Except there’s a 40% estate tax still levied at each generation. Plus unlike European aristocracy, American plutocrats rarely intermarry. Even if you’re only reproducing at replacement, your wealth gets diluted by 50% each generation. Stack the two and you’re getting slashed by 80% every generation.

Don’t take my word for it. How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.

There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance.

This was used recently by an MP.

That being said I agree with your thoughts, however:

> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.

This is probably true but I'd like to ask the question: how many of them simply inherit a lot of money without any of the fame associated with it, and just go unnoticed? I've met such a person, actually.

EDIT: https://www.bbc.com/news/business-36009963 - this is what I was thinking about.

> There are ways around this in the UK system, however. It's probably the same case in the US. The short of it is you transfer the wealth well before (15-20 years) the death occurs, thus there is no inheritance.

So, you pay gift taxes instead.

Unless you use fake business transactions.

> How many fourth generational heirs do we see among America’s wealthiest billionaires? Essentially zero.

Quite a few. Not sure how long you would make four generations, but let's say 100 years.

There are the obvious famous families; Ford, Rockafellers, Du Pont, Mellon, Mars, Hearst, SC Johnson ("a family company"), etc. But there are a number of billionaire families that aren't recognized much outside of their "home towns" because they started mundane things like retail stores or own mineral rights.

That's not even getting into families whose wealth has diluted, but whose descendents are politicians, actors, or otherwise notable / influential people.

Granted, most billion dollar businesses are <4 generations old, but more sophisticated investment vehicles exists for preserving wealth than existed even 50 years ago.

So at least on this list, https://www.forbes.com/forbes-400/, the vast majority do not have families that been on the list (or would have potentially been on the list if it existed 100 years ago) for 4 generations.

The list of billionaire families would be very different than the list of billionaire individuals. For example, there are currently 86 Ford heirs.

I went to a an expensive private school for college and there were a lot of old money students there. They didn’t all have the last name “Carnegie” or something else imminently recognizable, of course.

Plus, that money may get divided and spent over time, but it’s usually invested. It’s not like after 100 years it’s the same amount of money adjusted for inflation, if the next generations didn’t mismanage it.

This is the kind of myopic reading of the law that will curtail entrepreneurial endeavors and lead to corporate-only wealth.

I fail to see how.

Entrepeneurs aren't going to not build a company because of some specific tax treatment that only applies whilst they are wildly successful.

Taking away the money, though, will cripple their ability to grow the companies.

No SpaceX, no Tesla, no iPhone, etc.

I don't follow your reasoning, either. Do you really think that a new tax on several hundred billionaires will discourage the hundreds of thousands of entrepreneurs that are out there, that a significant amount of them will not bother since they can only make a few hundred million before they have an extra 15% of their money collected in taxes?

Most entrepreneurs would be overjoyed to be a billionaire and have to pay that extra 15%. Seems like they'd be the lucky ones. Seems like a billionaire or an aspiring billionaire complaining about such a thing would be pretty weird.

The parent you replied to mentioned wealth being locked up to avoid capital gains taxes. There are other pros and cons, I'm sure. Do you think this new tax on billionaires means that less people will be trying to become multi-millionaires?

Note that I'm not happy with the current tax system, and this seems like another kludge. I also don't know that we need to coddle or incentivize wealth maintenance, it's not an end in and of itself.

Extracting the money from them will mean less investment. It's simple mathematics. You take away a billion from an investor, then a billion is not invested.

Even worse, you're taking the money away from the most effective investors.

Maybe that's the part I'm confused about. Aren't they talking about taxing unrealized capital gains, i.e. money that is being left locked up in a single stock, in order to avoid being taxed when it is moved? Wouldn't one of the effects of this tax be to incentive these effective/successful billionaires into moving their money into new investments, instead of being left parked in their already successful investment?

And most entrepreneurs are not, nor will never be, billionaires who are subject to this extra tax. That being the case I wouldn't think that this will put a dent in overall entrepreneurship. It might have the opposite effect, where there are numerically more entrepreneurs making capital allocation decisions, which might be better for society than having fewer people (billionaires) controlling an ever increasing amount of capital.

I grant that tax changes like this have numerous conflicting effects, sometimes unpredictable. Perhaps their will be another art bubble...

I don't think that it's a good thing that we structure our society for the convenience of those who can amass money. I'm definitely not fond of kludgy taxes like this one, but I also don't understand why so many jump to the defense of so few billionaires.

