[metacritic12]

The obvious fix is to not step up basis on death.

The estate tax already means that the estate of a person who dies may need to sell / divide / split stuff to pay the government. There already is no fundamental protection for an asset passing unscathed from a parent to a child. I don't see how not stepping up basis qualitatively changes this.

And your argument of "you want a child to be able to inherit a family business / house and keep the family business protected" is incredibly axiomatic and the antithesis of a tax. While it's inherently consistent, you're making the same general argument as "all taxes are theft".

Yes taxes may be theft in one view, but under our current society, raising revenue for the common welfare is also a virtue, so we can't have have it both ways.

[geysersam]

It's a funny argument the one about the family farm. In this case it's not even about inheritance tax. It's a sob story about a guy who couldn't inherit the farm because his dad owed the state money because they had let him not pay tax on his capital gains for a long time.

Sorry for not tearing up.

[gammarator]

It also rarely applies to farms. https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threa...

[Rebelgecko]

When should he have paid his capital gains tax? Had the farm changed hands back and forth?

[_bin_]

You can't just arbitrarily set the status quo that way, can't just sneak a premise that the state has default a right to collect a piece of arbitrary appreciation on an asset (as all assets are used for speculation) when the owner hasn't actually gotten cash from that, and that any government that doesn't tax that is just cutting someone a break on something rightfully owed. The state of nature is no tax, and as it's unpleasant, we create societies and fund them with taxes that we must deliberate and determine to be just and reasonable. You don't get to argue from the point that your preferred taxation regime is simply how things should be and that how things are is therefore wrong, especially not without a justification.

I'd also point out that people's assets have gone up in nominal terms in the past few years, but for many that's not reflective of an increase in purchasing power. Much of that increase is due to excess inflation from the profligate overspending of our past two administrations, so the cycle currently looks like this: government prints money and causes inflation -> your assets are "worth more" -> taxman says "give me a piece of that" even though your real wages have fallen or have just barely recovered to pre-2020 levels. And of course, even if we index to inflation, that will necessarily hit the poor harder: food and energy are deemed "too volatile" to include in headline CPI, but as necessities, they comprise a larger part of poor households' spending and so inflation will hit them harder than the numbers suggest.

[CPLX]

We (almost) invariably tax money when it changes hands. Like if you own something and then I own it, there's a tax. If I give something of value to someone else, the government takes a cut.

There's a ton of nuance there, sometimes intended to avoid certain negative consequences that feel like double taxation or that provide peverse incentives. But that's the general premise.

If you pay taxes on your income and then use it to buy something from me, I have to pay taxes on it too. That's my income now.

If my father paid taxes on something he earned that's his tax bill. When I get it, I have to pay too. That's my income now.

This is very clear and consistent. Outside of all the people with an interest in pretending otherwise.

Also worth noting that there's no state interest whatsoever in preserving generational wealth. Just none. The fact that kids have to earn their own money instead of a family coasting for generations is a good thing for the most part.

There are some plausible arguments for preserving continuity in certain cases, like community based family owned businesses, farms, that kind of thing. But everybody already agrees with that which is why those kinds of things have been generally exempt from estate taxes for generations. The people telling you otherwise are trying to trick you into caring about their agenda, which is how to not pay taxes on their substantial wealth.

[logifail]

> We (almost) invariably tax money when it changes hands. Like if you own something and then I own it, there's a tax [..] But that's the general premise.

I appreciate HN is USA-centric, but over on this side of the pond it's nowhere near as simple as that.

> If you pay taxes on your income and then use it to buy something from me, I have to pay taxes on it too. That's my income now.

Except that companies - even one person companies(!) - generally pay taxes on their profits, not their total income or revenue.

[tsimionescu]

All companies almost everywhere absolutely pay taxes on revenue, in the form of sales tax / value-added tax.

[logifail]

"VAT is...

- an indirect tax on the vast majority of goods and services

- borne by the final consumer, not by businesses

- charged as a percentage of the sales price and collected fractionally at every stage of production and distribution

- neutral, as the tax borne by the final consumer is the same regardless of the length of the supply chain"

https://taxation-customs.ec.europa.eu/taxation/vat_en

[CPLX]

> I appreciate HN is USA-centric

We're commenting on a specific article written about the US tax system. The term "US" is in the title of the post I am commenting on.

