Confiscatory Inheritance Taxes
Dan Hepner
to some other claim:
"Confiscatory inheritance taxes are good for society, due to
the elimination of the non-productive option for heirs. Secondarily,
such taxes are a superior source of government income, when
compared to traditional sources, such as income taxes."
Note what this does _not_ say, namely that the government should
spend more money, that heirs represent the only type of unproductive
people, that the taxes we now pay have all been put to good use,
and, especially, that the net tax load should increase.
>From m...@cbnewsh.att.com Wed Nov 21 12:11:39 1990
>> Presumably intangibles such as education and health care
>> would be exceptions. Such a tax is no more unenforcible than an
>> income tax.
Mark>So you are defeating your own argument. You are saying that
Mark>basically most income is taxed and therefore tax has already been
Mark>collected on moneys spent towards ones heirs. Then how can you
Mark>possibly defend a tax on inheritance which *ALSO* is money which
Mark>has already been taxed through income taxes ?
Who claimed that double taxation is a priori evil? For what it's worth,
double taxation happens all the time. We pay sales tax on excise
taxes. Income taxes on dividends generated by corporations which paid
taxes on their income. We might not like it, but the dislike is based on
a general dislike of high tax rates, not of double taxation per se.
>> Non sequitur. "Achieving very little" does not necessarily imply "spent
>> the family fortune", nor for that matter does "spent the family fortune"
>> imply "achieved very little". Managing one's inheritance to produce
>> a perpetual sustenance income may well count as "achieving very little".
Mark>What about when the money is spent or managed in a way which
Mark>benefits the economy ?
Purchasing a lifetime supply of cocaine followed by consumating
the goal of such a purchase may indeed benefit the economy,
but no where near so much as if the heir had a 40 year working life as
say, a fry cook. Investing in a money market fund and living off the
dividends may benefit even less than buying cocaine. Sure, some
will take their modest inheritance and start a great enterprise
which ..., but to focus on these is to assert that the good they
do is greater than the good that all heirs would do if they had
to do it for themselves.
Mark>It isn't obvious to me. Again, if you aim is to promote
Mark>productivity, then why don't you do just that and tax
Mark>non-productive activities instead of inheritance.
The assertion is that there are two fundamentally different
kinds of non-productivity. One is an earned reward for success
in society. The other is an unearned transfer of assets
from one generation to another.
>> So again, the contrary position which lacks defense is that rich kids
>> are to be desired, and make a better society.
>
Mark>Well your position requires you to prove that rich kids have an
Mark>obligation to bear a greater portion of the costs of a better
Mark>society.
_That_ position presumes that the rich kids actually have some
claim to the inheritance. Such claims are granted at the will
of society, and the granting or non-granting should be decided upon
the predicted desirability of the result. Actually, my suggestion
was that rich kids have an equal obligation to participate in funding
a better society.
Mark> (I personally believe that you will never have a better
Mark>society unless *everybody*, or at least a great majority of the
Mark>people have a stake in the costs of a better society - i.e. if you
Mark>have some 'investment' at risk, you will generally care more about
Mark>the outcome)
>mark
Agreed. But that investment is so much the more precious having been
earned, and the care over the outcome so much the more acute.
Dan Hepner
Dan Hepner
>The real point is who cares whether someone inheriting money
>achieves very little?
Those who have something to gain from a maximized collective
achievement. All of us.
You seem to be making the argument that
>since these people do so little -- by your definition of course --
>'society', in the form of the government, should prevent them from
>getting all of an inheritance. After all, government will do
>much better things with that inheritance than the individual.
The discussion is not whether the government wastes money. Primarily,
the claim is that if the assets were _destroyed_, we would have a
better society. Secondarily, we should see such revenue as superior
to e.g. income taxes.
>The assertion is flawed. Confiscatory inheritance is a disincentive
>to save.
This is intuitively correct, but only to an extremely limited degree.
Much productivity is driven by a desire to control a large volume
of assets. Much less is driven by a prediction of what will happen
after one's death.
>Inheritance taxes are very much theft.
If you haven't already, you'll surely come across someone arguing
that profits are theft. What they're doing is attempting an
inflammatory enhancement to their argument that collectivized
business provides for a better society. I guess some of the
audience find themselves convinced by this inflammation, but
to most it is grating obfuscation.
At least with income taxes you
>could make the argument that the payer is getting some services for
>his/her money. In the case of an inheritance tax the person is dead.
And dead people should be a major concern of the living? Imagine for
a moment a government financed entirely from confiscatory inheritance
taxes. Unrealistic, but that's the direction.
Dan Hepner
Dan Hepner
>In any event, what we need is a
>more careful analysis of what "productive" and "non-productive" is.
>Are you a productive person only if you actually build some sort of
>widget or dig stuff out of the ground for a living?
>David Fox
I'm willing to accept "trying to legally earn money" as a broad definition
of "being productive". Pending some better suggestion, anyway.
What about Mother Theresa? With all respect, and it's a lot of respect,
Mother Theresa is quite dependent upon those who _are_ making money.
Dan Hepner
Keith Kluksdahl
Read Andrew Carnegie's thoughts on the subject. I can't quote what
he said, but I'll give you an idea. Second generation money doesn't
usually know how to make money, and thus be productive. The best
thing you can do for the offspring is to teach them how to be
productive, and then kick them out to prove themselves. He was
not much in favor of welfare, but did encourage knowledge as the
real wealth. This is probably why he donated so much money to
libraries.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
| These views are my own, but I may | Keith Kluksdahl |
| be re-programmed tomorrow........ | HP Bedford Falls |
| |
| "Life is not a spectator sport." |
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
James W. Howe
>From: j...@bodwin.ifs.umich.edu (James W. Howe)
>
>>The real point is who cares whether someone inheriting money
>>achieves very little?
>
>Those who have something to gain from a maximized collective
>achievement. All of us.
>
Speak for yourself. I personally don't care whether someone
inheriting money 'achieves' very little. For one thing, I think
it is impossible to determine. Unless the person lives in a self
contained world his purchases and investments will benefit others.
Even if he 'achieves' nothing (by some arbitrary criteria) he has
still contributed to society.
>
>>The assertion is flawed. Confiscatory inheritance is a disincentive
>>to save.
>
>This is intuitively correct, but only to an extremely limited degree.
>Much productivity is driven by a desire to control a large volume
>of assets. Much less is driven by a prediction of what will happen
>after one's death.
>
How then, do you explain the great interest in 'Estate Planning'?
>>Inheritance taxes are very much theft.
>
>If you haven't already, you'll surely come across someone arguing
>that profits are theft. What they're doing is attempting an
>inflammatory enhancement to their argument that collectivized
>business provides for a better society. I guess some of the
>audience find themselves convinced by this inflammation, but
>to most it is grating obfuscation.
>
Please explain to me how inheritance taxes aren't theft. I argue
that the person made the money and has a right to determine how
that money gets spent. I don't think the state automatically
gains control once the individual dies. If the individual wishes
his/her wealth to go to his/her children and the government
forceably takes a portion of it, how is that not theft?
> At least with income taxes you
>>could make the argument that the payer is getting some services for
>>his/her money. In the case of an inheritance tax the person is dead.
>
>And dead people should be a major concern of the living?
See argument on theft above. Are you saying that if I run across a
dead person in a park it's okay for me to take what ever cash and
valuables the person may have on his person? After all, the person
is dead and who cares, right? Perhaps theft is the wrong word, looting is
probably a better word.
> Imagine for
>a moment a government financed entirely from confiscatory inheritance
>taxes. Unrealistic, but that's the direction.
>
It's a very scary thought.
Brian Rauchfuss
>_That_ position presumes that the rich kids actually have some
>claim to the inheritance. Such claims are granted at the will
>of society, and the granting or non-granting should be decided upon
>the predicted desirability of the result. Actually, my suggestion
_This_ assumption I would disagree with! The owner of the assets
should have control of them, not the government. ("Society"
certainly does not decide these things.) I a greatly suspicious
of social engineering, I have never met a man or group that I
would trust with such decisions and such power.
----------------------------------------------------------------------
Brian Smokefoot "... never knowing I could shape my life
br...@hpfcdj.HP.COM like the artist paints his dreams
on a canvas." - Minor Detail
Dan Hepner
>>achievement. All of us.
>Speak for yourself.
Is this really an assertion that "collective achievement" is
not highly correlated with "goodness of society"? If so, go ahead
and make the case.
>>>Confiscatory inheritance is a disincentive to save.
>>This is intuitively correct, but only to an extremely limited degree.
>How then, do you explain the great interest in 'Estate Planning'?
When that's the game, people will play it. The way it works today,
you're a chump not to.
>>>Inheritance taxes are very much theft.
>>If you haven't already, you'll surely come across someone arguing
>>that profits are theft.
>Please explain to me how inheritance taxes aren't theft.
Because the dictionary defines theft as being different from
any tax, wicked or unfair as that tax might be. Argue if you
like that confiscatory taxes of any type are evil, argue that
double taxation is morally wrong, or whatever. But to just
assert "some (potential) taxes are theft, and theft is obviously
wrong, therefore said tax is wrong" just isn't a meaningful argument
to someone who follows dictionary meanings of English words. What
is needed is a claim that confiscatory inheritance taxes would result
in a worse society. No such claim has been forthcoming.
I argue
>that the person made the money and has a right to determine how
>that money gets spent.
So presumably you oppose taxes of _any_ kind, except perhaps some
hypothetical voluntary tax?
I don't think the state automatically
>gains control once the individual dies.
The state automatically gains control in tax matters once the
individual is born.
>Are you saying that if I run across a
>dead person in a park it's okay for me to take what ever cash and
>valuables the person may have on his person?
Now _that_ would be theft.
>> Imagine for
>>a moment a government financed entirely from confiscatory inheritance
>>taxes. Unrealistic, but that's the direction.
>It's a very scary thought.
Only to those who wish to rely on an inheritance to shield them from
going to work.
Dan Hepner
John J. Paulos
government should be financed entirely through confiscatory inheritance
taxes. Okay, that's an extreme rephrasing of a position that is
probably more extreme than he would agree to. Anyway, I have one
question for Mr. Hepner. Do you have any children? It's all very
fine to talk about confiscatory inheritance taxes when the victim
is a multi-millionnaire in his 70's or 80's whose children ought to
be able to take care of themselves. What if we are talking about
someone who has saved to get his kids through college and to provide
for retirement for his non-working spouse? What if this individual
drops dead at the age of 37? If his wealth is lost in inheritance
taxes, his wife loses the house, is unable to care for their children
and the children lose out on anything other than State U. If you
are going to argue extreme positions, be prepared to respond to
extreme hypotheticals. If what you are really saying is "let's
soak the rich, particularly the dead ones", why don't you just say
so. As currently structured, anyone in the their 40's with a house
in California is likely to get hit with inheritance taxes approaching
60% (incrementally). These are not the rich. And in this day and
age, you better be planning on having a million dollars in your
retirement pool when you retire, or you will suffer a real loss of
quality of life. So you seem to be arguing that one should save
for retirement, but if you never need it, it's simply taken away
from you. Funny, that sounds a lot like Social Security. If you
die before you need the benefits, your estate loses all the
contributions you made.
John Paulos
NCSU
James W. Howe
>>>Those who have something to gain from a maximized collective
>>>achievement. All of us.
>
>>Speak for yourself.
>
>Is this really an assertion that "collective achievement" is
>not highly correlated with "goodness of society"? If so, go ahead
>and make the case.
>
>>>>Confiscatory inheritance is a disincentive to save.
>>>This is intuitively correct, but only to an extremely limited degree.
>>How then, do you explain the great interest in 'Estate Planning'?
>
>When that's the game, people will play it. The way it works today,
>you're a chump not to.
>
You miss the point. You claimed that somehow confiscatory inheritance
taxes were an incentive to save. I disagreed. I ask you, how is a
confiscatory tax an incentive to save? Estate planning isn't about
saving, it's about avoiding taxes. Inheritance taxes distort economic
activity, they don't result in savings incentives.
>>>>Inheritance taxes are very much theft.
>
>>>If you haven't already, you'll surely come across someone arguing
>>>that profits are theft.
>
>>Please explain to me how inheritance taxes aren't theft.
>
>Because the dictionary defines theft as being different from
>any tax, wicked or unfair as that tax might be. Argue if you
>like that confiscatory taxes of any type are evil, argue that
>double taxation is morally wrong, or whatever. But to just
>assert "some (potential) taxes are theft, and theft is obviously
>wrong, therefore said tax is wrong" just isn't a meaningful argument
>to someone who follows dictionary meanings of English words. What
>is needed is a claim that confiscatory inheritance taxes would result
>in a worse society. No such claim has been forthcoming.
>
I simply claim that the government has no right to any portion of a
dead persons estate. Since I don't believe the government has that
right, if the government takes the money forcibly, it is theft. It
doesn't matter what name they put on the procedure.
> I argue
>>that the person made the money and has a right to determine how
>>that money gets spent.
>
>So presumably you oppose taxes of _any_ kind, except perhaps some
>hypothetical voluntary tax?
>
On an intellectual level, yes I oppose taxes of _any_ kind. If
government is going to provide services there should be fees
for those services. The people who make use of the services should
be the ones to pay. On a realistic basis, however, I can live
with some level of taxation. I am willing to taxes to cover
the legitimate functions of government. This includes primarily
defense and the expenses incurred in running the government. I am
even willing to subsidize those with lower incomes. I am in favor
of a flat tax (say 15%) with deductions allowed for costs incurred
in the generation of income. There would be a standard deduction
which would remove people at the low end of the income scale from
the tax rolls. I would be in favor of a negative income tax that
would give people making less than a certain amount a 'rebate' from
the government. This would replace all welfare programs. There
would be no FICA, excise taxes, inheritance taxes or corporate taxes.