Exactly this. And even worse, you are disincentivizing the most effective leaders from driving their companies to huge success.

It eliminates the risk to established entities to be disrupted.

We’ll when musk started both those companies he wouldn’t be affected by this tax. In fact it wouldn’t have hit him until a few years ago and he hasn’t given either company money in longer than that.

And Steve jobs did t inject money into apple when they were creating the iPhone.

So you’re entire point has been pretty much invalidated

Jobs put most of his fortune from Apple into developing Pixar, transforming it from a failure into a powerhouse. The rest went into Next, which formed the core(!) of Apple's resurgence when Apple merged with it.

No Jobs money => no Pixar => no Next => no iPhone

Neener neener!

Musk currently has a controlling interest in Tesla because of his stock holdings. Under the proposal, he would no longer have the holdings, and thus no longer control the company.

A tax on personal unrealized capital gains will not take away any money from the company. It's privately-held, and has no effect on a company's balance sheet.

> no effect on a company's balance sheet

Selling masses of stock to pay the tax will push the value of the stock down. That has a large effect on the company's ability to raise capital.

As for the entrepreneur, he'll have much less capital to invest.

It's a fantasy that one can extract endless billions from a company and its investors without consequences.

> This facilitates wealth transfer from generation to generation

Well, arguably it's the step up in basis that enables generational transfer without taxation.

Generational wealth transfer is a good thing. It's the main reason most people work hard in life - to provide a better life for their offspring.

Wealth inequality is a good thing too. People who work harder necessarily live better lives. If you want to start stealing their hard work to give to the lazy, you're going to find that the hard-working flee the country à la the USSR.

This comment is insulting and has no basis in fact.

There is no evidence that rich people work harder than poor people. In fact the opposite is far more likely to be true given the unique stresses of manual labour.

And there is no evidence that the driver of success is providing for their offspring. There are a whole range of factors at play.

You don't work harder than south east Asian ship breakers, who work 16 hour shifts in carsophaguses of asbestos and rust.

But you earn orders of magnitude more.

Income and wealth aren't solely functions of who worked the hardest and they never have been.

> There is no evidence that rich people work harder than poor people.

It's not about working hard, it's about working smart. I.e. leverage.

For example, my patio door kept getting stuck. I spend a lot of time with a file and chisel trying and failing to get it to fit properly. Finally, I bought a grinder for a few bucks from the pawn shop and had it fixed in a couple minutes, and it looked a lot better, too.

I think the primary issue is not precisely 'wealth inequality' but rather a lack of accountability and responsibility from people with large amounts of wealth. If one has assets whose value is representative of the life's work of several thousand people, it's one thing to have someone who is demonstrably capable and responsible manage it, and another thing entirely to have someone /own/ it. If I had to guess (and I clearly am) a larger proportion of people are upset with the latter than the former.

Nothing is stopping someone from employing their wealth to build a yacht, fifteen McMansions, and a thirty-foot solid-gold Mothman statue just after getting off of a six-month prison stint for a billion dollars of ecological damage (all purely hypothetical but I would assert entirely plausible); that people exist with the right to exchange a colossal amount of wealth to be allowed to waste an equally colossal amount of actual effort and resources is the problem.

I won't say nobody has an issue with individual people being allowed to direct huge amounts of funding, but I would assert that more people recognize that extravagant waste for the purpose of status should not be scaled to the extant degree of wealth disparity.

If you own your house, is it unfair that you don't share it with all the people who contributed to building it? Or is it fair that you paid them what they asked for their efforts?

This is not really the point that I'm arguing--my point would be that if you wanted your house entirely encrusted in precious jewels, each of which was individually polished by a team of people paid 50 USD an hour to do this weekly, nothing stops you from making that decision even though you are monopolizing a large quantity of resources for status, almost entirely. Someone with a large amount of wealth is generally within their rights to do this, which I would view as a problem.

This isn't to say that I would accuse the majority (or even very many) individuals in positions where they're able to leverage a lot of wealth of anything specifically this egregious, but rather that because they're able to control many resources because their efforts have enormous leverage (and therefore are worth more to the system they operate in), they can consume orders of magnitude more resources to gain comparably minuscule increases in personal utility.

In addition, because of how valuable their leverage makes their effort, when they cause damage whose negative value is on the scale of individuals, the disparity leads a system that's self-interested to forgive them much more quickly--if someone can get 1% more value out of 10 billion dollars' resources than anyone else, that system doesn't have any purely value-driven reason to replace them in their position if they should murder someone and its negative effects never amount to more than a couple million dollars' loss in value. From any ethical standpoint that holds "death at the whims of billionaires" incompatible with "certain unalienable rights", this is a problem.