[Wytwwww]

> The state of nature is no tax, and as it's unpleasant

Being able to accumulate capital, at least without having to resort to extreme violence is also about as "unnatural" as it gets..

No taxes = No government = No excess (above subsistence level) accumulation of assets

[entropicdrifter]

And the people who have a strong drive for the accumulation of capital/assets build armies and those armies shake down subsistence-living people for food and supplies in order to sustain themselves and suddenly you've got taxes again

[Wytwwww]

Yes, thankfully modern liberal(ish) democracy(sort of) and the rule of law allowed us to exit this circle (well.. at least brought us much closer to that point than we ever were).

[logifail]

> Being able to accumulate capital, at least without having to resort to extreme violence is also about as "unnatural" as it gets..

(This is a genuine clarifying question, because I'm struggling here) are you suggesting that saving is somehow unnatural?

[AnimalMuppet]

I believe that the claim is this: In the long scope of history, being able to accumulate money without having to be strong enough to defend it is really rare.

[Wytwwww]

> that saving is somehow unnatural

Depends on how you define saving. Hoarding perishable goods is of course a pretty natural behaviour but that only scales so much. Investment (i.e. owning more land or other productive assets than you can utilize directly yourself) seems pretty as opposed to communal ownership seems pretty "unnatural".

Not that I'm somehow implying that "natural" (whatever that really means, since using violence and coercion certainly seems like natural human behaviour) is somehow always superior to the opposite.

[jancsika]

> You can't just arbitrarily set the status quo that way, can't just sneak a premise that the state has default a right to collect a piece of arbitrary appreciation on an asset (as all assets are used for speculation) when the owner hasn't actually gotten cash from that, and that any government that doesn't tax that is just cutting someone a break on something rightfully owed.

That's a great point.

But note that you also cannot arbitrarily jump so far back in an implied chain of premises as if to suggest that you've somehow build your own (suspiciously libertarian-leaning) argument from first principles. For example:

> The state of nature is no tax

Well, the state of nature is also tribalistic. But imagine someone making an argument that collectivizing the farm in question is right because the state of nature is humans living in a collective.

You'd rightly reject such an appeal to nature in that case. Therefore, you should reject your own appeal above.

[TheCoelacanth]

> The state of nature is no tax

The state of nature is no property. Billionaires can't exist without a government enforcing their property rights. Why shouldn't they pay the entity that made it possible for them to accumulate their vast wealth?

[bluGill]

The state of nature is it is your property so long as you can protect it. There are lots of different ways to do that. Many animals have concepts of owned territory which they protect in various ways.

[jncfhnb]

And you principally protect your property by… wait for it… paying taxes to the state to uphold law and order

[mmcdermott]

While I'm sure that someone somewhere objects to paying for law and order, I think most tax grumbling comes from taxes rising (and, arguably, still not rising enough) to pay for bigger and bigger programs with an increasingly tenuous relationship to law or order. Not everyone objects to every line item, of course, but the bigger the budget gets the more certain it becomes that those rising taxes are not just to keep up with inflation on basic essentials.

[bluGill]

That is not the state of nature though. There are "primitive" societies that don't organize their village that way. Social pressures and you working alone are enough to protect your property when the total population to worry about is around 100 people.

We use taxes because nature doesn't scale to towns of 1000, much less nations of millions. But that is not the state of nature.

[lazide]

Eh, the oldest form of government is a Kingdom.

If a government won’t enforce others rights to property, eventually someone is going to form a government where everyone’s things are theirs eh? Since what other option do they have if they want to own something.

[jacobolus]

That's fine. Such people can renounce their citizenship and pay the required exit tax, convert all their assets to gold bars or whatever, and go move somewhere in the world without a functioning state, where they can hire a private militia, build their own basic infrastructure, etc.

[lazide]

why would they do that when they can take over the gov’t and steal everyone else’s stuff? (see Russia, Venezula, China, and many others)

Notably, the biggest thefts seem to happen when they can convince people that the gov’t is doing it for ‘the good of the people’, and they’re ‘going after the rich people’, and then they can pocket it when no one is looking.

[NoMoreNicksLeft]

Given that most billionaires have their billions as imaginary ownership of gigantic corporations, how exactly would someone steal their shares from them such that government needs to enforce their property rights? Can I just walk up to the bank and say "hey, I have $100 billion worth of Facebook stock, gibs me da money"? You know, but for the feds swooping in (or possibly the Delaware state troopers) and shutting that down?

