What will happen to these people?

[Much Fishing to Do]

Happens every day.  They will work until they retire on SS and Medicare, just like lots of people today.  Sure the percentage might go up some, but its not like its not whats been happening for a long time for a large percentage of the population.  On SS they will collect 25%-40% of what they used to make, but with reduced taxes (esp. payroll or the lower incomes)  thats more like a third to a half of working income.  It not impossible, its not the worst thing in the world.  Some will adapt well, some will not and seek help from family members, etc.  This is not unlike someone hardcore on MMM seeing the light and getting serious and having a 50-70% savings rate, but the difference is course those who did it MMM style will work 10 years before retiring, not 45.

[mm1970]

I am personally surprised at the number of older folks out there with no money smarts.  My grandparents generation (born and raised during and just post the Great Depression) we're very frugal, mortgage paid off early, retirement savings, they operated on a cash basis if they didn't have the money, they didn't buy it.

My parents generation however is quiet the opposite - I guess they were the 1960's-70's Hippie generation.  They ended up with decent jobs but no savings.  Most of my older family members in their 60's and 70's still have a mortgage and are still working.

I find this comment so very ignorant.    Do you realize that you're speaking of the baby boomers who at this point in time account for 65 million people across every strata of society.   And you're saying, that from a frugality/savings perspective, that they are opposite to the Greatest generation.     Generalizing your statement to account for 65 million people.    They who range in age from 53 to 71 years old.   And that none of them? None of them,  have any success at being effective savers/investers or some measure of fiscally responsible people by what I guess are your standards.     

I assure you that they run the gamut as does the Greatest Generation, the Millennials, and any other demographic group you might name.

Why is the comment ignorant?  Vegasgirl is just pointing out the differences in the generations in her family.  And to some degree, they match my own family also.  Nowhere is she applying a wide brush to an entire generation, but you can look at trends and make some basic conclusions.  Will they apply to everyone?  Of course not.

https://rescueonefinancial.com/debt-across-the-generations/

[shotgunwilly]

They will die poor and in need.  That's what will happen to them.

Unless enough of them do it and whine about the results.   

Then they will tax those of us who were responsible to pay for their care and upkeep.

They'll vote for politicians who make good sounding claims about taxing the Evil Rich (you) to pay for their Needs.

This is exactly what will happen.  And responsible people will be the ones who get screwed.

[Paul der Krake]

I am personally surprised at the number of older folks out there with no money smarts.  My grandparents generation (born and raised during and just post the Great Depression) we're very frugal, mortgage paid off early, retirement savings, they operated on a cash basis if they didn't have the money, they didn't buy it.

My parents generation however is quiet the opposite - I guess they were the 1960's-70's Hippie generation.  They ended up with decent jobs but no savings.  Most of my older family members in their 60's and 70's still have a mortgage and are still working.

I find this comment so very ignorant.    Do you realize that you're speaking of the baby boomers who at this point in time account for 65 million people across every strata of society.   And you're saying, that from a frugality/savings perspective, that they are opposite to the Greatest generation.     Generalizing your statement to account for 65 million people.    They who range in age from 53 to 71 years old.   And that none of them? None of them,  have any success at being effective savers/investers or some measure of fiscally responsible people by what I guess are your standards.     

I assure you that they run the gamut as does the Greatest Generation, the Millennials, and any other demographic group you might name.

As a group, that statement is completely correct. Boomers suck at saving. Some of them are great savers, but as a group they suck. End of story.

Why do you care to put unnecessary caveats around everything? I don't get offended when people call my generation obsessed with smartphones. We objectively are, even though I'm not.

[ChrisLansing]

I am personally surprised at the number of older folks out there with no money smarts.  My grandparents generation (born and raised during and just post the Great Depression) we're very frugal, mortgage paid off early, retirement savings, they operated on a cash basis if they didn't have the money, they didn't buy it.

My parents generation however is quiet the opposite - I guess they were the 1960's-70's Hippie generation.  They ended up with decent jobs but no savings.  Most of my older family members in their 60's and 70's still have a mortgage and are still working.

I find this comment so very ignorant.    Do you realize that you're speaking of the baby boomers who at this point in time account for 65 million people across every strata of society.   And you're saying, that from a frugality/savings perspective, that they are opposite to the Greatest generation.     Generalizing your statement to account for 65 million people.    They who range in age from 53 to 71 years old.   And that none of them? None of them,  have any success at being effective savers/investers or some measure of fiscally responsible people by what I guess are your standards.     

I assure you that they run the gamut as does the Greatest Generation, the Millennials, and any other demographic group you might name.

As a group, that statement is completely correct. Boomers suck at saving. Some of them are great savers, but as a group they suck. End of story.

Why do you care to put unnecessary caveats around everything? I don't get offended when people call my generation obsessed with smartphones. We objectively are, even though I'm not.

