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Comment by shados | Hacker News Reader

If I buy a house, and give the house to my children when they retire (and they either use it or sell it to get one they want to use), they'll never have to pay rent, only taxes and maintenance.

They can use that money to invest, to take longer to pick better job, to train and get better at what they do...and eventually they can take all of that, and give it to their children who'll be even richer, and so on.

The only way to prevent this from happening is to ban inheritance, which would be all sorts of bullshit.

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There's not a whole lot of benefit to society of inheritances. Inheritances mostly just distorts society and encourages a "fuck you, got mine" attitude

We should certainly be more aggressive about taxing inheritances since we are very far from the point where people will stop working because they have no desire for money.

The inheritance tax is a tax on people who were too stupid to put their money in a family trust or similar arrangement before they died. It's trivial to avoid if you are the kind of person who has enough money to be subject to such a tax. Increase the tax, and avoidance will increase as well.

You would be wrong, because you do not understand the estate tax system in the USA. There are things like the generation skipping tax. All the significant loopholes are covered, in terms of passing on wealth and avoiding any estate tax.

That said, the estate tax is very low. The exemption is huge. The vast majority of people who die in this country are just folks and they bury their dead and they don't go through probate or have trusts. Maybe they have a little life insurance if they are lucky.

Has anything changed on that front since 2013? Has the GRAT loophole been closed?

[1] https://www.bloomberg.com/news/articles/2013-12-17/accidenta...

GRAT loophole is not just a "family trust," and it doesn't make estate/gift tax trivial to avoid. It is ridiculous that it persists though.

I don't know all the loopholes, but I agree that we should be closing them.

The thing about the law is that it can be very flexible if we want it to be, so if we were serious about enforcement we could definitely do it, we're just not that serious about it.

What gives you the right to treat other people's hard work as some kind of treasure chest you can loot? How about I come to your house and start drinking your beer? There's not a lot of benefit to society for you to have beer in your fridge, after all. You could be feeding some orphans or helping some refugees instead of lazing around drinking beer.

If you want something, work for it. Don't steal it from others.

A rights-based framework is not the only way of making decisions in this world.

It's one a lot of people who are fortunate enough to have attained success in life, or expect to in the future, subscribe to, but it's not the only way to see the world.

If you were to follow your reasoning through to it's extreme the same way your beer example does, you would probably need to give all of society's land back to the native populations, but I doubt you're rushing to do that, I'm sure you have some moral gymnastics that makes that fine, but anyone trying to make a claim to anything you see as yours is immoral.

While you certainly may have worked hard, and I have no desire to disincentivize hard work, our position in society at birth and even our genetics are probabilistic, so I find it hard to justify the idea that the fruits of your labour should be yours alone.

Private property is a useful concept, but it is also not a universal requirement for a society, nor is is a binary feature.

The native Americans didn't have a concept of land ownership. What gives anyone the right to own land? The land existed before us, and stays here after we die. That you can own it seems kind of strange, when you think about it.

We make up the rules. We want to benefit society, and usually, to some degree, protect individual rights. If we change the rules so that we take your property when you die, then people thereafter get born into a world where they know that they can't work to have some amassed property passed on when they die.

If I responded with the same kind of hyperbole you used, I'd just say you can't steal from dead people, and what gives a dead person a right to dictate what happens in the world of the living?

>The only way to prevent this from happening is to ban inheritance, which would be all sorts of bullshit.

Shifting the tax and legal system to favor earned rather than unearned income would easily prevent it.

One example of this would be a land value tax. Another would be watering down patent enforcement. Another would be strengthening bankruptcy protections. Another would be strong enforcement of anti-trust law.

Taxing wealth instead of income solves this, but creates many different problems.

More taxed money is still more money than no money though.

    > ban inheritance, which
    > would be all sorts of 
    > bullshit

My only concern about a 100% inheritance tax is enforcement — what other bullshit is there? If there is one thing I can absolutely guarantee you, it's that once you're dead, you won't care what happens to your money.

I fail to see any benefit to society of people receiving unearned money for having the right parents.

Edit: as always, this is an unfailingly unpopular view. I'd encourage you to comment on what you don't like about it, though.

People care before they are dead about what is going to happen after, and this changes their behavior.

I'm not saying anything about your conclusion, but your reasoning is flawed.

Sure, although I'd suggest that it's irrational to care about what happens once you're dead.