The government may indeed enforce property rights in a meaningful way, but it doesn't seem like it's doing this for billionaires.

> Why shouldn't they pay the entity that made it possible for them to accumulate their vast wealth?

If this were indeed a true description of how that process occurs, why are you so comfortable with letting the government "make that possible"? Where in the Constitution (or even common law) does it grant the government this power?

[Wytwwww]

> Can I just walk up to the bank and say "hey, I have $100 billion worth of Facebook stock, gibs me da money"?

No, but assuming you are on Facebook's board / in upper management you can conspire with the rest of the board to get rid of Zuckerberg (possibly permanently) and share the company amongst yourself.

ARM China seems like somewhat close example of what can happen when there is no government willing to protect property rights. e.g. as long as he has enough local support a CEO of your subsidiary could just take over the entity and there would be nothing you can do about it.

IMHO we'd end up with some dystopian form of Cyberpunk style techno feudalism without strong governments regulating everything. Which in theory might be a good thing for the corporations themselves, just not for most of the people who are currently running them.

[NoMoreNicksLeft]

> No, but assuming you are on Facebook's board / in upper management you can conspire with the rest of the board to get rid of Zuckerberg (possibly permanently) and share the company amongst yourself.

Yes, if you want to oust him and take over as CEO, then boards of directors have that power. But that's more about his job security. When he leaves, he leaves with just as much stock as he ever had, and in the case of some termination clauses in contracts for that stuff, he walks away with more than he walked in with.

With the government out of the picture, this doesn't much change. If the board of directors tries to confiscate shares or some equivalent (I dunno, withholding dividends? Does Facebook even pay dividends?), then their stock price tanks immediately. Somewhere down near $0. Their financing falls apart shortly after that, and pretty soon the company goes under. The punishment for some group stealing Facebook isn't government goons stepping in and bashing skulls, it's in the complicated structures that make it worthless just about as soon as it's stolen.

I think your Chinese example is quite the opposite of this. The government of China basically has to step in and allow ARM China to pull such a stunt, or it's impossible.

[ForHackernews]

> ...most billionaires have their billions as imaginary ownership of gigantic corporations

Exactly. The entire notion of their wealth is predicated on an elaborate system of law and governance! Otherwise, it's all just freaking numbers on a computer.

[nemothekid]

>Given that most billionaires have their billions as imaginary ownership of gigantic corporations, how exactly would someone steal their shares from them such that government needs to enforce their property rights?

You have it backwards. "imaginary ownership of gigantic corporations" doesn't exist without government. The government doesn't "protect" Zuckerbergs shares, the government is the vehicle that gives Zuckerbergs shares value. Without the government Zuckerberg's billions is worthless.

In this fairytale world where Zuckerberg is somehow made a persona non grata, then all his shares would become worthless as he wouldn't be able to sell them, nor would he be able to enforce Facebook (the entity) to do anything on his behalf.

[tsimionescu]

Imagine the government went away tomorrow. Would Mark Zuckerberg's employees keep giving him any kind of money for the work they are doing? Would they even give Facebook money, or would they just emit invoices with their own bank accounts as the destination?

Billionaires absolutely depend on a very robust system of laws to maintain control of the giant corporations that they own. Zuckerberg couldn't even enter a Facebook building if his employees rebelled against him and the law wasn't protecting him.

Note, I'm not trying to single out Zuck in any way, just wanted to pick some billionaire tied to a well known corporation to make the examples simpler.

[FactKnower69]

>You can't just arbitrarily set the status quo that way,

huh, what natural, physical laws are being broken? collecting taxes exceeds the speed of light or goes below 0K or something?

[Log_out_]

yes, we can. the whole premise of a democracy is that every law is a solid majority away from being turned over.one of the reasons big money is inherent anti-democratic.

[_bin_]

Okay, I don't actually believe in that form of democracy. Not all things that are legal are good, therefore we should set constraints on what the majority can do. I'd describe your system as closer to mob rule. And no, that is not the premise of every system that incorporates democracy as an element, it's the premise of an absolute democracy.

[jjav]

> therefore we should set constraints on what the majority can do

Which inevitably leads to the question: who should get the power to do that and why they, specifically?