I believe that people can take care of their own retirement, I don't
believe in taxing dead people, and corporations don't pay taxes, people
do.
>>> Imagine for
>>>a moment a government financed entirely from confiscatory inheritance
>>>taxes. Unrealistic, but that's the direction.
>
>>It's a very scary thought.
>
>Only to those who wish to rely on an inheritance to shield them from
>going to work.
>
Not at all. It is scary to those who are concerned about the rights
of the individual and the national economy. Your proposal is a
detriment to both.
James W. Howe internet: j...@ifs.umich.edu
University of Michigan uucp: uunet!mailrus!ifs.umich.edu!jwh
Ann Arbor, MI 48103-4943
Dale Cook
j...@bodwin.ifs.umich.edu (James W. Howe) writes:
|> In article <103...@hpcuhc.cup.hp.com> dhe...@hpcuhc.cup.hp.com (Dan
Hepner) writes:
|> >From: j...@bodwin.ifs.umich.edu (James W. Howe)
|>
|> >
|> >>to save.
|> >
|> >This is intuitively correct, but only to an extremely limited degree.
|> >Much productivity is driven by a desire to control a large volume
|> >of assets. Much less is driven by a prediction of what will happen
|> >after one's death.
|> >
|>
|> How then, do you explain the great interest in 'Estate Planning'?
|>
Given current tax law, you're silly not to do it.
|> >>Inheritance taxes are very much theft.
|> >
|> >If you haven't already, you'll surely come across someone arguing
|> >that profits are theft. What they're doing is attempting an
|> >inflammatory enhancement to their argument that collectivized
|> >business provides for a better society. I guess some of the
|> >audience find themselves convinced by this inflammation, but
|> >to most it is grating obfuscation.
|> >
|>
|> Please explain to me how inheritance taxes aren't theft. I argue
|> that the person made the money and has a right to determine how
|> that money gets spent. I don't think the state automatically
|> gains control once the individual dies. If the individual wishes
|> his/her wealth to go to his/her children and the government
|> forceably takes a portion of it, how is that not theft?
|>
By this reasoning, aren't all taxes "theft"? Are you advocating the
elimination of all taxes?
|> > At least with income taxes you
|> >>could make the argument that the payer is getting some services for
|> >>his/her money. In the case of an inheritance tax the person is dead.
|> >
|> >And dead people should be a major concern of the living?
|>
|> See argument on theft above. Are you saying that if I run across a
|> dead person in a park it's okay for me to take what ever cash and
|> valuables the person may have on his person? After all, the person
|> is dead and who cares, right? Perhaps theft is the wrong word, looting is
|> probably a better word.
|>
Let's see... I don't think he's saying that any more than you're saying
that because there are inheritance taxes now that it's ok to take from
that dead person an amount equivalent to the current tax rate!
|> > Imagine for
|> >a moment a government financed entirely from confiscatory inheritance
|> >taxes. Unrealistic, but that's the direction.
|> >
|>
|> It's a very scary thought.
And unfortunately, not that simple. Much transferred wealth is in the
form of non-liquid assets such as businesses. The government would
have to either liquidate the assets or run the business, neither
necessarily in the best interest of anyone.
--- Dale Cook c...@inel.gov
========== long legal disclaimer follows, press n to skip ===========
^L
Neither the United States Government or the Idaho National Engineering
Laboratory or any of their employees, makes any warranty, whatsoever,
implied, or assumes any legal liability or responsibility regarding any
information, disclosed, or represents that its use would not infringe
privately owned rights. No specific reference constitutes or implies
endorsement, recommendation, or favoring by the United States
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opinions expressed herein do not necessarily reflect those of the
United States Government or the Idaho National Engineering Laboratory,
and shall not be used for advertising or product endorsement purposes.
Dan Hepner
>The owner of the assets
>should have control of them, not the government.
Based on what grounds? And surely, you're extremely
frustrated by the fact that this is far from true
even in the most libertarian of existing societies.
We have taxes of all sorts which compromise such control.
Dan Hepner
Dan Hepner
>I beleve the holding of real estate is a favored occupation of the old
>rich too.
Again, there are two forms of "limited productivity". One is a
reward for successful productivity, and offering this reward
motivates productivity. To the extent that they become less
productive, this is their earned choice.
The other form is when assets are simply given to one, independent
of anyting the person did to earn it. This form is what remains
unsupported by the opponents of confiscatory inheritance taxes.
Dan Hepner
Dan Hepner
>Anyway, I have one
>question for Mr. Hepner. Do you have any children?
In general, net discussions work best when the credentials
of the posters are not subjects of discussion, and I believe
that this type of question is marginally a "credentials"
question.
I.e. I could answer any question about my own status, but such
an answer acknowledges that the question is relevant, and imply
that opposing posters are somehow tainted if they do not similarly
offer details of their personal lives. For all I know, all of those
who disagree with me stand to inherit a fortune, but this is
simply irrelevant. Either they can make a good case or not.
>What if we are talking about
>someone who has saved to get his kids through college and to provide
>for retirement for his non-working spouse?
Let's assume that spouses are joint tenants, sharing full control
of common assets before, and individual control after the death
of one of the partnership. This is very common already with
regards to major assets, such as real estate.
As to "college funds", etc, this is clearly a secondary issue
which is solvable by, if needed, by simply making exceptions.
>If what you are really saying is "let's
>soak the rich, particularly the dead ones", why don't you just say
>so.
That's not at all what I said. What I said is "we'll have
a more productive society and we'll all be better off if everyone
has to make it for themselves".
>So you seem to be arguing that one should save
>for retirement, but if you never need it, it's simply taken away
>from you.
No, it's not taken away from you. You remove yourself from
it at death, and that's not a word game. "You" do not exist
after your death. What is of course being taken away from you
is the right to decide what happens to the assets which will
have no owner after you're gone.
But there is some essence of your statement that is correct, in
that people are expected to accumulate assets which they will
simply lose at death. That's the nature of dying.
Funny, that sounds a lot like Social Security. If you
>die before you need the benefits, your estate loses all the
>contributions you made.
>John Paulos
I'm not sure how relevant this is, but consider the nature of
one kind of annuity, which allow a retiree to invest a fixed
amount of money to guarantee an income for the rest of life,
regardless of lifespan. The offerer of such annuities is able
to offer a much higher income to the living if he can count on
"profits" from that portion of the retirees who die earlier than his
calculated average. While SS is so far removed from sound fiscal
theory as to have almost no connection, this is the theory behind
why SS, if we are to have it at all, should probably work as
it does in this regard.
Dan Hepner
Dan Hepner
>>>>>Confiscatory inheritance is a disincentive to save.
>>>>This is intuitively correct, but only to an extremely limited degree.
>>>How then, do you explain the great interest in 'Estate Planning'?
>>When that's the game, people will play it. The way it works today,
>>you're a chump not to.
>You miss the point. You claimed that somehow confiscatory inheritance
>taxes were an incentive to save. I disagreed.
I think that the attribution is complete in context. I previously agreed
that confiscatory inheritance taxes are a disincentive to saving,
albeit an extremely minor disincentive.
>On a realistic basis, however, I can live
>with some level of taxation. I am willing to taxes to cover
>the legitimate functions of government.
OK -- we can all agree here, and it's important to reiterate that
the size of government is not the topic of discussion.
>I am in favor
>of a flat tax (say 15%) with deductions allowed for costs incurred
>in the generation of income.
Fine. Now explain why that kind of a tax is better than a confiscatory
inheritance tax, and we'll have made progress.
>>Only to those who wish to rely on an inheritance to shield them from
>>going to work.
>Not at all. It is scary to those who are concerned about the rights
>of the individual and the national economy. Your proposal is a
>detriment to both.
>James W. Howe internet: j...@ifs.umich.edu
Well, at least I supported the contrary claim with plausible
theories as to why confiscatory income taxes would be in fact
superior when judged by their effect on both the individual
and the national economy. You're invited to provide such
theories in support of this claim. So far, all we have are
appeals to "rights" of dubious grounding.
Dan Hepner
James W. Howe
>>of a flat tax (say 15%) with deductions allowed for costs incurred
>>in the generation of income.
>
>Fine. Now explain why that kind of a tax is better than a confiscatory
>inheritance tax, and we'll have made progress.
>
The only reason (IMHO) for a government to tax is to cover the expenses
of government. Social engineering is not a valid reason for the government
to tax (IMHO). Presumably the government is providing some services
to the people that are being governed. As I stated, theoretically
I would prefer user fees but realistically I except some level of
taxation as an alternative. The implication is that people pay user
fees (in the form of taxes) to cover the services they receive from
the government. Dead people are dead and don't make use of government
services, hence I don't see the justification for an inheritance tax.
>>>Only to those who wish to rely on an inheritance to shield them from
>>>going to work.
>
>>Not at all. It is scary to those who are concerned about the rights
>>of the individual and the national economy. Your proposal is a
>>detriment to both.
>
>Well, at least I supported the contrary claim with plausible
>theories as to why confiscatory income taxes would be in fact
>superior when judged by their effect on both the individual
>and the national economy. You're invited to provide such
>theories in support of this claim. So far, all we have are
>appeals to "rights" of dubious grounding.
>
I think the "rights" issue is probably the most important aspect of
this entire discussion. If the government is going to try and
maximize the national economy by violating rights it could easily
require people to work in certain professions because it is "best"
for the country. After all, if I have a brilliant scientific mind
but I decide to be a hermit that is hardly in the best interest
of the national economy is it?
However, looking past the important "rights" issue there is
the issue of whether your proposal would be better for the
economy. We've already agreed that the proposal is a
disincentive to save. You seem to think that it is only a minor
disincentive, I disagree. My point about estate planning addresses
that issue. Estate planning is popular now because people want
to avoid current inheritance taxes. Estate planning is not about
saving, it is about avoidance. The higher the inheritance tax the
more people will find ways to avoid it. The net result is economic
distortions and not as much government revenue as expected.
Many inheritances take the form of businesses. How do you "tax" the
business. If the tax is "confiscatory" in nation, the inheritor
will probably have to sell the business in order to pay the tax.
I don't think this is beneficial to the economy.
Monies collected by a government are spent, they have no multiplier
effect. Monies saved create a multiplier effect. If a person inherits
a sum of money and he simply invests it and lives off the interest he
has increased the money supply. This increased money provides the
capital for people to build houses, businesses, etc., which in
turn results in more jobs and higher GNP.
Comments welcome.
James W. Howe internet: j...@ifs.umich.edu
James W. Howe
>>die before you need the benefits, your estate loses all the
>>contributions you made.
>
>one kind of annuity, which allow a retiree to invest a fixed
>amount of money to guarantee an income for the rest of life,
>regardless of lifespan. The offerer of such annuities is able
>to offer a much higher income to the living if he can count on
>"profits" from that portion of the retirees who die earlier than his
>calculated average. While SS is so far removed from sound fiscal
>theory as to have almost no connection, this is the theory behind
>why SS, if we are to have it at all, should probably work as
>it does in this regard.
>
The key thing about the annuity that you describe is that its
purchase is a voluntary decision. SS offers no such luxury.
Brian Rauchfuss
From: j...@bodwin.ifs.umich.edu (James W. Howe)
>to someone who follows dictionary meanings of English words. What
>is needed is a claim that confiscatory inheritance taxes would result
>in a worse society. No such claim has been forthcoming.
I don't think "better society" has been defined yet: happer people? richer
people? smarter people? I think that society would be better (less stress and
less crime) if our cities were less crowded, so eliminating 50% or so would lead
to a better society.
There are a number of criteria besides "better society" that could be used.
>>It's a very scary thought.
>
>Only to those who wish to rely on an inheritance to shield them from
>going to work.
Please keep the ad homiem attacks to a minimum please.
Joshua Landrum
>
>The only reason (IMHO) for a government to tax is to cover the expenses
>of government. Social engineering is not a valid reason for the government
>to tax (IMHO). Presumably the government is providing some services
>to the people that are being governed. As I stated, theoretically
>I would prefer user fees but realistically I except some level of
>taxation as an alternative. The implication is that people pay user
>fees (in the form of taxes) to cover the services they receive from
>the government. Dead people are dead and don't make use of government
>services, hence I don't see the justification for an inheritance tax.
>
not dead. So if we were to call it a tax on the receiving of an inheritance,
rather than on the giving, would that make you happier? I, personally,
prefer the "double tax" argument against inheritance; its harder to slip out
of.
Still, there is a problem: Who says having a higher income means getting more
use from what government provides? As a (contrived) example, consider a
drug runner vs a welfare recipient. For the first, government "benefits"
actually reduce income by making drug running a more difficult occupation.
The other has zero income, but substantial government benefits.
Not that I condone drug running.
Joshua Landrum
George Tucker
> silver) and panegyric for confiscatory inheritance tax.]
> Dan Hepner
Suppose one has no heirs. This is equivalent to a 100%
inheritance tax. The natural reaction is to accumulate
just enough for safe, comfortable retirement with reasonable
allowance for political turmoil, etc. What's left goes to
exempt charities. I assume this would be the response of many
people if inheritance tax were very high. The richest,
of course, would simply choose to vote elsewhere. I fail to
see how this produces a net social benefit compared to the present
system.
