TheAgitator.com
I Love It (A Death Tax Rejoinder)
Friday, August 29th, 2003This blogging thing is fun, I’m so giddy I hardly know where to begin. Most amusing is that 90% of the knocks on my death tax post can be easily dismissed simply by pointing out things I actually said.
I understand the original post is long. And I know it can be tough to continue reading when you are blinded by tears of rage, but had a few “libertarians” taken some deep breaths and read the actual post they might have realized that what I suggest is far from a socialist plot.
Let’s start with my favorites: Multiple commentators (the Toms, James Bowman, Matt, Glenn, etc…) take me to task for not wanting to do away with taxes entirely, while others (Nicholas Weininger, Michael Yuri) seem upset that my proposal will not raise enough revenue. How deliciously contradictory. The general conscientious is that my suggestion will generate the government less revenue it gets now, but that I am somehow a socialist because I have not cut the feds off entirely. I say straight-up “Government spending should be lowered and taxes overall should be cut” and “better yet, set [the income tax] at something like 3%-4% and tell Congress to live within those means.” I hate to break it to these math wizards but just because one tax rate goes up, it does not mean that taxes will rise. We can raise the death tax and still cut the amount that each individual pays through out his life, at death included.
This leads me to my second point, lost on oh so many: Loopholes. Nicholas again, roger, aaron, tom again, William Utley, and Michael again all attempt to attack the system as full of loopholes, which to quote one the best I can from memory, “will need to be plugged up with litigation and legislation.” These fellows miss the simple solution, the ability to easily move wealth while amongst the living is not a loophole, it is the plan’s design. People should be able to move wealth all they want while they are alive. The transaction cost should be low and should not favor spending on anything over anything else. People who have earned their money should be able to spend it however they want. Garth, while genuinely upset at my arguments, brings up the consumption tax – generally a very libertarian supported tax plan. I hate to tell you this guys, but my whole thing is designed to be a consumption tax with the incentive to spend. Granted, I have no love loss for people getting money they didn’t earn (whether it be from the forced charity of the government tit, or from their “luck” of having a rich loved one die) but I fully admit that what is probably going to drive this tax program is consumption.
This leads me to the first quality point made against the plan. Congratulations Michael, you take a quality shot near the end of your often misguided and sometimes idiotic “fisking.” When you say:
“A sufficient level of savings is also essential to a solid economy. It provides the backing for loans and mortgages that are especially important to small businesses. It also acts as a buffer to lessen the effects of economic downturns. Increasing spending primarily by draining savings is not necessarily a good thing for the economy. Keep in mind also, that it won’t just be savings, but all investments that suffer from the same disincentive. I find it hard to believe that that will be good for the economy.” I must admit, it has some substance. I disagree with you, but it is an intelligent and informed viewpoint.
My thoughts on the plans effects on the economy are this: No matter how much people want to avoid giving their money over to “Bryan the tax man,” they are going to keep some amount of savings just in case. Most people think the risk of losing their job or other income source is a little higher than their risk of death. Not only that, but selfishly, if I run out of money and I am still alive – that hurts me. If I die having something in savings – that only hurts the person I was going to give it to. I’m picking me over the recipient of my money any day of the week. So, savings will still be maintained, but not as much. Instead people will spend, buying things, creating more jobs, paying people higher salaries. Those getting higher salaries will, in turn, buy things to avoid saving too much, create jobs, paying people higher salaries. Not only are jobs created and salaries raised, but the people spending money get something to show for it. Everyone wins. As for the incentive in that system to invest – Investing is still where you are likely to receive your highest return. The promise of getting even richer will entice all the necessary capital out of people. And you know what, with everyone earning higher salaries, there will be more capital to go around, and there will be more markets for all the new products.
I’ll take a quick diversion from the quality points for a second and mention what I believe might take the cake for the most ignorant. Congratulations James Bowman, you win in what was, at risk of an understatement, a very crowded field. When you say: “[The death tax] is immoral because it attempts to deprive an individual of his right to his property. Ayn Rand stated the following “The Virtue of Selfishness”
‘The right to life is the source of all rights and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life. The man who produces while others dispose of his product is a slave.’”
you leave me with confidence that hypocrisy is not dead (and even if it was, no tax plan of mine could take it away from you). Read your statement. Now read Rynd’s quote. Now read your statement. Now back to Rynd’s quote. See the problem? Probably not so I’ll explain: Ayn speaks of sustaining one’s life through “his own efforts.” What of the inheritance rewards the heir’s efforts? Ah, I know, you will argue that it is the person who earns the money who is being deprived of his efforts. How ludicrous that argument is when you consider that keeping the death tax lower necessarily means that a tax on the living is higher. Your income tax is depriving the individual of his right to his own property. You are simply taking the individual’s property away from him before it gets into his hands. (I will quickly add that number 2 on the stupidest post also comes from Mr. Bowman when he says “Why wait until we die to seize our property? As soon as someone raises their head and dares to make a better life for themselves or their heirs, maybe you and the government should just swoop in and loot their property.” Hey James, I hate to tell you this, that’s what’s going on right now buddy. Its called the income tax. For those building something, it takes it while they are living.)
This has already gone on too long, but I will answer some quick questions before I stop:
1) Why is taxing cash better than taxing capital? (Mark S.)
A) My opinion is this, capital is better because capital creates jobs. Capital pays salaries. Granted, cash is the bank does that to some small extent, but not like capital. That is the sole reason I have for allowing business to skate through the system untouched while an equal amount of money would be “confiscated” by the government.