I'm not concerned with sweeping generalizations, but in my family it worked out differently than the "norm".   Me and most of my boomer siblings are pretty careful with our money, and have made investments.    We didn't get this from our parents.   My mother is 86 and has a home equity loan.   It doesn't seem to bother her, as she can service the loan with her income (ssi/pension - a very nice pension)   She made more money than I do yet she has a car payment, the aforementioned loan, a bit of CC debt.    Assigning a certain % of her income to debt servicing just seems to be a way of life for her.    I'm glad she didn't teach me anything about money.   

[Alim Nassor]

Some will be 'saved' by their parents or parents' estate.
Some will complain forever about how unfair the world is.
Some will make do when they have to.

Granted, there is a bit of "unfairness" in the situation you described, where only the people with the right parents get "saved".

(Of course it's an unfair world and we all have the unfair advantage of living in the rich world)

For those reasons, if given the choice I would tax the hell out of estates and inheritance, you could lower the taxes on earned income in return if you want. I have no problem reducing unearned and generational inequality through the tax system, and prefer it to taxing earned income when possible.

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

[CanuckExpat]

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

I won't derail the thread too much, and it's totally opinion, but I look at it this way
Person A works, creates value, and earns $100 of wages
Person B, sacrifies or not, and inherits $100 of wages

Right now we tax person A much heavier than person B. I would rather the tax system encouraged work :)
You can say that taxing assumes someone else deserves fruits of parents labor. But that is what happens with income tax. I said given the choice, I'd tax income lower and inheritance higher.

[sequoia]

If statistics and anecdata are to be believed, the majority of Americans today don't save anything for retirement, spend way beyond their means, etc. There are lots of causes here but I will speak mainly to my concern for people coming from a middle or upper middle class background who have good educations but do not have many practical experience living independently, earning money, saving, and investing.

Among my own friends, many are following this trend. They don't invest or understand money. They distrust banks and talk about "the market" like it's all Wall Street manipulations. They have spent a lot of time in school, living like college students, mostly living off support of parents or credit cards. They seem to expect that politicians will come to their rescue to help with their student loans. Some are chasing after impossible unicorn jobs in academia and are continuing to sign up for more and more education assuming it will pay off eventually. Some still live with family members and don't seem motivated to be independent. As we have grown up and begun entering our 30s the differences between the people who went to work in real jobs and started saving vs. those who did not are increasingly obvious. It's actually gotten kind of uncomfortable because I get guilted for having money to travel.. money which I worked and saved for!

Now here is my question. I keep trying to envision what will happen to these people in the future, when their health begins to fail, or they cannot work anymore, or the support they get from family comes to an end. Not only are they dependent on the money, but they also lack practical skills. I am talking about people who are smart and educated but have little actual work experience and very large amount of student debt.

I imagine that a large portion of whatever they earn in the future will automatically be deducted for the loans. Whatever remains, they will not know to save for retirement, since saving money period is a foreign concept to them.

Where will they live? Section 8 housing? What kind of social safety net is there for people who are not yet at the official retirement age, nor are they impoverished or disabled or unable to work, but still do not have the means to support themselves?

Lots of places in the world do not have benefit such as social security, which I think forces people to save for when they are old. If you do not have savings, then you end up working until you die. Not trying to sound harsh, but that is the reality.

I think ss kinda spoils people, and I know people who just have no savings, no intention of saving any money and hope that ss will be enough to take care of them.

[Paul der Krake]

Some will be 'saved' by their parents or parents' estate.
Some will complain forever about how unfair the world is.
Some will make do when they have to.

Granted, there is a bit of "unfairness" in the situation you described, where only the people with the right parents get "saved".

(Of course it's an unfair world and we all have the unfair advantage of living in the rich world)

For those reasons, if given the choice I would tax the hell out of estates and inheritance, you could lower the taxes on earned income in return if you want. I have no problem reducing unearned and generational inequality through the tax system, and prefer it to taxing earned income when possible.

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

There is no "deserving" in a modern society. There are rules that are only loosely related to what the majority thinks is good policy. This is why we give attorneys to unrepentant serial murderers.

Your parents may have been hard working saints who sacrificed their lives for you, or they may have been complete scum who never did an honest day's work in their lives and got away with it, or anywhere in between. It doesn't matter. We'll treat them their estate the same way.

[Alim Nassor]

[

Your parents may have been hard working saints who sacrificed their lives for you, or they may have been complete scum who never did an honest day's work in their lives and got away with it, or anywhere in between. It doesn't matter. We'll treat them their estate the same way.

Thankfully, a majority of the people seem to disagree with that kind of arrogant, condescending thinking.

[Racer X]

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

I won't derail the thread too much, and it's totally opinion, but I look at it this way
Person A works, creates value, and earns $100 of wages
Person B, sacrifies or not, and inherits $100 of wages

Right now we tax person A much heavier than person B. I would rather the tax system encouraged work :)
You can say that taxing assumes someone else deserves fruits of parents labor. But that is what happens with income tax. I said given the choice, I'd tax income lower and inheritance higher.