You could do away with tax exempt charities (I won't mention
restriction on currency movement, having seen the black market in
India.) Then the govt would get all those wonderful illiquid assets
to distribute to favorite campaign contributors in rigged auctions,
etc. That would create more self-made millionaires and promote
rugged individualism, no doubt.
If you think the prospect of passing wealth to progeny is
not a powerful motivation, check out the biological parallels.
Consider the incredible efforts made in other animal species
by individuals to produce advantage for their genes. If humans
were so much different, we would not have racism.
James W. Howe
>In article <1990Nov30.1...@terminator.cc.umich.edu> j...@bodwin.ifs.umich.edu (James W. Howe) writes:
>>
>>The only reason (IMHO) for a government to tax is to cover the expenses
>>of government. Social engineering is not a valid reason for the government
>>to tax (IMHO). Presumably the government is providing some services
>>to the people that are being governed. As I stated, theoretically
>>I would prefer user fees but realistically I except some level of
>>taxation as an alternative. The implication is that people pay user
>>fees (in the form of taxes) to cover the services they receive from
>>the government. Dead people are dead and don't make use of government
>>services, hence I don't see the justification for an inheritance tax.
>>
>Ah, but what about the person RECIEVING the inheritance? They are (usually)
>not dead. So if we were to call it a tax on the receiving of an inheritance,
>rather than on the giving, would that make you happier? I, personally,
>prefer the "double tax" argument against inheritance; its harder to slip out
>of.
I would not be any happier. I don't believe that any gift should be
taxed. I agree that the double taxation argument is a good one.
>Still, there is a problem: Who says having a higher income means getting more
>use from what government provides? As a (contrived) example, consider a
>drug runner vs a welfare recipient. For the first, government "benefits"
>actually reduce income by making drug running a more difficult occupation.
>The other has zero income, but substantial government benefits.
>Not that I condone drug running.
I don't necessarily think there is a correlation between higher income
and getting more use from government. I'm willing to live with a
resonable tax rate (say 15%) on all incomes above a certain level as
a matter of simplification. It's a compromise position. I think the
government would be more than adequately funded by such a tax. I
don't see any need for an inheritance tax. Personally I would prefer
a user fee system but I don't think that idea will ever fly.
George Tucker
>actually reduce income by making drug running a more difficult occupation.
Thus they do not deserve government benefits.
They provide their own defenses against international aggression.
2. Drug running is highly profitable due to high tariffs and non-
tariff barriers. If the govt did not provide such barriers, drugs
would flow through normal taxable channels and drug runners would
be out of business.
For most of us, govt is just a protection racket. It protects us from
other gangs of thugs. If we don't give it the cut it demands, it sends
in its own thugs. Presumably:
a. it demands a smaller cut than the others would, or
b. its thugs are kinder and gentler than the others.
Anyway, the more you have to protect, the more you benefit from its protection.
Welfare is its form of protection from The Poor. It keeps them
peacable, maintains a labor pool, etc. It is better for those not on it
than alternative methods of control.
Dan Hepner
>>Fine. Now explain why that kind of a tax is better than a confiscatory
>>inheritance tax, and we'll have made progress.
>Dead people are dead and don't make use of government
>services, hence I don't see the justification for an inheritance tax.
I guess that was the answer to the question. Reiterating, the
size of the government and types of services which should be
offered by the government is an interesting, but different
topic.
The response apparently claims that the dead have "rights",
specifically "the right to fair taxation". More on rights
later, but for here: dead people are not people, and should
have no rights at all. Like a rock. Our only concern should
be for the welfare and quality of life of the living.
>>theories in support of this claim. So far, all we have are
>>appeals to "rights" of dubious grounding.
>I think the "rights" issue is probably the most important aspect of
>this entire discussion. If the government is going to try and
>maximize the national economy by violating rights it could easily
>require people to work in certain professions because it is "best"
>for the country.
And it could eliminate freedom of the press and institute cruel
and unusual punishment? Any rights we have WRT taxation, and
WRT forced occupations for that matter are derived entirely from
our constitution, as amended. The government is us, and we
can essentially decide what we want, as limited by that constitution
and the conservativism of the amendment process. We simply
don't have the kind of rights which you refer to, and never
have had.
>However, looking past the important "rights" issue there is
>the issue of whether your proposal would be better for the
>economy. We've already agreed that the proposal is a
>disincentive to save. You seem to think that it is only a minor
>disincentive, I disagree. My point about estate planning addresses
>that issue.
This was responded to, so simple repeating without addressing the
response seems non-progressive. Concisely, the way we now define
the game, you're a chump not to plan. Further, the death
itself parts one from one's possessions in a far more profound way
than that the parting achieved by a confiscatory inheritance tax,
and yet people are motivated to control assets until death.
>Many inheritances take the form of businesses. How do you "tax" the
>business. If the tax is "confiscatory" in nation, the inheritor
>will probably have to sell the business in order to pay the tax.
>I don't think this is beneficial to the economy.
(Raised by Dale Cook also). Clearly this is a secondary issue,
but ok. Of course if the tax is confiscatory in nature the heir
will not simply inherit the business. The business will be sold.
In many cases, due to personal involvement, the business will be
worth far more to the heir than to anyone else, and the heir may
thus be willing to bid far more than anyone else. In other cases,
the heir may have no particular attachment to the business and
it will be sold to others.
>Monies collected by a government are spent, they have no multiplier
>effect.
The discussion is not over how much money the government should spend.
Monies saved create a multiplier effect. If a person inherits
>a sum of money and he simply invests it and lives off the interest he
>has increased the money supply. This increased money provides the
>capital for people to build houses, businesses, etc., which in
>turn results in more jobs and higher GNP.
>James W. Howe internet: j...@ifs.umich.edu
What is as yet unsupported, even by plausible theory, is the claim
that as a class, such heirs provide more GNP participation than
if they had to work to make their own fortune.
Dan Hepner
Lee Newberg
|In article jos...@wolf.cs.washington.edu (Joshua Landrum) writes:
|> I, personally,
|>prefer the "double tax" argument against inheritance; its harder to slip out
|>of.
|
Perhaps I'm just throwing a monkey wrench into things but I want to
know what is so bad about double taxation. I don't see why double
taxation is any more inherently evil then single taxation.
There is a whole continuum ranging from no taxes to tremendous amounts
of taxes. Having a position on where we ought to be on this continuum
is one thing but drawing an arbitrary distinction between single and
double taxation makes no sense to me. What's the difference between
taxing something at 2% and taxing it twice, each at 1%?
Lee Newberg
new...@cs.Berkeley.EDU
It's all In-My-Humble-Opinion. Believe it at your own risk.
David Fox
The other form is when assets are simply given to one, independent
of anyting the person did to earn it. This form is what remains
unsupported by the opponents of confiscatory inheritance taxes.
Very frequently the assets that are subject to the inheritance tax
(currently 55% in the U.S.) are family-owned and -run businesses.
The inheritance tax forces families to either liquidate the
business, which costs the economy jobs, or sell the business, which
usually means inferior management and efficiency (management by a
family is usually very effective), or adding more than half the
assessed value of the business to the debt load of the corporation.
We need only to look at the effect of such debt on various
previously healthy companies that took on huge amounts of debt in
the late 80s to see the ill-advisedness of this approach.
The standard work-around for this problem is to take out life
insurance payable to a trust to cover the estate taxes. You know
how the life insurance companies must feel about inheritance taxes.
David Fox
David Fox
What is as yet unsupported, even by plausible theory, is the claim
that as a class, such heirs provide more GNP participation than
if they had to work to make their own fortune.
This is not the issue. Obviously, if everyone who inherited money
had instead created that amount of wealth we would have a larger
GNP. However, such fortune-builders are very rare, either amongst
heirs or amongst people who inherit debt. The real question is, if
everyone who now inherits wealth instead had it confiscated by the
government and lived a life of relative poverty, would the GNP be
larger? One plausable theory might say that individuals apply
funds more effectively than the federal government, and I would
agree in many cases.
David Fox
Dale Cook
This has been interesting. I have yet to see a posting which comes
close to refuting Dan's position on theoretical grounds (BTW, I agree
with him). I do, however, have a practical question about the
implementation of such a tax, namely, how DOES the government go
about the taxation of non-liquid assets? I'm particularly concerned
with small, privately owned businesses. Obviously, we don't need the
gov't to be in the business of running businesses. So the only real
solution is for the gov't to sell the business, which, often as not,
would NOT be in the best interest of the business, the community, or
the taxpayer.
For example, a small company, employing 20 people, is confiscated by
the gov't when the owner dies. Uncle Sam puts the firm on the block,
and the high bid is less than the book value of the business. The new
owner proceeds to sell off the assets and closes the business. Now,
20 people are out of work. The business (if profitable) pays no
more taxes (a loss to the taxpayer). The local economy suffers.
Now I realize that the above scenario happens often enough under our
current system, but suppose we don't want this to happen. How do we
avoid it?
----------------------------------------------------------------------
--- Dale Cook c...@inel.gov
The following disclaimer was NOT my doing...
----------------------------------------------------------------------
Dan Hepner
[imagine the govt financed completely by CIT]
>>>It's a very scary thought.
>>Only to those who wish to rely on an inheritance to shield them from
>>going to work.
>Please keep the ad homiem attacks to a minimum please.
I meant no such attack. To anyone else who interpreted this
in that way, I apologize. A more direct request for enunciation
of the basis of such fear would have been far superior.
Dan Hepner
Dan Hepner
> If you think the prospect of passing wealth to progeny is
>not a powerful motivation, check out the biological parallels.
>Consider the incredible efforts made in other animal species
>by individuals to produce advantage for their genes. If humans
>were so much different, we would not have racism.
If there's a connection here, it's not perfectly obvious
to me.
Dan Hepner
Dan Hepner
>Very frequently the assets that are subject to the inheritance tax
>(currently 55% in the U.S.) are family-owned and -run businesses.
>The inheritance tax forces families to either liquidate the
>business, which costs the economy jobs, or sell the business, which
>usually means inferior management and efficiency (management by a
>family is usually very effective), or adding more than half the
>assessed value of the business to the debt load of the corporation.
Maybe you could clarify, as it would appear that you are claiming
that normal economic forces are undesirable in their affects upon
existing business. Indeed, CITs would destabilize some inefficient
businesses "ahead of their time".
>We need only to look at the effect of such debt on various
>previously healthy companies that took on huge amounts of debt in
>the late 80s to see the ill-advisedness of this approach.
Let's not confuse "previously healthy companies which were sold
for more than what they were worth" with "inefficient companies
which were living off of previously accumulated assets". Good
companies survive.
>The standard work-around for this problem is to take out life
>insurance payable to a trust to cover the estate taxes.
>David Fox
Clearly any decent CIT law wouldn't allow any such thing.
Dan Hepner
Dan Hepner
> What is as yet unsupported, even by plausible theory, is the claim
> that as a class, such heirs provide more GNP participation than
> if they had to work to make their own fortune.
>This is not the issue. Obviously, if everyone who inherited money
>had instead created that amount of wealth we would have a larger
>GNP.
The assertion is that even if heirs, on the average, accumulate
as much as the typical auto worker, that they will have participated
more than heirs, on the average, do now.
In fact, such people (children of the wealthy) will always carry
certain advantages, such as the example and advice of the parents,
and can be expected, as a group, to be well above average in their
fortune creation.
>The real question is, if
>everyone who now inherits wealth instead had it confiscated by the
>government and lived a life of relative poverty, would the GNP be
>larger?
OK. If you'd change the "life of relative poverty" to "a life
where all wealth was self-earned".
One plausable theory might say that individuals apply
>funds more effectively than the federal government, and I would
>agree in many cases.
>David Fox
A different question. The implementation of CITs does not imply that
the amount of money given to the govt will increase at all. Assuming
it remained the same, what would happen is that more money would come
to be in the hands of the people who earned that money, and maybe
we can all agree that such people are the most effective investors.
Dan Hepner
Dan Hepner
>I do, however, have a practical question about the
>implementation of such a tax, namely, how DOES the government go
>about the taxation of non-liquid assets?
An auction, of one description or another.
>For example, a small company, employing 20 people, is confiscated by
>the gov't when the owner dies. Uncle Sam puts the firm on the block,
>and the high bid is less than the book value of the business.
Which means exactly one thing: the book value of the business was
more than the actual value of the business. Not that uncommon,
and far from being an indication that anything went wrong.
The new
>owner proceeds to sell off the assets and closes the business.
Let's back up a bit. Here's three kinds of valuation:
a. Book value. An accounting figure not of direct interest here.
b. "Operating value", the value of the business doing business as usual.
c. Breakup value, the value of the business as sold off piecemeal.
Companies which are broken up have a higher breakup value higher than
operating value. This is indicative of something gone wrong. To
the extent that CITs encourage the breakup of such, a service has
been done. Companies, like heirs, can become unproductive if allowed
to live off accumulated assets. Companies, unlike real people, have
no justification for ever becoming unproductive as a reward for previous
productivity.
Now,
>20 people are out of work. The business (if profitable) pays no
>more taxes (a loss to the taxpayer). The local economy suffers.
>Now I realize that the above scenario happens often enough under our
>current system, but suppose we don't want this to happen. How do we
>avoid it?
>--- Dale Cook c...@inel.gov
We want it to happen, when it makes economic sense to have it
happen. This doesn't happen to good businesses, only inefficient
ones. Those assets which were sold off won't go away, they'll end
up becoming even more participant in the local society.
