[Shaanie]

If I buy something for $10 and it's worth $10,000 when you inherit it, you should (obviously?) be taxed on the increase in value from $10 -> $10,000 if/when you sell. The purchase price shouldn't be "reset" to $10k.

It'sutterly insane to me that the step-up basis exists in the US, it's such an obvious loophole that can fairly easily be closed without many adverse effects.

In my country (Sweden) if you don't know the purchase price, you can use an approximate purchasing price (e.g. for equities you are allowed to assume that it was acquired for 20% of the current value, so you'd be taxed on 80%).

[koolba]

> If I buy something for $10 and it's worth $10,000 when you inherit it, you should (obviously?) be taxed on the increase in value from $10 -> $10,000 if/when you sell. The purchase price shouldn't be "reset" to $10k.

There’s nothing “obvious” about tax policy. It’s an arbitrary determination of what’s in and what’s out.

Taxing capital gains at all is not “obvious”.

Taxing transfers of assets to your children, whether it’s while you’re alive or after you die is not “obvious”.

> It'sutterly insane to me that the step-up basis exists in the US, it's such an obvious loophole that can fairly easily be closed without many adverse effects.

The same law is the one that lets the surviving spouse or children to continue to live in a home rather than be forced to sell due to a sudden realized capital gain. You can argue that you don’t care about keeping multi millionaires in their childhood homes after their parents die, but it’s hardly “obvious” that it should be taxed.

[NotYourLawyer]

Getting rid of the stepped up basis doesn’t require that we realize the gain at death. Just transfer the basis to the heirs, and if/when they sell, then realize the gain.

[impossiblefork]

Yes. As a Swede, I don't even think of individual ownership of assets.

I see a line of descent as the unit which holds property, rather than individuals from that line, and from that PoV inheritance tax of course makes no sense, but similarly, disinheriting somebody, and some other notions, don't make sense either, so it's a different perspective.

I think the Swedish state actually takes my perspective on this, because in Swedish inheritance law you can't disinherit somebody, and we don't have inheritance tax.

[8note]

I think you've misunderstood what they're suggesting - they're considering the transfer from parent to child to not be a realization, so there's no taxes, and no change in basis.

The child who sells the house, then has to pay gains from when the house was first purchase, rather than against the value when they inherited it

[mschuster91]

> The same law is the one that lets the surviving spouse or children to continue to live in a home rather than be forced to sell due to a sudden realized capital gain. You can argue that you don’t care about keeping multi millionaires in their childhood homes after their parents die, but it’s hardly “obvious” that it should be taxed.

Well, "homestead" exemptions are usually already a thing in most countries' inheritance laws. There is no need to draw stocks into the mix.

> Taxing transfers of assets to your children, whether it’s while you’re alive or after you die is not “obvious”.

It actually is obvious, at least if you want to prevent a return of feudalist eras.

[mcculley]

Most parents don’t want meritocracy. They want their children to have an advantage over the children of others. They just have not squared this instinct with political ideology.

[next_xibalba]

This is a kind of odd framing. I have children and I don’t see it as zero sum, as in your description. I want my children to do well. I don’t want other children to do worse, necessarily. I don’t care about other people’s children because I don’t know them and I’m not raising them. I want my kids to do well because I have put huge amounts of labor and love into them. The great beauty of most western systems is that they don’t have to be zero sum and they empower individuals and families.

[mcculley]

Certainly some parents are proponents of the estate tax. I did not say that all parents are opposed to it.

[next_xibalba]

You have projected your bias onto my comment. I do not advocate for an estate tax and don't necessarily support it. And claiming that opposition to an estate tax is an opposition to the success of other people's children is also definitely not anything I believe or claim. Our economy is not zero sum. Everyone can win. Also, redistributive policies almost always fail and waste vast sums while failing.

[mschuster91]

> Most parents don’t want meritocracy. They want their children to have an advantage over the children of others.

Thing is, "meritocracy" doesn't exist on its own either. Even if a poor person's child is among the more intellectually gifted in school, it's hard to compete against the children of those who are blessed in money. And that extends to adult life as well: those born to academic parents are much more likely to go into higher education themselves and have an easier time there (both due to connections as well as the simple opportunity of having parents to ask how to best format a paper or to proofread one), those born to rich parents can simply afford to "try themselves out" - for someone with millions to burn, they can easily afford to seed-fund whatever scheme their kid comes up while most other potential founders depend on sheer luck meeting someone in a random elevator.

And the importance of children being "advantaged" ruthlessly is a recent trend too. Up until 30, 40 years ago, most kids worked in farms or the trades and they were happy with it. But ever since employers demanded higher education and everything else became decried as "something for immigrants" aka low economic lifetime perspective, that shifted... funny, cities would drown in garbage in a matter of weeks when there would be no garbage haulers, but they would continue to be livable if Wall Street went up in flames.

