It's an unfortunate fact that significant change happens rarely without large convulsions, e.g. after a major war, because I don't see this being sustainable even medium-term.
[0] https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce... and subsequent
One can simply look at historical income taxes in the USA and their progressiveness and conclude that over time taxes tend to regress until some economic calamity or war happens, after which taxes become extremely progressive again for a short while (top income tax rate bracket of 75% to 90%).
See for yourself, it's all there:
https://files.taxfoundation.org/legacy/docs/fed_individual_r...
1: https://www.davidsplinter.com/AutenSplinter-2024-ReplyToPSZ....
2: https://philmagness.com/2014/12/an-empirical-critique-of-tho...
3: https://qz.com/1725562/elizabeth-warrens-economic-advisers-a...
EDIT: Here is the rebuttal for 2 by Piketty himself: http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec... courtesy of andrepd
Who has not been criticize in their methodology? Who do you expect to avoid any amount of "controversies" for such a political subject?
Your comment seems to be pure ad hominem. Also, discarding authors because they're French is kinda stupid: historically, quick advances in a field most often start at one time and place.
It would be like expecting American economists to be very libertarian, or Chinese economists very interventionists. The culture of their countries reflects their ideas.
NB: J'habite en France
Because the politics precede the findings
I think it's important to separate the empirical and analytic part, to which you can apply objective criticisms, to the political part, with which you can agree or not but which should have no bearing on the former part.
Anyway if you want to be honest you can also link to Piketty's rebuttal to the criticism, e.g. http://piketty.pse.ens.fr/files/capital21c/en/Piketty2014Tec...
I agree, there is a difference between the technical and political parts. Sorry if I seemed dishonest, but I cited both the 2014 critique as well as a more general 2024 PSZ critique (from right wing POVs) including other economists who usually post on the same subject of income inequality. I will edit my original comment to include Piketty's rebuttals.
And what do you suggest for those that don't have any inheritance?
Lack of housing is a disconnected problem from inheritance taxes.
The decision is not necessarily wrong. But the reasoning to base someone's fortune on the merits of their parents is very arbitrary. Why not base it on their own merits or needs?
This assumes that each family only gets a single house. With enough wealth you can buy out all the houses (not considering other factors)
Only if you don't build enough new homes in places where people desire to live, because you can own a home - just not where you want to actually live.
The reason there is an issue with housing is the same reason why these articles appear declaiming the political risks (notice, Stigliz only says the risk is political...his friends losing office) of inequality.
This will continue forever, it is ingrained in human nature, it is why it took tens of thousands of years for economic growth to happen from the birth of modern human society.
Why are houses so expensive? Alongside challenges and inefficiences related to permits and building (as plenty discussed elsewhere) housing is also used as an investment asset by people with money to invest. This ranges from individuals buying an apartment to rent out, to large investment and private equity firms buying up whole swathes of real estate. When the global money supply is increased (e.g. post-2008 crash, post-Covid, etc.) a lot of it ends up with the rich, who then invest directly or indirectly in asset classes including housing. (Also see how e.g. classic car prices have increased since ~'08).
Until this mechanism is recognised as the cause of asset appreciation and measures are put in place to reverse this trend, the current cost-of-living issues will continue to worsen. Sadly, most politicians are already rich enough to benefit from this situation, and so --in the unlikely event that they even recognise this as a cause-- are unlikely to strongly advocate for measures to address it. Additionally, politics in many countries is too intertwined with big business to mean that such a revolutionary concept would be entertained.
tl;dr: addressing the huge progressive accumulation of wealth by the rich --of which inheritance is one aspect-- is what is needed to address the continual appreciation in so many asset classes, including housing.
What do you mean "until"? It's the core of many of European "dreams".
Take UK for example, where there's a concept called "property ladder". This property ladder is the promise of ever increasing property values, to build wealth(it's a pyramid scheme). This "always appreciating" promise is not just subtextual, it's literally the core of the method for becoming wealthy.
Whole economies in Europe are built around this constant real estate appreciation and first-home-buyers' support.
