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Thursday, October 14, 2010

Liberal Lunacy 5: Complete Inheritance Tax

There are people who propose a 100% inheritance tax. They say that people should earn what they can earn themselves, not be given gifts that give them an advantage other people do not. When rich parents give their children millions of dollars it is unfair for poor people, because the rich have an advantage over the poor. Therefore, there must be a 100% inheritance tax that takes away this money from the rich so that their children should earn their money just like everyone else. That is what is fair.

A problem with such a law is how will this law actually be enforced? Let us say that an old man knows he is going to die soon. So instead of writing a will to give his money as inheritance he simply gives out his money to his children as he is still alive. That way when he dies his children already received all the money. The complete inheritance tax just makes it a minor inconvenience for rich people to give out their money. Thus, the goal of preventing the children from inheriting millions from their parents is not achieved. It will still happen. The only way to prevent the rich from giving money to their children is to regulate the way rich people can spend their money. I am sure I do not have to explain why such a system is a totalitarian system. So such a egalitarian goal is incompatible with a free society.

But the method of enforcing such a law is not even the main problem with it. The major problem with such a goal is that it is impossible to make the world fair. Some people are born extraordinary smart. Some people are born really dumb. The smart ones have it easier to learn than the dumb ones. It is certainly unfair that there are smart people and dumb people. What must the state do? Must the state keep the smart people out of universities because it is unfair for the dumb people? Or must the state accept exactly 1/2 smart and 1/2 dumb people because that is fair? Or consider really beautiful people. Some people are ugly. The beautiful people would be able to find physically attractive people to sleep with, the ugly would have a big difficultly here. That is unfair. Or consider healthy people. Some people hardly ever get sick. Some are constantly stricken with disease. Is that fair? What must the state do? Must the state now forcefully inject into healthy people diseases so that they can be sick too because that is fair?
There is nothing fair about this world whatsoever. The amount of money people have is actually one of the more fairer things in the world. Because rich ugly sick people would give up their money to look attractive and be healthy. They do not value their money as much as beautiful people value their beauty or healthy people value their health.

It is certainly true that rich children will have it easier in this world, but it is also true that children from intelligent partents would also have it easier in this world. Must the state prevent professors from educating their children because it is unfair for children who did not come from intelligent families? Some kids are taught to play the violin by their parents and have a valuable skill as a gift from their parents. Most kids do not have this talent. That is unfair. But must the state prevent parents from educating the kids from playing the violin because it is unfair for other children?

Money, just like everything else in the world, is unfair. But it is probably the most fair thing out of all unfair things that exist. Because a person with a few million dollars will blow it in his lifetime if he is a dumb person, and will have nothing to pass down to his kids. Money, unlike health and beauty and talents, is temporary unfairness.

It is highly inconsistent for people who complain about the rich giving money to their children as unfair and ignore all the other injustices that take place in this pathetic world on a daily basis.

Here is a video about inheritance (Milton Friedman): Here.

11 comments:

  1. I agree with your point that the 100% or any high percentage inheritance tax is unworkable in practice. That said I do not agree with the rest of your argument because its essential point is that nothing should be done to alleviate systematic unfairness caused by human beings. Rather, we should adopt a fatalistic view that life is unfair and just get over it.

    John Adams famously wrote in his letter to Thomas Jefferson. "Now, my Friend, who are the aristoi [aristocrats]? Philosophy may Answer "The Wise and Good." But the World, Mankind, have by their practice always answered, "the rich the beautiful and well born." And Philosophers themselves in marrying their Children prefer the rich the handsome and the well descended to the wise and good.

    What chance have Talents and Virtues in competition, with Wealth and Birth? and Beauty?

    One truth is clear,; by all the World confess'd Slow rises worth, by Poverty oppress'd.

    The five Pillars of Aristocracy, are Beauty Wealth, Birth, Genius and Virtues. Any one of the three first, can at any time over bear any one or both of the two last."

    Part of the genius of American society is that there is a belief in the opportunity of everyone to achieve, not just the rich and the well born. This has been enforced by laws promulgating a progressive taxation and wealth redistribution as well as through laws enabling bankruptcy and the clean slate. All of these laws are opposed by people with money who wish to keep it permanently within their families.