2) Why do you call it a death tax when you are in favor of it? (Bones)
A) Bones was actually much harsher on me for my word choice but I’ll let him slide because I like his name. Dude, its just words. It doesn’t matter what I call it, I could call it the Mr. T tax plan (no disrespect to Mr. T). It doesn’t change what is actually going on. If people get it, they’ll be down no matter what I call it. If they don’t get it, they are going to be pissed and say I am “hiding behind tricky, slick language.” I would rather embrace their obvious miscatagorization of the plan and point out that taxing the dead is really not that bad a concept. Its the same reason I’ll use the word “confiscated” when I talk about the government collecting its blood money. The government is no less confiscating money under my plan than it does under the income tax. I’m not arguing in favor of raising tax revenue. If people want to get pissed that I’m encouraging government confiscation under the death tax, while they are allowing some sort of benign transfer under the income tax, they are only showing their ignorance. That and I think its funny.
3) Won’t this lead to higher poverty levels/lower standard of living? (I’m too lazy to check who said this)
A)This person is basically supporting nannyism. “The federal government should take more of our money when we are living so that we don’t spend ourselves in to the poorhouse trying to keep them from getting it when we are dead.” Are we so against the federal government getting any money that will will lower our own standard of living just so it doesn’t get money after we are dead? Keep in mind, this intense hatred of the very notion of the government getting anything comes after we have lived our entire lives with a reduced tax burden on the promise that the revenue we would have paid while alive, the government will simply collect when we are no longer living to spend it ourselves. Seems like you assume that the population as a whole will cut off its nose to spite the government’s face. “Please government, protect us from our hatred of you.”
Okay, truth be told, there are some other good points in the comment section. I am too tired tonight to address them tonight but I may come back at them sometime soon. Check back if you think you “burned me good” or better yet post it again and I will try and respond. I’ve been out of the office today and will be tomorrow so internet has been scarce. Still, I am always happy to show misguided libertarians where they are supporting the raping of the freedoms of the living by supporting a vehical that they can never take advantage of becuase they will be dead when it finally pays off.
I think you lose a lot of people because you fail to stress that the stipulation for any death tax would FIRST be to drastically lower or abolish the income tax altogether. It is unrealistic to think the government will willingly give up money coerced through an income tax even if they are able to replace it with money acquired from a death tax. Our first goal should be limiting the funds available to government. Only this will curb spending (It has not and will not work the other way around ie. get the government to curb spending first, then decrease taxes). Basically your argument is moot. The solution to the problem is not going to be found by answering the question â??what is to best way to replace one form of stealing with another form of stealing?â?. It is to stop the stealing.
Devin -
Well thought-out, and equally well stated.
Bryan -
You are so messed-up on this issue it is actually frightening. At first, given the breathtaking level of insanity in your pro-Death Tax position, I assumed the piece HAD to be written in jest. Now that I see, having read your excessively long defense of an indefensible position, you are indeed serious.
The only real credit I can give you in your original post is that you didn’t avoid the “kicking someone when they’re down”, or in this case, dead, argument. You came right out and let us know that kicking a dead person doesn’t hurt them. I can’t speak for others, but that is clearly where the window to MY open mind closed. The concept is sick.
At this point, I only ask you, for the good of your fellow man, please do not run for public office, since people with foolish ideas tend to win. The more foolish the better, and at this rate you could probably run for President of France.
The fact that you say “90% of the knocks on my death tax post can be easily dismissed simply by pointing out things I actually said” shows that your brain is clearly incapable of dealing with the possibility that you might actually be wrong about the Death Tax. Of course all of the “knocks” are easily dismissed – you never really intended to consider opposing views as potentially valid.
Most of your numerous detractors, including me, were simply suggesting that:
1. We should reduce or eliminate the Death Tax.
2. We should reduce the Income Tax.
3. Government must reduce spending, and THAT comes from reducing tax revenue.
and most importantly,
4. The Death Tax is morally corrupt.
The mere fact that you want the government to rush in and confiscate one’s property after they die is SICKENING.
Why not simply wait until someone acquires a pre-determined amount of wealth, then swoop in to take it while they are still alive?
I believe the 2nd ammendment prevents that, so I guess instead we have to steal from the dead. At least THEY can’t shoot the government agents.
Again, PLEASE stay of out public office.
I would like to thank Bryan and the academy for my first and second place awards. However, Iâ??m afraid Bryan is a bit confused. All three of Bryans attacks rely on the premise that I support higher income taxes. I pointed out to GR when he asked, â??What should we do?â? that we â??Get rid of the estate tax. Get rid of most other taxes. Get rid of regulations that hamper free markets. You get the idea.â? Bryan conveniently seemed to have ignored that statement. Bryanâ??s arguments that I contradicted myself fall apart based on exposing his unwarranted assumption, but allow me to address each one individually.
Bryan stated: â??Ah, I know, you will argue that it is the person who earns the money who is being deprived of his effortsâ?.
Answer: Itâ??s not that I will argue it; I clearly stated: â??The rights in question are that of the producer of the wealthâ?. This is important to the rest of my argument.
Bryan stated: â??How ludicrous that argument is when you consider that keeping the death tax lower necessarily means that a tax on the living is higher.â?
Answer: Wrong again! Libertarians should cringe at this. I do not concede, as you do, that the government is at some level of spending that cannot be lowered. The abolishment or lowering of one tax does not necessarily mean that another tax must be raised. Therefore, there is no contradiction in my opposition to your death tax. By the way, that sounds like a true contemporary liberal to not even entertain the idea that government could actually reduce spending. Tsk, tsk.
