. I'll definitely have to talk about that next time.

And I completely agree with your last paragraph. The left will always complain when someone has something that they don't. They're like little kids who finally get a toy that they've been crying about, and then they don't care about it anymore when they see a new toy and start crying again.

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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Sieben replied on Wed, Jun 23 2010 9:48 AM

Glad you found it interesting. Its also fun to mess with leftists by saying that wealth redistribution only bids up the price of goods and services; it doesn't produce more of them. If they have any economic insight, they'll claim that the wealth redistro bids up price signals initially, which sends a signal to entrepreneurs to stop producing as much rich people stuff to produce poor people stuff.

Of course, the counterclaim is that this capital restructuring isn't 1:1 efficiency. You can't convert a factory and engineers who produce mercedez to produce corn without losing their specialization advantage. Over the very long term capital would readjust, but, if leftists were concerned with the long term they'd just let the market rock and roll.

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Giant_Joe replied on Wed, Jun 23 2010 9:52 AM

http://www.youtube.com/watch?v=MRpEV2tmYz4

Haven't seen anyone really emphasize this point. ;)

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If interviews with Milton Friedman were played in every classroom, our future would look so much brighter.

"Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats." - H.L. Mencken.

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DD5 replied on Wed, Jun 23 2010 10:23 AM

 

In the free market, one's man gain is not another man's lost.  The pie is not fixed but grows as more and more people get wealthy.  Envy is no justification for propagating the myth of social injustice.

 Now, since we don't have anything near a free market, there is no doubt that there are many wealthy people who have become wealthy by  real injustice.  But your friend has it all backwards.  Injustice and the concept of one man's gain at the expense of another really does exist, but only in the sphere of government action.  Whether it is manifested by regulations that favor some well connected producers at the expense of others, or by outright direct services provided to the government itself, i.e., profiteering by providing goods and services supplied with tax payers money.

So if envy is at the heart of your friend's objection to freedom, then I'm afraid you can't help him.  But if it is true injustice he's concerned about, then he should consider that his entire theory is exactly backwards.

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Michael replied on Wed, Jun 23 2010 10:59 AM

 one time I had a debate with someone on the issue of  minimium wage and why I am oppossed to it. Basically what happened was that I went through my premises one by one and asked that person if he agreed. What ended happening was that he agreed to with all my premisses but disagreed with my conclusion that minnimium wage was actually harmful to the poor. When asked why he still disagreed he only stated that people who work at the bottom should be paid more because it would be just (which he adimitted was not just in the premises)

Some people are not willing to learn in a debate but merely prove they are right (I admit I do this to sometimes but I am trying to stop). This is especially true in the soft sciences like politics. Keep in mind you may not change your friend.

Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup.You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water my friend. -Bruce Lee
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Clayton replied on Wed, Jun 23 2010 11:57 AM

What's the best way to introduce those who think they're Democrats into the real conservative/libertarian movement?

Read Rothbard's essay Egalitarianism as a Revolt Against Nature. You will not understand the left until you do. Most importantly, Rothbard exposes in this essay how conservatism has discredited itself by conceding the moral high ground from the outset. Socialism/communism/etc do not have "good ideals". Also check out Bryan Caplan's recent Mises daily article to this effect, here.

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Joe replied on Wed, Jun 23 2010 7:40 PM

Interesting that Milton Friedman was talking mostly about the lack of high order goods that a society would see with an inheritance tax. To my knowledge, he didn't seem to focus on it much when it comes to business cycle (at least in comparison to Mises or Hayek)

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chloe732 replied on Thu, Jun 24 2010 12:01 AM

Brian,

Be careful.  Stef says alot of STUFF, some of which makes sense, some of which is questionable to say the least.  Beware of his DEFOO philosophy.  Grayson Lilburne actually debated him in this forum.  Maybe someone can provide a link to the thread for you.

"The market is a process." - Ludwig von Mises, as related by Israel Kirzner.   "Capital formation is a beautiful thing" - Chloe732.