(It's tempting to toss this off as a different question, but it's
really not. The effect of a CIT would in fact be to break up a
lot of companies. A prime example would be that of a company which
has over time had its real estate holdings come to dominate its
break-up value, while the business ran as if the RE were worth
what it was bought for 30 years earlier. Current inheritance laws
allow for pressure to be put onto the heir, quite well off himself,
to allow the business employees to continue to live off this asset,
reducing the productivity of not only the heir but also the entire
company. If the business is worth saving, it will have no trouble
renting or buying suitable RE.)
Dan Hepner
Gordon E. Banks
said that taxation is theft. But I'd rather have the government
steal from the dead than the living, if it comes down to a choice.
Seriously though, confiscatory inheritance taxes don't work,
because people will then just make sure that they don't
leave anything behind to be confiscated in most cases.
Only in the cases of sudden, unexpected death, of a relatively
young person will the government realize much.
Joshua Landrum
is it really all that confiscatory? The federal estate tax only kicks in after
the first $600,000 (1.2m for a couple) and while it is high after that, with
the amount of money at stake it is not difficult to avoid. At least in
Washington (state) there is no inheritance tax. So, with this in mind, why
is this tax so bad, in comparison with other taxes?
Joshua Landrum
John Behrs
> For example, a small company, employing 20 people, is confiscated by
> the gov't when the owner dies. Uncle Sam puts the firm on the block,
> and the high bid is less than the book value of the business. The new
> owner proceeds to sell off the assets and closes the business. Now,
> 20 people are out of work. The business (if profitable) pays no
> more taxes (a loss to the taxpayer). The local economy suffers.
> Now I realize that the above scenario happens often enough under our
> current system, but suppose we don't want this to happen. How do we
> avoid it?
I question how often businesses are closed by the government because of
inheritance tax; I would be interested in seeing supporting data.
In general, businesses are often closed by the IRS because of failure to
pay taxes of any nature. If a business cannot meet its obligations,
whether to creditors or the government, in many cases it implies
mismanagement or a poor business. It may actually benefit the
economy to use those resources (office space, people) in more productive
areas. Bankruptcy law usually allows for continuation for business failures
of other kinds.
Most businesses are worth more alive than their liquidation value would
bring. "Book value" is a misleading accounting term and usually overstates
liquidation value. If a public business is worth more in liquidation,
corporate raiders buy it and liquidate it long before the government
enters the picture. Argument could be made that this is good for the economy
in the long run, because underperforming assets could be used more productively.
The same can be argued for private, small businesses. If the business
does not sell for some multiple of cash flow far above liquidation value,
the owner would be better served economically by liquidating it
and going to work for someone else.
--
---
John Behrs
druco!jrb
(303)538-3539
Dan Hepner
>I agree that such a tax would probably be enforceable, but to truly enforce
>it would require the government to scrutinize every financial transaction
>that you make to ensure that you are not making a 'taxable transfer of
>wealth between generations'.
Sort of like now they scrutinize every financial transaction that
you make to ensure that you've paid the taxes on any profit?
Such ideas lead us to the current
>incomprehensible tax code.
Our current incomprehensible tax code is due to its variance
from a flat tax, with e.g. certain things being tax free except
as other limits are exceeded. CITs are as clear as glass:
inter-generational asset transfer is not allowed.
I would also point out that there is always one sure way for
>wealthy people to avoid such a tax - leave the country and take your
>assets with you. Or do you advocate restricting the ability of citizens
>to travel ?
Do you really believe that the only possible plug in this hole
is restricting the ability of citizens to travel?
If you do not think
>that people should leave money to their heirs, then don't leave money to
>your heirs. It is that simple.
Society has a vested interest in the productivity of its citizens. Do
you equally oppose compulsory education on such grounds? There is
a difference between "doing what you want with your money" and
"doing what you want to someone else".
>I would also argue that nobody has shown that rich kids are any LESS productive
>than the average. Since it is the people who are claiming that rich kids are a
>drain on society who want to change the status quo, I would submit that it is
>their responsibility to prove their assertion. I suspect that it would be
>very hard to show that this is indeed true.
>Guido
Granted, it hasn't been rigorously proven here, only offered as
plausible. The supporters of the value of rich kids to society
however haven't done even that well.
Dan Hepner
_real_ drift: our spell(1) passes both "enforcible" and "enforceable". WNC
shows only 'eable'. Who knows the rule?
James W. Howe
We're not discussing the current inheritance tax. The discussion was
whether a truly confiscatory inheritance tax would be "good" or "bad".
James W. Howe internet: j...@ifs.umich.edu
Jacko
<Yet another in a seemingly endless series of articles designed to
inflame anyone with a normal sense of capitalism and individual rights.>
Look, the day Mario Cuomo gets elected president, and names Dan Hepner
as his Secretary of the Treasury, is the day I max out my Visa cards
and move to the Australian outback.
Could you PLEASE move this discussion to misc.taxes where it belongs
(if anywhere).
Thank you, now I can go back to sleep, er, work.
--Jacko
P.S. I know nobody is reading this, since the subject is clearly in
90% of the kill files in the United States.
David Fox
From: f...@allegra.att.com (David Fox)
>Very frequently the assets that are subject to the inheritance tax
>(currently 55% in the U.S.) are family-owned and -run businesses.
>The inheritance tax forces families to either liquidate the
>business, which costs the economy jobs, or sell the business, which
>usually means inferior management and efficiency (management by a
>family is usually very effective), or adding more than half the
>assessed value of the business to the debt load of the corporation.
Maybe you could clarify, as it would appear that you are claiming
that normal economic forces are undesirable in their affects upon
existing business. Indeed, CITs would destabilize some inefficient
businesses "ahead of their time".
I don't consider suddenly and without warning having to raise 55% of
the company's assessed value in cash as a "normal economic force".
>We need only to look at the effect of such debt on various
>previously healthy companies that took on huge amounts of debt in
>the late 80s to see the ill-advisedness of this approach.
Let's not confuse "previously healthy companies which were sold
for more than what they were worth" with "inefficient companies
which were living off of previously accumulated assets". Good
companies survive.
As a matter of fact, companies that are simply living off accumulated
assets have less trouble raising cash than a company whose assets
are in use. CITs hurt efficient companies more.
Dan Hepner
>>inter-generational asset transfer is not allowed.
>Then what incentive would one have to save money?
The desire to control assets.
Everyone who retires
>would immediately sell all their assets and buy an annuity contract
>based on life expectancy so that all of the money they have will
>be spent during their lifetime and they'll end up with zero the day
>they die.
There appear two components of this objection. One, that assets
will be converted to annuities, and two, that wealthy people will
become spendthrift.
The conversion of assets to annuities doesn't change a thing
for people who spend less than their annuity might pay. If
I convert my $50 million into an annuity paying going interest
rates year until I die, I will die with exactly as much money,
on the average, as if I just invest my $50 million at going
rates. Principal + Income - spending. Lifetime annuities reduce
initial principal, and raise income. Excepting the profits of the
annuity company, on the average, assets at death are identical.
Increased spending will of course reduce estate value, but so what? The
economy is advantaged, and the effect is mitigated by that desire to never
run out of money no matter how old one might get.
>That's clearly not a good thing for the economy. The government gets
>zero from the CITs and many businesses are destroyed as a result ...
>Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
Most assets cannot be simply be destroyed, although I guess investing
in old masters to use as fire starters might accomplish that. The
assets of most wealthy people will remain until death. The economy however
will have its chief benefit from the fact that the would be heirs are
out there working to accumulate their own fortunes.
Dan Hepner
Eduardo Krell
>CITs are as clear as glass:
>inter-generational asset transfer is not allowed.
Then what incentive would one have to save money? Everyone who retires
would immediately sell all their assets and buy an annuity contract
based on life expectancy so that all of the money they have will
be spent during their lifetime and they'll end up with zero the day
they die.
That's clearly not a good thing for the economy. The government gets
zero from the CITs and many businesses are destroyed as a result ...
Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
UUCP: {att,decvax,ucbvax}!ulysses!ekrell Internet: ekr...@ulysses.att.com
Dan Hepner
> Maybe you could clarify, as it would appear that you are claiming
> that normal economic forces are undesirable in their affects upon
> existing business. Indeed, CITs would destabilize some inefficient
> businesses "ahead of their time".
>I don't consider suddenly and without warning having to raise 55% of
>the company's assessed value in cash as a "normal economic force".
A couple of points. First off, conceptually anyway, a CIT is not
55%, it's 100%. I for one find no desire to defend the current
law.
Back to raising capital, and your objection. Companies do not
own themselves, they're owned (ultimately) by real people. The
difference that a CIT would make is that when one of those real
people died, his part would be sold to the highest bidder rather
than given to an heir.
For publicly held corporations, this has little or no impact. The
impact is most acute when discussing sole proprietorships or
individually held corporations. Now the business _will_ be sold,
and the bid offered will be based on either the goals of the purchaser
to close down the business and sell the assets, or the purchaser will
intend to operate the business as before, maybe with new management.
The assertion is, that people with money bidding on such businesses
have shown proclivity to make money in the past, and that if the
business is a good business, it will continue to be operated as such.
To the extent that this assessment of viability becomes a common event,
this is a Good Thing, a powerful force for maintaining competitive
businesses.
>As a matter of fact, companies that are simply living off accumulated
>assets have less trouble raising cash than a company whose assets
>are in use. CITs hurt efficient companies more.
Maybe you can explain why the ability of such companies to raise cash
is relevant. CITs would apply to people, not businesses.
Dan Hepner
Eduardo Krell
>The desire to control assets.
I don't get it. Why would anyone invest money in any type of
enterprise which is a long term investment and which will pay off
big, but AFTER your life expectancy?
People do it now so that their heirs will benefit from it,
under a CIT, these types of investment would never be made.
>The conversion of assets to annuities doesn't change a thing
>for people who spend less than their annuity might pay.
That's not the point. The pont is that running businesses will be
liquidated and the money turned into annuity contracts. People will
do anything they can to avoid paying CITs (if my heirs can't have
my money, the government won't either). There are so many ways to
avoid CITs that it would be impossible to enforce them. The end
result will be a total income of ZERO from CITs.
>I convert my $50 million into an annuity paying going interest
>rates year until I die, I will die with exactly as much money,
>on the average, as if I just invest my $50 million at going
>rates.
But you would gain more (and the economy will grow more) if the
money was kept in whatever business you had. That's why entrepeneurs
exist.
Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
UUCP: {att,decvax,ucbvax}!ulysses!ekrell Internet: ekr...@ulysses.att.com
Dan Hepner
>I keep hearing about all the reasons the government should
>confiscate someones' estate upon their death,
>Their money is being used by you
>and me whenever we charge something to a credit card, borrow
>money to buy a car, or get a mortgage for a house.
>Anybody who believes that the
>people of this country are better served by letting the government
>take control of this money is either an absolute fool, or hasn't
>read a newspaper in the last 10 years.
To restate your points,
one, even unproductive heirs have a positive effect on the economy
two, leaving money with the private sector is better than giving it
to the government.
Both points are totally valid, and equally irrelevant. This is not
the dispute.
The question is not whether an heir is more beneficial to society than
say, a welfare queen, but whether as a class, that same collection
of people would be vastly more productive if they were not given money
which they did nothing to earn. If they had to work to accumulate
their own fortune. Nobody as yet has been willing to make a contrary
argument.
Confusing as it might be, arguing that a particular tax should be
raised does not imply arguing that government income should be raised.
Confiscatory inheritance taxes are superior to income taxes, because
they maximize the freedom of people who have made money to invest that
money as they see fit. What is easily then seen is that CITs do not
transfer money from the private sector to the government, they transfer
money from heirs to people with current income, most of whom are working
people, the best investors.
Dan Hepner
Dan Hepner
>>The desire to control assets.
>I don't get it. Why would anyone invest money in any type of
>enterprise which is a long term investment and which will pay off
>big, but AFTER your life expectancy?
>People do it now so that their heirs will benefit from it,
It's clear Eduardo that your circle acquaintances is different
from mine in this regard. I honestly know no person, not one,
who has a primary investment objective of providing wealth to
heirs.
>>The conversion of assets to annuities doesn't change a thing
>>for people who spend less than their annuity might pay.
>That's not the point. The pont is that running businesses will be
>liquidated and the money turned into annuity contracts. People will
>do anything they can to avoid paying CITs (if my heirs can't have
>my money, the government won't either). There are so many ways to
>avoid CITs that it would be impossible to enforce them. The end
>result will be a total income of ZERO from CITs.
If the CIT was unenforceable, a la 55 MPH speed limit, this would
indeed be a very good reason to not have one. But there's plenty
of reason to believe that it is just as enforceable as the income
tax, and a hell of a lot better for the living.
And reiterating, a CIT would indeed force the sale of businesses,
but would never imply the breakup of businesses which weren't more
valuable broken up than operating. There's certainly no reason
to believe that a sole owner would sell the business, convert the
assets, only to have the CIT take the converted assets. Death
already precipitates a profound separation of a person from assets,
far more profound than that of a CIT.
>But you would gain more (and the economy will grow more) if the
>money was kept in whatever business you had. That's why entrepeneurs
>exist.
>Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
And that's why people won't convert such businesses into lesser performing,
passive assets. They'll die with a better score by sticking with what
they have, not to mention having derived more personal pleasure.
Dan Hepner
Gary Heston
> [ liquidation scenario deleted ]
> Now I realize that the above scenario happens often enough under our
> current system, but suppose we don't want this to happen. How do we
> avoid it?
Simple. Abolish estate taxes.
Gary Heston, at home...
Eduardo Krell
>I honestly know no person, not one,
>who has a primary investment objective of providing wealth to
>heirs.