It is, but thats not a bad thing (in the board sense of irrational).

A parent is willing to save a lot of money to give a bigger inheritance for his children, even knowing that his children will be much richer than he ever was at any point. That is irrational, but in the end is a huge part of the economic progess of society. Why would we want to deny some people the opportunity to do what they want AND benefit society as a whole at the same time?

Won't the inheritance stop their children working so hard?

Isn't spending better than hoarding for the economy?

Intellectually, yes and yes.

And I see no indications there will be a pile of money for my kids once I die. So, intellectually, it's easy for me to agree with you.

But if by a turn of events my life transforms from being a financial disaster into a money-making success story and I end up with money at the end, I would like to give them what I feel every human being should have: a chance to find themselves, to find out what they are good at and what they love, without wrecking their finances. Because you only live once and you should try not to give your small amount of hours on earth to someone or something you do not believe in. So I would like to give them each a little "go and find yourself" fund that they could utilize once they're, say, 20 or 30 years old.

That feels wrong, intellectually, but if I have money and we haven't yet scrapped the notion of inheritance, then there will be "find your true you" funds for my kids. No doubt. Because if my kids find what they're really good at, they'll kick your kids asses ;)

That's what life's all about right? Setting things up for your genes. Bootstrapping your gene carriers lives, not with money in particular, but with the things they'll need to out-perform the rest or more importantly, to be as happy as they can be. Anything else we do with our time are just hobbies.

Many things are massively beneficial on an individual level and bad at a societal level. My children will be well looked after by a trust as long as others' children are too.

I agree.

My point was this: will you not create such a trust yourself, for your kids, if there does not exist one that is available for all, if you had the means?

I hope Bill Gates starts a trend. I'm sure he'll give away all of his money except for that 100M trust fund for his kids. What if they then turn that measly 100M into billions and then repeat what their father did? That would be pretty cool. How could laws about inheritance stop that from happening, I wonder.

I think laws about inheritance are mostly good because they protect the inheritor. The money would go that way either way, unless the parents and their kids ave afalling out. If a child has a falling out with his parents, parents could easily cut him out of the heritage if it were not for laws protecting those children. I think those laws are mostly good. Because rebelling against your parents is mostly a good thing, to society that is, because there is a very good chance you are smarter than them.

I'm a bleeding heart liberal, and I want Democrats to use and abuse Super PACs as far as possible, while also working to get rid of them.

> Won't the inheritance stop their children working so hard?

Any evidence of the income from labor of children that came from wealthier family is very likely to point that the highest income jobs go to people with richer parents. That points to the exact opposite: the inherited capital allows them to pursue higher education and more perfectioning of skills, even if they dont need that labor.

But even if at some point of inheritance, people developed a significant dissuasive to work well paying jobs, it would be a drop in the bucket. The labor of the people who's inherited capital allows them to never work, and not only that but never for their children to work, is not a significant population and clearly, managing the capital is worth a lot more than their labor.

But lets say that even then, we want to squeeze as much as possible. Why stop at life? Lets just confiscate everything at any point in a mans life: someone that IPO'd and made 50 millions by 30y-old is tempted to never work by that same assumption, shouldnt we tax it all away? Of course, we know that taxing in that way is not only not to the liking of many, but it has economic consequences. SAme with the inheritance tax.

> Isn't spending better than hoarding for the economy?

I need more context for this, im not sure i get it. Spending by itself is not good for the economy, its actually terrible. Frivolous spending is not good for the economy: it creates jobs that have limited use beyond basic wealth transfer. If you spend your money on maids and people to afford luxury to you, once the capital is spent, all that value goes with you when you die. But if that capital goes into something that lasts after you perish, the economy gets richer. For example, if you buy 200 cars, at least after you die ,there are more assets in the overall economy.

    > the inherited capital allows
    > them to pursue higher education

I suspect most people's education is complete by the time their parents die.

    > Why stop at life? Lets just
    > confiscate everything at any
    > point in a mans life

Because I can assure you that once dead, you will maintain no further interest in your assets. While alive, I suspect you will.

    >> Isn't spending better than
    >> hoarding for the economy?

    > I need more context for this

They were teaching it in highschool economics when I was a kid.

> They were teaching it in high school economics when I was a kid.

If you mean the Paradox of Thrift [1], I remember that class in macroeconomics. But it was quickly followed up with the point that funds that aren't spent are either (a) invested in capital which increases society's productive capacity, or (b) made available as loanable funds to others.

