I can't think of another mechanism from preventing a permanent aristocratic class from passive investment
Now power via money in politics is another issue completely, but money isn't the issue, corruption is. I would wholeheartedly agree we need to fix corruption in the government. I just disagree that the fix to corruption is to make everyone marginally poorer via taxation. (at least some margin is lost to bureaucracy)
Or even just plummeting real yields on investment like we've been seeing over the past decade.
Another commenter posted [0], which indicates that there's something besides inheritance taxes driving successive generations back towards the mean.
0: https://www.nasdaq.com/articles/generational-wealth%3A-why-d...
>> I can't think of another mechanism from preventing a permanent aristocratic class from passive investment
> I can! Spendthrift children.
Well, in that case, it's all gonna be spent instead of invested anyways, so GGP's argument is moot and we might as well just tax it instead of having employees of public sector companies subsidize the layabout.
Well, there's a difference between passive and active investment...
If the child of the wealthy person is bad with money, then having them actively invest that money is net harmful.
And if the child of the wealthy person is not bad with money, having them actively invest that money ends up with dynasties.
And we're back to the same double bind: to defend the wealth tax, you need to either a) justify dynasties or else b) explain why we should subtract from the salaries of employees at public sector companies in order to subsidize dividend payments/bond yields for one or two generations of destructive layabouts.
(TBH there are reasonable arguments for family wealth and for allowing layabouts, but I don't think there's any way out of this bind. "oh don't worry, they'll piss away that money anyways" is a bad reason for not taxing someone.)
IMO that argument is meant to counter people disliking unearned wealth.
But to argue in favor of dynasties:
1. It might encourage a longer time horizon. "Leaving something good for your grandchildren", etc - and in a lot of ways people not doing this is why we have issues fighting climate change.
2. If investment ability is correlated across generations (and I'll eat my hat if it's not) then giving the children of competent investors more capital than those of incompetent investors will lead to better investments overall, and thus faster economic growth. And economic growth is everything. (2% difference in annualized growth for a century is the difference between the US and Mexico)
Well, sure, for a lot of people. I care less about unearned and more about unproductive.
Hedonistic consumption on the weekends/a few weeks in the summer/20 years at the end of your life so that you can go build something during the rest of your life is net productive in most cases. Hedonistic consumption 24/7 for a lifetime is probably totally unproductive.
> 1. It might encourage a longer time horizon. "Leaving something good for your grandchildren", etc - and in a lot of ways people not doing this is why we have issues fighting climate change.
I think a huge wealth tax would be better. People would probably not let all that go to the gov. They would probably donate quite a lot. Hopefully to causes that address our most important problems (like climate change, but also healthcare, mental health, organizations to promote community fabric to fight loneliness, education, etc.).
>2. If investment ability is correlated across generations (and I'll eat my hat if it's not) then giving the children of competent investors more capital than those of incompetent investors will lead to better investments overall, and thus faster economic growth. And economic growth is everything. (2% difference in annualized growth for a century is the difference between the US and Mexico)
Well, the alternative is taxation. That could mean direct wealth redistribution. Or, that could mean war. Or, that could mean reinvestment in infrastructure/research/etc.
Now the question becomes "do you trust the grandchildren of the rich more or less than you trust the people's government?"
Yes, I trust a collection of 3rd-generation rich more than I trust a government that is currently led by Trump. Some of those kids will be good, some will be bad - but they'll have diverse outcomes, while relying on the "people's government" is a single point of failure.
And, ironically, might not have become the president if he didn't inherit a $400m+ fortune.
And each of those jurisdictions is full of people, some quite wealthy, who can make decisions with the wealth that they generate in their own lifetime. And even beyond their own lifetime, by donating generously to churches and hospitals and schools and universities and parks and so on.
There's plenty of parallelism, and even plenty of ways to invest one's wealth in meaningful pursuits posthumously without passing it to your offspring. I don't see why third generation aristocrats are needed to achieve the diversity and parallelism you seek.
If we didn't have the system of inter-generational wealth transfer that you're defending, Trump very likely wouldn't be president right now.