Bryan stated: â??Hey James, I hate to tell you this, that’s what’s going on right now buddy. Its called the income tax. For those building something, it takes it while they are livingâ? in reference to my facetious question asking, â??Why wait until we die to seize our property?â? (Man, these two-layered quotes are confusing)
Answer: Same reasoning as above; I am not advocating income taxes. Bryan stopped a little short on his cutting and pasting. Two sentences after Miss Rand’s quote I stated: â??The right to property includes the right to use and disposal.â? Bryan advocates denying us the right to dispose of your property in the manner of our choosing (a will), but allowing us the privilege to using our property while we’re alive for the good of the collective. He does this while incorrectly accusing me of attempting to violate property rights. Clear hypocrisy.
Allow me to summarize:
Damn it! Replace your with our just before my summary. It totally changes what I was saying.
With regard to my comments on loopholes: I do, in fact, understand that you intend the death tax not as a replacement for all or most income tax revenue, but as a much smaller funding source for a minimal, Constitutionally limited government. I sympathize with the goal of finding such a source to replace the execrable income tax.
Given my admittedly limited experience, however, I doubt that a reasonably well-loopholed death tax would be adequate even to this reduced task. I could be wrong. Neither of us has a lot of empirical evidence to put up here.
In any case, I think that if you want to go down this minarchist road, there are simpler funding ideas that have less of a chance of producing either evasion or perverse incentives. One is the system of contract enforcement fees that Rand proposed in one of her essays (can’t remember the name, but it was one of those collected in _The Virtue of Selfishness_). Another would be the geolibertarian idea of property taxes covering only the unimproved value of property. I have my doubts about both of these, too, but I think they’re less bad than a death tax.
If we tax estates 100%, who is the one harmed? The individual who built the estate? They’re dead how are they harmed? Do the dead have rights? Is the inheritor harmed? Do we not expect people to earn their own way? Isn’t a key element of Libertarian thinking the notion of self-reliance? So if we can agree that a potential inheritor OUGHT NOT to rely on inheriting and instead make his or her own way, then how is the potential inheritor harmed? If no one is harmed, then how is taxing an estate 100% immoral?
If we can agree that the government needs revenue to function, then is it not reasonable to propose a tax system that defers a majority of taxes until after a citizen’s death?
The issue of the revenue stream is a valid one. Can the government pay it’s daily bills with the change in revenue flow? Exactly what items or investments will be considered part of the government’s take? If I’m a billionaire and sink most of my money into fine wines and keep just enough cash to live on, is the wine considered a family possession or an investment and will the remaining cash make up for the little I paid during my life? If we allow trusts to remain legal, then they will become more common, and then how does the government make it’s money? The wealthy currently pay a huge portion of tax revenue. If we allow the wealthy and middle class to hide their estates through trusts, then the government will be relying on the poor’s estates which will leave us short.
I like the idea in general, but the devil is in the details. What abou that wine I bought, will the government consider that an investment made to hide my wealth for taxation? Is the government going to get in the business of selling the tangible investments of everyone that dies? If I personally own multiple rental properties does the government inherit them? Is the government going to become a commercial landlord? Will it auction these items off at current prices or will the government auction items at prices designed for a fast sale? If they sell items at lower than market prices, won’t that depress the value of similar items in private hands (keeping in mind that if this is implemented, the government will be inheriting items of an untold amount, an untold type, and in an untold variety of places everyday.)
The bottomline is that this all centers on whether or not taxing an estate 100% is a violation of someone’s freedom or rights. So far, I haven’t seen a compelling argument that explains how an inheritance is anything more than a luxury.
A good writer does not blame his readers for not understanding his argument. A good writer concludes that he didn’t make himself clear in the first place and tries to do better next time around. If most of the points can be “easily dismissed” (as you condescendingly put it) by pointing out things you already said, maybe next time try making your argument not so long-winded and convoluted.
It is clear to me now that this isn’t even a real argument. I doubt you even believe what you’re saying. Because if you did, you would be more concerned with convincing us this is a good idea and less concerned with scoring points off reactionary libertarians. You also wouldn’t be wasting time responding to the bad arguments and being too tired to respond to the good ones. This is nothing more than an exercise in mental masturbation, not a serious discussion of ideas.
Mark S:
If we tax estates 100%, who is the one harmed? The individual who built the estate? They’re dead how are they harmed?
Two people. In the first case, you’ve abrogated the rights of the estate-builder, while living, to determine what will happen to his property when he dies. That person had a legal right to make arrangements while living that retained legal status after death.
If you disagree, then would a funeral home have every right to dump my body out in a garbage dumpster when I’d paid tens of thousands beforehand for a lavish funeral and ornate crypt? I think not.
Do we not expect people to earn their own way? Isn’t a key element of Libertarian thinking the notion of self-reliance?
In the second case, you harm the person who would have received the estate. The libertarian/conservative interest in self-reliance (at least on the libertarian side) is merely a general consequence of the principle that people should live by voluntary action and not by compelling others to provide for them. If someone doesn’t pay his or her own way, but is supported by the voluntary contributions of another (say, a deceased relative or a working spouse in a single-income family), that’s the business of those two people, not of some would-be policy-maker lusting after other peoples’ inheritances.
Eric — Thanks for the reply.
Let’s assume you’re correct. Taxing an estate 100% would abrogate the rights of the estate builder. The topic at hand is the partial deferment of taxes until after death. In that situation, the government plays what is essentially a creditor.
*SIDE BAR* I realize some of you will jump on that last statement and claim the government must first possess our money in order to become a creditor to us. However, the money we would pay at death represents the money we OUGHT to have paid during life. So the government is acting as a creditor in a sense. If you can think of a better way to say it and still carry the concept, let me know. *END SIDEBAR*
Since the government plays creditor, then it receives the same preferential treatment as commerical creditors do today.
“If you disagree, then would a funeral home have every right to dump my body out in a garbage dumpster when I’d paid tens of thousands beforehand for a lavish funeral and ornate crypt? I think not.”