So it's really not a paradox at all. Whether you're spending, investing or saving, you're still making an important contribution to the economy.

[1] https://en.wikipedia.org/wiki/Paradox_of_thrift

> I suspect most people's education is complete by the time their parents die.

I guess it depends on how you define or implement inheritance tax. If you can afford your kids your entire capital while you are alive, the inheritance tax will only affect the unprepared. In argentina there is a sizable estate tax , so people transfer all their deeds to their children in their 60's. Of course such implementation would not render the kids unable to live without wages.

> Because I can assure you that once dead, you will maintain no further interest in your assets. While alive, I suspect you will.

I dont see how this follows what I said. I said that if the goal is to maximize the amount of labor in the system (adding inheritance tax so children of welathy people also have to work) then we could just ban wealthyness altogether and truly maximize the amount of people that work. by making it a necessity. I dont know what interest in assets means in this context.

> They were teaching it in highschool economics when I was a kid.

I dont know what model they taught you, but if spending by itself were the undisputable best use of capital, then we should collectively just ban savings from ever existing and reap the rewards.

It is a type error to speak of utility functions as being rational or irrational.

Many people with children that work incredibly hard do so precisely so that their children can live a better life than they did. Removing this motivation would definitely reduce economic activity.

Or they'd simply spend more, which would increase economic activity. And one assumes their children will need to work harder without inheritance, so that work isn't going anywhere.

There should at least be a decay function built in. People care before they're dead about the immediate future - but they won't care as much about 150 years into the future. Yet intergenerational wealth can last more than 150 years.

So, I'm in my 30s right now. I own a home, have quite a bit of investments and valuables. My parents did not give me a dime (it has been the other way around, really).

Now, if i decided to give all of this to my hypothetical kids -right now-, potentially decades before I'm dead. They could grow up with it, invest it, make money, and be reasonably "rich" (not 1%, but better off than most) by the time they are in their 30s. And then they could give THAT right away to their kids, again, decades before they are dead.

Repeat the cycle. So my grand-grand-grand-etc childrens could be absurdly rich, technically thanks to me, but where do you draw the line between whats inheritance and what is not? I gave the money while I was alive (taxed and stuff, but still), they were the one who invested it and made that additional money through their own action (though it was super easy, it was still them clicking the buttons on their investment account's website, and according to taxes, they made it).

So how to you stop that from happening? I can't give money to my kids while I'm in my 30s?

Now ok, let say I can't give money. Instead I take my money and I spend it on private school, tutors, private college, etc. Even if living in a place where education is free, you can certainly have a lot of influence through money.

No matter how you spin it, somewhere down the road, this effect will compound. Starting from scratch in a videogame means you'll take longer to catch up than someone who's been playing the game for a while and twinked their subsequent characters. No way is it going to be different in a system as complicated as real life.

Investing in your children so they will be successful feels like a net win for society in a way that simply giving them assets does not.

Yes. But it does not change the final result: lineage has a huge influence on financial success.

There's pros and cons on the various ways they can happen, but it does not change the fact that the kid of several generations of successful/influencial/rich/whatever people will do better for themselves on average than someone fleeing a poor country who just came in this one.

While that certainly sounds true (even to me), I wonder if there's evidence that supports that.

> Now, if i decided to give all of this to my hypothetical kids -right now-, potentially decades before I'm dead. They could grow up with it, invest it, make money, and be reasonably "rich" (not 1%, but better off than most) by the time they are in their 30s. And then they could give THAT right away to their kids, again, decades before they are dead. > Repeat the cycle. So my grand-grand-grand-etc childrens could be absurdly rich, technically thanks to me, but where do you draw the line between whats inheritance and what is not?

Actually, you don't need to draw the line. It's covered in the tax code. There's this thing called the "gift tax." People moan about the complexity of the tax code but a lot of it is there for a reason, so you can't just go AHA and pivot a little bit and subvert the entire intent.

If you give enormous wealth to another who is not a spouse or a charity, while alive, or while dead, then you (or your estate in place of your dead spouse) will, in fact, have to pay the taxes due.

The thing is the taxes are too low and the Republicans keep zeroing them out when they get in power.

Don't let the perfect be the enemy of something better than our current situation.

> ban inheritance, which would be all sorts of bullshit

Well we already have a partial ban, in the form of the estate tax. We could make it a full ban.

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