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krazy kaju replied on Thu, Jun 24 2010 11:17 AM

Stef is also one of those people who claims to understand ABCT, but doesn't.

http://www.youtube.com/watch?v=q519rt2sBLI

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People who have more "marketable" traits also get a head start in life.  There should be a talent tax.

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Isn't there already an income tax for that. They also have programs for those who lack talent... welfare. So basically, the state punishes talent and rewards lacking talent.

Sometimes I truly believe socialism is what happens when the talent pool in society begins to shrink.

Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup.You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water my friend. -Bruce Lee
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I agree 100% that socialism happens when the talent pool shrinks. There's a girl at my college who actually believes socialism works and that capitalism is some kind of scheme set up in order to give evil people more money. I don't understand that one bit. Shows how stupid people are on the left.

I'm not sure if anyone will agree with me on this one, but I feel that if all taxes were set to 0 - pretend there are no implications of such, and everything runs the same as it does now - Fortune 500 companies would feel much more compelled to hire a lot of people and create better working conditions and everything. The reason I say this is because our government has been so anti-business for such a long time that all people at the top want is money. I wouldn't say there's necessarily something wrong with that, but I feel that people would have more pride in their own company if society didn't view them as "fat cats" from the get-go. What do you guys think?

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I think that the subjective value theory would make it impossible for us to know whether or not people would feel more pride in their companies or whether or not companies would be more philanthropic. However, with no taxes and regulaitons, companies would be able to higher more people and use more of the existing capital to produce more products that society wants, thus cheaper prices.

As for better working conditions, it is possible but not certain. With the barriers to social mobility gone, more businesses can hire more people. Demand for labour will increase as more businesses require labour to use up thier capital. Since more demand for labour equals more pay and better working conditions for labourers, then your theory could hold.

However, events may occur that are reminicent to America's so called gilded age where companies actually used to chain people to their workplace. There was a famous case where one such company set on fire and all the people working their were unable to escape. However, I don't know much about that era except that government intervention and merchantilism were the norm. So you have to leave up to someone who knows the histroy of that era better than myself so you can understand cause and effect. I would be happy to know since I am pushing towards anarchism but their are somethings like the mistreatment of workers that concern me (in terms of positve actions taken by a company that directly harms the individual worker not wages or conditions).

Empty your mind, be formless. Shapeless, like water. If you put water into a cup, it becomes the cup.You put it in a teapot it becomes the teapot. Now, water can flow or it can crash. Be water my friend. -Bruce Lee
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chloe732 replied on Sat, Jun 26 2010 1:08 PM

Brian Anderson - "Shows how stupid people are on the left."

It may not be that she is stupid.  Smart people often hold on to ideas that are wrong.  The person you are talking about could become a defender of liberty, but she must discover the errors in her thinking. 

If you should choose to discuss the issue of socialism with her, your challenge will be to first have a solid understanding of sound economics, not the economics taught in college. 

/end random thoughts.

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"If interviews with Milton Friedman were played in every classroom, our future would look so much brighter."

Not so fast. Milton Friedman did a lot more harm than good.

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I don't think he did 'more' harm than good.

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

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"I don't think he did 'more' harm than good."

Can you explain? I mean, he was only one of the biggest advocates for government controlled paper money.

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I think that's a realm in which his influence largely wasn't relevant

Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid

Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring

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Read this.

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DD5 replied on Thu, Jul 1 2010 2:11 PM

Here's the thing about Friedman.  If one stumbles upon him, and as a result, is enlightened by his message of economic freedom, then It's hard to see why that is harmful.

On the other hand, there is no reason to purposely "plant" him as some intermediate stage towards the real deal as some here have suggested.  It's far better to guide people directly to Mises or even Rothbard.'

Honestly, one good essay by Mises on the market economy will probably leave a more profound affect on the newcomer then the entire "Free To choose" stuff.

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Well I was one of the people who Milton influenced and he got me more interested in free markets. However, I don't think that somehow cancels out the negative impact he's had on policy. The point was he's done more harm than good.

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