I understand your point - the recipients of said inherited wealth likely have done little to "earn" that wealth, hence they make a convenient target for taxation. 

However... what if we look at it from the point of view of the newly deceased?   I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.  And instead of being able to dictate what happens to that net worth upon my demise, you want the government to take it?  I can't agree with that.  It's my money.  I earned it.  I want to be able to distribute it to family, friends, and charities of my choosing - not the government's.  And if we ever get to a point where I can't do that, I invite everyone on this forum to come visit me in the old folks' home, because we will be throwing ballin' parties.  I will spend every last dime on wasteful excess before I allow the government to do the same.

[scantee]

I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.

Except for the roads the government built and maintained to help you get to your job.

And the education they provided your kids to help your family thrive.

And the police force the gave you to give you stability so you could focus on working rather than fearing for your safety.

And the vaccine research they funded so you could be healthy (and alive) enough to work.

And on and on.

Estate tax is a tax like any other. We tax all other forms of income and gains and property and sales, the estate tax is and should be no different. The only real question when it comes to taxes is "at what level?" and considering that only .2% of household pay any estate taxes, that seems pretty damn low to me.

[Racer X]

I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.

Except for the roads the government built and maintained to help you get to your job.

And the education they provided your kids to help your family thrive.

And the police force the gave you to give you stability so you could focus on working rather than fearing for your safety.

And the vaccine research they funded so you could be healthy (and alive) enough to work.

And on and on.

Estate tax is a tax like any other. We tax all other forms of income and gains and property and sales, the estate tax is and should be no different. The only real question when it comes to taxes is "at what level?" and considering that only .2% of household pay any estate taxes, that seems pretty damn low to me.

Ah yes, the old "You didn't build that" argument.  Nope, not buying in to that, either.  I've paid enough in taxes in my life time to cover the roads and sewers that I've used.  You don't need my net worth on top of that.

[scantee]

Ah yes, the old "You didn't build that" argument.  Nope, not buying in to that, either.  I've paid enough in taxes in my life time to cover the roads and sewers that I've used.  You don't need my net worth on top of that.

You're not buying it because you have a legitimate argument against it, or because you personally just happen to not like it? Because, I gotta say, whines against tax policy that basically boil down to "but i, Racer X, just don't liiiiiiiike it" aren't super persuasive.

[Racer X]

Ah yes, the old "You didn't build that" argument.  Nope, not buying in to that, either.  I've paid enough in taxes in my life time to cover the roads and sewers that I've used.  You don't need my net worth on top of that.

You're not buying it because you have a legitimate argument against it, or because you personally just happen to not like it? Because, I gotta say, whines against tax policy that basically boil down to "but i, Racer X, just don't liiiiiiiike it" aren't super persuasive.

No no no.  You're the one that wants to change the law.  You need to make the persuasive argument.  I'm not on defense here.  You need to convince me that rather than being able to dictate where MY money goes upon my death, that the government should have it.  I'll hang up and listen.

[scantee]

Have I proposed a change to the law? Looking back at my comments it appears I've done no such thing. Right now, in the US, there is an estate tax, but it includes an exemption for $5.45MM for individuals and $11MM for married couples Only a very small percentage of people pay that tax (.2%). You have said to you're opposed to all estate taxes, on principle, which would entail a change to that tax policy.

Maybe a better question is, why do you want a change to tax policy that seems to be working as intended and that affects so few people?

[Paul der Krake]

[

Your parents may have been hard working saints who sacrificed their lives for you, or they may have been complete scum who never did an honest day's work in their lives and got away with it, or anywhere in between. It doesn't matter. We'll treat them their estate the same way.

Thankfully, a majority of the people seem to disagree with that kind of arrogant, condescending thinking.

Condescending? No, that's just good policy. There's currently a 10m exemption on estates. Even wrongful death settlements don't usually go as high.

If you truly think your sacrifice for being born to successful parents is worth more than 10 million dollars + 60% of the remainder of the estate, you're the one with an arrogance problem.

[Alim Nassor]

I guess I should stop being surprised at the number of people who think they have a claim on other peoples wealth.  SMH

[Alim Nassor]

I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.

Except for the roads the government built and maintained to help you get to your job.

And the education they provided your kids to help your family thrive.

And the police force the gave you to give you stability so you could focus on working rather than fearing for your safety.

And the vaccine research they funded so you could be healthy (and alive) enough to work.

And on and on.

Estate tax is a tax like any other. We tax all other forms of income and gains and property and sales, the estate tax is and should be no different. The only real question when it comes to taxes is "at what level?" and considering that only .2% of household pay any estate taxes, that seems pretty damn low to me.

