[bufordsharkley]

Even if people pay full capital gains, that doesn't prevent the existence of a multi-generation estate. And those kind of estates are the whole point of the estate tax.

If a tax directly taxed holdings on an ongoing basis (a wealth tax, or much better, a land value tax), I could see an argument for doing away with an estate tax, but only then. (And I'd say not even then)

[KZeillmann]

What's inherently wrong with a multi-generation estate? What's wrong with me wanting to pass on wealth to my kids and grandkids without this already-taxed money to be double-dipped by the government? If I want to work so hard that I can leave significant money for my descendants, why should the government get to tax that money twice? That seems incredibly unfair to me.

[kllrnohj]

Look at it as a regular income event. You were taxed when you got that money from whoever gave it to you and now your kids are being taxed when they get the money. Your kids aren't you. Money isn't a taxed-once thing, it's taxed every time it changes hands. Death is an event at which money changes hands (from you to your kids), and is taxed appropriately.

Anyway multi-generation estates are very well tested as being bad for society over time. Just look up monarchies.

[KZeillmann]

Then why not tax everyone when they pass money/assets onto their kids? Why is there an arbitrary ~$5.1 million cutoff?

(Not that I have anywhere near that much money, but it's the principle)

[bufordsharkley]

Taxing everyone would be the "correct" solution, but it's more pragmatic/politically expedient to allow a $5mil exemption.

[kllrnohj]

There's always a cutoff just due to practicality. If you give a friend $5 probably neither of you filed taxes for that. If you give a friend $10m, well, the IRS will probably notice that one.

(in the case of a gift tax the cutoff is $14k and yes it applies to your children, see: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Emplo... )

[geofft]

If you want to work so hard that you can leave significant money for your employees, the government taxes that twice: once when it goes to the business, and once when it goes to the employees. Why are children different?

[ganeumann]

Well, not in the US. The money paid to employees is tax-deductible to the business, so it's only taxed once (the employee pays taxes on the money paid to them, but the business doesn't.)

[themartorana]

I am failing to see where - salaries are write-offs, and sales tax, which doesn't necessarily apply to all situations, are a tax on the buyer, not the recipient...

What am I missing?

[KZeillmann]

Except that you can write off salaries.

[nhaehnle]

Wealth tends to translate into power. Multi-generation wealth transfer translates into dynasties. Dynasties are the antithesis of democracy.

Hence, multi-generation estates are anti-democratic.

Of course there is nuance in the extent of the effect. Some inter-generational wealth transfers are fine. Multi-generation estates wouldn't be a problem if everybody had them. And so on. But the core of an important argument against multi-generation estates is very plain. (Other arguments can and have been made as well, of course, including fairness arguments - I didn't work for my inheritance, for example.)

[Chris2048]

Is that why there are so many laws to prevent the accumulation of wealth in the US?....

[mac01021]

Why is a land value tax much better than a wealth tax?

[bufordsharkley]

A wealth tax is inherently limited; for example, you can't tax 100% of wealth-- that would be pure confiscation.

However, a land value tax can scale up to 100%, because you're taxing rent, and not wealth that is bought/created by any individual.

An estate that has its rent taxed 100% will eventually dissolve, unless it's constantly generating new value aside from rent (which is in general not the case).

[mac01021]

This seems like an interesting idea but, every time I read about a land value tax (LVT), the description is very high-level and leaves me with more questions than it answers:

  - How do you measure the basic value of the land?
    Is is it the amount of rent collected minus 
    maintenance-and-improvement expenses?  Does
    this mean it is impossible to turn a profit
    as a landlord?

  - Is the tax also applied to land that is not 
    rented?  Is it harder to assess the value of
    that land?

  - Does this system discourage conservation by
    incentivizing everyone to sell their unused
    land to someone who is going to develop it?

  - A common type of investment in today's no-LVT
    world:  I buy an undeveloped plot of land that
    noone would pay anything to live on in a town
    just outside of Worcester, MA.  I spend $100k
    building a house on the premises, and then I
    proceed to rent out that house for $1k per month.

    Under an LVT system, do I still have any reason
    to buy that land and build a house on it?  How
    much money can I make? 

Thank you for your time.

[bufordsharkley]

I agree that a lot of the questions it raises need to answered (in practice, LVT has run into issues because of poor practices by the assessors office).

To answer your questions to the best of my abilities:

  - A landlord should be able to make a profit because the building itself would 
    not be taxed. The only kind of landlord would which not see a profit is the 
    kind that rents out land use, but does not actually develop or perform 
    maintenance.

  - Land that nobody wants wouldn't get taxed. (A few square feet of land in 
    Alaska, for instance) But if there's any demand to own the land, it would have
    a rental value.

  - It highly discourages sprawl, so it's good for conservation in that
    sense. However, I recognize that greenlands near city centers need special
    consideration. For instance, the Muir Redwoods in Marin absolutely would have
    needed intervention to be saved; the LVT would have been an incentive to
    develop so close to SF.

  - In a LVT system, undeveloped land would always sell for $0. The tax on the
    land is equal to the return on the land itself. So in the current system,
    you pay $100k for the land, $100k on the house, get taxed $2k/yr in
    property taxes, get taxed on the rental income, etc.

    In a LVT system, the land would be free, but would be taxed at $5k a year.
    (Assuming 5% rate of return). You're not going to get $5k for that land unless
    you do something with it, so you absolutely have the incentive to build a
    $100k house and rent it out for $1k per month.

    But let's say that the land was worth $500k instead of $100k. Now the LVT
    would be $25k a year; you'd have an incentive to build much more than a
    $100k house; you'd want to develop it even more to generate even more
    return. This is how the LVT aligns the incentives for land use better
    than the current system (where property tax on improvements leads
    as a discentive to develop, and encourages restrict zoning laws).

I think the valuation of the land is the hard part, but active markets and self-valuation may have secrets to accurate and convenient pricing. I think it merits more research on this field, at any rate.

[largote]

Land value taxes are called property taxes.

[larsiusprime]

Not quite. property tax includes the value of the buildings. Land value tax is different: https://en.wikipedia.org/wiki/Land_value_tax