[pdonis]

You have it backwards. The actual question is, how did the majority magically get the power to enforce its will on the minority in the first place?

[keybored]

Of course no one is surprised.

> therefore we should set constraints on what the majority can do.

The constraints are supposed to be a constitution and time. In time, as people die and new people are born, the world changes. New people are in charge. They can even rewrite the constitution.

What other alternative is there?

> I'd describe your system as closer to mob rule.

“Mob rule” is just the pejorative anti-democrats use for democracy not going their way.

What’s a rule-by-rich-people pejorative? Pig-rule? Just a pejorative. Just as meaningless.

Anti-democrats don’t have rational arguments on their side. Therefore they have to invent specters of the pitch-forked mob who is killing babies in the streets, the desperate, unwashed…

But all of that begs the question: if the “mob” rules, why are they in the streets? With pitch forks? Desperate? Of course it is completely irrational. If the “mob” already ruled there would be be no mob because the average person would enjoy dignity and respect. Safety and security.

They would have enough means to appear upstanding. Like you know, those rich people who rule now or ruled in the past. Those who never had to excuse themselves for being part of a mob or being unclean.

But it’s clear that if you want people to be desperate and in the dirt then you also don’t want them to rule. That’s how you get a mob.

[FactKnower69]

>I'd describe your system as closer to mob rule.

lmfao this is always, always, always the refrain

[freejazz]

Really? We're a 'solid majority' away from murder being made legal?

[witchammer]

> The state of nature is no tax

> You don't get to argue from the point that your preferred taxation regime is simply how things should be

Those two statements seem mildly contradictory.

[gperkins978]

The state of nature has no schools, no water, no sewer and no police. If one is going to live in a civilized nation, he should pay his share of taxes. Capital gains is 15%. That is not an outrageous amount. Everyone should pay because everyone benefits. One is free to leave and live in tax shelter principality or Sultanate.

There is a problem with high taxes on earned income, but anyone complaining about the 15% capital gains tax has problems. The estate tax only applies to this who are very, very fortunate. These are not even earned. Again, if one hates his country, he can move to Dubai, Bermuda or the Glorious Sultanate of Brunei and enjoy their lifestyle.

I do understand that people in California get angry because the state is so poorly run, but most of the US has easily avoided the self-created problems of California and New York city.

[supplied_demand]

==most of the US has easily avoided the self-created problems of California and New York city.==

Two places which produce an outsized share of the country's businesses and wealth? Seems like they are doing something right.

[Nasrudith]

Fair enough that they are outsized productivity but they are also two places which have managed to basically population-cap themselves, primarily through real-estate mismanagement and refusal to build sufficiently to make it worth living there even as infamously high paying areas.

[_bin_]

Not really. Trace the course of history and the natural state of man is much closer to what Hobbes described. In the wild, homo sapiens doesn't have a taxation system. As we built up civilizations, we created taxes as I described. And neither am I arguing for my preference to stick with how we mostly run our taxation regime (tax value when moved, not value at rest) without some justification for it.

[consp]

No tax in the wild? In my view, sure there was: you get water and share it, the other guy hunts and shares it. The fact no centralised system existed does not mean no tax on the community was levied in some way.

[mbrumlow]

I don’t believe sharing was all that common. But the difference in your story is voluntary sharing.

Once the hunter demands water for meat it becomes an exchange, and is the basis of our capitalist society.

Taxes in that system would be more like 10 men who did not hunt or gather demanded you give them food and water or they would beat your face in.

[mensetmanusman]

Yes, let’s implement this so that all farms are owned by large corporations.

[MisterBastahrd]

Not even sure why I should be upset in the first place. If I get fired from my job, nobody is going to run to my aid crying that I deserved that job because my daddy worked really hard to put me through school (he didn't, but that's besides the point) and he wanted me to have it. No, I just get fired. How is a family farm any different? It's just an asset. Birthrights shouldn't exist past citizenship.

[lazide]

Because the idea of leaving something to your kids (and a legacy beyond oneself) is a fundamental motivator for most people?

[SR2Z]

Boo. That's not what's at stake here; people don't wanna pay taxes that are fairly owed to the government.

[_bin_]

> fairly owed

You're doing it again. You're assuming that it must be a just tax. You're assuming that a tax is somehow intrinsically "owed", that any tax requires no justification.