Everyone else had the same access to all that you listed above, and because some people were more successful, you think you have a claim to that?  The dollars  they earned while amassing that wealth were taxed, sometimes multiple times.   Hands off.

[RetiredAt63]

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

I won't derail the thread too much, and it's totally opinion, but I look at it this way
Person A works, creates value, and earns $100 of wages
Person B, sacrifies or not, and inherits $100 of wages

Right now we tax person A much heavier than person B. I would rather the tax system encouraged work :)
You can say that taxing assumes someone else deserves fruits of parents labor. But that is what happens with income tax. I said given the choice, I'd tax income lower and inheritance higher.

But once you retire all your income is some category of Person B.  You have no work income, it is all investments and pensions.  Just not inherited.  So how do you differentiate if you are writing tax policy?

[sequoia]

I guess I should stop being surprised at the number of people who think they have a claim on other peoples wealth.  SMH

This ^

[CanuckExpat]

But once you retire all your income is some category of Person B.  You have no work income, it is all investments and pensions.  Just not inherited.  So how do you differentiate if you are writing tax policy?

It's already differentiated, and investment income is in some sense treated much worse from a tax point of view than receiving an inheritance, and I find this a bit counter productive. Many of the objections above were about the "double taxation" if you were to "touch my inheritance/estate", but investment income can be argued to be triple taxed, and people seem fine with that (at least compared to the emotions surrounding inheritance/estate)

Looking at investment income:
You earn income, pay taxes once on income tax, and invest with the proceeds
The companies you own earn profits, and pay corporate taxes, and then pay you dividends with after tax profits (or it is rolled into a capital gain)
You earn dividends, and then you are taxed on the dividends (or capital gains eventually).

In a sense, that's triple taxes of that income source. Compared to no taxation of receiving an inheritance.
The part that is strange is each of the activities in the investment income should be productive: earning income, generating profits, etc. But we choose to tax that, and not the relatively unprodutive activity, that was my point. But it appears there are strong emotions feelings (and general anti tax sentiment).

My point isn't that we should have more taxes for the sake of having more taxes, but that if society has decided it needs to raise X dollars, I am more than fine with some of that of X dollars coming from "unearned" inheritences, whereas right now we take a lot of those X dollars from very productive activities instead.

This was originally in relation to some of these people being bailed out by their parents, and my point being if given the choice, I'd rather tax those people being bailed out, then those people working to bail them selves out. Right now we do the opposite.

I derailed the thread, mea culpa, I will probably leave this side point now. 

[PDXTabs]

CanuckExpat,

I agree with half of your post. I want lower income tax rates and higher estate tax rates. So do Warren Buffet and Bill Gates. Wouldn't you rather have the money when you are alive?

However, how is capital gains triple taxation? Let's say that a mining company mines an oz of gold, and on the day that they mined it, it was worth $10. To the best of my knowledge they are taxed at the fair market value of the gold the day that they mined it. Then, sometime later I purchase it for $100 dollars. Then, sometime later I sell it to you for $1000.

There were 3 taxable events here:
1. Mining $10 of gold, taxed as ordinary income.
2. Selling gold for $90 capital gain.
3. Selling gold for $900 capital gain.

Ignoring the fact that only the mining company created any value, every dollar of the gold's value was taxed exactly once.

[paddedhat]

I think it's important to remember that saving a lot of money doesn't make someone a good person. There is no shortage of people who are great with money or frugal or high earners who are also mean and petty and selfish. But there's this tendency in FI crowds to get self righteous and believe that because we're good with money, that means we're better people. But really, no, that's just not true. Certainly it's possible to be both smart with money and a good person, but the former is not a precondition of the latter.

So most people don't have a ton of money but they make it work and mostly they find happiness in other parts of their lives. Across the entire population, I think it would be good if people were thriftier,  less consumerist, better savers, but tsk-tsking individuals who are bad with money doesn't do a ton of good.

Very much this.

I also come across many genuinely good and contented - and generous - people who have never had much and have let everything they've earned slip straight through their fingers, and who consider themselves wealthy on the state retirement pension and are grateful for the other little bonuses to which their age entitles them and for pleasures that really do cost nothing.

I first learned this lesson in the 1990s. I was volunteering on a native reservation in South Dakota. I became friends with an awesome couple who were there as missionaries for a housing ministry. They were in their 50s, and took a one year assignment that included the use of an old mobile home (no utilities included) a beat up old pickup truck, and a $750/monthly stipend. They had a wonderfully productive year, and headed down the road with an extra $3000 in their savings, because they didn't need all that cash to live a comfortable life. In the last two decades, they have continually proven that you can live a very meaningful life on very little, and still serve those that are less fortunate than they are.

[mm1970]

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

I won't derail the thread too much, and it's totally opinion, but I look at it this way
Person A works, creates value, and earns $100 of wages
Person B, sacrifies or not, and inherits $100 of wages

Right now we tax person A much heavier than person B. I would rather the tax system encouraged work :)
You can say that taxing assumes someone else deserves fruits of parents labor. But that is what happens with income tax. I said given the choice, I'd tax income lower and inheritance higher.

