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(I came back and edited this answer completely.)

The difference is that when you give money to your children, you're not getting any goods or services in exchange. The transaction is making them richer, but you poorer by the same amount.

(Also, later when the children pay a mechanic the amount of total tax paid will be the same.)

iso1631 1888 days ago

> The difference is that when you give money to your children, you're not getting any goods or services in exchange

Maybe you are, maybe you aren't. What if my kid is a mechanic and does the work for me?

> If anything I think we should encourage rich people to give their money away (even if only to their children) since wealth consumed by a broader number of people leads to more happiness than if it's all consumed by one person. It's better for a $10 million fortune to be spent by 10 consecutive generations than for it to all be spent by the original owner.

I don't understand how you reach this conclusion. If the original owner spends all of it it enters a whole lot of more peoples pockets than his kids.

Increasing the velocity of money doesn't help the world on average. Otherwise the Fed would just set their inflation target higher. Even if you disagree, given that the Fed has a fixed inflation target you can't do anything about it by changing inheritance tax. If you force a bunch of rich people to spend more than they would have, the Fed will just take that money straight back out of the economy.

Sometimes I find all this money swirling around difficult to keep track of. It's easier to forget about money and look at what's happening to the goods and services. Ten families in $1 million houses get more happiness than one family in a $10 million house and nine homeless families. No matter how you shuffle the accounting around it has to add up to that same utility difference.

> If you force a bunch of rich people to spend more than they would have, the Fed will just take that money straight back out of the economy.

So if they go on more vacations, buy a flashy car, have more parties, you are saying that the Fed "takes that money straight back" and that it doesn't go to travel agencies, car dealers, caterers, party planners, service workers etc?

> Ten families in $1 million houses get more happiness than one family in a $10 million house and nine homeless families. No matter how you shuffle the accounting around it has to add up to that same utility difference.

Sure, and I reject your hypothetical and say it's better if 100 people live in $80k (after some tax) houses/condos than 1 in a $10M house, if we're just making things up.

> So if they go on more vacations, buy a flashy car, have more parties, you are saying that the Fed "takes that money straight back" and that it doesn't go to travel agencies, car dealers, caterers, party planners, service workers etc?

They do get the money. But the world hasn't become any more productive; the number of goods and services being produced is still the same. So when they spend that money and consume goods and services, someone else must necessarily be consuming less.

> They do get the money. But the world hasn't become any more productive; the number of goods and services being produced is still the same. So when they spend that money and consume goods and services, someone else must necessarily be consuming less.

More flights (its' virtue another discussion), more cars produced, more parties planned, food made, services rendered.

Of course production has gone up, and will continue when those people spend their money on their (smaller) houses etc.

And are you making your claim as a counterpoint to my scenario compared to inheritance? Because pushing money down the line to sit on it certainly does not make the world more productive.

> More flights (its' virtue another discussion), more cars produced, more parties planned, food made, services rendered.

That would only be possible if we had previously been using the labour and capital to produce those things at less than 100% efficiency. That's not what happens. Businesses will always have been trying to operate as efficiently as possible. When demand increases they either have to increase prices or increase supply. Increasing prices will mean that someone else doesn't get the good or service. Increasing supply will mean employing extra labour or capital that would otherwise have been used elsewhere. Either way, spending money doesn't cause total productivity to increase.

(Unless of course the Fed screwed up and put us in a deflationary recession. In which case, yeah, extra spending would help. But that's only if they screwed up. Normally, they have already optimised the variable you're trying to adjust. Adjusting it away from the optimum will just cause them to push it back.)

imtringued 1888 days ago

Assuming those savings are invested, it wouldn't change anything. Right now there is an excess of uninvested savings in corporations that is not being invested and sure, distributing that money would help with the economy but betting on inheritance taxes to do the job is weird. It's too unreliable.

Por que no los dos?