But this clearly is one of the reasons why people try to increase
their fortune. What incentive would people have otherwise? I think
you'll have a hard time convincing someone thay they should break
their backs so that the government can take all the money they have
when they die.
>If the CIT was unenforceable, a la 55 MPH speed limit, this would
>indeed be a very good reason to not have one. But there's plenty
>of reason to believe that it is just as enforceable as the income
>tax, and a hell of a lot better for the living.
OK, answer this: I have $1 million in the bank. To avoid CITs, I
put the money in a trustee account (me in trust for my heir). I die,
my heir gets the money, no inheritance tax since it's not part of
the estate.
You would have to outlaw trustee accounts.
If you do that, I would create a joint account with right to survivorship.
Again, if I die, the account becomes my heir's without any inheritance
considerations.
You would have to outlaw joint accounts.
If you do that, I would buy a life insurance policy with my heir as
beneficiary. The amount of the insurance policy would be such that it
is covered by the payments from an annuity contract based on my life
expectancy. I would sell all the assets I have in order to put as much
money as possible into the annuities.
When I die, the government gets all my assets (zero) and my heir gets
the insurance policy proceeds.
You would have to oulaw life insurance policies.
This can go on and on. I'm not even a creative accountant, who could come
up with much clever and non-intuitive ways of avoiding any CIT. You can
close some of these "holes", but only by means of government coercion.
Closing all of them would require a police state (IMHO).
Also, under a CIT, if a couple dies, for instance, in an auto accident,
will the government take their house and other assets and leave their
children in the streets ? Send them to an orphanage ?
Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
UUCP: {att,decvax,ucbvax}!ulysses!ekrell Internet: ekr...@ulysses.att.com
George Tucker
>say, a welfare queen, but whether as a class, that same collection
>of people would be vastly more productive if they were not given money
>which they did nothing to earn.
of us would benefit by altering the tax structure, not whether a
particular group of other people would be more or less productive.
Your version can be surely be answered by a statistical comparison of
average Americans vs. people who inherited wealth. I'm sure you will
find the latter make more money, but also have a higher percentage of
lawyers. You need to define "productivity", among other things.
Preferably in alt./dev/null.
Gary Heston
> From: f...@allegra.att.com (David Fox)
>
> >Very frequently the assets that are subject to the inheritance tax
> >(currently 55% in the U.S.) are family-owned and -run businesses.
> > [ ... ]
>
> Maybe you could clarify, as it would appear that you are claiming
> that normal economic forces are undesirable in their affects upon
> existing business. Indeed, CITs would destabilize some inefficient
> businesses "ahead of their time".
Nice of you to arbitrarily decide that any closely held company
that doesn't keep over 55% of their assets in cash are "inefficient"
and should be "destabilized". They're generally more efficient than
the average Fortune 500 company. They just have more strict limits
on capital and resources.
I don't consider a CIT to be a "normal economic force"; I agree
with the opinions that oppose any inheritance tax. I'll take any
operating company, generating business, sales, income, and property
taxes year after year any day in place of a one-time liquidation
grab. After 20 years or so, there won't be any more inheritances
to confiscate; either they'll all have been liquadated, or they'll
have left the country.
> >We need only to look at the effect of such debt on various
> >previously healthy companies that took on huge amounts of debt in
> >the late 80s to see the ill-advisedness of this approach.
>
> Let's not confuse "previously healthy companies which were sold
> for more than what they were worth" with "inefficient companies
> which were living off of previously accumulated assets". Good
> companies survive.
Let's not confuse family businesses with previously healthy companies
that overloaded with debt. Generally, a family business doesn't overdo
the debt, because the OWNERS are both making the decision to go in
debt or not, and risking the most if they fail. I'm mimimizing my
personal debt as a means of securing my future, not selling junk
bonds on my house. After all, I worked hard to get this place, and
I'm not going to risk it. Family businesses think the same way.
> >The standard work-around for this problem is to take out life
> >insurance payable to a trust to cover the estate taxes.
> >David Fox
>
> Clearly any decent CIT law wouldn't allow any such thing.
This is an oxymoron. "Decent" and "confiscatory" in the same
sentence?
Tell you what. Sign over anything you inherit to the U.S. Treasury,
and will your estate to the same. Then, you can be smug about
how much smarter and righteous you are than the rest of us.
Gary Heston, at home....
Guido Marx
>as much as the typical auto worker, that they will have participated
>more than heirs, on the average, do now.
>
>In fact, such people (children of the wealthy) will always carry
>certain advantages, such as the example and advice of the parents,
>and can be expected, as a group, to be well above average in their
>fortune creation.
>
>
You repeatedly assert that people who inherit money are somehow less
valuable to society than those who do not. You have yet to offer any
evidence at all that this is indeed the case. Furthermore, such a
blanket statement seems to be patently false on its face. Are you
saying that if I know that I will inherit $20,000 from my parents,
that I will simply lie around, waiting for them to kick off ? Well
if its not $20,000, is it $100,000 ? Surely, there must be some
magic number that transforms me from a hardworking, contributing
member of society, into a useless bum intent only on self pleasure.
Perhaps you could tell me what that magic number is ?
There is another issue that no one has touched upon. Inheritance is
much more than a financial issue, it is an emotional one. My
grandmother died recently, and she left her grandchildren a number
of personal possesions. Now, these certainly did have some monetary
value, but the sentimental value of these items to people in our
family make them far more valuable to us than their intrinsic value
makes them to someone else. She gave me a pair of gold cuff-links
that my grandfather wore on their wedding day. I wore them on the
day that I got married. They are probably not worth more than $100.00,
but they mean far more to me. Why should the government have a claim
to items such as these? Am I going to become a worthless bum because
my grandmother gave me these ?
I think that people are more productive if they think of themselves
as part of a family, not just single entities. It makes you more
responsible, you realize that you must do more than make your own
life comfortable, you have obligations to your ancestors and your
heirs. IMHO this is a good thing.
Guido
Gary Heston
(Apparently, this posting by Hepner was pieced together from two
or three othe postings, as one portion is from one of mine, and
others are from at least one other person. The attributions are
nowhere near correct.)
> From: f...@allegra.att.com (David Fox)
> > Maybe you could clarify, as it would appear that you are claiming
> > that normal economic forces are undesirable in their affects upon
> > existing business. Indeed, CITs would destabilize some inefficient
> > businesses "ahead of their time".
>
> >I don't consider suddenly and without warning having to raise 55% of
> >the company's assessed value in cash as a "normal economic force".
>
> A couple of points. First off, conceptually anyway, a CIT is not
> 55%, it's 100%. I for one find no desire to defend the current
> law.
Right. The disasters aren't bad enough, you want to make things
worse. I have no desire to defend it either, I think it should
be abolished in the interests of improving the economy. Estate
taxes cause too much disruption of business as it is, making it
worse would probably cause a serious depression rather than a
recession like we're likely to see now.
> Back to raising capital, and your objection. Companies do not
> own themselves, they're owned (ultimately) by real people. The
> difference that a CIT would make is that when one of those real
> people died, his part would be sold to the highest bidder rather
> than given to an heir.
a) companies can own themselves. b) in the case of a majority
stockholder dying, IT WILL BE A DISASTER FOR THE COMPANY AND
IT'S EMPLOYEES. Not to mention the customers. An heir is more
likely to be able to keep the business running without severe
disruption; a new owner generally fires everybody above the
manufacturing floor level and then lays off 20% of them, unless
everyone is fired to shut down the business.
> For publicly held corporations, this has little or no impact. The
WRONG.
> impact is most acute when discussing sole proprietorships or
> individually held corporations. Now the business _will_ be sold,
> and the bid offered will be based on either the goals of the purchaser
> to close down the business and sell the assets, or the purchaser will
> intend to operate the business as before, maybe with new management.
So you consider that no matter what happens to the business, as
long as it's sold and you get the money (as tax revenue) it's good.
If it's closed down, competetion and quality go down, prices go
up, and all the employees are drawing unemployment instead of
paying income taxes. Nobody is "going to operate ... as before"
because they're going to squeeze more cash flow out to pay the
interest on the money they borrowed to buy it. (After all, they
couldn't have inherited money to do this, and nobody could build
a fortune without being able to borrow inherited money at
reasonable interest rates.) Either way is a disaster for the company,
employees, customers, and the economy.
> The assertion is, that people with money bidding on such businesses
> have shown proclivity to make money in the past, and that if the
Like Donald Trump? Naww, he borrowed all of it. Now, everything he
took over is on the verge of failure. Under his "new management".
> business is a good business, it will continue to be operated as such.
> To the extent that this assessment of viability becomes a common event,
> this is a Good Thing, a powerful force for maintaining competitive
> businesses.
No, it'll be shut down if it was a competitor, or gutted of half
it's staff in "cost cutting" and "efficiency improving" measures,
which are disasterous in small companies. It is NOT a good thing,
it does NO good, it DESTROYS.
> >As a matter of fact, companies that are simply living off accumulated
> >assets have less trouble raising cash than a company whose assets
> >are in use. CITs hurt efficient companies more.
>
> Maybe you can explain why the ability of such companies to raise cash
> is relevant. CITs would apply to people, not businesses.
When the company is a sole proprietership or partnership, it is part
of the estate and therefore subject to inheritenance tax already.
Your CIT makes it a disaster to be in a partnership when a parther
dies, or be working for either one.
I can't decide if you're insane, on something, or intentionally
pushing this irrationality just for laughs. I'm about to decide
there's no point in arguing with you; you have no concept of how
businesses operate, what estates and estate taxes involve, or
simple economics. Your conceptions of what new owners do to small
businesses are totally out of contact with reality. Go get a
subscription to Forbes, or The Wall Street Journal, or something
that'll educate you about business a little, and quit wasting time
with this nonsense.
Gary Heston, at home....
Joshua Landrum
>say, a welfare queen, but whether as a class, that same collection
>of people would be vastly more productive if they were not given money
>which they did nothing to earn. If they had to work to accumulate
>their own fortune. Nobody as yet has been willing to make a contrary
>argument.
people need SOMETHING to work with. And if you believe that smart people are
more likely to have smart children than others, and that smart people are more
likely to have money to bequeath, then the inheritance is going exactly where
it will be most productive--to those that know how to use it.
The government certainly doesn't.
Joshua Landrum
Dan Hepner
>>I honestly know no person, not one,
>>who has a primary investment objective of providing wealth to
>>heirs.
>But this clearly is one of the reasons why people try to increase
>their fortune. What incentive would people have otherwise?
While it may be a secondary reason, the primary reason is that
people are very motivated to control assets.
>>But there's plenty
>>of reason to believe that it is just as enforceable as the income
>>tax, and a hell of a lot better for the living.
>OK, answer this: I have $1 million in the bank. To avoid CITs, I
>put the money in a trustee account (me in trust for my heir). I die,
>my heir gets the money, no inheritance tax since it's not part of
>the estate.
Accept what it means to have a CIT. Inter-generational transfer of
assets is illegal. Period. This implies of course that "Confiscatory
Inheritance Tax" is a little too restrictive a term, and that we
need to treat gifts, however disguised, similarly to inheritance.
The mechanics needn't be exactly this, but a reasonable way is that
transferral of assets is subject to a 100% tax to be paid by the
recipient. In this, as well as all of your other examples, the
recipient owes a tax of what was received, and attempting to avoid
that tax is treated as such things are treated now.
>This can go on and on.
Or be covered in one fell swoop, much the way income tax laws are
written. You make income, you pay taxes.
>Closing all of them would require a police state (IMHO).
Well, some say that the IRS acts in this way.
>Also, under a CIT, if a couple dies, for instance, in an auto accident,
>will the government take their house and other assets and leave their
>children in the streets ? Send them to an orphanage ?
>Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
Exceptions, particularly for intangibles involving children, could
be reasonably expected.
Dan Hepner
Dan Hepner
>You still haven't proved that an heir is less productive because of
>the inheritance. I can cite examples of heirs who are more
>productive, equally productive, and less productive as a result of
>their inheritance.
You're right, I haven't made the case in a rigorous fashion. I offered
my anecdotal conclusion, and challenged anyone to defend the opposite
conclusion. As yet, nobody as accepted that challenge. Do
you claim that as a class heirs are of more benefit to society
having been given their money, as compared to having to work to
make their own fortune? [incorporates the progressive suggestion
of a poster who appeared to not desire a response]
>You also haven't addressed my solution, that is, to tax those
>people that are not productive instead of taxing all members of a
>certain group. (i.e. heirs)
>mark
There are more than one kind of unproductive people. I for
one am more than willing to defend the rights of anyone to
live off the assets they have collected, as a reward for
having been productive in the past. If your suggestion is
that we hold heirs responsible for maintaining a level of
productivity proportional to their inheritance, well,
maybe you could explain in more detail what it is that your are
recommending. I honestly can't quite imagine how it would
go.
Dan Hepner
Dan Hepner
>Are you kidding !!! People in this country who have substantial
>wealth PLAN for their death, and PLAN for reducing estate taxes
>long before they die.
Of course they do. Consider the difference between "if you
plan correctly, most of your estate can be passed to your
heirs" and "it is illegal to pass any of your estate to
your heirs".
>How can you prove that it is enforceable ? How can you prove that
>if such a tax was put into place, that people wouldn't plan on
>spending most, if not a large portion, of their money before they
>die. I know I would, how would you propose to stop me ?
I wouldn't of course, propose to stop you from spending money
on whatever you liked, unless what you were doing was attempting
to illegally transfer assets to someone else. Even then, it
may be better to put the responsibility upon the recipient,
rather than the giver. Have a good time. Enjoy your assets.