I understand your point - the recipients of said inherited wealth likely have done little to "earn" that wealth, hence they make a convenient target for taxation. 

However... what if we look at it from the point of view of the newly deceased?   I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.  And instead of being able to dictate what happens to that net worth upon my demise, you want the government to take it?  I can't agree with that.  It's my money.  I earned it.  I want to be able to distribute it to family, friends, and charities of my choosing - not the government's.  And if we ever get to a point where I can't do that, I invite everyone on this forum to come visit me in the old folks' home, because we will be throwing ballin' parties.  I will spend every last dime on wasteful excess before I allow the government to do the same.

But your heirs did not earn it.

We tax money when it changes hands.

Why did you amass wealth?

Why didn't you hire a gardener, a cook, a nanny, a cleaning person?  If you did, you could have employed people, given them an income, and given more income taxes to the government.

Which is better for society in general?

In any event, I return to my statement "we tax money when it changes hands".  Your heirs did not earn that money.

[Alim Nassor]

You're assuming that someone else deserves the fruits of my parents labor besides me.  When parents sacrifice to build wealth, the children also sacrifice.  No one else has any claim to that wealth.

I won't derail the thread too much, and it's totally opinion, but I look at it this way
Person A works, creates value, and earns $100 of wages
Person B, sacrifies or not, and inherits $100 of wages

Right now we tax person A much heavier than person B. I would rather the tax system encouraged work :)
You can say that taxing assumes someone else deserves fruits of parents labor. But that is what happens with income tax. I said given the choice, I'd tax income lower and inheritance higher.

I understand your point - the recipients of said inherited wealth likely have done little to "earn" that wealth, hence they make a convenient target for taxation. 

However... what if we look at it from the point of view of the newly deceased?   I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.  And instead of being able to dictate what happens to that net worth upon my demise, you want the government to take it?  I can't agree with that.  It's my money.  I earned it.  I want to be able to distribute it to family, friends, and charities of my choosing - not the government's.  And if we ever get to a point where I can't do that, I invite everyone on this forum to come visit me in the old folks' home, because we will be throwing ballin' parties.  I will spend every last dime on wasteful excess before I allow the government to do the same.

But your heirs did not earn it.

We tax money when it changes hands.

Why did you amass wealth?

Why didn't you hire a gardener, a cook, a nanny, a cleaning person?  If you did, you could have employed people, given them an income, and given more income taxes to the government.

Which is better for society in general?

In any event, I return to my statement "we tax money when it changes hands".  Your heirs did not earn that money.

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.   

[Paul der Krake]

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.

Opinions are to be defended if you want people to take you seriously. So far, you have offered "heirs sacrificed too" and "it shouldn't be the government's business" (paraphrasing for brevity). That sounds a lot like an intro to the internet libertarian stump speech of taxation being theft.

Do you have other arguments?

I mean, there is room for debate here. We could talk about whether humans have an inalienable right to personal property, its limits, including whether they exist after death. That's an interesting ethical discussion.

[PDXTabs]

However... what if we look at it from the point of view of the newly deceased?   I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.  And instead of being able to dictate what happens to that net worth upon my demise, you want the government to take it?  I can't agree with that.  It's my money.  I earned it.  I want to be able to distribute it to family, friends, and charities of my choosing - not the government's.  And if we ever get to a point where I can't do that, I invite everyone on this forum to come visit me in the old folks' home, because we will be throwing ballin' parties.  I will spend every last dime on wasteful excess before I allow the government to do the same.

I realize that this is a conceptually difficult topic for you, but that's exactly what happens when you earn your money the first time. The government takes some of "your" money, that's part of the social contract and has been around far longer than democracy.

But to put it a little more succinctly, we have a massive accumulation of wealth by a very small number of people on this planet. That's how you end up living in an oligarchy. I don't want to live in an oligarchy, and neither do many others. We can take the wealth with taxes when they are alive, we can take it with taxes when they die, or we can take it with pitchforks. Which would you prefer? Historically, BTW, it has been with pitchforks.

[nara]

Thank god for social security and Medicare!!! I do believe that if the government didn't forcibly take money from people's paychecks during their working years, they would literally starve.

[Out of the Blue]

However... what if we look at it from the point of view of the newly deceased?   I will have worked hard, saved, invested, and sacrificed to be a responsible citizen who required no assistance and built a sizable net worth.  And instead of being able to dictate what happens to that net worth upon my demise, you want the government to take it?  I can't agree with that.  It's my money.  I earned it.  I want to be able to distribute it to family, friends, and charities of my choosing - not the government's.  And if we ever get to a point where I can't do that, I invite everyone on this forum to come visit me in the old folks' home, because we will be throwing ballin' parties.  I will spend every last dime on wasteful excess before I allow the government to do the same.