No that would be fraud and the estate should sue. And under this hypothetical tax scheme, the government would collect. Even under our current tax scheme, no one’s rights have been violated in your funeral home scenario. It’s a contract dispute, not a constitutional issue.
I think you make a great point when you say that an individual supported by the voluntary contributions of another is perfectly okay and should not be disrupted. But I only think it’s a good point if the receiver of funds is a lawful dependent (underage child, spouse, disabled child) then yes that’s a valid use of an estate. Do not forget that this tax scheme is about the deferment of owed taxes. If there is no lawful dependency then a person must fulfill their obligation to pay taxes prior to the inheritor getting anything, that’s even true under our current system.
So your point of one person supporting another is only valid if we keep our current tax system and also tax estates 100%. But if we change the system so that we pay a fraction of our current taxes during life and pay the balance at death, then no, I don’t value the ability of someone to receive an inheritance above the need of the government to function.
Keep in mind no one has suggested what exactly would be used in calculating the government’s take from an estate (cash, bonds, stocks, home, car, RV, boat, paintings, collectible stamps, investment properties, etc.) What exactly the difference would be between a personal/family heirloom type item and an item to be used in calculating the government’s take is unclear.
Mark S:
The topic at hand is the partial deferment of taxes until after death. In that situation, the government plays what is essentially a creditor…I realize some of you will jump on that last statement and claim the government must first possess our money in order to become a creditor to us. However, the money we would pay at death represents the money we OUGHT to have paid during life.
How is the government playing the part of the creditor? And what is this “deferment”, this “money we OUGHT to have paid during life”? If you mean taxes, presumably the person who built the estate has paid all relevant income, savings, etc taxes due up to the point of death. If not, that’s another matter entirely.
[About the funeral home example] No that would be fraud and the estate should sue. And under this hypothetical tax scheme, the government would collect. Even under our current tax scheme, no one’s rights have been violated in your funeral home scenario. It’s a contract dispute, not a constitutional issue.
No one said it was a constitutional issue. Many torts are founded in the premise that someone’s common law right has been violated. But you still haven’t addressed the point – if no one is being hurt, who is defrauded?
So your point of one person supporting another is only valid if we keep our current tax system and also tax estates 100%. But if we change the system so that we pay a fraction of our current taxes during life and pay the balance at death, then no, I don’t value the ability of someone to receive an inheritance above the need of the government to function.
That’s a dilemma that only exists if you create it, so that’s no point at all. You’re arguing that opposing a confiscatory estate tax undermines your idea of imposing a confiscatory estate tax. Well, yeah.
Keep in mind no one has suggested what exactly would be used in calculating the government’s take from an estate (cash, bonds, stocks, home, car, RV, boat, paintings, collectible stamps, investment properties, etc.) What exactly the difference would be between a personal/family heirloom type item and an item to be used in calculating the government’s take is unclear.
100% is, by definition, everything. If you start allowing exemptions for “heirlooms” or “sentimental items”, it’s no longer 100%.
(Not to mention that fraud is a criminal act, not a tort.)
Eric — True, fraud is a criminal act and I should have put that along with the contract issue.
I suppose we could hypothesize all day long about proposed ideas and their effects on society.
The original proposal was vague on the issue of what would be considered part of an estate and my oringinal post talks about that. I think that issue really makes the whole proposal unworkable.
I really don’t understand your statement regarding a dilemna. I’ve read it and re-read it and I’m confused about what you mean and I don’t see the circular argument within my previous post that you refer to. My point was if a person OUGHT to be paying X amount under the current income tax rates and then we change to the proposed idea and yet the person still OUGHT to owe X amount then the system is essentially defering a majority of owed taxes until death. Maybe Bryan Westhoff can make the point clearer because I don’t know how else to say it.
As I said earlier, one of the proposal’s weaknesses is in the confusion over exactly what portion of an estate is taken by the government. I used 100% because that was what Bryan used as an example. It may be 80% depending on where we set the income tax rate. But the more immediate problem of what items and assets would apply to the government’s take is so complex that it really does overwhelm the proposal.
I really don’t understand your statement regarding a dilemna. I’ve read it and re-read it and I’m confused about what you mean and I don’t see the circular argument within my previous post that you refer to. My point was if a person OUGHT to be paying X amount under the current income tax rates and then we change to the proposed idea and yet the person still OUGHT to owe X amount then the system is essentially defering a majority of owed taxes until death.
That makes more sense. Your original statements seemed to be confusing the current and proposed situation. Or, at least, they confused me.
Of course, if the idea is simply to defer as much of that taxation until death, I really don’t see any benefit. Sure, it’s in principle terribly easy to avoid (see the book Die Broke and other plans of that ilk). But that means that the revenues won’t be considered sufficient, so the inevitable next step is to restrict money transfers by elderly and sick people. And then people in high-risk jobs. Smokers. The particularly overweight. Etc.
As I said earlier, one of the proposal’s weaknesses is in the confusion over exactly what portion of an estate is taken by the government.
That’s actually the least tricky part. Look at current tax regimes. The government will promulgate arbitrary rules, which will then be amended, adjusted, and “clarified” to the point that a few new generations of accountants and lawyers will have guaranteed incomes.
I guess, in the end, that I just don’t understand the attraction of the inheritance tax as a replacement of the current tax system.
Inheritance occurs by STATE ACTION or by the implied threat of same. This comes in two forms: (1) Laws of Intestate Succession, the statutes enacted in each state prescribing what happens to a decedent’s property which is not passed by a will; (2) Wills Acts, the statutes enacted specifying the formal and ceremonial requirements of a valid will.
As a result of one of these laws, or the other, or both, every death results in the law declaring someone else the owner of that decedent’s property. A declaration which will be backed if necessary by the force of the state.