It's worth noting that many forms of spending money, especially
large sums of money, are merely conversion of assets from one
form to another.
>> There's certainly no reason
>> to believe that a sole owner would sell the business, convert the
>> assets, only to have the CIT take the converted assets. Death
>> already precipitates a profound separation of a person from assets,
>> far more profound than that of a CIT.
>But there is a reason to sell the business and greatly enjoy the
>last few years of ones life.
The people who are most affected by a CIT law don't need to sell their
business in order to have enough money to greatly enjoy life. Nor would
a CIT seek to preclude them from taking out loans, or whatever, in order
to maximize their own consumption.
>I will derive more pleasure by converting to liquid and passive
>assets and travelling around the world.
>mark
Fine. CIT's seek no revenge upon those who have earned a
comfortable, or even conspicuously consumptive retirement. To
the extent that they may encourage "over-consumption", so what?
Dan Hepner
Dan Hepner
>You repeatedly assert that people who inherit money are somehow less
>valuable to society than those who do not. You have yet to offer any
>evidence at all that this is indeed the case.
Correct, I've limited my "proof" to personal observations and
plausible theories. I've challenged those who disagree to
support the contrary position. Forgive me if I am mistaken,
but I didn't really interpret your posting as intentionally
accepting that challenge.
>Are you
>saying that if I know that I will inherit $20,000 from my parents,
>that I will simply lie around, waiting for them to kick off ?
No, nor would I say anything about what you or any other individual
might do in the future. The discussion is over the group of such people
as a whole.
Well
>if its not $20,000, is it $100,000 ? Surely, there must be some
>magic number that transforms me from a hardworking, contributing
>member of society, into a useless bum intent only on self pleasure.
>Perhaps you could tell me what that magic number is ?
It's enough to live on indefinitely without working. More for some
than others.
>There is another issue that no one has touched upon. Inheritance is
>much more than a financial issue, it is an emotional one.
>She gave me a pair of gold cuff-links
>that my grandfather wore on their wedding day. I wore them on the
>day that I got married. They are probably not worth more than $100.00,
I for one have no real problem with some kind of a lower cut-off, to
cover well more than $100 worth of personal effects, or maybe
even a "heirloom declaration" which would preclude liquidating the asset.
Somewhat related, for what it's worth, modest sums being given at
judicious times by parents can be extremely helpful and motivating.
Let's not necessarily imagine a CIT designed by people with no sense of
exceptions.
>I think that people are more productive if they think of themselves
>as part of a family, not just single entities. It makes you more
>responsible, you realize that you must do more than make your own
>life comfortable, you have obligations to your ancestors and your
>heirs. IMHO this is a good thing.
>Guido
Let's say your first and last sentences hit it on the head. The
best things one can do for one's children do not involve giving
them a lot of money.
Dan Hepner
Dan Hepner
>>Nobody as yet has been willing to make a contrary
>>argument.
>How about "it takes money to make money"? After all, even the most brilliant
>people need SOMETHING to work with.
How about it? This is something like what I imagined the argument would
go, but surely if you really believe this, you can flesh this out to
be convincing that those heirs which do make something of their
inheritance are so valuable such that we should take money from
the working and transfer it to them so that we will all benefit?
And if you believe that smart people are
>more likely to have smart children than others, and that smart people are more
>likely to have money to bequeath, then the inheritance is going exactly where
>it will be most productive--to those that know how to use it.
My experience may be different than yours, but I've noticed a remarkable
difference in the "know how to use it" when comparing those who made
the money with their children. Now after those children have watched
and learned and went out and made their own ...
>The government certainly doesn't.
> Joshua Landrum
Which is why it shouldn't be given to the government, it should be
given to people who earn their money, in the form of reduced taxes.
That's actually a different issue, but it seems easier to argue
the "keep government revenues neutral or lower case" than to
explain in a vacuum why it is a different issue. Somewhat
coincidentally, I do wholeheartedly agree that government
revenues should in fact be reduced.
Dan Hepner
David Fox
>>Also, under a CIT, if a couple dies, for instance, in an auto accident,
>>will the government take their house and other assets and leave their
>>children in the streets ? Send them to an orphanage ?
>>Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
>Exceptions, particularly for intangibles involving children, could
>be reasonably expected.
>
>Dan Hepner
What on earth does this mean? People keep asking you this same
question over and over and you keep giving evasive answers like
this. I think it is time to stop beating this dead horse.
David Fox
Dan Hepner
>Sorry, this is inherently unworkable. The government cannot hope to
>impose such a tax on a public unwilling to accept it, no matter how
>much the government needs the money.
Maybe you can explain in this in the context of the successful
imposition of income taxes?
Under strict interpretation, a
>confiscatory gift and inheritance tax would result in an inability to
>give a child a birthday present. Children would be forced to fund their
>own educations. Imagine the public support for that!
Nobody suggested that. The most reasonable exceptions would be
those for care and education of orphan children.
>Even if the law contained reasonable exemptions (such as the current
>$10,000 annual limit on gifts before taxes are due), some people just
>aren't going to take this sitting down. How much revenue will the CIT
>raise if everyone with a substantial estate moves to Canada or Bermuda
>or the Bahamas before they die, when those countries impose no CIT?
About as much as goes such places to avoid current taxes.
>After all, if the U.S. has a 100% inheritance tax, the
>Bahamas will become an incredibly wealthy place just by imposing (say)
>only a 10% inheritance tax.
"Son, you're gonna have to move with me to the Bahamas. I know you
like it here, and that there's no future for you in the Bahamas, but
it's so important that you receive your inheritance that we must both
leave forever".
>>Exceptions, particularly for intangibles involving children, could
>>be reasonably expected.
>This is silly. Where are you going to draw the line? At a certain age
>(i.e. Junior gets to use the house until he's 18, then the government takes
>it)? What about vast differences in situation (i.e. Donald Trump Junior
>gets to live in the Connecticut mansion until he's 18, with the government
>picking up the tab for hot and cold running maids, vs. Willie Horton who
>gets nothing at all)? The yuppie 4 year old gets to keep the Beemer and
>the $25,000 worth of toys Mom bought him, but has to fund his eating by
>selling them?
Why imagine a system which is terrible? Try imagining one which allows
for the education and nurturing of children, but not the transfer of
large sums of money to them.
>>rather than the giver. Have a good time. Enjoy your assets.
>
>Agreed. My assets are MY assets. If I can't dispose of them as
>I see fit, they don't really belong to me, do they?
If you have to pay them as income taxes, they don't really belong
to you, do they? The case being made is that inheritance taxes
impose far less constraints onto people than do taxes which separate
working people from their earned money.
Is your argument
>that the government holds ultimate title to all of my assets?
Ultimate title? I don't know. But as abhorrent as I would find
it myself, I see nothing in the constitution which would preclude
us from freely selecting a totally socialistic government which
outlawed private property.
>I say "To hell with it. I'm taking a million dollars
>out to spend the rest of my life on the QE2, and then I'm razing the
>mill."
Well, gee, why would you do that? We'll agree, you _could_
invest in old master paintings and then burn them, but that
this behavior would be unusual. We shouldn't really spend a
lot of time worrying about such behavior.
>>Explain
>>why we would be better off transferring even more money from those who
>>made it to those who did nothing to earn it.
>If I earn $100,000,000 in my lifetime,
>net of income taxes, the CIT proposes to confiscate that for the
>government. Surely the government "did nothing to earn it".
Most of us agree that the government needs some level of financing,
(the alternative being actual anarchy). If the government is not
earning this level of financing, we the voters are responsible.
Even the
>people the government represents "did nothing to earn it". I earned it.
>Me. I want to spend it. If I want to spend it on my children, that
>should be my right.
>Norbert
Yes, in a minor sense I agree. We should try and not minimize your
choices. But in order to finance the government, we do need to forcefully
extract some money from you. Your choice is, do you want it taken from
you during your life, or after your death?
Dan Hepner
Dan Hepner
>>>Also, under a CIT, if a couple dies, for instance, in an auto accident,
>>>will the government take their house and other assets and leave their
>>>children in the streets ? Send them to an orphanage ?
>>Exceptions, particularly for intangibles involving children, could
>>be reasonably expected.
>What on earth does this mean?
>David Fox
Sorry, I mistakenly thought it was clear. My Websters offers a
definition of 'tangible' as "capable of being appraised at an
actual or approximate value <tangible assets>". In the
context, I intended "intangibles" to mean basically things
which cannot be spent or converted to cash, even though they
cost money. Such as education, nurturing, experience, and
health care.
Dan Hepner
Dan Hepner
>(Apparently, this posting by Hepner was pieced together from two
>or three othe postings, as one portion is from one of mine, and
>others are from at least one other person. The attributions are
>nowhere near correct.)
Others have pieced things together. The posting of mine found here
was originally a response to David Fox's posting, and contained only
that attribution.
>> From: f...@allegra.att.com (David Fox)
>> > Maybe you could clarify, as it would appear that you are claiming
>> > that normal economic forces are undesirable in their affects upon
>> > existing business. Indeed, CITs would destabilize some inefficient
>> > businesses "ahead of their time".
>>
>> >I don't consider suddenly and without warning having to raise 55% of
>> >the company's assessed value in cash as a "normal economic force".
>>
>> A couple of points. First off, conceptually anyway, a CIT is not
>> 55%, it's 100%. I for one find no desire to defend the current
>> law.
>Right. The disasters aren't bad enough, you want to make things
>worse. I have no desire to defend it either, I think it should
>be abolished in the interests of improving the economy. Estate
>taxes cause too much disruption of business as it is, making it
>worse would probably cause a serious depression rather than a
>recession like we're likely to see now.
Well, nobody has yet to explain why the only effect of a CIT on
business, that of initiating the breakup of businesses which is
worth more broken up than operating, is detrimental to the overall
business climate. This would have a profound _positive_ effect,
as dead-on-their-feet businesses would bite the dust sooner, and
the assets and people could be productively put to use somewhere else.
>> Back to raising capital, and your objection. Companies do not
>> own themselves, they're owned (ultimately) by real people. The
>> difference that a CIT would make is that when one of those real
>> people died, his part would be sold to the highest bidder rather
>> than given to an heir.
>a) companies can own themselves.
Explain, please.
b) in the case of a majority
>stockholder dying, IT WILL BE A DISASTER FOR THE COMPANY AND
>IT'S EMPLOYEES.
Not if it is a real, viable business. Whoever buys it will keep
it as such.
Not to mention the customers. An heir is more
>likely to be able to keep the business running without severe
>disruption; a new owner generally fires everybody above the
>manufacturing floor level and then lays off 20% of them, unless
>everyone is fired to shut down the business.
Nonsense. Part of the problem is that when such small business
are sold today, as they routinely are, it doesn't make the news.
The ones which do make the news typically are examples of management
having failed their owners; it's not surprising that changes
are made by the new owners.
>> For publicly held corporations, this has little or no impact. The
>
>WRONG.
Well, that's convincing. You know you're doing all right in a
net debate when the opposition entrenches.
>> impact is most acute when discussing sole proprietorships or
>> individually held corporations. Now the business _will_ be sold,
>> and the bid offered will be based on either the goals of the purchaser
>> to close down the business and sell the assets, or the purchaser will
>> intend to operate the business as before, maybe with new management.
>So you consider that no matter what happens to the business, as
>long as it's sold and you get the money (as tax revenue) it's good.
Hmm. The only money _I_ want out of this is that portion of my
taxes which can be replaced. You could expect the same. But to
the point, the only businesses which would be broken up are those
worth more broken up than operating. It's a Good Thing to break
up such businesses, the quicker the better.
>> The assertion is, that people with money bidding on such businesses
>> have shown proclivity to make money in the past, and that if the
>Like Donald Trump? Naww, he borrowed all of it. Now, everything he
>took over is on the verge of failure. Under his "new management".
>Gary Heston, at home....
Maybe you could clarify the nature of your beef with D. Trump? What
is he an example of?
Dan Hepner
Dan Hepner
>They buy new cars and they go on expensive trips abroad. Those
>things are purchased from travel agents and from auto dealerships
>owned by their children. Those children make certain profits (the
>standard profit, not an [illegal] excessive profit to transfer
>assets) from the sales of those things. How would you keep retired
>people from spending much of their assets during retirement ?
Analogous situations are already handled. We have legal definitions
of "arm's length transactions", which can of course be consummated
between close relatives. I of course would make no step to "keep
retired people from spending much of their assets during retirement".
>> It's worth noting that many forms of spending money, especially
>> large sums of money, are merely conversion of assets from one
>> form to another.
>What major asset aquisitions do people make when they
>are retired ?
Annuities have been suggested. Passive income sources are quite
common. Income sources which will prevail across both inflation
and depression are goals. Basically, income which will last as
long as one lives, regardless of how long that is, is popular
with retired folks.
Why do many retired people
>sell their businesses then ? Why do many retired people transfer
>their more risky investments into fixed income investments around
>retirement time ?
Perpetual income. Smart ones don't take 100% fixed income investments,
however.
>That destroys your thesis of funding government soley with CIT's,
>doesn't it ?
Somewhat exaggerated as a "thesis". What I do assert is that
CITs have less negative impact on the economy than do taxes
which take money from those who have earned it.
If it is consumed before the govt. ever gets is, then
>where does the govt. get its money from ?
>mark
Contemplate if you like the thought of consuming $100 million,
just so that the government didn't get it, while simultaneously
guaranteeing that you will have say a $2 million annual income
for the rest of your life, to sustain your lifestyle.