This is becoming the case in US as well, to lesser extent. US has a much more dynamic property market, than the wealthy Europe.
Politicians will bend over backwards to protect this "dream"... and at this point it is screwing over the new generation.
Sorry if I was unclear; I'm not referring to the "housing ladder" here, but rather that the accumulation of wealth (accelerated in recent years) by the already-rich has driven investment patterns that have in turn driven the appreciation of many asset classes that sit behind the current "cost of living crisis".
If one accepts this premise, then an obvious solution would be wealth taxation, of which inheritance tax is one form. But very few people in the politican/economics sphere are seriously talking about wealth taxation. (There are some, e.g. Gary Stevenson, and Zack Polanski is gently flirting with it as a policy.)
Right now (where i live) you pay a big tax on inheritance, this is ok if you only inherit cash. In 99% of inheritances this is not the case. You inherit family home, a cottage etc. Then you must sell because you cant afford to pay for it. Now the asset is gone forever and the next generation will most likely inherit nothing.
Its really hard to keep anything of value in the family because of this, that one house that was purchased for 60K is now somehow worth 600K (even it has all kinds of problems) and you need to take a loan just to keep it.
By taxing inheritance its sure that decendants that work basic jobs will forever be poor.
Someone who wants to spend an inheritance is going to do it, whether it’s liquid (cash) or marginally less so (real property)
Once you sell it you pay more taxes. Do you think any of the money you got will go to your kids, or even grandkids? Id say in 80% of all cases it will be long gone before that time comes.
This incentivises the rich to split up their fortune, and allows the poor to keep control of objects with emotional luggage.
That said, if the value of your house has grown tenfold, it is most likely because the community added that value. And so I don't think it is necessarily wrong if that same community sees some of that value back.
Ridiculous straw man, because this is like saying income tax should be abolished because minimum wage people can't afford it. Yeah no shit that's why it's progressive. In the case of inheritance, even a 0% bracket until ~1M$ will mean the tax leaves the middle class entirely unaffected while ensuring massive feudal-levels of generational wealth are at least curbed, and turned over to the commons.
This means your 800K asset maybe gives you 650K, and from that sum you still pay the inheritance tax + sales tax (thats usually in the 20% range).
You will likely get somewhere in the 450-500K for an asset that was worth 800K.
This is how to poor will remain poor.
The whole property market in UK is a pyramid scheme, time to realize that.
The whole system is FUBARed.
we all make our own way in the modern world and i feel as a society we try to not just leave it to fate and how gilded the vagina you crawled out of was
What you do with your life is up to you, but having a guardrail can make life just that more pleasant. Life should not be about counting cents and going from pay-check to pay-check.
The inheritance tax has to go somewhere. It could go into science and infrastructure and then everyone gets richer. Or it could be paid out as a dividend, then everyone below the average gets richer. There are many options here. Just saying "inheritance tax bad" without talking about the output side of such a tax is by definition going to be... well.. weird.
So we shouldn't really argue for raising or lower taxes, we should argue for spending it better.
Isn't the fact that the ultra rich are using their wealth productively the reason we have growing wealth inequality? Because active money grows faster than inflation, which is why they get richer compared to the rest of us over time.
There is some kind of bizarre world that we live in that the article has a quote from Ramaphosa, the totality of his extraordinary wealth was generated by corruption, on the terrors of inequality.
Hoarding is, generally, not a real problem because it requires believing that wealthy people are not greedy. The problem is that most societies heavily incentivize irrational behaviour through disincentivizing investment. Strangely, these same places also have political cultures that focus heavily on inequality (again, there is no better example than South Africa) because genuine openness tends to be very disruptive politically.
There is no way to square the circle. The solutions are known, the problem is that human nature and political culture tends to prevent those solutions being realised (as it is more politically beneficial to continue to sell people lies: it is this group of people, they are the problem, if we can take their money and give it you then you will be rich).
If a net worth of $2 mil is considered outrageous then surely that kind of salary would be considered equally so.