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  2. "I agree with your point that the 100% or any high percentage inheritance tax is unworkable in practice. That said I do not agree with the rest of your argument because its essential point is that nothing should be done to alleviate systematic unfairness caused by human beings. Rather, we should adopt a fatalistic view that life is unfair and just get over it.":

    Not a fatalistic view, but a non-utopian view. The idea that the unfairness of the world can be solved by the state is utopian. It cannot be done. And even if you ignore beauty and talents and just concentrate on wealth you are creating a unfairness in your attempt to create fairness. Because consider an untalent rich person. And consider a talented poor person. It is unfair the for the rich that the poor is talented, and it is unfair for the poor that the rich has money. But in some way their unfairness cancel one another out. However, if you take away (steal) the money of the rich person because you wanted to prevent the rich from obtaining the money of their parents then you have made what would have been a rich person less favorable, and it is now more unfair for him. Thus, there is no way to accurately measure and determine what is fair and unfair. It cannot be done, to think otherwise is a utopian view.

    "Part of the genius of American society is that there is a belief in the opportunity of everyone to achieve, not just the rich and the well born. This has been enforced by laws promulgating a progressive taxation and wealth redistribution as well as through laws enabling bankruptcy and the clean slate.":

    The beauty of America is not taxation and wealth redistribution, but the pursuit of happiness. For close to 150 years there was no income tax, there was no wealth redistribution, and people were able to keep what they obtain without it being stolen from them. The success of America was build on this very concept. What you are saying, about taxation and wealth redistribution, is not an American idea, it is inherently unAmerican, and it is not what made America great. People are not born equal, and it is not fair. But they have equal rights and opportunities, that is what American was supposed to be based on. This is not anything like what you are saying.

    "All of these laws are opposed by people with money who wish to keep it permanently within their families.":

    This is not true. You can find a lot of rich people who are fine with increases in taxation because they have good intentions. And you can find a lot of poor people, and people who do not have a lot of money (my family does not have a lot of money), who oppose these laws. You can also find a lot of rich people who are opposed to it. And you can find a lot of poor people in favor of it. So what you are saying is not so simple.

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  3. This Libertarian ideology that you are espousing is fundamentally flawed in its conception. America has always had taxation. It may not have had federal government taxation to the extent it does now, but it always had local taxation and what is local taxation except what you call stealing. When a road is built connecting someones neighborhood to main street that is wealth redistribution as clearly as if someone poor received a check from someone rich. it is just hidden in platitudes like the public good.

    The pursuit of happiness is an aspirational statement, not a constitutional one. The constitution subordinates freedoms to the goal of creating a more perfect union. It removes certain freedoms (including the unfettered right to pursue happiness) in order grant enumerated powers to the federal government. It allows for a great deal of freedom to be sure, but it also allows for the government to create policies designed to advance the idea of the more perfect union. You describe this as Utopian but it is certainly true that some countries have done better than others as a result of policies that they have enacted. Just because we do not reach perfection does not mean that we cannot progress at all.

    I wrote that Part of the genius of American Society is that there is a belief in the opportunity of everyone to achieve. I point out that tax policy and bankruptcy (vs. debt peonage) has had a hand in making people believe that they and not just the rich have an opportunity to succeed. You misread my comment to say that I am thinking that the tax policies themselves are beautiful. The opportunity to succeed IS freedom. There are people who are so destitute and are without the tools to succeed that they are as if without freedom in spite of perhaps being able to speak their minds.

    Freedom is beautiful, but is not a permanent condition that can simply be expected to continue. Rather freedom must be defended by making sure that the playing field is not tilted towards the rich and powerful as it is in so many areas of the world. Otherwise equal rights and opportunities are a sham.

    Taxes do not go down when social problems increase, they are simply transferred to police departments and prisons.

    What I am saying about taxation and wealth redistribution is not an American idea and its not a foreign idea, it is more accurately described as a modern idea.

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  4. "This Libertarian ideology that you are espousing is fundamentally flawed in its conception. America has always had taxation. It may not have had federal government taxation to the extent it does now, but it always had local taxation and what is local taxation except what you call stealing.":

    For most of American history there was no income taxation. The rich were allowed to be as rich as they could have been and there was no punishment for that. The only taxes that really existed were for various programs and basic government services. The poor during this time period were able to increase their standard of living as did everyone else, but they did not get any welfare, no social security, no benefits, and no money. So most of American history is more accurately described as how I describe it, not like you describe it.