The supposed “right” of the heir (or in the case of a will, the devisee) exists only because the statute created it. In the case of the heir, the “right” is illusory also because the decedent could have written him out with a will. In the case of the devisee, the “right” is also illusory because the decedent could have changed his will or torn it up at the last moment.
Neither of these are true of persons who had contractual relations, backed by consideration, with the decedent.
So-called “death” taxes do not fall on contractual obligations of the decedent. They fall only upon the leftovers, the fictional “rights” created by statute.
three quick responses before I have to catch yet another flight:
1) Matt, I never said I was a good writer. In my defense, it is tax policy and a tax policy that is completely foreign to everyone. Its going to be a little convoluted. I get frustrated though when it appears that people hear the term death tax and immediately stop reading or assume I want to take more money from them. If read the actual words I wrote, this is clearly not the case. I don’t know what I might have said to make that stand out more. I put it in bold for goodness sakes.
2) James Bowman, contrary to your thoughts, in the grand scheme of things lower one tax source does mean another has to be raise. It does not mean another rate has to be raised but the revenue does have to come from somewhere else. Observe: Let’s say we were able to fund the government on $100. Hopefully this will take away your argument of “just cut spending” which I do agree with wholeheartedly. The question then becomes what are we going to tax to get that hundred dollars. If we are getting more of it from the death tax ($99 maybe) we can get less of it from other tax sources. If we only get $50, $50 still has to come from somewhere else. Granted, this does not mean that we necessarily should raise other tax rates, sometimes you can get more revenue at a lower rate by increased participation in the taxed behavior. Still, lowering the revenue coming from one source does necessarily mean raising the revenue coming from another source. Then the question becomes, which behavior do we feel the least bad about taxing. For me, its inheriting money hands down.
3) Mark S., you are exactly right. I appreciate that someone gets it and you make the (what I thought would be the clearly obvious point) the devil is in the details and I have not worked all of them out. Contrary to the wishes of some (and to the delight of roger) I am not a policy wonk working for the federal government. I am a guy working in chicago who simply thinks taxing heirs is a better system than taxing the working. Making an actual working tax plan is way over my head. I just get a little sick and tired of people complaining about the death tax in theory when I believe that “in theory” it is actually the best tax we can have. reforming slavery perhaps, but some taxes are a necessary evil. Seems here that what most people are doing is just complaining that tax are to high. They take too much revenue in. Duh. Doesn’t mean that we can’t separate out a discussion on how they should get the little that we all agree they should have.
Not as short as I thought
Bryan,
No one is or has disputed that when A+B=100 if A goes down B must go up. The dispute on that is whether the spending level is fixed, not whether A+B=100. You state that you wish to cut spending. Why concede that the spending level has to be 100? Why not eliminate A if possible and force spending down to 90? It is a much easier battle to force spending cuts with a tax revenue shortage than with a tax revenue surplus.
Your argument is still wrong for at least three reasons:
1. You assume that government can/will cut wasteful spending without being forced by tax revenue shortages. It won’t, can’t, and has never happened in modern history.
2. Your death tax raises taxes on one group of people in order to lower the taxes of another group. This is a very un-libertarian point of view. Should I vote for a tax on lawyers if lowers my taxes?
3. Your argument that itâ??s the lesser of two evils assumes that there is a distinction between inherited wealth and other wealth. You still fail to recognize that you are infringing on property rights by permitting use but denying the owner from disposing of it in the manner of his choosing.
Just as in any conflict, the preferred strategy is to focus on the weakest point attack there. I am saying that the death tax is a weak link and it should be attacked. After it has been eliminated, the next weakest tax should be attacked and eliminated. In doing so, we would force spending cuts on wasteful government programs.
James Bowman –
At the outset, let me state that I oppose gift taxes. My comments are limited to the “death” taxes, either estate or inheritance.
The owner of the wealth to be inherited does not have any right which is infringed upon by a tax on the inheritance or the estate. He or she remains free to dispose of it as he or she chooses throughout life. The more of it disposed of during life, the less will be subject to the tax.
He or she can also buy life insurance, an enforceable contract by which the insurer promises to pay a third-party beneficiary. Under contract law, a third-party beneficiary can enforce a contract.
But as to the decedent, once he or she has died, what rights can he or she be said to have? As I argued above, these “rights” are solely creatures of the government itself for the sake of order, and not because of a natural right. Without the statutes, everything formerly owned by the decedent would be up for grabs.
Peter,
Iâ??ll elaborate on why these are in fact part of natural rights. I have a right to my life. If we want to debate that, we need to go back into epistemology and metaphysics and should probably move this thread over to alt.philosophies.objectivism. If youâ??ll accept that I have a right to my life, we can begin there.
All rights are derived from the right to life. If I donâ??t have a right to my life, then I can have no rights and am just fodder for the state, tribe, collective, or whatever. Included in having a right to my life is having a right to sustain my life through my labor. If you deny me the right to work to sustain my life, you are denying me my life. I have a right to the product of my labor, my property. If I donâ??t have the right to the product of my labor, then I am merely a slave and have no right to my life. Property rights include the right to use the property and the right to choose how it is used. If you allow me to own my car but deny me the right to say who drives it, then I don’t truly own it.
Now, as I stated in my earlier posts, the rights in question are the property rights of the original owner not the heir. A will is a statement of how I want my property to be disposed of when I die. That is why wills use the phrase â??last will and testamentâ?; it is my last decision.
Iâ??m glad to see you donâ??t oppose gift taxes. They are even more repressive than death taxes.
Woops! I’m glad to see you do oppose gift taxes. I need to work on my proof reading.