[echoangle]

> The same law is the one that lets the surviving spouse or children to continue to live in a home rather than be forced to sell due to a sudden realized capital gain. You can argue that you don’t care about keeping multi millionaires in their childhood homes after their parents die, but it’s hardly “obvious” that it should be taxed.

So make an exception for a single home the inheritor personally lives in and tax everything else.

[Scoundreller]

We have this in Canada, but it also means the richer you are, the bigger the subsidy you get.

Also means people over-invest in their homes and remain in homes that are larger than necessary for themselves instead of downsizing.

And renters get squat.

[Hikikomori]

Is it obvious that we should have roads, running water, someone that builds up the basics of society?

[carlosjobim]

> It's utterly insane to me that the step-up basis exists in the US, it's such an obvious loophole that can fairly easily be closed without many adverse effects.

Who do you think writes the laws and the tax code?

[presentation]

Yup, here in Japan inheritors have to pay 10-55% (progressive based on the amount) of the value of all inherited property globally within 10 months.

As an American, knowing that I could have gotten away without this tax had I decided not to live in Japan long-term, and knowing that I will have considerable inheritance when my parents pass is a bit of a downer; but logically speaking, the step-up basis loophole is BS and it probably ought to be this way, or some variant of it, everywhere.

[mackman]

If you exceed the inheritance tax exemption then you are taxed on the $10k so LTCG would be double taxing. You could argue that the inheritance tax should have a much lower exemption but double taxation is harder to justify.

[vel0city]

> double taxation is harder to justify

Bullshit. "Double taxation" is such a weak argument to me.

When I buy gas at the pump it's taxed multiple times. State sales tax. City sales tax. Federal gas taxes. State gas taxes. Quadruple tax on me there.

My wage income has several taxes. FICA taxes. Payroll taxes. Federal income taxes. Potentially state income taxes. Potentially city income taxes.

When I pay for a hotel there's often a bevy of different taxes on that. When I pay my phone bill there's a bunch of different taxes on that. Even getting a drink at a bar there's a sales tax and a liquor tax.

And all of that is on money I've already paid all those several income taxes on, so it's really all just stacking there.

Oh but boo hoo ultra wealthy get their massive inheritance "double taxed". Get bent crying over your "double taxed", I'm quadruple taxed and more all the damn time. Weak argument.

[commandlinefan]

> Quadruple tax on me there.

We have a problem with that, too.

[vel0city]

But like, why? It's a worthless point. If there were five taxes of one percent each versus one tax of 20% how is the one tax somehow better? Which one would you choose, getting taxed five times or once?

It doesn't really matter that there's a FICA and an income tax and a payroll tax in the end, what really matters is the overall tax rate and if that's fair given some moral decision of fairness of sharing costs of society.

If a city chooses to levy sales taxes and hotel taxes to capture more revenue from visitors because their town is a tourist destination and want to collect from tourists more than locals that's fine. I won't weep a tear for those getting "double taxed" on their vacations.

[caeril]

> how is the one tax somehow better?

Local and state taxes generally actually help you. Your local infrastructure is maintained, and your kids go to schools funded by your taxes.

Federal taxes, however, are largely transfer payments from the productive to the unproductive, as well as funding wars in areas that have absolutely nothing to do with you.

It's pretty easy to make the distinction between "good" and "bad" taxes.

[vel0city]

Completely ignoring the actual question.

>> If there were five taxes of one percent each versus one tax of 20% how is the one tax somehow better?

Would you rather pay five different tax authorities a 1% tax each or a single tax authority 20%? Not asking about the morality of those five tax authorities, in this example they're all the same.

The argument is against this idea "double taxation" is something inherently wrong. In the end it's not a matter of how many different taxes actually apply to a given transaction, what matters is the tax amounts and where those taxes are going to.

[8note]

I'm generally helped by my federal taxes going to help feed students in poor areas. Both from a feel good standpoint and that those students have a better chance at becoming more productive, which means they can buy stuff from me.

I also benefit from those foreign wars because they keep the US empire of cheap shipping open, so I can buy stuff for cheap from countries who've specialized in manufacturing

[oceanplexian]

Payroll tax is a problem because it’s not accounted for in your overall tax rate, it’s accounted for via lower wages. So you have no idea what your actual income would be if not for all the taxes your employer is paying.

[vel0city]

> So you have no idea what your actual income would be

Payroll taxes aren't some secret things which are impossible for an employee to calculate on their own. You're right, it's not usually directly shown to an employee on their paystub, but it's pretty trivial to do the math and see what your employer paid (or was at least originally liable before any weird tax handouts, but typically rare) for your salary.

I do think payroll taxes should be required to include on paystubs if even just as an informational aspect to people. People should have a real understanding of how much labor is taxed compared to capital. People see "capital gains is 15%? Gosh that seems high..." without realizing how much of their W2 income was taxed. Most people I talk to can't even ballpark what their effective income tax rate was, I often hear "oh I had to pay like $800 in taxes this year, that sucked!" No, you paid a lot more than that, you just didn't pay attention.