There's been a surge in real estate values lately. I've yet to see any homeowner decide they owe part of that gain to the people who built the house or the folks who mow their lawns.

I'm... confused as to what your interpretation of my comments here is. I'm explicitly stating that the issue isn't about people deciding they owe something to other people, or what the market decides the value of something is--it is about people in highly-leveraged positions who are currently able to waste resources or actively cause damage with some impunity because of the value their leverage allows them to provide.

I'm not making the suggestion that those who are wealthy should divest themselves of their wealth and donate it to charity, the point I'm intending to communicate is that such leverage shouldn't act as a pass to engage in unethical behavior.

I simply disagree that an economic incentive is necessary or useful for people with extreme wealth. Already rich people who are primarily motivated by the accumulation of wealth are unlikely to have some unique skill that society needs in our active labour force. If our tax structure made them more likely to retire early, our workforce would not be starved of useful skill.

Genuinely smart people with genuinely valuable skill (like Musk or Jobs) would work equally hard whether their offspring were set to inherit 10 million or 10 billion dollars.

> People who work harder necessarily live better lives

The words "CITATION NEEDED"— in bold 72 point-font flashing letters—spring to mind.

Do you have any data, or other evidence, to back that claim up?

> It's the main reason most people work hard in life - to provide a better life for their offspring.

Do you believe people without children have no motivation to work hard?

You mean old middle class, and poor homeowners, can stay in the house they raised a family in?

The only reason my high school educated 80 years old mother in declining health can stay in a home, and county, she feels somewhat safe is because of prop 13.

Her biannual property taxes are still a big deal when they arrive.

I've said this before, but I'm beginning to think if you didn't live through the craziness before Prop 13, you won't ever quite get it.

Prop 13 has been the only blessing most homeowners have been given.

If you want to put income limits on the gift of prop 13 fine, but doing away with it completely would be evil. By income limits I mean the guy making $600,000/year, and a huge bank account, could probally still survive without prop 13 protection.

The 80 year old lady, or man, surviving on 1/2 widower's blue collar pension is another story.

(I'm for means testing on all programs. I'm also for tieing all societal fees/fines---speeding tickets, registration, patent fees, etc. to 1040 income/assets wealth.)

What seems odd to me (if I understand it correctly) is that prop 13 keeps your property tax low, but you still get the full benefit of the appreciation in price when you sell the property. It kind of seems like if it's artificially keeping the tax low, the full tax bill should come due at some point, which would logically be at the change of ownership.

Property tax is the recurring value tax, kind of a wealth tax while you hold a property, and prop 13 does shield much of the appreciated value from this. A new homeowner might be paying 1-2% of market price per year, while an elderly neighbor might pay 1-2% of an assessed value that is closer to a market value from 20+ years ago. The assessment does increase at a very slow rate, and in larger jumps with remodeling or other improvements.

At the sale, the appreciation becomes realized as capital gains income. There are some rules making a portion of gains tax-exempt for a typical homeowner, but the remainder of a large appreciation is taxed as income. There can also be a sales/transfer tax on the transaction, which is of a comparable rate to the annual property tax rate.

The third significant event is inheritance, where the house could pass to an heir without a sale and have its basis updated to current value. This is when the appreciated gains can really go untaxed.

You can have carveouts for your 80 year old grandmother without freezing property taxes for everyone.

Prop 13 disincentivizes building housing.

Stop calling people evil just because your grandmother isn't the center of their policy concerns.

> Prop 13 disincentivizes building housing.

I didn't think we reached the point where people are arguing that things that make housing more valuable disincentivize building more homes - but here we are.

It is zoning restrictions, EIR, etc., that disincentivize housing.

Prop 13 absolutely disincentivizes building housing. Other policies can also be bad. But grandma's house isn't being bulldozed to make way for a quadplex because she's insulated from the market.

https://www.kqed.org/news/11700683/too-few-homes-is-proposit...

But if you own a home in California, you are incentivized to maintain prop 13.

It's funny how hard it is for people to understand something when it cuts against their personal interests.

Your mother could easily pay higher property taxes with a home equity line of credit. She probably should also be using that HELOC to fund a more comfortable lifestyle -- she probably needs that money more than her heirs do. (I'm assuming, given that you're posting on HN).