James Bowman –
A will is a statement of how the original owner wants his or her property disposed of after any possibility of any consequence to himself or herself is a nullity.
Peter
Peter,
I think this is just arguing minutia. It is their last will and testament; their last will; the last thing they wanted; their last decision. The fact that there are legal formalities that are not executed until after their death has no bearing on whether or not it was their last decision and whether they have the right to make it.
You could argue that since it is actually willed before their death, it is subject to a gift tax. This is still minutia.
James Bowman –
Wrong. In the case of a will, it is not simply legal formalities that are not executed until after death; the testator retains the power to revoke until that death occurs. In the case of intestate succession (inheritance), it is the fact of a death not covered by a will which causes the transfer to take place.
In either case, it is the power of the state which enforces it.
Furthermore, under Wills Acts, it does not matter what it was that was the last thing the decedent wanted. No matter how overwelming the proof of what that last wish was, the law (the power of the state) will ignore it unless that wish was expressed with the right formalities, number of witnesses, etc.
And you are losing sight of my original point, which is that since not a dime of the decedent’s money is taken until after it is no longer his, and since the heir or devisee has no “right” to it, the tax is not inconsistent with libertarianism. There may be good policy reasons why the estate or inheritance should, nonetheless, be untaxed, but they are at best liberty-neutral. (And maybe anti-libertarian, where — as Bryan pointed out — the choice is between this kind of tax and a tax on the productive economic activities of the living.)
James Bowman –
Wrong. In the case of a will, it is not simply legal formalities that are not executed until after death; the testator retains the power to revoke until that death occurs. In the case of intestate succession (inheritance), it is the fact of a death not covered by a will which causes the transfer to take place.
In either case, it is the power of the state which enforces it.
Furthermore, under Wills Acts, it does not matter what it was that was the last thing the decedent wanted. No matter how overwelming the proof of what that last wish was, the law (the power of the state) will ignore it unless that wish was expressed with the right formalities, number of witnesses, etc.
And you are losing sight of my original point, which is that since not a dime of the decedent’s money is taken until after it is no longer his, and since the heir or devisee has no “right” to it, the tax is not inconsistent with libertarianism. There may be good policy reasons why the estate or inheritance should, nonetheless, be untaxed, but they are at best liberty-neutral. (And maybe anti-libertarian, where — as Bryan pointed out — the choice is between this kind of tax and a tax on the productive economic activities of the living.)
You stated, “not a dime of the decedent’s money is taken until after it is no longer his, and since the heir or devisee has no “right” to it“. Wrong. The heir has every right to it. His rights are derived from the rights of the orignal property owner who chose to grant it to him as his last will before death. The property owner has the right to use and disposal. He chooses to bequeath it to an heir. He dies. Now it’s the heirs property.
I am arguing that it is a natural right regardless of whether it was, as you stated, “expressed with the right formalities, number of witnesses, etc.” It may very well be that the state has passed laws abridging this right. They do it all the time.
The hatred of inherited wealth is a Marxist concept not a libertarian or conservative one.
In praise of death tax.
Bryan, an alleged libertarian, posted a long socialist diatribe in favour of the “death tax.” Not only does he praise this evil bit of the tax code, he wants to increase it, maybe even to 100%! Several commenters have given…
James Bowman –
First, what you have just negatively implied is that someone who merely inherits property (that is, acquires it by operation of law, but without the decedent’s wish as anywhere expressed) has no right to it, because the original owner did not give it to him. You have conceded that a tax on an unwilled estate or part thereof violates no one’s right.
Second, no, you have not “argued” that to will the property is a “natural right” of the testator. You have only stated that opinion, without any backing argument. You might as well have stated that you have a “natural right” to health care or a living wage. Putting the “natural right” label on an outcome you favor does not make it the philosophical winner.
Third, now you suggest that the state violates this so-called “natural right” by insisting on the formalities which it has prescibed. In the absence of the Wills Acts formalities, would you suggest the decedent’s wishes be ascertained by whatever means a judge’s whim might dictate? Or does the state violate the “natural right” even by imposing jurisdictional rules, rules of evidence, statutes of limitations, etc. And in the absence of these state-imposed formalities, are we not left with no more than first-come-first-serve and might-makes-right among the claimants?
It is the undesirability of exactly that kind of scenario which is the justification for recognizing inheritance and wills.
Inheritance and wills are rooted in practicality. It is an error to call them rights, natural or otherwise.
Andrew Ian Dodge –
I am a libertarian, and have never been a Marxist. I do not know that Marx himself hated inherited wealth anyway, but I welcome you to research that and report back with the appropriate quote from his boring prose.
I do not hate inherited wealth. I think what I have written on the subject is proof enough of that.
But maybe I can give you more proof. If you have any inherited wealth, then just as an experiment, give it to me. I won’t hate it.
Peter,
You are still focusing on minutia and failing to address any arguments. Iâ??m growing bored with repeating myself on this issue.
First, I have made the positive statement that an heir who inherits property by the will of the original owner has a right to it. You have provided nothing that contradicts that the heir has a right to the property.
Second, you stated, â??you have not “argued” that to will the property is a “natural right” of the testator. You have only stated that opinion, without any backing argument.â? Hmmâ?¦ Let me check my dictionary; argue: To attempt to prove by reasoning; maintain or contend. Allow me to repost part of my argument since you obviously didnâ??t read it:
Unless you are arguing the right to life is not a natural right, then you have presented nothing to contradict my reasoning on why the right to dispose of my property in the manner of my choosing is a natural right.
Third, I stated since it was a natural right, it exists regardless of the stateâ??s formalities. This implicit in the definition of a natural right.
“1. You assume that government can/will cut wasteful spending without being forced by tax revenue shortages. It won’t, can’t, and has never happened in modern history.”