See if you don't end up dying with at least half of that $100
million.
Dan Hepner
Dan Hepner
>I am not proposing the opposite, I am simply saying that on
>AVERAGE, an heir is EQUALLY as productive as a non-heir. (and since
>they are on average equally as productive, they shouldn't be taxed
>more than the average person)
So you believe that for all those heirs we all know who are
unproductive you know certain ones which are so productive
that they make up for the losers, and that those winners
wouldn't have been winners had they been self made?
>I would prefer a minimal government with minimal taxes taken from
>ALL, I MEAN ALL income INCLUDING inheritance.
>mark
Maybe you could address the difference between "minimal total
taxes" and "anything the government taxes, it should do
in a minimal way".
To me, the second makes no sense. Try this: assuming a necessary level
of taxes, we should collect those taxes with the minimal effect
on the liberties of people.
Dan Hepner
Joshua Landrum
>just so that the government didn't get it, while simultaneously
>guaranteeing that you will have say a $2 million annual income
>for the rest of your life, to sustain your lifestyle.
>
>See if you don't end up dying with at least half of that $100
>million.
>
>Dan Hepner
10 years in which to work (I can start after retirement, after all) move to
the post of Chairman, and hire my relatives to act on the board. Set my
salary at $2,000,000, and pay relatives to run the company, mainly in stock
options, which they use. Never retire (since I own the business, no need
to). By the time I die, my heirs already own the business, so no inheritance.
Merely income tax on the stock options, income which they earned. Or are
you going to make a law against high wages, too?
(By the way--even if you don't own a business, you can still incorporate
your retirement account as an investment firm, and higher fund managers).
There are, of course, numerous other ways to have income, but no assets.
Joshua Landrum
Dan Hepner
can be reasonably hoped for at this time. I'll post what I see as
the "final analysis", and those who disagree can go ahead and post
as they like, and I won't either respond or rebut, for six months
or so anyway. To those who haven't enjoyed the discussion, I truly
hope you don't read these words. The title has remained
the same throughout, I believe for both rn style readers as well
as notes style, and hopefully easy to skip over for those not
interested.
I've hoped to show that a Confiscatory Inheritance Tax has merit,
from both a capitalistic and libertarian perspective. While the
argument has not been conclusive, some merit has clearly been
established.
Reiterating what we're talking about, a CIT is conceptually
a 100% tax on inheritance, with appropriate exceptions. Closely
associated with a CIT is a prohibition on gifts to others,
again, with appropriate exceptions. The law would be written,
and exceptions worked out by congress. In essence, with
exceptions, transfer of assets from one person to another
is not allowed.
Do I expect a CIT any time soon? No. For one thing, if this
discussion is any example, CITs are a very confusing topic,
with many people willing to make their decision based on
incomplete intellectual analysis. "It _seems_ anti-libertarian,
It _seems_ anti-capitalistic, It _seems_ to increase the influence
of government in our lives, and since I'm a libertarian
and a capitalist who favors small government, it must be bad".
The arguments have fallen into three (arbitrary) categories:
1. True objections
2. Mistaken assumptions as to what is implied by having a CIT
3. Bogus logic and other forms of irrelevant argument
I'll list the arguments as I see them, and suggest where we have
left off.
Thanks to all who participated.
True Objections:
1. "CITs infringe upon rights of people to do what they want with
their money"
- Yes, they do. And that's undesirable. So do income taxes, and
that's undesirable. There's plenty of reason to believe that
CITs infringe less than do income taxes.
2. CIT laws would induce attempts to avoid the law.
- Yes, they would. And they would be unpopular with those who missed
out on their inheritance. But analogous to income tax laws, most
decide to stay here and keep the advantages. Further, other countries
could be expected to join in.
3. Heirs have some self evident right to an inheritance.
- While a true objection, I simply disagree. Such rights need to
be defended as desirable to society at large.
4. We don't know that heirs are, as a class, less productive
than they would be as self made people.
- Indeed we don't. The evidence we've seen doesn't lent itself
to "it's proven" one way or the other. I continue, given the
lack of hard information, to chose to accept my own observations,
that there are a lot of unproductive heirs who possess enough of
what it takes to predict that nearly all would have made it as self
made people. To anyone who believes the opposite, (nobody claimed
that here), this may well be reason to oppose a CIT.
5. CITs would disrupt business for closely held businesses.
- CITs would imply breakup of businesses which are worth more
broken up than operating. They would not imply breakup of
good businesses. This is a highly pro free market, a pro
capitalistic, and a pro increased productivity of companies
as well as individuals effect.
6. Multi generational fortunes are very valuable to society.
- While I saw this early on, and would have enjoyed seeing
someone take it up, it was dropped. Personally, I don't
believe it for a minute, but this argument, if supported,
could be a reason to avoid a CIT.
7. Retirees will spend more money, knowing that if they don't,
it will go to the government.
- I agree. But I don't see where most retirees, having
made a fortune working, are likely to die sans such a
fortune. They enjoy having it more than spending it.
8. A CIT would be wildly unpopular.
I agree. So is the income tax. So would any kind of
tax. We need at least _some_ taxes. Unpopularity
is inevitable.
Mistaken assumptions as to the implications of a CIT
1. "We can decide better as to how to spend our money than the
government can"
- By far the most confusing to explain, because I guess it's
just counter intuitive that increasing one tax does not
necessarily imply increasing government revenue. It is of
course contrary to our experience with congressional tax
increases. A CIT is absolutely neutral in it's effect on how
much money _we_ get to decide how is spent and how much money the
government gets to decide how is spent. Unless accompanied
by a decision to raise government revenues, a CIT would
imply a dollar for dollar reduction in some other tax,
most likely the income tax. A transfer from one section of
the private sector, those who are given money, to another
section of the private sector, those who earn money.
Bogus arguments (arguments which miss logical engagement with what
is being advocated)
1. [boiled down]: The CIT as proposed by Dan Hepner misses addressing
some particular secondary point. Examples were the need for various
exceptions. Also were a few "if you do a little of this, you
of necessity will go to extreme".
- My basic suggestion of a CIT was not intended to be a formal
specification of such. Of course there needs to be exceptions,
and to the extent I did engage in discussion of such exceptions,
it was to show that such discussion could always take place.
The question wasn't "does Dan Hepner's proposal make sense?",
the question was "does the best CIT I can imagine make sense?".
2. (Sort of like 1) If the law were worded in a particular way,
it would be unenforceable because people would behave like
this...
- The wording would be written by lawyers, of course. And
it would, by definition, tax transfers of assets. And, by
definition, attempting to avoid the tax by disguising the
transfer as something else, say disguising a gift by paying
one's heir $10 million per month, would subject either the
heir or both to the penalties imposed upon those who attempt
to avoid taxes. Most of those things are already subject to
the current tax on gifts.
3. A CIT would be "theft", and since theft is wrong, that proves
that a CIT would be wrong.
- Substitute "profit" for "CIT" in the above, and you'll see that
asserting novel definitions of words doesn't prove much.
4. The fact that people today spend much time and money on estate
planning proves something about how important current inheritance
rights are in their motivation to make money.
- While a claim of say "leaving money to the kids is more important
than having money when I'm alive" would be a real objection, this
is not. When you set up the rules, people will play the game as
best they can.
5. Heirs aren't the only kind of unproductive people.
- Simply irrelevant.
6. A CIT is double taxation.
- I was willing to have someone explain why this was a real reason,
but was disappointed. So what? At least it needs a supported
claim that "any double taxation is unconstitutional" or "any double
taxation will distort the free market". We have double taxation
all over the place today.
Dan Hepner
Guido Marx
>
>>You still haven't proved that an heir is less productive because of
>>the inheritance. I can cite examples of heirs who are more
>>productive, equally productive, and less productive as a result of
>>their inheritance.
>
>You're right, I haven't made the case in a rigorous fashion. I offered
>my anecdotal conclusion, and challenged anyone to defend the opposite
>conclusion. As yet, nobody as accepted that challenge.
You have not made your case even in anecdotal terms. All that I have
seen is that you have asserted the proposition that people who
inherit money are less productive than they otherwise would be. You
then go on to propose draconian measures that would require the
government to use police state powers to enforce (I am referring
to your suggestion that all inter-generational transfers of wealth
be prohibited).
>Do you claim that as a class heirs are of more benefit to society
>having been given their money, as compared to having to work to
>make their own fortune? [incorporates the progressive suggestion
>of a poster who appeared to not desire a response]
>
If you would like, I would be happy to offer anecdotal evidence that
counters your assertion. However, it is my opinion that since you
are the one who is suggesting a radical departure from the status
quo for the sake of an opinion which you yourself describe as not
having been proved "in a rigorous fashion", then you are the one
who should prove that your assertion is correct. I believe that
'gut feelings' are extremly poor criteria to develop either law
or social policy with.
>
>Dan Hepner
Guido
Brian Rauchfuss
I'm sorry, but I just have to give one more objection to a CIT:
If, for example, Dave Packard was to die and the government confiscate
all his HP stock and sell it, the stock would crash. Badly. There are a number
of large stockholders in the world whose death would cause extreme distress.
This would be "bad for society".
The government could, of course, simply take the stock and sell it in bits over
years. This looks like the first step in the government becoming a major
player in both the stock market and in running private businesses. Ugh.
----------------------------------------------------------------------
Brian Smokefoot "... never knowing I could shape my life
br...@hpfcdj.HP.COM like the artist paints his dreams
on a canvas." - Minor Detail
Guido Marx
>From: m...@cbnewsh.att.com (mark)
>
>unproductive you know certain ones which are so productive
>that they make up for the losers, and that those winners
>wouldn't have been winners had they been self made?
>
inherited money have been losers if they HADN'T inherited any
money ? Remember, coincedence does not prove causation. It is
my own opinion that whether someone is succesful or not depends to
some extent upon their circumstances, but to a much
greater degree upon their own personality.
>
>To me, the second makes no sense. Try this: assuming a necessary level
>of taxes, we should collect those taxes with the minimal effect
>on the liberties of people.
>
I agree. Your proposal of no transfers of wealth between generations
would neccesitate a tremendous negative effect on everyone's liberty
because of the enormous government intrusion into everyone's personal
financial lives. After all, every significant transaction that you
make would need to be scrutinized to ensure that it did not involve a
transfer of wealth between generations.
>Dan Hepner
Guido
Guido Marx
My problem with Dan's position is twofold. The first is a fundamental
philisophical disagreement that we must simply agree to disagree about.
1) I think that people have the right to their assets, and one of those
rights is leaving your assets to your heirs if you so choose. I disagree
that you must show a benifeit to society to justify this. I am not
required to show a greater social benifeit for other uses of my assets.
The second disagreement is whether such a tax is really practical in any
real sense.
2) I believe that such a tax would present insurmountable problems in
its actual implementation. Dan has refused to deal with these by saying
things like "The law would be written, and exceptions worked out by congress."
He must have a great deal more faith than I in the ability of the congress
to write a workable CIT.
There is a fundamental economic rule about taxes that he ignores. Simply,
for a tax to be effective, the cost of avoidance must be greater than the
tax itself. In the case of the income tax, the cost of avoidance for most
people is substantially greater than the cost of simply paying the tax.
In the case of a CIT, I submit that the reverse would be true. Ie: the
cost of avoidance of the tax for large estates would be substantially
less than the cost of the tax. Hence, there would be a great deal of
avoidance. The experience in Great Britain with confiscatory income
taxes supports my theory. (ie: people with large incomes simply
moved out of the country.)
Dan also proposes a CIT as a replacement for other revenue that the
government currently collects ( he proposes that revenues
from this tax would be used to reduce income taxes). While this is
indeed what he would like, I submit that the chance of this ever
coming to pass is approximately the same as the proverbial snowball
in hell. Our historical experience has been that increased taxes
lead to increased government spending. In the case of the
government, outgo always rises to meet and exceed income. Early
on, Dan used the income tax as an example of how the congress would
work out the problems in a CIT. We obviously have very different
views on how workable and fair this tax is. What is unassailable
is the fact that the income tax causes tremendous government intrusion
into our private lives, a CIT would cause even more.
Guido
Gary Heston
dhe...@hpcuhc.cup.hp.com (Dan Hepner) writes:
> From: ga...@cdthq.UUCP (Gary Heston)
>
> >Nice of you to arbitrarily decide that any closely held company
> >that doesn't keep over 55% of their assets in cash are "inefficient"
> >and should be "destabilized". They're generally more efficient than
> >the average Fortune 500 company. They just have more strict limits
> >on capital and resources.
>
> You've made an assumption which I didn't follow. Remember,
> CITs are 100%. In what way would that affect the needs
> of a company to keep any particular portion of its assets
> in cash?
You're right, I assumed things are bad enough for business; you
think they should be worse. Since the siezure for taxes will
result in liquidation (and cessation of operations), there is
no need to worry about what portion is in cash. Please give one
documented example of the IRS siezing a business and keeping it
operating; all instances I've heard of involved locking out all
employees, removal (irregardless of damage caused) of everything
possible, including personal property belonging to employees
("It's yours, not the companies? Prove it. File a claim in court,
after we auction it off (or, in the case of money, simply taken).")
> >I don't consider a CIT to be a "normal economic force";
>
> The "normal economic forces" are those which dictate that a business
> is more valuable broken up than operating. CITs are neutral in
> such decisions, although they may hasten the day of reconning with
> "normal economic forces".
