Death Tax and Welfare

[doodle]

Here is an interesting question that I came across in a comment to a Paul Krugman article.

If many wealthy people are against the moral injustice of doling out welfare money to people who have not earned it and created no value for society, why is it that it is morally justified to dole out inheritance money (often in vast quantities) to children and heirs when they haven't earned it either? At the end of the day in both cases a group of people is receiving money when they created no value.

Now, of course you could make the argument that the rich person earned the money and therefore has the right to distribute the money as he sees fit. With this I would agree, but perhaps the morally correct way to address this is to say that this money must be distributed as he sees fit back into society as a whole and not to the individual who happened through luck to grace this earth as his offspring.

Food for thought....

[MediumTex]

Welfare money is distributed as part of a coercive property confiscation scheme with violence as the consequence for noncompliance.

Inherited money is distributed as part of a private exchange of private property between two consenting parties who enter the exchange voluntarily.

I think that comparing one to the other is off-the-mark.

[chrish]

If many wealthy people are against the moral injustice of doling out welfare money to people who have not earned it and created no value for society, why is it that it is morally justified to dole out inheritance money (often in vast quantities) to children and heirs when they haven't earned it either? At the end of the day in both cases a group of people is receiving money when they created no value.

It seems to me that it is better to tax unearned wealth such as inheritance, rather than earned wealth, such as income. If I have to pay more income tax then I have less of an incentive to work hard and create value. OTOH, if I know that when I die my heirs would get a large inheritance tax bill, then it might encourage more philanthropy whilst I am alive, and it would provide an incentive for my children to work hard also. It would be a step towards a more meritocratic society, and that could only be a good thing IMO.

[Bean]

Totally different distributions of wealth.

1) Welfare is someone forcing others to be generous with money
2) Inheritance is someone electively being generous with their own money.

When anyone says give back to society, who determines what is best? My best for society may be different than your best.  Also, most wealthy people got there and stayed there because they were good stewards of wealth, who better to choose where it goes than someone with a track record of smart decisions?

[doodle]

Welfare money is distributed as part of a coercive property confiscation scheme with violence as the consequence for noncompliance.

Inherited money is distributed as part of a private exchange of private property between two consenting parties who enter the exchange voluntarily.

I think that comparing one to the other is off-the-mark.

I understand the coercion argument, but taking that out of the picture for a moment....the end result is basically the same. Someone is receiving something for nothing.

Possibly there is a higher good that society can agree upon such as the need to guard against creating aristrocratic dynasties. Then turning over and distributing your money back into society simply becomes a rule, like any other in the Constitution which exists to guard against the concentration of power.

Of course the wealthy person would be free to have his money used after his death as he saw fit...building hospitals, schools, etc. etc. So it is not absolute coercion...

[MediumTex]

Possibly there is a higher good that society can agree upon such as the need to guard against creating aristrocratic dynasties.

I would say that any "higher good" that involves stealing someone's private property in order to give it to someone else based upon a judgment by the state of who would make the best use of it is absurd.

If I went out and stole someone's stuff and gave it to a group of poor people, that wouldn't be a defense against the crime of theft.  Why do we apply a different standard when it's the government engaging in the theft?

[doodle]

Another question....is wealth (as it relates to money) not a social concept? In other words, can someone be monetarily wealthy if they live alone on a deserted island? Isn't it the existence of society that allows an individual to be wealthy in the first place?

[MediumTex]

Another question....is wealth (as it relates to money) not a social concept? In other words, can someone be monetarily wealthy if they live alone on a deserted island? Isn't it the existence of society that allows an individual to be wealthy in the first place?

In Robinson Crusoe I would say that he created a lot of wealth through his own efforts and he was able to enjoy the fruits of that labor in the form of survival.

If a band of natives had come by each evening and stolen half of what he had built, created or grown, I can easily see him dying early in the story.

[doodle]

Right, but Robinson Crusoe's wealth is not in the form of coins and bills. It is real wealth that necessitates constant labor.

His wealth doesn't involve interest on a socially constructed money, but the sweat and toil of what he builds, plants and harvests. His inheritence to his children would be no more than a life of work planting and harvesting.

This is quite different when money is brought into the picture, isn't it?

[stone]

Money gathers more money. That wealth gathering by wealth depends on a peaceful prosperous society. A business based in USA, UK, Switzerland or Singapore is worth massively more than it would be were it transposed to somewhere "free of government" such as Somalia or whatever. It costs a lot to impose law and order even if you leave to one side having a transport system, educated and healthy population etc etc. The benefits of such an ordered state accrue in proportion to how wealthy you are. Warren Buffet's assets gather for him $5B per year let's say whilst someone else's non-existent assets might gather nothing for them. Warren Buffet's assets would gather nothing for him without the rule of law and an ordered state. I think it is only just that people pay for what they get and so taxes should be paid each year in proportion to what you own and we should do away with all of our current taxes on transactions etc.

I also think an asset tax system avoid the credit fueled asset bubble phenomenon which is a frailty of capitalism that is being mercilessly bled at the moment and looks to me to be in danger of destroying everything.