But the newly deceased does get to dictate what happens to their net worth upon their demise - it's just that the recipients may get taxed on some of it.  Your argument doesn't seem to be all that different to me than saying "I worked hard, saved, invested and sacrificed to be a responsible citizen who built a sizeable net worth.  Instead of being able to give my money to people in exchange for goods/services (without those people having to pay tax), you want the government to take it?"  That's clearly ludicrous.   

Besides, I suspect any inheritance tax would provide an exemption for charities and usually some level of tax-free threshold.  So if you choose to distribute your net worth exclusively to charities, or to a wide number of people so that they're all below the tax-free threshold, there'll be no tax at all.  Yet if your net worth is worth millions and you decide to give it all to one person only - well, you still can, but I don't see any good reason why it shouldn't be taxed in that person's hands just like income is.

[Alim Nassor]

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.

Opinions are to be defended if you want people to take you seriously. So far, you have offered "heirs sacrificed too" and "it shouldn't be the government's business" (paraphrasing for brevity). That sounds a lot like an intro to the internet libertarian stump speech of taxation being theft.

Do you have other arguments?

I mean, there is room for debate here. We could talk about whether humans have an inalienable right to personal property, its limits, including whether they exist after death. That's an interesting ethical discussion.

Amazing how this forum, which is about accumulating wealth, can be populated by people with this type of mindset.  It is you who cannot be taken seriously.

[mm1970]

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.

Opinions are to be defended if you want people to take you seriously. So far, you have offered "heirs sacrificed too" and "it shouldn't be the government's business" (paraphrasing for brevity). That sounds a lot like an intro to the internet libertarian stump speech of taxation being theft.

Do you have other arguments?

I mean, there is room for debate here. We could talk about whether humans have an inalienable right to personal property, its limits, including whether they exist after death. That's an interesting ethical discussion.

Amazing how this forum, which is about accumulating wealth, can be populated by people with this type of mindset.  It is you who cannot be taken seriously.

Accumulating wealth legally, and for the most part, ethically (though I'm sure there is variation on that).

We don't discuss accumulating wealth, necessarily, to the detriment of others.  "I've got mine, so fuck you!"  We don't support slavery as a way of building wealth either.  I mean, honestly.

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.   

I don't actually care if you hired domestic servants or not.  I was pointing out that there are a variety of ways of spending your own money, and in *nearly every* case - the government will tax it when it changes hands.  Because that's what they do. 

There's a whole discussion that we could have about whether it's better to spend money on things, or hiring people or experiences or ... whatever (and just google "cleaning person" and you'll find a bunch of them!)  But it doesn't really matter.

The government taxes people when money changes hands.
Company A sells metal to company B?  Sales tax
Company B sells car parts to company C?  Tax
Company C sells a car?  Sales tax
Company C pays their employees?  Income tax.
Employees go buy plane tickets? Tax
Employees rent a hotel for vacation?  Bed tax.
Employees get dinner out? Tax
Employees decides pay for a domestic cleaning service?  Cleaning service pays their employees, who pay income tax.
Employee saves up money to send her kid to college?  Employee pays college tuition.  College uses it to pay their employees.  They pay taxes.
Employee dies with a lot of money in the bank and gives it to their kids?  Kids pay taxes.

We are taxed when money changes hands.

[Alim Nassor]

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.

Opinions are to be defended if you want people to take you seriously. So far, you have offered "heirs sacrificed too" and "it shouldn't be the government's business" (paraphrasing for brevity). That sounds a lot like an intro to the internet libertarian stump speech of taxation being theft.

Do you have other arguments?

I mean, there is room for debate here. We could talk about whether humans have an inalienable right to personal property, its limits, including whether they exist after death. That's an interesting ethical discussion.

Amazing how this forum, which is about accumulating wealth, can be populated by people with this type of mindset.  It is you who cannot be taken seriously.

Accumulating wealth legally, and for the most part, ethically (though I'm sure there is variation on that).

We don't discuss accumulating wealth, necessarily, to the detriment of others.  "I've got mine, so fuck you!"  We don't support slavery as a way of building wealth either.  I mean, honestly.

What business is it of yours or anyone if I did or did not hire domestic help?  What's better for society in general is a matter of opinion.   I will just never understand the mindset that thinks the government or other people are more entitled to an estate than the heirs.   

I don't actually care if you hired domestic servants or not.  I was pointing out that there are a variety of ways of spending your own money, and in *nearly every* case - the government will tax it when it changes hands.  Because that's what they do. 

There's a whole discussion that we could have about whether it's better to spend money on things, or hiring people or experiences or ... whatever (and just google "cleaning person" and you'll find a bunch of them!)  But it doesn't really matter.

