How Rich Kids Get a Head Start

[Benvolio]

BTW, capital gains is something that needs to be overhauled. It shouldn't apply to any sale of stock except the initial IPO, because only the IPO is actually an investment that helps a company grow -- after that it's just money changing hands for the profit of the buyer and seller, and the company isn't part of it.

When an asset, including stock, is held for a long time, part of the apparent gain is probably inflation, which is not income. That part should not be taxed and arguably cannot constitutionally be taxed unless proportionate to the census.

 

[frankfrank]

I said the "loophole"--in quotes--charitable deduction. It is not a loophole.

Nearly all loops have holes in the middle.

Let's say that some rich guy gives $20 million to charity, and he takes the deduction. He DOES NOT get a $20 million tax writeoff. He uses the charitable contributions to offset against, and therefore decrease, his taxable income. What might he save on his taxes? Let's say he pays $6 million less tax. HE IS STILL $14 MILLION LESS in his portfolio.

on the death of a wealthy person the wealth would be distributed to those who worked to create it, in proportion to the work they put it. If a son or daughter worked like crazy to contribute to that wealth, he or she would be entitled to a portion commensurate with the work done.

How would that be administered, though? It's very easy to "fake" the number of hours worked, especially if somebody is self-employed. Because a teacher may not work through the entire year, or because somebody was sick or disabled and could not consistently put in 40-hour days, are they less entitled than somebody who worked fulltime (regardless of whether at Taco Bell, or as a renowned neurosurgeon)?

For most of a century, now, the days have been gone when the children often worked alongside their parents to contribute value to the estate.

 

[rareboy]

Drafters do not intend to leave it possible to circumvent or avoid the intent of the system.

Nonsense. Of course they do. Particularly if they are being paid to do so.

 

[opinterph]

In a rational society, on the death of a wealthy person the wealth would be distributed to those who worked to create it, in proportion to the work they put it.

Does that list of persons who worked to create the wealth include hired laborers?

 

[Benvolio]

Nonsense. Of course they do. Particularly if they are being paid to do so.

Hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah

 

[Benvolio]

No, because inheritance is a system that exists regardless of the existence of a state. It rests on the assumption that someone who didn't earn it has a greater right to it than those who actually did merely because of blood relationship.

In a rational society, on the death of a wealthy person the wealth would be distributed to those who worked to create it, in proportion to the work they put it. If a son or daughter worked like crazy to contribute to that wealth, he or she would be entitled to a portion commensurate with the work done. If there was no work done, then the son or daughter should be tossed out to learn to be an honest citizen.

A rational society allows the individual to work, innovate and accumulate wealth and pass it, or most it to his heirs, because that, ex-erience shows, provides the powerful incentive to work and innovate. Any other system reduces or destroys the incentive to work and innovate.

 

[xbuzzerx]

A rational society allows the individual to work, innovate and accumulate wealth and pass it, or most it to his heirs, because that, ex-erience shows, provides the powerful incentive to work and innovate. Any other system reduces or destroys the incentive to work and innovate.

No it doesn't.

Many qualified scientists and researchers do NOT work in pure research because the path to profit is slow and the income and funding unsteady.

They take more lucrative jobs in sure-things.

 

[opinterph]

When an asset, including stock, is held for a long time, part of the apparent gain is probably inflation, which is not income. That part should not be taxed and arguably cannot constitutionally be taxed unless proportionate to the census.

Census?

If an asset is liquidated for inflated dollars – those same inflated dollars are used to pay any tax associated with the capital gain.

 

[Benvolio]

Census?

If an asset is liquidated for inflated dollars – those same inflated dollars are used to pay any tax associated with the capital gain.

Inflation gain is not income. Suppose sn asset is bought for 100 and held for a period of years and is sold for 110. But suppose the interim inflation is such that the 110 has only the buying power of the original 100. There is no actual gain. If the 10 is taxed, he ends up with less than before. Part of the reason for the lower capital gain tax is an attempt to avoid taxing inflation.
Further, the entire 110 should be regarded as principal, and a tax of it would be a direct tax, which under the constitution must be proportionate to the census. (It is not clear how duch a tax would work. I dont believe congress has ever adopted such a tax, because it would seem to tax citizens of different states at different rates)

 

[Kulindahr]

A rational society allows the individual to work, innovate and accumulate wealth and pass it, or most it to his heirs, because that, ex-erience shows, provides the powerful incentive to work and innovate. Any other system reduces or destroys the incentive to work and innovate.

But passing it to the heirs means passing it to people who did nothing to earn it. If you want incentives, then wealth should go to those who earn it.

You are far too delighted by systems that award people with immense wealth when they do nothing to earn it. The irony is that you don't approve of some systems of getting money that isn't earned but love others. Such a double standard isn't rational.

 

[Kulindahr]

Census?

If an asset is liquidated for inflated dollars – those same inflated dollars are used to pay any tax associated with the capital gain.

Yep. And it's all income, and should be taxed the same as any other income.

Personally, I'd make capital gains from sale of stock taxable at the individual's normal rate, but income from the first three years of a new business zero. That really would encourage innovation, and since new businesses are far more effective at job creation than existing large corporations, it would encourage higher employment numbers.

 

[Benvolio]

But passing it to the heirs means passing it to people who did nothing to earn it. If you want incentives, then wealth should go to those who earn it.

You are far too delighted by systems that award people with immense wealth when they do nothing to earn it. The irony is that you don't approve of some systems of getting money that isn't earned but love others. Such a double standard isn't rational.