    "The opportunity to succeed IS freedom.":

    You misunderstand what freedom means then. Freedom does not mean that you have a necessarily easy life, it means that you can live your life as you see fit. Having the opportunity to go to college is not freedom, it is a privledge. I use the word freedom very carefully.

    "Freedom is beautiful, but is not a permanent condition that can simply be expected to continue. Rather freedom must be defended by making sure that the playing field is not tilted towards the rich and powerful as it is in so many areas of the world. Otherwise equal rights and opportunities are a sham.":

    Going to war to promote peace is like having sex for virginity, it does not make sense. To say that, "we need to have these laws governing the lives of people to protect freedom", likewise is a self-contradictory statement. Taxing people and redistributing wealth is not freedom, and it is self-contradictory to call these policies as "promoting the freedom of the people". The best that can be done to secure freedom of the people is to get the government out of the lives of people, all the people. Furthermore, when you have a state, and it has certain power over the people, then the rich will take advantage of it. The real owners of US today are not the common people, but the wealthy, and the powerful businesses and corporations. They have the power to bribe the state for their own benefits. When the poor and the rich have influence over the state do not be surprised that the rich will win out. That is why getting the government out of people's life (or abolishing the state entirely) is the only position that can negate the influece of the rich.

    "What I am saying about taxation and wealth redistribution is not an American idea and its not a foreign idea, it is more accurately described as a modern idea.":

    It is not a modern idea, it has been in place for a very long time. At least taxes that is. Wealth redistribution has been used before by other countries of the past too, to a lesser degree. It is not that modern as you think it is. Freedom, however, as envisioned in American, is a very very modern and new idea.

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  5. PART I
    "For most of American history there was no income taxation."
    That is correct; there were property taxes, poll taxes, excise taxes and taxes on goods and services. That was money that was taken from some people and used for public goods whether the individual person agreed or not.
    "The rich were allowed to be as rich as they could have been and there was no punishment for that. "
    If you look at a sales tax you realize that without specifically targeting rich people they tend to spend more and then end up paying more. The current progressive income tax is not a punishment to rich people in that they pay the same taxes per dollar earned but pay a higher rate at higher income levels. They are never worse off earning more income.
    "The only taxes that really existed were for various programs and basic government services." This is to some extent true although good producing land was unoccupied in large sections of the country so that people were able to acquire it nearly free for many years. They were simpler times back then when much of the country was agrarian. Nevertheless, public work projects like the Erie Canal were still beneficial to some areas at the expense of others and were therefore in your view "stealing".
    "The poor during this time period were able to increase their standard of living as did everyone else, but they did not get any welfare, no social security, no benefits, and no money."
    This is largely due to the existence of nearly free productive rent. If you recall David Ricardo's Law of Rent you will note The Law of Rent implies that wages bear no systematic relationship to the productivity of labor, and are instead determined solely by its productivity on marginal land. If there are highly productive land sites available for free, wages will tend to be high, all things else being the same; if the only available free land yields little, wages will tend to be lower. What I am arguing here is that the opportunity for the American dream was largely a historical accident due to the availability of near free productive land. It was not due to non-existent government.
    "So most of American history is more accurately described as how I describe it, not like you describe it." To some extent it is true that low federal taxes characterized much of the history of the United States and it is certainly true that the modern welfare state is…well modern, but our period of rapid growth during the 50s and 60s coincided with extremely high marginal tax rates (much higher than now).