This is besides the point, but I’ll humor you with a response. Part of what I caught heat for from my original proposal is that it would not raise enough revenue. Whether this a good or bad thing is debateable, but I would think you would see it as a good thing. The revenue shortfall would cause spending to be cut. I would be happy about that. Point for death tax.
“2. Your death tax raises taxes on one group of people in order to lower the taxes of another group. This is a very un-libertarian point of view. Should I vote for a tax on lawyers if lowers my taxes?”
I don’t know how you think tax policy works but every tax decision necessarily is a decision to tax one group in order to lower taxs on another. Whether or not you are actually raising taxs on one group is besides the point. Who says the tax policy right now should be ground zero? If you lower it on heirs by removing the death tax, you cannot lower it as much on the working.
Further up in your post it is clear that you still don’t understand the concept of necessary government spending. In the universe I created for my example, government spending cannot get lower than $100. I got spending down to $100, all the waste has been cut. We can’t just make it 90. why not just make it $10 . If we have to get 100, every dollar that you take away from a death time collection, is a dollar you have to get from somewhere else. You can’t just say collect one less dollar, at this point, every dollar is necessary. So, where do you get the dollars. you are necessarily letting some people not pay at the expense of others.
“3. Your argument that it’s the lesser of two evils assumes that there is a distinction between inherited wealth and other wealth. You still fail to recognize that you are infringing on property rights by permitting use but denying the owner from disposing of it in the manner of his choosing.”
I am not denying anyone any choice. They get the money while they are alive. Because income taxs are cut, this is money they would have paid to the government in taxs had the death tax not been raised. Lets say you used to pay $100 in income taxs every year. And that you would have lived for 20 years paying those taxs. Under my plan you would be 2000 richer throughout your life because you would not have lost that money at any point while you were alive. If you really wanted your children to have that money, you could give it to them right when you get it. Right now, that money is going to the government. Who is really denying choice? Me by taking it after they had a chance to dispose of it but didn’t, or you by taking out of the paycheck before they ever get a hold of it?
Bryan,
Lets keep this simple. Iâ??m going on vacation and Iâ??d like to put this to bed.
James Bowman –
First, have a nice vacation, if you so choose.
Second, you did indeed state that property rights include the right to choose how the property is used. I agree that that much is included in property rights. I also agree that your right to the fruit of your labor flows from the right to sustain your life, and that the right to sustain your life is part a natural right.
My issue is whether, once you have ceased to sustain your life, you or your corpse have any right to tell the rest of us what to do or not to do with that stuff you had not given away when oxygen was still important.
Your death gives you no right to force the rest of us, the living, to carry out the wishes which you failed to carry out in life. You seem to have just assumed that it does, by labeling same a “natural right”.
As I stated, inheritance and wills are practical conveniences for the sake of law and order; and they are important for that reason alone. But that does not translate to a right. Thus, no right is violated by a tax on same.
James Bowman –
First, have a nice vacation, if you so choose.
Second, you did indeed state that property rights include the right to choose how the property is used. I agree that that much is included in property rights. I also agree that your right to the fruit of your labor flows from the right to sustain your life, and that the right to sustain your life is part a natural right.
My issue is whether, once you have ceased to sustain your life, you or your corpse have any right to tell the rest of us what to do or not to do with that stuff you had not given away when oxygen was still important.
Your death gives you no right to force the rest of us, the living, to carry out the wishes which you failed to carry out in life. You seem to have just assumed that it does, by labeling same a “natural right”.
As I stated, inheritance and wills are practical conveniences for the sake of law and order; and they are important for that reason alone. But that does not translate to a right. Thus, no right is violated by a tax on same.
Sorry for accidentally posting the same message twice.
Peter,
I understand your agument about a transfer being made on behalf of a null, and I would agree it is valid if I thought this was the situation. My argument is: Isn’t the choice, and therefore the transfer, made before death as my last will? The formalities and the verifications are made afterword, but isn’t the actual act of giving done before death? This is splitting hairs but it makes all the difference.
You appear to agree it is a natural right to dispose of my property during my life in the manner I choose. If I do so as my last decision before dying, then there are no wishes to be carried out after my death. It is already done except some paperwork.
I guess my point is: If it is a natural right to give it away and I do it before death, then how does it involve anyone else? The heir would obviously pay a small fee for the paperwork.
Bryan:
I don’t have much time right now, so I’m just going to comment on one part. You say:
“Multiple commentators … take me to task for not wanting to do away with taxes entirely, while others … seem upset that my proposal will not raise enough revenue. How deliciously contradictory. The general conscientious is that my suggestion will generate the government less revenue it gets now, but that I am somehow a socialist because I have not cut the feds off entirely.”
I can’t speak for the other commentators, but you seem to be completely misunderstanding my argument (probably my fault for not being clear). I fully agree with you that government spending should be cut (the more drastic the cuts, the better), but I certainly am not “upset” that the estate tax won’t generate more revenue. In fact, I was trying to point out a large logical leap in your argument.
You explicitly and repeatedly invoked the ability to lower the income tax as a justification for raising the estate tax. But as I pointed out, the amount of revenue generated by the estate tax is tiny in comparison to the income tax. Furthermore, an increase to 100% would provide a miniscule increase at best and at worst (if exemptions are substantial enough, or if people’s pre-death behavior changes significantly due to the tax) revenues from the estate tax could even decrease.
So the question becomes, how does this slight increase in estate tax revenues help in any way to reduce the income tax burden? I fail to see how it will provide either the political leverage or the financial offset necessary to in any way bring about a major income tax cut. To paraphrase one of your remarks, “just because one tax rate goes up, it does not mean that other taxes will go down.”
