Then you think about, what happens when parents die in a car wreck to the kids? So maybe what you implement is some type of National Life Insurance federal program, geared towards minors or maybe more broadly across the population. Tweaks to Social Security survivor benefits, essentially.
There are also weird questions like, what happens to a company that's singularly owned by the newly deceased? It's sold to the highest bidder, even if it's company run by the whole family?
I don't actually favor this policy for the obvious reasons people will list. But I think it's an interesting question that gets to what it means to have something closer to equality of opportunity.
Assuming the parents had sufficient foresight, there would be a blind trust established for the children which will provide for them.
Or maybe not a blind trust. Maybe some other instrument or institution. Whatever it is, you can be assured it would be common to the point of being established using a standard form in the local library, much like how simple wills can be created today.
Moving money offshore is how companies avoid income tax. The way families avoid inheritance tax is employment.
Your family has a business. It's worth a hundred million dollars and makes five million dollars a year in profit. The five million dollars is going to be taxable income to somebody anyway, so you pay it to your kids as salary (a tax deduction for the parents/business), and most of the compensation is paid in the form of shares in the business. By the time the parents die the kids already own most or all of the business and what's left is below the threshold for inheritance tax.
There's a reason they say the only people who pay it are the ones who didn't plan ahead.
If everything above 10 million is taken as a death tax you can be sure no estates are going to be worth over 10 million publicly.
Creatively reducing the values of estate wealth to the taxable cap would increase access to like conditions for people who normally have access to that much wealth and not much more which greatly lowers wealth distribution in the top 1% which is still a good thing.
If those are unacceptable and they have no wealth, because it’s locked up overseas, they could bring it all back for taxation minus 10 million.
In all smaller companies I know, at the end of the year, they try to spend as much of their profit as possible in a way that enabled growth the next year. They keep the profit low because it is being taxed.
For the state, both is fine - more profit leads to more tax, more growth also leads to more tax AND more employment, and better products due to research and so on.
Tax evasion and off shoring breaks this and the negative effect is far greater than the actual loss in tax. It breaks the system that incentives companies to invest in their futures rather than their shareholder's cashing out.
Isn't that a recipe for hyperinflation?
Of all the money being transferred per year, little of it is transferred via inheritance. And and even smaller amount of the total money transferred via inheritance is above $10 million range. So maybe you'd see a 0.1% or 0.01% tick up in inflation.
Setting inheritance rats at 100% above 21 million is a silly idea, but not because of a risk of hyper inflation.
> Isn't that a recipe for hyperinflation?
But of prices on... what? Yaacts? It's not like people are going to start buying 1000x more bread loaves and corollas.
On the contrary, it'd probably deflate prices of housing in major "investment" markets, as families off-load second/third/fourth houses.
And for the luxury goods, it might even drive down prices of certain goods. More demand => economies of scale => more efficient production => lower prices => suddenly affordable to a larger market => more demand => ...
But the original premise is kinda depressing. There is an alternative to blowing all your money on hedonism. You can substantially ramp up your donations, for example. I think you'd see an explosion of small churches/local colleges/community centers/etc. with $100M+ endowments.
And then what will the yacht company do with all of the money?
> it might even drive down prices of certain goods. More demand => economies of scale => lower prices => more demand => ...
That's not consistent with economic theory. Economies of scale don't work "forever". At some point, the per-unit price will start to rise with quantity again.
Employ people. Reinvest. Raise wages. Expand to new markets. Throw better Christmas parties. Buy the CEO another yacht. You know, run their business.
> That's not consistent with economic theory. Economies of scale don't work "forever". At some point, the per-unit price will start to rise with quantity again.
You mean we won't get $10 yacht?! ;-)
Anyways, that part of my original pose was supposed to be tounge-in-cheek. The point is, I don't think bidding up the prices of real estate in a few super-upper-class retirement snowbird communities is the end of the world. Yes, inflation will happen. But only in certain asset classes that I don't care much about.
That is a loophole which is extremely hard to close.
There would also be economic consequences for those not wanting to evade tax laws because there is now a compelling reason to perform the impossible: spend all that damn money before the tax man gets it. That is one hell of an economic stimulus, but also means large injections of cash into charities and scientific research, and commercial investment.
To me all these options seem like a net positive.