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  6. PART II
    "Freedom does not mean that you have a necessarily easy life, it means that you can live your life as you see fit." I think you are confusing the idea of freedom of choice with freedom of action. You may be free to choose to do something but be constrained for all practical purposes from doing that thing for a variety of reasons. Assuming you live in the middle of a desert where water is scarce you may have to to spend all of your time searching for water in order to live. You may not have the leisure time to actually indulge your desire to do something more meaningful with your life. While you may argue that you can choose to pursue your own path anyway, if the practical result is your death after a couple of days I would say that your freedom is in fact constrained by circumstance. Much like I cannot fly even if I choose to try, there are some opportunities that are so impracticable to some people that they cannot be said to be within the choice palate.
    "Going to war to promote peace is like having sex for virginity, it does not make sense.
    I should not need to say this but if another country is going to seize your people and put you in chains you may believe that going to war in the short run will protect your “peace” in the long run.
    "we need to have these laws governing the lives of people to protect freedom" is likewise a self contradictory statement."
    Not true. In a democracy people have the FREEDOM to vote for things, even those things that take away the freedom of others (such as prison sentences). The freedom of one person frequently impinges on another. Governments and courts are set up to decide right of way issues directly between people.
    "Taxing people and redistributing wealth is not freedom."
    It absolutely is freedom. It is the freedom for one person to vote for a policy that removes the freedom from another, but of course that happens all the time. If someone owns a piece of land that may limit my freedom to use it or even to walk across it!
    All in all, I think you are confusing the idea of property rights with freedom. They are not synonymous. Property rights are not absolute rights. They are a social contract between people which limit the freedom of one person to utilize something that was claimed by another.


    Good Shabbos

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  7. "If you look at a sales tax you realize that without specifically targeting rich people they tend to spend more and then end up paying more. They are never worse off earning more income.":

    Under a sales tax the rich pay more taxes than the poor. But so what? That money, in early American, is not being used on welfare, or any of the other government programs. So there is no redistribution of wealth, just the rich end up paying more taxes indirectly. That was my entire point. For most part of American history the poor did not recieve any of these benefits from the government. So your description of "the beauty of American" as having wealth redistribution to help the poor is entirely unAmerican. The poor never recieved this kind of help for most of American history.

    "They were simpler times back then when much of the country was agrarian.":

    What I say also applied to the industrial revolution.

    "Nevertheless, public work projects like the Erie Canal were still beneficial to some areas at the expense of others and were therefore in your view "stealing".":

    Why do you put quotations on stealing? Taxation is stealing. I have never heard anyone ever refute this. Taxation is forceful, happens with a gun, and people must pay, that is not theft? You are just using a euphemism for theft, but it is theft nonetheless.

    I have no problem with money being used on public works projects provided that the people give their consent for that. It is not the public works I have the problem with, it is the state stealing money.

    Also, whenever the state does something positive you should ask the question, like Thomas Sowell always do, "at what cost?". It is true that with enough money the state can do something positive, but at the same time the cost turned out being too much.

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  8. "What I am arguing here is that the opportunity for the American dream was largely a historical accident due to the availability of near free productive land. It was not due to non-existent government.":

    It is not based on the large availability of land. Alexis de Tocqueville studied this question when he came to America. He said the main reason why America prospored so much was because of limited government, liberty, and a market based economy. Everything else is not as much as important. Large area of land is useful, but it alone does not lead to more wealth. The Indians had all that land before the Europeans (and later the Americans) brutally murdered and stole their land. But the Indians never managed to achieve anything with it. Adam Smith, in the Wealth of Nations, wrote about how the colonies had more wealth than most already developed European countries. The colonies at that time did not yet have large areas of land, but they were more thriving than most European countries (though I do not like this argument, it is too corellative, so you can ignore it if you wish). It is not land, or anything else, that primarily determines wealth, but the economy. Free markets are the best method for obtaining wealth. If you still not convinced just consider Hong Kong. Milton Friedman, once talked about how he visted Hong Kong when it was underdeveloped, a poor place to live. But when Hong Kong took on a market based capitalist economy is thrived. A small small country, thrived. Thrived a lot more than China. You did not have people running from Hong Kong into China, you had people from China running into Hong Kong. If you still not convinced then consider the Soviet Union. A big giant piece of land. But the USSR had lower standards of living than the more market friendly countries.

    Now about David Ricardo. It is generally not a good idea to follow what the classical economists like Smith or Ricardo had to say on the rent of land. Because this is one instance in where the classical economists were quite wrong. Smith devoted like a 1/5 of his book all on one chapter, the rend of land. But his views, just like other classicalists, are outdated, there are better ways to understand rent. I may be wrong here, I am not an economist, just saying the maybe it is not a good idea to listen to classicals here.