[Pointedstick]

Another question....is wealth (as it relates to money) not a social concept? In other words, can someone be monetarily wealthy if they live alone on a deserted island? Isn't it the existence of society that allows an individual to be wealthy in the first place?

Money is just a medium of exchange, but wealth can, as MediumTex indicated, be created alone. Since money is just an accounting shorthand for previously created wealth, I would say that the distinction is fairly meaningless.

But to answer your question, of course it's the existence of society that allows exchange, specialization, and all the wealth creation that can result from these things, but let's not confuse society with government. When one generates wealth within a society, one already "pays it forward" by purchasing goods and services provided by others, employing people, investing in new enterprises, making loans, or creating capital for others to use after you no longer have a need for it.

Nobody makes money in a vacuum; one spends a great deal to get there and in the process transfers money to others, thereby paying their way forward. Let's not pretend that people who have become wealthy have been resource-sucking leeches who have done nothing but subtract from society.

[Pointedstick]

Right, but Robinson Crusoe's wealth is not in the form of coins and bills. It is real wealth that necessitates constant labor.

His wealth doesn't involve interest on a socially constructed money, but the sweat and toil of what he builds, plants and harvests. His inheritence to his children would be no more than a life of work planting and harvesting.

This is quite different when money is brought into the picture, isn't it?

Not at all. If he builds his children a sturdy earthen house, they can enjoy it indefinitely. If he fashions tools and weapons of iron that his children can use to build more things and hunt animals, they will have the use of them until they break (which may be a long time or even never, if they are properly-constructed). And so on and so forth. "Wealth" need not be money or a farm. Wealth is anything that in its combined form, satisfies human wants and needs better than would its individual component pieces. It could be a fat bank account, a pile of gold coins, a farm, a house, a hammer, a boat, a fishing pole, a car, a shovel, a computer, a chair, a stereo system, a cooking stove, a wall, a water purifier…

[doodle]

Money is just a medium of exchange, but wealth can, as MediumTex indicated, be created alone. Since money is just an accounting shorthand for previously created wealth, I would say that the distinction is fairly meaningless.

There is a huge distinction in my mind between wealth as money and wealth as real production and goods. The second is a depreciating asset that requires a labor input to maintain and preserve. The former in our present economy has the ability to garner interest. In other words to create something out of nothing.

[doodle]

If he fashions tools and weapons of iron that his children can use to build more things and hunt animals, they will have the use of them until they break

Isn't the operative word here "use". The tools wont hunt or plow the fields themselves and put food on the table. 10 million dollars in the bank however will do that without me even lifting a finger.

[doodle]

What about a set-up like this...MT,

Have an estate tax of like 75%, but the dying person gets to apportion that 75% to whatever causes/programs they choose (government doesn't apportion money). The remaining 25% they can will to whomever or whatever they like...

Do you think this would be overly coercive, or a reasonable balance between an individuals freedoms and societies interests?

[2thefuture]

I feel we might be confusing good socialism with bad socialism. Socialism is the natural philosophy of the family unit. By sharing assets, it allows the family to exist within a larger environment. It's size and the need for it's weaker members by loving support. As history has shown, it has been easy to extend the philosophy on to society as a whole. Most history has shown these attempts at utopia have failed. Our founding fathers may have understood this when they established each individual as being sovereign to government and determined each can own property (estate) which cannot be removed from him or his family.

[Bean]

What about a set-up like this...MT,

Have an estate tax of like 75%, but the dying person gets to apportion that 75% to whatever causes/programs they choose (government doesn't apportion money). The remaining 25% they can will to whomever or whatever they like...

Do you think this would be overly coercive, or a reasonable balance between an individuals freedoms and societies interests?

Why do he have to tax them at all? What is so wrong with someone's last wishes if they don't meet everyone else's demand? What if I wanted the largest kegger ever thrown at my funeral? If the government gets to demand 75% of my estate, was it ever really mine in the first pace then?

[stone]

In the UK medical research is funded mostly by two funding bodies, the MRC which is directly paid for out of taxes and The Wellcome Trust, which uses its asset holdings to gather the money it pays out ( >£700M per year and growing).

Why do people say that the government is unjustly confiscating money by taxes to pay for medical research and yet say that it is fine that Henry Wellcome (who died many decades ago) is able to in perpetuity ensure that future society pays for medical research by means of the money gathering capability of the Wellcome Trust's asset holdings?

Of course most money gathering by people's asset holdings is not used for medical research. 

[doodle]

Bean,

Did you read what I wrote? The government doesn't get any money. You are free to apportion it as you choose....including a giant kegger. The one stipulation is that it must be spent back into society from whence it came. Only a portion can go towards creating an aristrocratic blood legacy.

[Pointedstick]

a reasonable balance between an individuals freedoms and societies interests?

