Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
Inherited wealth and complacency
Published on May 13, 2005 By Draginol In Politics

My wife and I are looking for lake front property up near Higgins Lake Michigan. There's not much lake front property now.  Not surprising given the law of supply and demand.  But the realtor told me something telling -- the reason there's not much land available is due to multi-generational inheritence.  That is, 150 years ago people bought land up there and simply hand it down from generation to generation.  Family land. How can that be bad?

At first glance, such generational property ownership might sound like a good thing.  And I think it is good -- to a point.  But on the other hand, as a society, how fair is this? When talking about limited resources, such as water front property, how "fair" is it that one family gets to live on the beech simply because their great great grandfather bought the property a century or more ago?

Or more often, ancestors who squatted on the land.  I am a strong believer in things being kept in the family. But I am also an opponent to concentrated unearned wealth.  Sometimes the contradiction becomes an issue.  At some point, a society has to make some tough decisions.  If we want an upwardly mobile system, then there has to be a mechanism in which generations can't simply inherit wealth and sit back and do nothing generation after generation. 

The lake front example is just that -- an example of such stagnation.  Without inheritence taxes, the natural resources of society really comes back to being a "whose ancestors got there first"?  I tend to think that our society should give everyone an equal shot. 

I don't think the government should be confiscating land from people.  However, I do think that inherited wealth should be treated as any other type of income.  Like most people, the money that puts food on the table comes from my labor.  The income from that labor is then taxed.

When someone inherits money from a friend or relative, it's still income. In fact, it's more than income, it's unearned income.  I don't see why it shouldn't be taxed at the same levels as regular income.  This has all kinds of benefits for society and if we're going to tax people's hard work, why not tax income that came from simply being born?  The benefits include ensuring that we don't stagnate society.

In an egalitarian society such as the United States, much of the American dream is premised on the concept of hard work leading to great reward. Anyone can make it.  But if the children of successful people can simply inherit immense wealth wholesale without having earned it that strikes me as not being good for society.  This is especially true when it is property -- land holdings -- that are being inherited.

That said, I am not in favor of massive taxation of inherited income.  I don't agree with the whole "that money has already been taxed" argument at all, however.  After all, money gets taxed as it passes hands all the time.  Why would inherited income be treated differently?  It's still income.  What I would like to see is a healthy balance between what is good for society as a whole and what is good for individual families in particular. 

I'm all for people at Higgins Lake being able to have cottages that pass on to their next generation. But that next generation should have to put something up too to get it so that there is at least the hope that other citizens may have a shot at buying that property to pass on to their children too.

Post Notes:
Some people are reading this article as "Oh greedy Brad just wants cheap land."  Sigh. I was using thiis example to illustrate a general point.  I have no problem with inheritence, I am simply saying that inheritence should be taxed as any other income at the same rates as other income.  So technically speaking, I'm in favor of LOWERING the inheritence tax but I still support there being an inheritence tax.


Comments (Page 1)
on May 13, 2005

Interesting perspective, Brad, and something to think about. But the flip side of the coin is that of the family farmer (a situation I'm sure you are well aware of, living as you do in Michigan). I don't know if I entirely support it; I'll have to digest your argument more before I comment further, but it's a definite and welcome "flip side".

Thanks again.

on May 13, 2005
WAH, WAH, WAH, Daddy Government Make it Fair!!!

Since I have been blogging here at JU, I have heard people crying that the government should make everything from healthcare to homeownership fair. Now you chime in with how you want the government to ride in on their shiny white steed, so you can buy the spot of ground you want for your family and yourself? Sorry, but your logic doesn't flow.

You want to use your money to buy a place for your mom to live out the rest of her days, as an investment for you, and a place for your family to enjoy. Those are all admirable motivations, and I congratulate you for using your resources in those ways. Guess what though, someone else is already using those properties for their own mothers, and their own investments, and even for their own families to enjoy.

Fairness is never fair and equality is never equal!

Is it "fair" if the family that has inhereted the property, now is being forced to sell the cabin that their grandfather bought all those years ago? All the memories of family reunions, fishing and boating trips, and whatever else the family used the property for... ripped out from under them, just so they can make things "Fair"?

Part of that "American Dream" of which you speak IS passing something down to our kids on our passing. I'm sure that when you do find a lakefront cabin, you would want to pass it along to your kids and grandkids too. When you find the one that is up for sale, and you buy it, are you going to remind your kids, "Don't enjoy it too much, it will just make it harder on you when you have to sell it, just to make things "fair" to other families who might want these memories too."

Yes, inhereted property is income, so if we are going to have an income tax, the increase should be taxed. However, it should be taxed as income, not at a higher rate.