    "but our period of rapid growth during the 50s and 60s coincided with extremely high marginal tax rates (much higher than now)":

    Corellation does not equal causation? Besides how do you know? By looking at the GDP? But the GDP is a non-sense figure because it includes government spending. Furthermore, the US first gained the wealth by a market economy. Once it had that wealth then it had the ability to spend it more. As an anarchist I know says, the smallest governments always become the largest, because the small government prosper, and eventually the government grows due to abundance of wealth.

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  9. "I think you are confusing the idea of freedom of choice with freedom of action.":

    I am not confusing anything. I support liberty, as defined by John Locke. My view of freedom is liberty. And I view the function of law (which does not even have to come from the state - but I do not want to get into that now) as to protect liberty. Your view of freedom is a popular view held by the left, for example: the right to an education, the right to healthcare, the right to a job, and so forth. The freedom that you seem to support is not compatible with liberty. Because the only way to give people freedom (in your sense) is by negating the liberty of other people. So I am not bi-confused. I just use the term very different from how it is popularly used today by the left.

    "Governments and courts are set up to decide right of way issues directly between people.":

    First of all courts and governments are not necessarily the same. I strongly support laws and court systems and defense, but I am very anti-state. Law is not inherently a state function and the state does not need to care for the law, therefore I do not equate the law and the state. Second of all governments are not set up. The social contract is a myth. The way states got into existence is by the powerful overtaking the weak. The states that remain today are just the outbirth of the old states that formed with no social contract. There are only a few exceptions, America is one of them, that was in a way set up. But the US government today does not care about your freedom. And the courts do not function to protect your freedom or your property, not directly.

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  10. You state your opinions forcefully but fail to convince. Alexis de Toqueville had his opinions about why America was successful but while eloquent he was hardly an economist in the academic sense of the word.
    Citing him as a proof text does not mean much.

    With regards to David Ricardo, you are absolutely NOT correct that the law of rent is wrong. Rather, like Comparative Advantage it is one of the foundational aspects of economics. It is thus more accurate to state that it is inconvenient to people whose fortunes are made through the ownership of this increasingly scarce natural resource. Indeed it was not necessary to think in this way in a country like the United States where there was cheap and productive land for much of its history. Your reference to the aboriginal native Americans is irrelevant since it discounts the entire idea that different societies can have different outcomes based upon their choices (a simple fact that is proven every day).

    "I have no problem with money being used on public works projects provided that the people give their consent for that."

    Now how exactly do they give their consent? Does each and every citizen have a veto on every expenditure. No of course not. They give their consent through the vote. Their representatives act with the general consent of the population. Therefore, taxation is not stealing since it is made through the consent of the population.

    I'm not going to address your anti-state rhetoric which is overwrought and filled with unconvincingly extreme pronouncements.

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  11. "Alexis de Toqueville had his opinions about why America was successful but while eloquent he was hardly an economist in the academic sense of the word.":

    Reject him if you like, I had other arguments to why land usage is not the primary reason why America prospered, but it was its limited government, respect for liberty, and free markets. I simply quoted someone, if you do not like him then you can ignore him if you wish he is not meant as some absolute barometer or truth.

    "With regards to David Ricardo, you are absolutely NOT correct that the law of rent is wrong.":

    Okay, so maybe I am wrong. I am not an economist, I am not familar with this law. But I do not think this is very relevent to our discussion. Because like I said, America prospored due to its economics, just like Hong Kong. While other countries like the USSR or China did not prosper even though they were very large.

    "Now how exactly do they give their consent? Does each and every citizen have a veto on every expenditure. No of course not. They give their consent through the vote. Their representatives act with the general consent of the population. Therefore, taxation is not stealing since it is made through the consent of the population."

    If 10 people come to you house to rob you and you say no, they raise their hands and say "we approve", this is not stealing? Taxation is bloody and violent it happens with a point of a gun. If it was consentual, like you claim, then there would be no need to use a gun. The representative do not represent everyone. So this argument is utter fail.

    "I'm not going to address your anti-state rhetoric which is overwrought and filled with unconvincingly extreme pronouncements.":

    Tell me then how states, with the exception of the United States, came into existence. The social contract theory that you probably use as a justification for statism does not exist.

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