It is totally rational as the desire to pass assets to heirs is an important incentive to work and innovate. Destroy it and you place a ceiling in incentive. The children continue to have the incentive to preserve and increase the wealth by work and innovation.The system works great. Dont try to reinvent the wheel.

 

[Kabluey]

A rational society allows the individual to work, innovate and accumulate wealth and pass it, or most it to his heirs, because that, ex-erience shows, provides the powerful incentive to work and innovate. Any other system reduces or destroys the incentive to work and innovate.

An irrational society has elderly men hoarding their riches in the belief that whatever erupted out of their cocks is genetically superior to the rest of the human race.

 

[Kulindahr]

It is totally rational as the desire to pass assets to heirs is an important incentive to work and innovate. Destroy it and you place a ceiling in incentive. The children continue to have the incentive to preserve and increase the wealth by work and innovation.The system works great. Don't try to reinvent the wheel.

The system as the GOP has it and wants it is destructive of liberty. Hence, it does NOT work, "great" or otherwise.

My proposal retains more than enough incentive: a person can pass on wealth in chunks of several million dollars to people or organizations he/she chooses. It avoids massive concentration of wealth, and allows people with the talent to expand wealth but not necessarily gain it from scratch to generate more wealth.

One of the real weaknesses of unrestrained capitalism is that it excludes many talents. If billionaires spread their wealth to a few thousand people, inevitably some of those otherwise excluded by the system would be benefitted and in turn would benefit the rest of us. And in terms of this thread, instead of a handful of kids getting a great start, a few thousand kids would get a great start.

It wouldn't change the system much, really; the ridiculously wealthy 0.01% would turn into an amazingly wealthy 1%, and the current amazingly wealthy 0.1% would turn into a notably wealthy 10% (-ish). The truly wealthy portion of society would end up being what Americans think it should be.

 

[xbuzzerx]

It is totally rational as the desire to pass assets to heirs is an important incentive to work and innovate. Destroy it and you place a ceiling in incentive. The children continue to have the incentive to preserve and increase the wealth by work and innovation.The system works great. Dont try to reinvent the wheel.

The heirs of large fortunes neither work nor innovate. Nor need to. Nor have an incentive to.

 

[Kulindahr]

From the idea in the article, the issue is that people with a certain amount of wealth get a better start, and end up accomplishing more in their lives. There's no argument against the proposition that if more kids had that better start, the whole country would be better off. So the question is how to adjust things so that more people get a better start.

For all those who want this to be a "Christian nation", and who delight in digging out bits of the Old Testament to invoke for making it one, maybe the original Old Testament tithe would be acceptable: not a tenth of one's income, but a tenth of one's net worth. I suspect that would whittle down the fortunes of the lazy wealthy; the creative wealthy would figure out a way to grow their fortunes faster. Any property taken as part of that 10% could be given to people who have none -- who would then have to become creative enough to earn enough to keep it!

I'm not impressed with that system, unless it came with a cut-off below which net worth didn't get tithed, or at the very least a protection for one's basic home and transportation and anything covered by homeowners' insurance, because it has the potential for ruining too many people. I also don't like it because all the revenue that came in as money would go to the government, which wouldn't address the issue of kids getting a better start, or help in creativity.

So the easiest route I see is to require the wealthy to share their wealth -- not to put it into the hands of the state, but just require them to distribute it to more people. At the rate I suggested earlier, a billion dollars would have to be split among around 250 heirs -- not something that's going to make a lot of people wealthy, but which certainly would provide the kids of 250 families with the better start the article speaks of.

But another approach occurs to me: make gifts from people paying in the highest tax bracket given to people in the bottom bracket, up to ten times the federal poverty level, non-taxable. So if Rich Mann is on vacation and goes through a town that he thinks is great, but the people are hurting, he could give each person there (who is old enough to pay taxes) a hundred thousand dollars, and the government wouldn't get a cent. Rich would get to deduct those amounts from his income for tax purposes, and the recipients wouldn't have to report it as income.

Yet whatever else is done, the system wherein fewer than a quarter million people in the country are the real choosers of our elected officials has got to go.

 

[Kulindahr]

The heirs of large fortunes neither work nor innovate. Nor need to. Nor have an incentive to.

What's interesting though is that according to the reading I've done since diving into economic discussions on this board, the heirs of small to moderate fortunes actually DO both work and innovate. Even before I discovered that, I favored requiring the wealthy to spread out their estates to larger numbers of heirs; that just makes the system even more sensible: instead of one or a few huge fortunes being passed to people who won't do anything to help the economy or society, scores of fortunes would be passed to people already shown to have a high likelihood of innovating and creating.

 

[Benvolio]

The heirs of large fortunes neither work nor innovate. Nor need to. Nor have an incentive to.

Your stereotype is more often wrong. Many large family businesses stay under active family management for generations. Ford Motor Company, for instance. S C Johnson Company. DuPont for a long time.

 

[xbuzzerx]

Your stereotype is more often wrong. Many large family businesses stay under active family management for generations. Ford Motor Company, for instance. S C Johnson Company. DuPont for a long time.

Oh, so it's the chairman or the shareholders who do the actual working and innovating in a corporation?

 

[Benvolio]

Oh, so it's the chairman or the shareholders who do the actual working and innovating in a corporation?

Your claim was that heirs neither work nor innovate. Wrong.The heirs who are active in management are working and good management innovates.