Let me reiterate – I agree that reducing the income tax is a noble goal. However, raising the estate tax will do nothing to bring us any closer to that goal. Unless you can show some feasible mechanism by which raising the estate tax will help to bring about the drastically reduced income tax you want, the estate tax needs to be evaluated purely on its own merits. Any argument based on the benefits gained from an income tax reduction is irrelevant.
Michael, this is why I liked your response for the most part. I still think you missed the point on a lot of things (or simply jumped to wrong conclusion on what I was advocating) but in a number of places you mention what are some very real concerns about the plan. In these concerns, however, I think reasonable minds can disagree.
Truth be told, I don’t think any of us knows exactly how this plan would operate in real life (and I by no means believe that we ever will, so people like roger can rest their heads easy tonight). I guess though that my answer to your questions would be this:
1) The increase in the death tax rate would be the political justification for cutting the income tax. Not just because of the increased revenue but also (and mostly) because it would be the new way to look at the tax system. We would be raising taxes on the deceased in order to lower taxes on the living because living people are entitled to keep more of their money. We would have to get people to buy into the concept but I think if they did, they would want to see some real tax savings.
2) The real revenue would probably come from the transaction tax. Not wanting to leave all their money to the government, people would spend more (with a 5%-7% transaction tax) or give more away (with a 5%-7% transaction tax). And the people receiving that money would want to spend or give it away (with a 5%-7% transaction tax). The hope is that the volume of transactions with a lower tax rate will off-set some of the revenue that is lost by a higher income tax rate.
Can I be sure it would happen this way. No. Absolutely not. I simply don’t have the means to test that out (nor apparently the willing participant thanks again to people like roger). The best I can do is make the theoretical argument and hope that people are willing to debate the broader issues of who should be paying taxes instead of getting caught up in how the specific policy decisions of my “plan” might or might not play out.
James, I think I finally see where you and I disagree. I don’t put much value in protecting people’s ability to enact their choices once they are dead. Sure they made the decision when they were alive but how hard was that? They knew when the willed their money to someone that it would only transfer once they could not spend it anymore. They knew they were going to be dead.
Buying insurance is one thing because a sacrific was made by the living to provide for their loved ones after their death. People pay money that they could spend on anything else in order to enact that choice. A will is just someone saying “If I can’t spend anymore of my money because I am dead, give it to (blank).” I just don’t think that deserves the respect that you seem to give it.
If they truly want someone else to have the money, give it to them while still alive. If they don’t do that, their choice is not really to give away the money. Rather, their choice is to have the money and only if they can’t still have the money (because they are dead) then their 2nd choice is for someone else to have the money.
Bryan:
“… I liked your response for the most part”
Thank you, I appreciate that. It’s not the impression I got before when you called it “often misguided and sometimes idiotic”.
This was directed at James, not me, but I wanted to make one more quick comment – you said:
“Buying insurance is one thing because a sacrific was made by the living to provide for their loved ones after their death. People pay money that they could spend on anything else in order to enact that choice. A will is just someone saying “If I can’t spend anymore of my money because I am dead, give it to (blank).” I just don’t think that deserves the respect that you seem to give it.”
But for many people a will acts just like insurance. People give support while they’re alive to friends and family and that support may come in many forms – financial, emotional, advice, actual physical assistance. They may also routinely support charities, or churches, or other organizations.
When they die, they want to be able to leave something to these people and organizations in lieu of the support they might have given if they were still alive.
You accept life insurance as legitimate, but how is that really any different from leaving the money in a will? In the case of life insurance, a middleman is taking a cut, reducing the expected value of the total payout, in exchange for reducing the risk of a very small payout due to an early death. With a will, a person accepts the risk of low payout due to early death in exchange for on average leaving a larger sum.
The real difference between leaving your money in the bank and sinking it into premiums is one of risk tolerance. And as you get older the difference between the two gets even smaller, as the uncertainty surrounding eventual net worth at time of death is reduced.
You propose as a difference that “a sacrific was made by the living to provide for their loved ones after their death. People pay money that they could spend on anything else in order to enact that choice.”
But since when is the legitimacy of a transaction determined by how much it hurts one of the parties involved? While we may feel that a gift-giver’s actions are more noble if they involve a personal sacrifice, I don’t see how this provides a moral basis differentiating.
Would you extend this logic to a person on his deathbed? He knows he’s going to die very shortly and he’s confined to a small room in a hospital. If he decides to start giving away his possessions would you suggest that his gifts shouldn’t be respected because he’s not sacrificing anything since he couldn’t spend the money anyway? Leave aside the practical issue – obviously it would be impossible to ever implement a system like this – but would it be morally acceptable for the state to tell this person that any gifts he chose to give could be confiscated because they didn’t reflect any sacrifice?
Furthermore, I don’t think it’s right to say that leaving an inheritance involves no sacrifice. Wills are written when the giver is still very much alive, and a decision to leave possessions to certain parties is also a decision not to leave anything to others. It’s not unusual for family members and other potential beneficiaries to be aware of the contents of a will long before the owner actual dies (this is especially true if the estate contains significant physical property). So the writing of a will involves real decisions with real consequences.
Beyond that, people often do make financial sacrifices to leave an inheritance. They may delay retirement or live more modestly than they need to in order to be able to leave a larger amount of money to those they care about. The fact that the payout doesn’t come until after the sacrifice is over doesn’t mean that it never happened.
You characterize inheritance by saying “If I can’t spend anymore of my money because I am dead, give it to (blank).” But that’s only true if you assume that the money people leave behind is just the leftover money they didn’t manage to spend while alive, rather than money they have specifically earmarked to give away.
In short, I don’t find the moral distinctions being drawn between gifts given while alive and inheritance to be very persuasive.