[cool_dude85]

What is "double taxing" and why is it bad?

[vel0city]

So much stuff has several layers of taxes on it but "double taxation" is really only used when discussing inheritance taxes.

It's a term wealthy people made up to trick poor people into feeling sorry for ultra wealthy actually paying taxes on things.

[JumpCrisscross]

> "double taxation" is really only used when discussing inheritance taxes

It’s a common concept, e.g. in the double taxation of corporate earnings and dividends.

[chgs]

But not when you pay income tax and then buy something and pay sales tax.

[vel0city]

You're right, its pretty common for the wealthy to try and trick poor people into feeling sorry for the wealthy actually paying taxes on things.

As my other post pointed out, tons of things have multiple layers of taxes. But the things people suddenly have some big moral issue with "double taxation" are things like estate taxes and corporate earnings and dividends and capital gains.

Few people bat an eye at us double taxing the low income nicotine addict. Everyone seems to want me to shed tears for the billionaire having to pay "double taxation" on their third vacation mansion they're inheriting.

Argue the rates are too low or too high for a given transaction. I can get behind that. But just crying because there's two different taxes being applied to a given transaction? Really?

[JumpCrisscross]

> people suddenly have some big moral issue with "double taxation" are things like estate taxes and corporate earnings and dividends and capital gains

People get plenty mad about sales taxes double taxing taxed income, too. Nobody likes paying taxes.

This isn’t a localised term.

[nobodywillobsrv]

Why should you be taxed on it at all?tax is policy. You tax things you want people to consume less of.

Inflation makes nominal values to up.

More inflation more capital gains. Gov is now incengltivized to inflate to pull tax out of realized assets that have not even gained real value

[scotty79]

What you tax is not really relevant as long as it doesn't disrupt some activity you want to continue happening. If it was up to me I'd tax spending not income. Regardless of what you are spending on. Bread? Sure! Employee? Yes! 10% of Tesla? Same!

[vel0city]

> If it was up to me I'd tax spending not income. Regardless of what you are spending on

Under this system the poor who spend the majority of their income just to survive pay the highest effective tax rate while the wealthier who save most of their income have the smallest effective tax rate. That sounds like a fair and equitable system to you?

[orionsbelt]

Sure, you can have transfers back to the poor.

[vel0city]

You're just moving the point a little along the scale though. So now instead of the super poor paying a higher rate, now it's the slightly less poor. And the slightly less poor as you keep moving that transfer cutoff point. You're still going to have some point where the wealthier are paying a significantly lower rate than those who make a good bit less than them.

[scotty79]

At appropriate level of transfers the cutoff point is at millionaires you no longer can call poor in good conscience.

And people below cutoff point thanks to transfer effectively pay negative tax.

[scotty79]

And yet the rich spend vastly more money than poor. You can see it trivially by noticing that the poor have all their money from the work that they do for the rich.

Taxing spending would be way more equitable than whatever we are now doing.

We are already doing some taxation of spending. VAT, sales tax, social security fees. All of those are paid by buyers of goods, services and labor. If we did the same for investments government would have so much more money to deal with the problems instead of borrowing it from commercial banks at interest.

[vel0city]

> And yet the rich spend vastly more money than poor

You're just totally ignoring the effect of effective tax rates.

Sure, the billionaire spent way more money than the poor person. But who spent a higher percentage of their income? And who had vastly more opportunity to spend that in a place outside of that sales tax jurisdiction? Are the poor people flying to other countries to buy their luxury goods?

To you, is society fairer for poor person and the billionaire to pay the same nominal amount or the same tax rate? Is it even fair/good for the poor and the wealthy to pay the same for either of these values?

[scotty79]

> But who spent a higher percentage of their income?

Everybody knows. That's because we tax income. And income, unlike spending is easier to muddle. You can always fabricate a loss or at least a temporary loss to avoid paying taxes on your income. It's harder to hide spending.

> And who had vastly more opportunity to spend that in a place outside of that sales tax jurisdiction?

It's just as easy today to move your profits to another country if you are rich.

If you tax spending, you can just tax money transfers to other countries as spending. Rich can fly wherever they like but they still had to pay taxes on the plane they bought, fuel they put in and all the money they spent on their trip.They could buy crypto, but guess what, on crypto purchase, also a spending tax. They can even move to live in another country till they die, but still their money transfered outside of their home country into their new one, taxed on exit.

You brought the money into the country because you are in the business of exports? Great, here's a tax credit. You may deduct it from the tax you pay on your excursions abroad.

The problem is not what is the moral thing to tax. The problem is how to do it efficiently with no loopholes without affecting desirable behaviors negatively and promoting undesirable ones.

Taxing spending would also help with vast empires that cosist of inherited money. Income was already done, century ago so there's nothing to tax. If you try to tax wealth, so many people would equate it to theft. But if you tax spending ...