I understand your frustration, but the government in effect forcing people to put their assets on the market, just for the sake of opening the market, flies in the face of property rights.
on May 13, 2005

Part of that "American Dream" of which you speak IS passing something down to our kids on our passing.

I agree with Ted on this one... If I reach the point where I have property I wish to pass on to my dughter and feel that I am nearing the end of my life I will sell her as much of it as I can for $1.00 (earnest money ya know) so that politicians don't get the chance to tax the things I purchased after paying taxes on the money I earned. As for the American Dream of being able to buy property I would submit that you could make an attractive offer on these properties and would eventually find someone willing to sell even though they are not actively seeking a buyer. Ain't capitalism grand?

on May 13, 2005
Sorry Brad but this comes off as just sheer selfishness on your part. You are upset because someone else already owns something that you want and you don't like it. Why should someone be subject to additional taxation just because their parents were successful enough to purchase property to pass on to their offspring?

I have a feeling that if the shoe were on the other foot and you were the recipient of such an inheritance and subjected to additional taxation you would be arguing against it. What is it you keep saying? Oh yeah, the well off are already paying the bulk of the taxes?

Weren't you the one complaining not too long ago about how much you were having to pay in taxes? And now you're arguing that "those other people" should be paying more taxes?

You're suggesting that some people should be punished through taxation because they have something you want. Or is it that you just don't want those "poor people" owning property in the same area that you will?
on May 13, 2005
It does smack of jealousy, doesn't it.. You are human, Draginol As you would say, work hard at finding a spot, even if it means buying it from someone else because of an attractive offer, it is the capitalist way. The article is very counter-productive to what you've stated before, though.

on May 13, 2005
I absolutely must disagree with you on this topic.

Property rights are the very foundation of this nation, and the fundamental "RIGHT" on which the Constitution is based.

The very idea that others should be taxed to the point that they are forced to sell their inheritance, so that YOU have a chance to buy it, is as repugnant a thought as forcing your fellow citizen to remove the crucifix from her necklace because don't like looking at it.

If you really want that piece of property, make an offer they can't refuse. If the price it too steep for you to afford, then you have do without.

If you were to hold a gun to the owners head and say,"You will sell this property to me because I've got a gun to your head." You would be a thief.
How then can you ask the government to hold the gun, and force them to sell?
That is what you are doing, using the Police power of the government (the gun) to get what you otherwise could not have.

gNOME
on May 13, 2005
I have to disagree as well. We are taxed on our income, we are taxed on our investments, then when we die, that same tax-harrowed estate is taxed again when we pass what little is left on to our kids. You have to draw a line somewhere, and I think it is way too difficult to pass on an inheritance as it is.
on May 13, 2005
I've got to comment on this one. Inheritance taxation is absolutely wrong - and here's why:

Why don't we call it just what it is, like everything else here in America - theft and robbery? We come up with all kinds of coy names for everything to hide the simple fact that what we do as a society is steal from one another. Taxation for any purpose is theft. Taxation for national defense is obviously less egregious, but taxation in general is stealing. What most people don't realize is that taxation of property has been, since our country's inception, and will remain for as long as we have our constitution, illegal; inheritance or otherwise. In fact, property has not ever been taxed and it never will be. Congress is very careful not to step on those rights. So why are things taxed? The explanation is simple - contract always supersedes constitutional rights; you have the right to contract your freedoms away. Since we all have contracted our rights away, we have allowed ourselves to be taken advantage of and therefore given the authority to our government to become our benefactors; and as such, they now have the right to exact whatever taxation (read theft) they want to impose on us.

It is undoubtedly wrong for me to hold up my neighbor at gun-point and request that he give me all the money in his wallet and yet we believe it is ok for our government to do the same. And they do. Who in their right mind wouldn't try to cow-tow to the IRS when they come knocking on the door? So, why should my neighbor’s property be distributed to the government for them to redistribute to someone else, or fund some pork-barrel program simply because they worked hard their whole lives and attained something? Have not they already paid their dues to our benefactors?

Should we be so willing to just hand over everything at gun-point just because it seems like the better deal for our society? Not everything that seems good is good.
on May 13, 2005
i once caught a turtle while at higgins lake (a very large blandings turtle). i named it higgins. somewhere along the line i divested myself of it or it of me (i really can't recall what happened to poor ol higgins, mostly because i was quite successful at catching turtles; at one point i had more than 60 adults of various species in my portfolio--not to mention my backyard...and room). it sounds sorta sad but i'm cheered by the realization i wont need to consider the consequences of bequeathing him to anyone.
on May 13, 2005

Income is taxed.  When you die, it's not your money anymore. Those assets go to wherever and those receiving it are taxed.