The government taxes people when money changes hands.
Company A sells metal to company B?  Sales tax
Company B sells car parts to company C?  Tax
Company C sells a car?  Sales tax
Company C pays their employees?  Income tax.
Employees go buy plane tickets? Tax
Employees rent a hotel for vacation?  Bed tax.
Employees get dinner out? Tax
Employees decides pay for a domestic cleaning service?  Cleaning service pays their employees, who pay income tax.
Employee saves up money to send her kid to college?  Employee pays college tuition.  College uses it to pay their employees.  They pay taxes.
Employee dies with a lot of money in the bank and gives it to their kids?  Kids pay taxes.

We are taxed when money changes hands.

And that is fine.  But what frosts me is people thinking the inheritance tax should be some hugely punitive percentage above whatever amount they think is FAAAIIIRRRR.    I'll never agree that anyone ever owes the government 80-90 percent of ANYTHING.  Fuck that. 

[Paul der Krake]

I don't think anybody is seriously advocating for an 80% inheritance tax, not even Bernie Sanders. If memory serves right, he wanted a top federal rate of 65% and a 4m exemption.

Again, as things currently stand the top rate is 40%, after a 10m exemption. I'm not sure what a good number is, but you could either raise the top rate, or lower the exemption, and not even come close to an effective 80% tax.

If it makes any difference, I am saying this as someone who is very likely to pay inheritance taxes at some point.

[Alim Nassor]

I don't think anybody is seriously advocating for an 80% inheritance tax, not even Bernie Sanders. If memory serves right, he wanted a top federal rate of 65% and a 4m exemption.

Again, as things currently stand the top rate is 40%, after a 10m exemption. I'm not sure what a good number is, but you could either raise the top rate, or lower the exemption, and not even come close to an effective 80% tax.

If it makes any difference, I am saying this as someone who is very likely to pay inheritance taxes at some point.

I've seen people in another thread calling for it.  Sorry, I guess I thought I'd seen it here, when I made that comment.  It's certainly not farfetched given the history of confiscatory tax rates in the not too distant past.  It goes way against my grain to ever allow a government more than 40 percent or so of ANYTHING, and even that is too damn high.  But if a government can't run it's functions on 40% tax rates, that government needs serious reigning in.

[paddedhat]

I don't think anybody is seriously advocating for an 80% inheritance tax, not even Bernie Sanders. If memory serves right, he wanted a top federal rate of 65% and a 4m exemption.

Again, as things currently stand the top rate is 40%, after a 10m exemption. I'm not sure what a good number is, but you could either raise the top rate, or lower the exemption, and not even come close to an effective 80% tax.

If it makes any difference, I am saying this as someone who is very likely to pay inheritance taxes at some point.

I've had friends that are worth from 5-10 million to probably close to a hundred. I have heard repeatedly from them that paying any significant inheritance taxes is nothing but a failure of planning while you still have the time.  Given that these folks are in the demographic that actually would get hit with federal inheritance taxes, and have actively shielded their estates from it, I wonder how real any of it is?  I know that the low information, lower income folks on the right can really be driven to a lather by federal inheritance taxes, since their propagandists like to tell them that the left is dying to take their hard earned inheritances away, yet always fail to mention that there are exemptions that far exceed anything that the 99% even leave behind.  So how prevalent is it, that the 1% end up taking a multi-million dollar hit, after death, since they couldn't shield their wealth?

[AZDude]

If statistics and anecdata are to be believed, the majority of Americans today don't save anything for retirement, spend way beyond their means, etc. There are lots of causes here but I will speak mainly to my concern for people coming from a middle or upper middle class background who have good educations but do not have many practical experience living independently, earning money, saving, and investing.

Among my own friends, many are following this trend. They don't invest or understand money. They distrust banks and talk about "the market" like it's all Wall Street manipulations. They have spent a lot of time in school, living like college students, mostly living off support of parents or credit cards. They seem to expect that politicians will come to their rescue to help with their student loans. Some are chasing after impossible unicorn jobs in academia and are continuing to sign up for more and more education assuming it will pay off eventually. Some still live with family members and don't seem motivated to be independent. As we have grown up and begun entering our 30s the differences between the people who went to work in real jobs and started saving vs. those who did not are increasingly obvious. It's actually gotten kind of uncomfortable because I get guilted for having money to travel.. money which I worked and saved for!

Now here is my question. I keep trying to envision what will happen to these people in the future, when their health begins to fail, or they cannot work anymore, or the support they get from family comes to an end. Not only are they dependent on the money, but they also lack practical skills. I am talking about people who are smart and educated but have little actual work experience and very large amount of student debt.

I imagine that a large portion of whatever they earn in the future will automatically be deducted for the loans. Whatever remains, they will not know to save for retirement, since saving money period is a foreign concept to them.

Where will they live? Section 8 housing? What kind of social safety net is there for people who are not yet at the official retirement age, nor are they impoverished or disabled or unable to work, but still do not have the means to support themselves?

