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Stop The JerkTech

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Re: Stop The JerkTech

#201
post #136

Earlier quoted context omitted.

Economic theory. A rich person earns more money per hour than a poor person (by definition). Money is a representation of value (by definition). In Economics, value earned is at least proportional (if not equal) to value created. So a rich person creates more value in the same amount of time than a poor person. Their time is literally more valuable. The assumption of a rich person being rich because of the value crea…

I don't know about Germany, but for USA it is does not appear to be true. Which data your based your claim on? Here: http://www.forbes.com/sites/moneybuilder/2012/04/20/most-wea... it says only 6% of wealthy people are wealthy by inheritance. Here: http://blogs.wsj.com/wealth/2008/01/14/the-decline-of-inheri... they arrive at the same conclusion (minority got wealthy by inheritance).

Sorry for the late reply, I didn't recognize your answer earlier. Is there some comment notification option on hn that I missed?

The forbes article you quoted is a bit problematic because the data given are voluntary answers. In studies like these there always is the problem of a potentially skewed return rate: Given a return rate of 30%, what is the wealth inheritance quota of the other 70%? My speculation would be that someone who is proud of the fruit of his own hard work (the quoted local business owner) is more likely to answer such a survey. On the other hand some rich person who found a clever way to unofficially inherit parts of the own wealth while avoiding the correlating taxes won't answer such a survey.

At least the second of the blogs.wsj.com studies is self-selected, too. I couldn't find the papers for the two other quotes because the sources were too vague.

It's better to use data sources like tax income of states. IMHO even better is the concept of social mobility (the wikipedia article is quite good: http://en.wikipedia.org/wiki/Social_mobility), as it also encompasses factors like the parents' social contacts and educational chances. The studies cited there all use official, non-self-selected data and sometimes even proper longitudinal studies. In the results presented there the USA has the the lowest intergenerational vertical social mobility of all researched OECD countries (i.v.s.m. means the probability of a child to get into a higher (or lower) class than its parents live in).

An example for Germany: The probability of a child of workers to get a degree from a university is 17 times lower than that of a child with academic parents (source: http://www.deutschlandfunk.de/geschlossene-gesellschaft-uber...).

Yes, social mobility is not the same as inherited wealth, because it's a result of a combination of inheritance and other factors. On the plus side, the empirical data it's based on is of comparibly high quality. The problem is that monetary (as opposed to social etc.) wealth is pretty hard to measure even given government data. In Germany for example the data for people having income is more or less 100% available. But the richer you are, the less probable it is for you to have income: The money then comes from capital gains, rent etc. These are way harder to measure, e.g. the capital gains could get collected by a corporation and not an individual. The corporations money only gets tapped on demand (=saved inside the corporation hull until retirement). And the child of the owner has a counsulting contract with that company. Legally, thats not inheritance at all, but practically it pretty much is.

Re: Stop The JerkTech

#202

Earlier quoted context omitted.

really are you sure a few years ago my parents worked out that in the UK my sister and I would have to immediately find over $130,000 in cash to pay for death duty. We could just do it but we have far more savings than the majority of the uk population.

I don't know how death duty works there, but if it's like here, I presume that means you would be inheriting something asset worth a lot more than $130,000 but didn't want to sell it. Thus you would end up richer than before, just with an illiquid asset. In which case it would not harm your middle-class status.

Often the illiquid assets being inherited have great sentimental value to the inheritor. Also, inheritees would get around the tax by hiding assets, gifting them before death, putting them in holding companies, etc. After all, what's the worst the government can do if they're caught?
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