Since I have been blogging here at JU, I have heard people crying that the government should make everything from healthcare to homeownership fair. Now you chime in with how you want the government to ride in on their shiny white steed, so you can buy the spot of ground you want for your family and yourself? Sorry, but your logic doesn't flow.

Oh spare me.  I love how some people define "logic" as equating to having the same beliefs as them.

Let's take YOUR logic to its logical conclusion - the hyper wealthy slowly amass huge amounts of wealth and buy up all the land. Eventually the super rich own all the desireable areas.  Perhaps we can bring back serfdom. Let the peasantry work the lands of the inherited rich people.

I have found that on most issues that there's a happy middle ground between extremes.  We don't want governments confiscating the earned wealth of its citizenry to the point where it discourages said citizens from creating wealth which in turn benefits society.  But at the same time, concentrations of wealth -- whether it be with governments or individuals is not good for society either.

This is particularly true with issues that involve scarce (physically limited) resources such as land.  Those of you who are all in favor of first come first serve when it comes to owning land and other natural resources might want to consider that that land was once owned by others such as the native Americans and was seized by the government "at gun-point" as well.

 

on May 13, 2005
'Let's take YOUR logic to its logical conclusion - the hyper wealthy slowly amass huge amounts of wealth and buy up all the land. Eventually the super rich own all the desireable areas. Perhaps we can bring back serfdom. Let the peasantry work the lands of the inherited rich people."


That would be true if everyone was limited to one child and kids always stayed on family land. In reality families have a couple of kids, who have a couple of kids, who have a couple of kids. Estates are sold, split, subdivided over and over. Even when there is just an only child, they generally move away and sell eventually.

Look at Ireland and all those pretty rock fences that honeycomb the landscape. The reason those are there is because family land was subdivided over and over and over with each progressive generation. Eventually someone buys up a lot of the small plots and puts together a larger estate again.

Regardless, I don't see the government imposing a toll to prevent hereditary land ownership. That kind of social engineering isn't in their mandate.
on May 13, 2005
Wasn't the reason for establishing the inheritance tax to avoid an aristocracy?

It sounds bad to tax what you want to leave to your children, but isn't the alternative worse?
on May 13, 2005

Property rights are the very foundation of this nation, and the fundamental "RIGHT" on which the Constitution is based.

..and this has to do with inheritence..how?  So if your great great grand father happened to buy up land in Oklahoma shortly after the US government kicked out the native inhabitants you should automatically inherit it without any sort of tax on it?

Sorry Brad but this comes off as just sheer selfishness on your part. You are upset because someone else already owns something that you want and you don't like it. Why should someone be subject to additional taxation just because their parents were successful enough to purchase property to pass on to their offspring?

Well no kidding it's about selfishness. What additional taxation are we talking about here btw? Income is income.  I don't agree with the concept the Billy Jr. should be able to get $10M untaxed simply because the source of the income was biological.

But let me make sure I get this straight: Joe Schmoe Working guy making $40k annually gets taxed on HIS income.  But Billy Jr. who happens to have been born into a rich family should get his $40M untaxed?

And don't kid yourself -- my example was to illustrate my point.  I'm patient and will eventually get one of the lakefront properties because, how do I put this delicately, I will be able to afford to buy it -- partially thanks to the existing inheritence tax. Without the inheritence tax, I'd still be able to buy it but it would be at a much inflated price. 

The net effect is that the inheritence tax helps decrease the stratification of our society. No inheritence tax means that only other rich people will be able to have a shot at affording scarce resources such as waterfront property.

What I find totally amazing is that there's more uproar against taxation on completely meritless income (inheritence) than there is on merit based income (working a JOB).  If we weren't paying nearly half our income in various merit-based taxes already, I would agree.  But in terms of low hanging fruit, I'd say inheritence taxes are far more reasonable than individuals having to pay 33% of their income to the federal government.

on May 13, 2005

Part of that "American Dream" of which you speak IS passing something down to our kids on our passing.

I agree and I make a distinction between passing something down and handing over the whole plate.  I have no problem with inheritence -- as long as it is taxed like any other income is. 

I find it mind boggling that any conservative would find meritless income somehow more sacred than merit-based income.  Hell, even the lottery is taxed. And being born in to a rich family is the ultimate lottery.  What's next? You guys going to advocate a caste system?

on May 13, 2005
" What's next? You guys going to advocate a caste system?"


Again, you're pretending that hereditary land stays in the coffers of The Family for centuries. That simply isn't how it works in America. Inherited land is usually inherited when people are in their 30s-50's. More often than not it is sold.

If I saw what you describe happening, maybe I'd understand, but in my experience the estates around here, even the multi-million dollar estates, rarely stay in the same family for more than a generation or two. Those days have past.