Huh? You made an assumption here, that whoever ends up taking title
of the property pays 100% of market value for it. If you believe that,
you're crazy--out of several thousand items I've seen auctioned, maybe
two or three sold for retail or close. I've seen farm tractors in
perfect condition, retail value $80,000 or so, drawing bids of $15-17K.
Anybody with an IQ at an auction will pay well below "market" value,
because they intend to sell it (or the pieces) at a profit. Companies
with an asset value of $5 million will be lucky to draw total bids
of $1 million, for two reasons: 1) everyone will be trying to buy
cheap to liquidate at a high profit margin, and 2) there'll be such
a glut of these auctions, nobody will have to pay near market. (This
is a rule of economy you've probably never heard of, it's called
"Supply and Demand".)
> I agree
> >with the opinions that oppose any inheritance tax.
>
> Fine. Now explain why we would be better off to maximize taxes on
> the working people so we could eliminate inheritance taxes. Explain
> why we would be better off transferring even more money from those who
> made it to those who did nothing to earn it.
Repeat after me: TAX ON MONEY IN AN ESTATE WAS PAID WHEN IT WAS
EARNED. I don't understand why you insist on double taxation; I'm
opposed to that, too. I'd rather have someone with $1 mil or more
in nice, low interest CDs so I can borrow it at low interest rates.
By the way, just what do you plan to do with the brief surge of
tax revenue (since everyone with money would leave the country if
such a thing were put into effect, devestating the business operations
in the process, which would eliminate future tax revenues): put it
into "social" programs like welfare, so it can be given to people
who did nothing to earn it?
> I'll take any
> >operating company, generating business, sales, income, and property
> >taxes year after year any day in place of a one-time liquidation
> >grab.
>
> I don't know what your idea of a "one time liquidation grab" is,
> but there's no reason why an operating company, generating business,
> sales, income, ans property taxes year after year would be worth
> more broken up than operating; we would thus assume that its new
> owner(s) would operate the company rather than break it up.
You have hereby proven conclusively that you know NOTHING about
business economics or operation. This kind of thing happens
DAILY. Go talk to a probate court clerk. My idea of a one-time
liquidation grab is a confiscatory inheritance tax. You're making
another assumption here: that the business will be kept operating
after seizure until there's a "new owner". Doesn't happen; the
IRS locks the door to make sure nobody takes home a pencil.
> >that overloaded with debt. Generally, a family business doesn't overdo
> >the debt, because the OWNERS are both making the decision to go in
> >debt or not, and risking the most if they fail.
> >Gary Heston, at home....
>
> Maybe you could clarify why this is relevant?
"at home..." means I'm sitting in my den, that I have a newsfeed from
the system at work. Glad I could clear that up for you.
> Dan Hepner
I FIGURED IT OUT!! I JUST FIGURED IT OUT!! HE DOESN'T HAVE A CLUE!!
The problem is that we have a different definition of "productive"
than Mr. Hepner. His definition of "productive" is "number of widgets
stamped out this week", whereas the rest of us are operating with
"making a beneficial impact on the society and economy". Perhaps
he'll figure it out, someday..... Worst case is he might go into
politics.
Gary Heston, at home.... building up an estate, unless it'll be
confiscated--I'll move to Australia, first.
Gary Heston
I.e., under Mr. Hepners' CIT, they'll be out on the street, "being
productive".
Yet another strike against the concept of a CIT.....
Gary Heston, at home....
Gary Heston
home is limited as to the length of message I can follow up to.)
In article <103...@hpcuhc.cup.hp.com> dhe...@hpcuhc.cup.hp.com (Dan Hepner) writes:
>From: ga...@cdthq.UUCP (Gary Heston)
>
>>(Apparently, this posting by Hepner was pieced together from two
>>or three othe postings, as one portion is from one of mine, and
>>others are from at least one other person. The attributions are
>>nowhere near correct.)
>
>Others have pieced things together. The posting of mine found here
>was originally a response to David Fox's posting, and contained only
>that attribution.
My apoligies, Mr. Hepner, in this case, you are correct. It appears that
David Fox and I were both blasting your CIT proposal with identical counter-
arguments. The quote "Great minds think alike" passes thru my thoughts, but
in this one instance, I have incorrectly maligned you. Your CIT idea,
however, still stinks.
>> From: f...@allegra.att.com (David Fox)
>>> > Maybe you could clarify, as it would appear that you are claiming
>>> > that normal economic forces are undesirable in their affects upon
>>> > existing business. Indeed, CITs would destabilize some inefficient
>>> > businesses "ahead of their time".
>>> >I don't consider suddenly and without warning having to raise 55% of
>>> >the company's assessed value in cash as a "normal economic force".
>>> A couple of points. First off, conceptually anyway, a CIT is not
>>> 55%, it's 100%. I for one find no desire to defend the current
>>> law.
>>Right. The disasters aren't bad enough, you want to make things
>>worse. I have no desire to defend it either, I think it should
>>be abolished in the interests of improving the economy. Estate
>>taxes cause too much disruption of business as it is, making it
>>worse would probably cause a serious depression rather than a
>>recession like we're likely to see now.
>Well, nobody has yet to explain why the only effect of a CIT on
>business, that of initiating the breakup of businesses which is
>worth more broken up than operating, is detrimental to the overall
>business climate. This would have a profound _positive_ effect,
>as dead-on-their-feet businesses would bite the dust sooner, and
>the assets and people could be productively put to use somewhere else.
I operate under the assumption that a functioning business is worth
more than the auction value of the furniture. You obviously don't.
If the corner gas station gets sold in pieces to satisfy a CIT, I
suppose you'd consider it more productive for me to drive another
couple of miles to fill up. I don't.
I further don't consider a business "dead-on-their-feet" simply
because their book value exceeds their cash flow. It might mean
that the business is well-managed, or they hold one asset (like
real estate) that has skyrocketed in value over the last several
years. (Based on that, Lockheed and Boeing are "dead-on-their-feet"
as a result of their property holdings in southern California.)
I don't consider the continual axing of small businesses to be a
positive effect on the business climate. The people would be out of
work, and the assets might be in someones' garage. You make some
very naive assumptions about what would happen to a business under
the circumstances you put forth.
>>> Back to raising capital, and your objection. Companies do not
>>> own themselves, they're owned (ultimately) by real people. The
>>> difference that a CIT would make is that when one of those real
>>> people died, his part would be sold to the highest bidder rather
>>> than given to an heir.
>>a) companies can own themselves.
>Explain, please.
Easy. Ever hear of a "stock buy-back"? Happens all the time. "The Acme
Widget Company announced that it will buy back a block of stock at the
current market price, representing a total expenditure of $10 million."
After enough of those, the company owns all the issued shares of stock,
and therefore owns itself. The Board of Directors and management vote
the stock by proxy, and (naturally) all their initiatives pass unanimously.
> b) in the case of a majority
>>stockholder dying, IT WILL BE A DISASTER FOR THE COMPANY AND
>>IT'S EMPLOYEES.
>Not if it is a real, viable business. Whoever buys it will keep
>it as such.
BS. The viability of a business doesn't determine whether or not
it survives under a new owner; if the Blivit Widget Company buys the
assets of the Acme Widget Company, they'll "absorb" it by laying off
most of the Acme employees, and adding the Acme customer list to their
existing one. Most likely, no Acme employees will be retained; some of
the equipment will be reused.
You're assuming that where there is a choice between an altruistic
decision and a competitive one, the altruistic one will be made.
Won't happen ("Acme Widget is making the same profit margin as we
are, so we should keep it running." "By shutting down Acme Widget,
we'll have a 20% increase in our sales and production." Which do you
think Blivet Widget will do?) in any business environment I've seen,
and I subscribe to Fortune, Forbes, and The Wall Street Journal.
I suggest you do, too. You might learn something.
> Not to mention the customers. An heir is more
>>likely to be able to keep the business running without severe
>>disruption; a new owner generally fires everybody above the
>>manufacturing floor level and then lays off 20% of them, unless
>>everyone is fired to shut down the business.
>Nonsense. Part of the problem is that when such small business
>are sold today, as they routinely are, it doesn't make the news.
>The ones which do make the news typically are examples of management
>having failed their owners; it's not surprising that changes
>are made by the new owners.
No, its' suprising when no changes are made. Do you read the
want-ads section of your local newspaper? Do you look around and see
how many small businesses that were operating last year aren't this year?
Usually, I see "Following the death of Sole Proprietor, the assets of
Soles' Department Store are being disposed of via auction".
When the "changes" the new owner makes are stripping the floors bare
and handing pink slips to the staff, it makes the news, all right. As
part of the unemployment statistics.
Remember Satellite News Network? It was bought by Turner Broadcasting
Company. Specifically, it was bought and shut down, so it didn't
compete with Cable News Network, Turners' existing news channel.
Please cite examples of any businesses sold to new owners that don't
shut them down, or load them with debt to sell out at a profit.
>>> For publicly held corporations, this has little or no impact. The
>>WRONG.
>Well, that's convincing. You know you're doing all right in a
>net debate when the opposition entrenches.
"Entrenches"? Gee, I thought I disagreed with you. You make a major
assumption ("little or no impact" on publicly-held corporations) with
no substantiating data, and then claim you're "doing all right" when
someone disagrees with you? We must be doing all right in this debate
if you're getting this evasive, and can't provide any data or personal
experience to back it up. Ask the former employees of SNN how many were
kept by Turner. I went to an estate auction a couple of weeks ago where
all the equipment from a (formerly) operating farm were being sold by
the family. I didn't ask, but I can call the auction company to make
sure, whether or not the equipment, tools, materials, and all the small
parts hanging from the walls in the barn were being sold to cover the
cost of estate taxes; I think that was the case, though. I didn't see
any of the bidders on the farm equipment trying to hire any of the farm
workers. I guess the family wanted to keep the property, at least, and
had to sell the equipment to raise the tax payment. Real "productive".
I'll try to make it to another estate acution this Saturday, and ask
the auction company a few questions.
>>> impact is most acute when discussing sole proprietorships or
>>> individually held corporations. Now the business _will_ be sold,
>>> and the bid offered will be based on either the goals of the purchaser
>>> to close down the business and sell the assets, or the purchaser will
>>> intend to operate the business as before, maybe with new management.
>>So you consider that no matter what happens to the business, as
>>long as it's sold and you get the money (as tax revenue) it's good.
>Hmm. The only money _I_ want out of this is that portion of my
>taxes which can be replaced. You could expect the same. But to
>the point, the only businesses which would be broken up are those
>worth more broken up than operating. It's a Good Thing to break
>up such businesses, the quicker the better.
You make another naive assumtion that your taxes will be reduced if a
CIT is put into effect. Have you bothered to read even a cursory
review of the latest budget from Congress? They'll find ways to need that
"additional revenue", without reducing any other taxes. I assure you,
they'll find ways. New Congressional offices, more staff, more perks,
more porkbarreling, more useless bureacuracies, raises for themselves
and the staff (did you know that the budget bill wasn't even in written
form when it was voted on? Last time that happened, the written version
that finally appeared included a 10% raise for all staff personnel--which
no member of Congress could remember voting on. It wasn't rescinded,
either.), not to mention keeping unnecessary facilities operating.
I've got this nice bridge in Brooklyn I'll sell you. Give you a good
deal.....
>>> The assertion is, that people with money bidding on such businesses
>>> have shown proclivity to make money in the past, and that if the
>>Like Donald Trump? Naww, he borrowed all of it. Now, everything he
>>took over is on the verge of failure. Under his "new management".
>>Gary Heston, at home....
>Maybe you could clarify the nature of your beef with D. Trump? What
>is he an example of?
He's an example of the type of person you'd be selling business assets
to. My beef with him is that he's taken over things like the Eastern
Shuttle, painted his name onto it, and ended up reducing the value
of them. He borrowed a pile of money, and blew a lot of it on luxury
living, and now he can't meet his interest payments. He's an example
of someone with money to bid on businesses who can't make money, only
throw it around to impress bankers into loaning him more. Real productive.
Of course, if I were to fail to meet mortgage payments (if I still had
them), I'd be foreclosed on immediately, and evicted. He just goes on
a productive cruise on the Trump Princess.
Hepner, don't bother posting anything else on this until you can PROVE
that a CIT would be beneficial, citing real examples of small business
being taken over without major layoffs or shutdowns. Also, show proof
that the individual tax rate would go down.
And, if you're intelligent enough to do that, explain why you're not
the richest man in the world.
Until you can do at least two of those, I'm not going to waste further
bandwidth on this. You put forth an inane suggestion, haven't provided
any real examples to back it up, and ignore those presented that refute
your position. You're wasting our time.
>Dan Hepner
--
Gary Heston System Mismanager and technoflunky uunet!sci34hub!gary or
My opinions, not theirs. SCI Systems, Inc. ga...@sci34hub.sci.com
The sysadmin sees all, knows all, and doesn't tell the boss who's
updating their resumes.... This .sig Copyright G. L. Heston, 1990
John Eaton
< If, for example, Dave Packard was to die and the government confiscate
< all his HP stock and sell it, the stock would crash. Badly. There are a number
< of large stockholders in the world whose death would cause extreme distress.
< This would be "bad for society".
HP Stock has managed to crash quite nicely over the last two years without
anyone having to die. With the recent death of Armand Hammer, his stock
became more valuable because his company was now a takeover target.
The trick is to live long enough to transfer your wealth into a foundation
that will live on and sponser a lot of PBS programing.
John Eaton
!hpvcfs1!johne
PS: It's tough being the child of a wealthy industrialist. You can't even
ask for something simple like an aquarium for you birthday without it
turning into a major project.