Let's say I gather up a posse and we break into your house and find a jar of money in your closet. Let's say we take 75% of it, leave you the remaining quarter, and then send you a letter thanking you for earning all that money for us to steal, and saying that as a gesture of goodwill, we'll let you determine how we'll spend the money.

Would that be a "reasonable balance" between your individual freedom and my posse's interest in the product of your labor?

[moda0306]

I tend to sympathize that transfers of assets from parents to "undeserving" children as simply yet another economic transaction that should be free of spiteful, oppressive taxes, but let's not forget that the taxpayer in the 25% tax bracket is paying about 32% of his marginal "economic transaction" into federal income/payroll taxes.  Why should it be any different for a Trust Fund Baby?  With all the exemptions and gift exclusions out there, even for uber-wealthy people, most wealth transfer is a tax-free item, so it probably evens out against a very high estate tax rate to being relatively equal to income taxes.  Why I should have to pay out over 1/3 of my economic transactions to taxes at my modest income while the son/daughter of a wealthy person should not is beyond me.

I still think the discussion of wealth creation/distribution leaves much to be hashed out... Since money is either a natural or fiat way of giving people an efficient medium of exchange and a claim on others' labor & resources, I don't necessarily think of it as having some special status in terms of how it should be distributed.  However, natural resources represent much more of a quandry.  We aren't nebulous entities floating through nothingness, offering our "services" to other entities in exchange for compensation.  We live in a world of finite resources that our entire society is built around, and how we choose to allocate those resources is extremely impactful... and when I say CHOOSE, I mean that to imply that nobody has earned them and therefore any attempt to allow one person to take claim to them is coercively removing them from being "public" in nature, and I still see no evidence that there is a natural connection between any one man and a plot of land or natural resources.  It takes government to negotiate that link in anything that would resemble a modern economy.  Do men "naturally" desire to own things? Yes.  That doesn't make private property in that form all that "natural" in a philosophical sense, IMO.  Further, governments have given certain people the priority of obtaining that link MUCH easier than others, so I tend to think a social safety net to offset it is a very fair trade.

Further, I remember recently having a debate about whether the gov't protecting legitimate private property (I think we can all agree the product of one's creative effort is probably the most pure form of private property) is a form of a "handout" to those with property.  I'd question whether any gov't at all is legitimate based on the "coercion" arguments, since there are always people out there who are fully equipped to defend their own property.  Therefore, they're being "coerced" into buying protection for everyone else to pay for a sherriff and court system.

So it seems to me that this isn't a debate about which functions of government are coercion and which are not, but maybe to acknowledge that any and all government is a coercive entity, and we simply prioritize what coercion we like vs the kind we don't like and try to assign moral values to them.

[chrish]

Why do he have to tax them at all? What is so wrong with someone's last wishes if they don't meet everyone else's demand? What if I wanted the largest kegger ever thrown at my funeral? If the government gets to demand 75% of my estate, was it ever really mine in the first pace then?

The government has to raise taxes somehow. We could argue all day about what the level of taxation should be and how much infrastructure, healthcare, education etc. should be provided by the state, but the level of taxation required to fund even the smallest government is never going to be zero, is it? I personally think taxing inheritance is probably one of the least harmful ways of raising revenue, certainly preferable to taxing income, becasue, after all, it is money for nothing anyway.

[moda0306]

a reasonable balance between an individuals freedoms and societies interests?

Let's say I gather up a posse and we break into your house and find a jar of money in your closet. Let's say we take 75% of it, leave you the remaining quarter, and then send you a letter thanking you for earning all that money for us to steal, and saying that as a gesture of goodwill, we'll let you determine how we'll spend the money.

Would that be a "reasonable balance" between your individual freedom and my posse's interest in the product of your labor?

PS,

But all our wealth is not just a product of our labor, but also of natural resources and to a great degree, a stable social structure that promotes healthy markets and long-term investments.  I agree there's a balance, but a lot of time gov't facilitates the creation of wealth in ways that simply would not work if the private sector did... do you think the GDP of NY City could ever be as large as it is if there was no government?  Not a chance.  This doesn't give credit to gov't so much as it simply acknowledges that there is a symbiotic relationship there.

[stone]

Pointed stick

Would that be a "reasonable balance" between your individual freedom and my posse's interest in the product of your labor?

The point is that much wealth is not a product of the owner's labour. It is the product of other peoples' labour that has been gathered in as a return on capital. Its seems to me that return on capital is a phenomenon that depends on government to enforce law etc. It should be paid for in proportion to what is owned by the owners.

[Pointedstick]

But all our wealth is not just a product of our labor, but also of natural resources and to a great degree, a stable social structure that promotes healthy markets and long-term investments.

Well I completely agree with you there, but none of those three things requires government. Just because one or more may today be provided by government in some cases, that doesn't mean that no alternative social structure that lacks it/them could exist. That's all I'm saying. It may be hard to imagine a world/country/town/island/area that lacks government but still has healthy stable markets and a functioning crime prevention industry, but I just don't believe that it is impossible, as I have lived in one. The only violence in this society came from without, from the nearby government that occasionally oppressed the people.