They steal... err... I mean borrow from their children, relatives, etc... They buy cheap mobile homes and live in squalor. They abuse the disability system to collect a paycheck. They become the stereotypical Walmart greeter. Etc, etc, etc...

[Paul der Krake]

I don't think anybody is seriously advocating for an 80% inheritance tax, not even Bernie Sanders. If memory serves right, he wanted a top federal rate of 65% and a 4m exemption.

Again, as things currently stand the top rate is 40%, after a 10m exemption. I'm not sure what a good number is, but you could either raise the top rate, or lower the exemption, and not even come close to an effective 80% tax.

If it makes any difference, I am saying this as someone who is very likely to pay inheritance taxes at some point.

I've had friends that are worth from 5-10 million to probably close to a hundred. I have heard repeatedly from them that paying any significant inheritance taxes is nothing but a failure of planning while you still have the time.  Given that these folks are in the demographic that actually would get hit with federal inheritance taxes, and have actively shielded their estates from it, I wonder how real any of it is?  I know that the low information, lower income folks on the right can really be driven to a lather by federal inheritance taxes, since their propagandists like to tell them that the left is dying to take their hard earned inheritances away, yet always fail to mention that there are exemptions that far exceed anything that the 99% even leave behind.  So how prevalent is it, that the 1% end up taking a multi-million dollar hit, after death, since they couldn't shield their wealth?

Estate planning is very real, but not a complete free lunch. You typically need to surrender some control of the assets when placing them in a trust. Some assets lend themselves a lot better than others to this. Then there are legal costs, but to be fair, that's pretty much background noise at this level of wealth.

This is a great book on the matter if you're interested:
https://www.amazon.com/Complete-Book-Trusts-3rd/dp/0471214582

But yeah, the vast majority of people who rail against death taxes will never be in a position where it applies to them. Wealthy people to whom they apply usually have enough common sense to not advertise that this is a concern to them. Politicians use phrases that sound scary to folks who are deadly afraid that the government will take their life savings away. Uncle Sam is not interested in their mid 6 figures nest egg.

[paddedhat]

But yeah, the vast majority of people who rail against death taxes will never be in a position where it applies to them. Wealthy people to whom they apply usually have enough common sense to not advertise that this is a concern to them. Politicians use phrases that sound scary to folks who are deadly afraid that the government will take their life savings away. Uncle Sam is not interested in their mid 6 figures nest egg.

Great post. My only quibble is that, anybody I know who finds a need to rant against the "death tax" is typically totally unaware that they haven't got a snowball's chance in hell of triggering such an event, is living check to check, in debt,  and is five figures short of your "six figure nest egg" It's kind of amusing to hear the wife tell me about death tax rants on FB or emails, and  my response of, "Are you shitting me? Uncle Don can't afford delivered pizza, and Obama is trying to steal his imaginary pile of money he intended to leave the kids"  Some days the stupid makes my head hurt.

[CanuckExpat]

CanuckExpat,

I agree with half of your post. I want lower income tax rates and higher estate tax rates. So do Warren Buffet and Bill Gates. Wouldn't you rather have the money when you are alive?

However, how is capital gains triple taxation? Let's say that a mining company mines an oz of gold, and on the day that they mined it, it was worth $10. To the best of my knowledge they are taxed at the fair market value of the gold the day that they mined it. Then, sometime later I purchase it for $100 dollars. Then, sometime later I sell it to you for $1000.

There were 3 taxable events here:
1. Mining $10 of gold, taxed as ordinary income.
2. Selling gold for $90 capital gain.
3. Selling gold for $900 capital gain.

Ignoring the fact that only the mining company created any value, every dollar of the gold's value was taxed exactly once.

I was thinking more along the lines of capital gains on ownership of (non pass-through) corporations
To give a manufactured example:
You earn income, taxed once, and then buy 10% of XYZ corp for $100 with your after tax money (it's valued at $1,000)
XYZ corp generates profits of $150, and is left with $100 after paying corporate taxes.
XYZ uses the after tax money to increase their cash reserves. Nothing else has changed, the market is super efficient and noise free, it values the company at $1,100 (exact same company as before, with $100 more in cash reserves).
Your stake is now worth $110, and if you sell you will pay capital gains tax on the $10 gain, which is based on the increased cash reserves due to after tax profits.

Capital gains is not as clear cut, but the idea should be the same as dividends (ignoring speculation, etc)...

[Sofa King]

Those who had lower incomes all along will mostly be okay, because (for most) social security will replace a high enough % of what they're used to bringing in that they will make due.

I concur. It's strange how it works out this way alot.  I know people who all their lives that made less each year (much less in many cases) who now in their retirement are happier and better off than the people who were higher earners before they retired. The people who made more had a lifestyle to match the pay check and now the pay check is gone and the people who made less are just as happy with their lives as they were before they retired.