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Over $70T of inherited wealth over next decade will widen inequality, economists

theguardian.com

71–80 of 236 posts

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#71
post #6

Inheritance is in most cases the only way young people in a lot of European countries can even own their own home

That observation is correct, but I'd challenge the implication that "therefore inheritance must be allowed to continue in its current form".

Why are houses so expensive? Alongside challenges and inefficiences related to permits and building (as plenty discussed elsewhere) housing is also used as an investment asset by people with money to invest. This ranges from individuals buying an apartment to rent out, to large investment and private equity firms buying up whole swathes of real estate. When the global money supply is increased (e.g. post-2008 crash, post-Covid, etc.) a lot of it ends up with the rich, who then invest directly or indirectly in asset classes including housing. (Also see how e.g. classic car prices have increased since ~'08).

Until this mechanism is recognised as the cause of asset appreciation and measures are put in place to reverse this trend, the current cost-of-living issues will continue to worsen. Sadly, most politicians are already rich enough to benefit from this situation, and so --in the unlikely event that they even recognise this as a cause-- are unlikely to strongly advocate for measures to address it. Additionally, politics in many countries is too intertwined with big business to mean that such a revolutionary concept would be entertained.

tl;dr: addressing the huge progressive accumulation of wealth by the rich --of which inheritance is one aspect-- is what is needed to address the continual appreciation in so many asset classes, including housing.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#72
post #31

This is just wrong. If we skip the ultra rich totally and focus on normal families inheritance is THE way to help you decendants. Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generati…

What is a progressive tax? Ridiculous straw man, because this is like saying income tax should be abolished because minimum wage people can't afford it. Yeah no shit that's why it's progressive. In the case of inheritance, even a 0% bracket until ~1M$ will mean the tax leaves the middle class entirely unaffected while ensuring massive feudal-levels of generational wealth are at least curbed, and turned over to the co…

It does not matter. If a person with 40K/year salary inherits a 800K house there is no way he can pay for the taxes. No bank will even give him a loan. The house is basically going to the highest bidder. This means you will most likely get a poor price on the house, and even worse when times are bad (like now) when no ones buying.

This means your 800K asset maybe gives you 650K, and from that sum you still pay the inheritance tax + sales tax (thats usually in the 20% range).

You will likely get somewhere in the 450-500K for an asset that was worth 800K.

This is how to poor will remain poor.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#73

1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence) 2) tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit

So people put the money in a trust or use another way to dodge it. I don’t think it’s nearly as easy to collect ad you hand wave.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#74

1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence) 2) tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit

I think the bigger issue is that people are hording wealth instead of spending it in general making money work for them and not for the greater economy which is the only thing giving their money substance long-term. Well, long-term is longer than human lifetime so I guess there's no real reason for them to worry about it either.

Not really. After all that is the point of inflation, to tax people who hoard money.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#75
post #9

Earlier quoted context omitted.

Why would there be no money under socialism?

Because it would be stolen by the government. Ask people in post-Soviet countries about how Soviet governments were stealing money from their bank accounts, from all citizens collectively. No one believed in money under socialism in the USSR. The government could always pull a funny trick called "and now... it's gone". Be happy, comrade, that only your money is gone, you could also be in prison.

USSR operated under state capitalism, nothing like what any of the communists or socialists ever imagined. But I guess that is what USSR made socialism mean as a result.

BTW: Most of the world lives under state capitalism, not capitalism, not socialism, not any other form of economic system. The state has an unrestricted claim to any and all of your wealth.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#76
post #15

This is just wrong. If we skip the ultra rich totally and focus on normal families inheritance is THE way to help you decendants. Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generati…

May want to say where you live, in US estate tax is exempt under 13M

Europe. Here we tax everything, usually twice.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#77

This is just wrong. If we skip the ultra rich totally and focus on normal families inheritance is THE way to help you decendants. Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generati…

its such a feudal mentality that I really have trouble identifying with it. My parents are significantly wealthier than me, but i just have zero sense of being entitled to the fruits of their labor (though of course i have benefited from it) and even moreso their house... (i wish they had a cottage lol) we all make our own way in the modern world and i feel as a society we try to not just leave it to fate and how gil…

Ofc. But as a parent i WANT to give something to my children after i pass. Why should every generation "suffer" like the previous did?

What you do with your life is up to you, but having a guardrail can make life just that more pleasant. Life should not be about counting cents and going from pay-check to pay-check.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#78
Many in the US expecting an inheritance from their baby boomer parents are in for a rude shock. Why? Because their assets are going to get eaten up by retirement living and end-of-life care. If you still own your assets when you go into care, Medicaid is going to use up all those assets before paying for it and this could be tens of thousands a month with long-term medical care. You can avoid this is you plan ahead. Medicaid has a 5 year lookback on gifts so you need to transfer assets 5+ years before you need to pay for care but most people haven't done that.

For those who say this is the only way people get ahead, you are correct but you're missing the point. That shouldn't be the case and it's non sustainable. In the 1990s, the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society).

I've come to believe that this century will see a point where there's simply nothing left to exploit, nothing left to transfer from the working class to the ultra-wealthy. And as has always been the case historically, that's going to end with a more violent form of wealth redistribution (eg French revolution, Russian revolution).

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#79

1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence) 2) tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit

> tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit

If you think you’ve seen zany tax schemes, just wait till they try implementing something as crazy as a 100% tax.

There’s also a moral question of why you feel entitled to not just a majority of the fruits of my labors, but apparently all of them.

Re: Over $70T of inherited wealth over next decade will widen inequality, economists

#80
post #31

Earlier quoted context omitted.

What is a progressive tax? Ridiculous straw man, because this is like saying income tax should be abolished because minimum wage people can't afford it. Yeah no shit that's why it's progressive. In the case of inheritance, even a 0% bracket until ~1M$ will mean the tax leaves the middle class entirely unaffected while ensuring massive feudal-levels of generational wealth are at least curbed, and turned over to the co…

It does not matter. If a person with 40K/year salary inherits a 800K house there is no way he can pay for the taxes. No bank will even give him a loan. The house is basically going to the highest bidder. This means you will most likely get a poor price on the house, and even worse when times are bad (like now) when no ones buying. This means your 800K asset maybe gives you 650K, and from that sum you still pay the in…

UK is a country where a person with 70k of annual income can buy a home for 1mil.

The whole property market in UK is a pyramid scheme, time to realize that.

The whole system is FUBARed.

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