[lazide]

Literally the comment I am replying to is about making it so no one can pass on property to their kids.

[Slava_Propanei]

The asset has not moved outside the family, has not been sold, no profit on sale has been realized.

You think a profit transfer has been made, because you think in terms of atomized individuals with no family.

[MisterBastahrd]

Citizens are taxed as individuals, not families. A person did not have assets, and now they do. I don't care that the land was "in their family." If they are even decent at managing their assets, then they will have more assets when they die than when their parents did. And if they don't, then it's not my concern. I don't believe in government policies to perpetuate generational capital wealth, and I will vote against them as long as we have a system where money can be used to influence the government.

[MisterBastahrd]

You can make that claim, but the fact of the matter is that the US is a representative democracy, and our elected representatives make the laws. We are free to choose other people for the job if we want different laws. The vast majority of people were not lucky enough to be in a situation where their bumpkin ancestors just happened to possess a large swath of land, and so we don't vote to protect large swaths of inherited land.

They owe taxes? They can pay them. They can afford to pay them because they have inherited assets. "Oh no, they're gonna get a diminished inheritance. What a disaster." I'm not getting one, and neither are most of the people in the country. They'll still have their inheritance, they just won't have the land. And they aren't entitled to it if they don't have the money to pay their taxes.

[_bin_]

I've watched chunks of beautiful Texas ranchland get sold off and built up by insufferable austinites for the marginal mcmansion. I will probably oppose a policy that encourages that and would rather the descendant of your so-called "bumpkin" keeps it.

[svara]

> The obvious fix is to not step up basis on death.

And that's how it's done in many parts of the world, works perfectly fine. There's really no reason to step up basis except to provide that loophole, which is probably exactly the reason it's done.

[tim333]

I'm not sure that's a very good fix because the data of how much was paid for the assets may not be available after their owner is dead. The system in the UK seems to work ok for the most part. No CGT on death (the equivalent of step up basis in the US) but 40% inheritance tax on most of the assets over £325K.

We do have the odd exemptions like Clarkson's Farm which was bought partly for inheritance tax avoidance, but you don't have to do that.

[eli]

What would the owner have done if they decided to sell the assets shortly before death? Either they can establish a cost basis, or the basis is assumed to be $0. I don't see why this is a big problem.

[tim333]

It's enough of a hassle acting as an executor when your parents die without that on top.

[_bin_]

There's also no fundamental reason for the state to institute any form of estate tax; on the contrary, I specified it goes against our usual federal regime of taxing value as it's moved rather than value at rest. If anything, I'd question why you believe there's some inherent reason or right to have any form of estate tax, let alone to the point one forces liquidation of assets. One form of taxation can be more or less just than another and it's much easier to make the moral case for using force to collect a portion of value moved through government infrastructure (banking system, roads, ports, etc.) than something that remains unsold.

I didn't say taxation is theft and would rather you didn't put words in my mouth. You're assuming I'm against any form of taxation whatsoever on a moral basis, which isn't actually true. I think there are values reasons (most of us actually like the idea of a family business staying in a family, not getting sold to private equity) and moral reasons why we should continue resetting the tax basis of inherited assets. As a compromise position, I think it would be more reasonable for you to suggest removing the stepped-up basis but not counting inheritance as a taxable event.

[pintxo]

I don’t get you intro argument. An estate tax is like the poster child of value moved: from the parents to the children. In contrast to a wealth tax.

[mbrumlow]

I can see the reasoning. But the value did not really move. As the estate is family owned. The family did not die, a member of it did.

[dwater]

Seems like splitting hairs to me. If the estate is put into an LLC or similar then the death of a member doesn't involve movement of money. If the estate is owned by an individual and then inherited by their beneficiary then money moved from the deceased to the living. The Family is not a legal unit; the beneficiary doesn't have direct benefit of ownership while the owner of the estate lives.

[tsimionescu]

By this logic, if I sell you a car, no money moved, because both the car and the money are still owned by the both of us. Or at least, if you're brother takes your car, you can't ask the state to give it back to you, as the car didn't really move, it's still in the family.

A family is not a single entity under any law in any country I know of. Certainly not in the USA or anywhere in Europe.

[mbrumlow]

Are you going to drive me to work everyday after the transaction?

The difference is the kids have been spending estate money and have access to all the assets the estate controls. It make no sense that would change because a member of the family died.