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 2)
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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.


This statement is just too stupid for words, so out of respect that you normally at least make some sense, we'll move on...

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


True, income is taxed, and when a family inherets land that is income, so sure, it should be taxed as income. The problem is, it ISN'T taxed as income (based on current graduated income scales), it is taxed as Inheritence.

I am not one who believes all taxes are theft. The government does need revenue to operate and they can only gain revenue through one form of taxation or another. So, as I said, if we are going to base taxes on income, go ahead and tax the recipients of the property, but do it as income not stupid, whiny, class warfare lies and stupidity based on how some things should be taxed more extensively than others.

10-15% on everything above $30,000 (adjusted for local cost of living) is all the government should get. If it wants more, it should sell government assets, just like it expects us to do if we need to raise personal revenue.
on May 13, 2005
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.


ParaTed, I agree with you on this one point only, but not on the rest.

Draginol, good article, I agree sompletely. Call me selfish if anybody else wants, but I believe those who get incoming money/property in any way sould pay. The old saying that nothing in life is free, is true.
on May 13, 2005
'But what about people who don't happen to own software companies and didn't have the good sense to be born into rich families?'

Hmm, let them eat cake, anybody? Well Draginol, my guess is that the people you refer to have rather different things to worry about than 'being able to buy a place that my mom can live in when she retires, have a good investment, and have a place for the kids and I to visit and vacation.' Like feeding and clothing themselves, saving up for a holiday ( as opposed to a holiday HOME), and buying a place for THEMSELVES (possibly with a bit of room for their mothers and fathers too, when they retire) to live in. But of course that's just my guess ...
on May 13, 2005
hey brad? any extra dough you feel you NEED to let go of send to me OK? We {my wife and I} just saw a huge inheratence shrink
by leaps and bounds due to inheritence taxes { call em what they really are } DEATH TAXES. Some people work and save there whole lives just to be able to give their children a leg-up, the GOV. {big brother} takes from whom ever and spends it on pork, pork and more pork. I am afraid I must agree with majority here brad, you are wrong on this one.
on May 13, 2005
Usually when I have an opinion that would unite this many camps I keep it to myself, lol. Kudos for your bravery, Brad, and I respect your opinion, even if I don't agree with it.
on May 13, 2005

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.

We currently have an inheritence tax. Get rid of it and I suspect you would see "hereditary lands" in the hands of the very rich much more often.

on May 13, 2005

I find it equally boggling that you consider there to be such a thing as "meritless" income.

Making a bunch of money simply because you were born is not my idea of merit.

on May 13, 2005

This statement is just too stupid for words, so out of respect that you normally at least make some sense, we'll move on...

So you've decided not to comment on my blogs for awhile. Very well. (plonk) (if you can't discuss the issue civilly don't discuss it at all -- I don't care of people comment on my blogs so I have a low tolerance for having my arguments name-called)

 

on May 13, 2005
I think of the family farm I grew up on as a child and worked on as an adult for 15 years. Some of MY OWN blood, sweat, and tears has been invested in that land, but, when my chance comes for a piece of it...

There's the taxman 'cause:

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?


It's "fair" cause I sweated on it too, while my country buys it's cheap food elsewhere thus driving millions of my generation off the farm. Ahh... never mind...
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.


Sorry Brad but this is just wrong. When that money was earned it was taxed. And now your saying that they should be able to tax it all over? Would you not consider that double-dipping?
on May 13, 2005
All of the justifications in the world won't change the basic message. People should be taxed off of their land so that someone with money can buy it out from under them. It's just wrong.
on May 13, 2005
I'm finding it difficult to agree with you here, Brad. The money that buys that land or gets passed on to beneficiaries is very much "after tax" money, having been taxed a whole bunch of ways on the way from being earned to becoming an asset. I'd rather just be sure the individual is fairly taxed in the first place (get rid of all the loopholes or go to a consumption-based tax) and get rid of the death tax. The only real reason it exists is that the government needs a guilt-free way to recover some of the money that dodged taxes during the first pass due to all the silly loopholes extended to the rich in the tax code. Worst case acceptable scenario would be to tax the appreciation in value when the asset is disposed of, at ordinary income tax rates.

Cheers,
Daiwa
on May 13, 2005

Sorry Brad but this is just wrong. When that money was earned it was taxed. And now your saying that they should be able to tax it all over? Would you not consider that double-dipping?

Every time money changes hands it's taxed. It's a fact of life unfortunately.

on May 13, 2005

All of the justifications in the world won't change the basic message. People should be taxed off of their land so that someone with money can buy it out from under them. It's just wrong.

On the contrary, I don't accept your premise.  I don't think descendents have an automatic right to inherit everything.

No one is kicking the owner of the land off.  When that person dies, the inheritors certainly have a priviledged advantage at getting it, but I don't think it should be automatic.

on May 13, 2005
Drag - sorry, I (like others) have to take you to task on this one. Normally I pretty much agree with you, but in this case, as your later added note says, it seems that this just points out your own jealousy in wanting something for yourself that others already have.

Inheritance taxes are not the answer. They do nothing to really make these properties available, or at least to make them available at a reasonable cost. In fact, they may do just the opposite in many ways - they may wind up sold off to pay the inheritance taxes, but of course because the person receiving the inheritance wants to maximize their new wealth, the property must be sold at the highest possible prices.

I don't want to see properties like the ones you describe handed down in perpetuity either, but having the government tax it away doesn't solve the problem. Where do you draw the line? 3 generations is enough to hold on to something, but 4 is too many? 1 is too many? 2 is too many?

You can't make it fair by taking it away via taxes in the name of the government. All you'll do is add more money into the government and someone with just a bit more money left to them, or earned via hard work or a lucky stroke of software coding can come along and still lock up the property you long for.

Perhaps the answer isn't so much in inheritance taxes as it is in getting the government to take some properties via other methods so that the property can be turned into public lands and facilities. I will say that it (to some extent) broke my heart to drive along the PCH (Pacific Coast Highway) and see so much of the coastal land literally littered with cruddy homes that provide some lucky individuals a fantastic view of the ocean. Of course there are negatives with those properties too -- including the potential for mud slides and more. But my point is that where I would much prefer to see a fairly pristine skyline (similar to the public beach and park lands also along the highway), there are parts which have been private for many years.

For the greater good, perhaps less private ownership of some areas would be a good thing, but again, not done through taxation as much as other methods of having the government acquire the lands and property.
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