There should be no wealth tax, but above a certain threshold - there should be a maintenance fee associated with the wealth. I get charged maintenance fee by my mutual funds, for example.
One of the purposes of the government is to protect and secure property... and that is what ultra wealthy are getting for a fraction of what they should be paying.
There is a lot of low hanging fruit.
Arguably capital gains should be taxed at a higher rate than income. But that's not going to happen, because your home's change in value is capital gains.
That rate will not be where you and I live. It will be some tiny foreign government.
Cool, cool. Work for 30 years, save up and have say $3M to retire on, based on stock market at an all-time high. You're not a robber baron or investment banker, just someone who worked a long time and saved and invested. Govt takes $1M away from you, you have $2M now. Market drops 25%. Now you have $1.5M.
Congrats, your "plan" resulted in someone like that having HALF of everything they saved up just gone.
Yeah, yeah, I know, "if you have $1.5M you don't NEED any more money." Sounds like something that only someone with something less than $1.5M would say.
You don't "need" your iPhone, or your flat screen, or whatever. The government should not be in the business of determining what you "need" and taking the rest.
The benefits of wealth are exercised long before the inheritance can be applied.
Your first home down payment, your education, your wealth generation while being on support by your parents, etc. - will push you off the ground faster, than any inheritance in a world where people easily live to 80-90. Most people hit retirement age, by the time their parents pass away.
Inheritance tax doesn't work anymore, in any case.
It's not the 19th century and we shouldn't try fixing 21 century issues with 19th century remedies.
Well, not quite.
Agreed.
But isn't that an argument FOR a strong inheritance tax? Because inheritance doesn't actually help your children anyway? That seems like it was your argument.
With that argument taking 100% of the inheritance as tax and taking 0% is exactly the same, as the wealth transfer was done before anyway.
Wealth disparity doesn't grow because wealthy people are allowed to retain their generational wealth or not, it grows because the rest can't build and retain their wealth.
This isn't a zero sum game.
PS: I would also not trust the government or any political body to handle income from the inheritance taxes. So I would rather the children of wealthy people squander their wealth, than a politician transfer that wealth to their patron.
Most 80 year olds know they arent going to live forever and would probably just transfer their assets a little early.
But America is so thoroughly owned by the wealthy that implementing one of these solutions is not desirable. The legislature in America only works on behalf of the ultra wealthy and any legislation that passes will be to increase the magnitude of the wealth gap.
A lot genuinely have no idea that there's a very high lower limit on inheritance tax... at the same time they hate the ultra rich.
This is genuinely a very schizophrenic country.
If you think you’ve seen zany tax schemes, just wait till they try implementing something as crazy as a 100% tax.
There’s also a moral question of why you feel entitled to not just a majority of the fruits of my labors, but apparently all of them.
I feel like communism is inevitable at this point. People know communism isn't the solution, but they will still vote for it because at least it pretends to stand for equality.
We're going to reach a point of such extreme inequality that even the pretense of equality provided by communism would be welcomed by the majority.
In a way, the pretense of equality sets a floor on inequality; because, in a communist system which calls all humans equal, any actual inequality has to be either hidden or justified... This requires effort. A system which pretends to stand for equality can only become so unequal before it loses its ability to justify itself; then it collapses.
By contrast, our current system makes no claims about human equality, quite the opposite; it exaggerates and propagandizes the inequality of humans and human ability as a means to justify its failures in terms of human resource allocation.
For example, our current system sees homelessness not as a failure of its resource-allocation capabilities but as a kind of efficiency. It does so by dehumanizing the homeless; painting them as lazy and incapable of value-creation; deceptively conflating 'value creation' with 'value extraction' in the process. Our system keeps trying to portray the 'value extraction' endeavors of the entrepreneur class as being on the same level as the 'value creation' of the working class... They will not acknowledge the reality that 'value extraction' is the main cause of wasted human potential.
It is our current system itself which fails to efficiently allocate the most valuable resource in society; people's time and energy. Our current system implies that human life is of such low intrinsic value, that some people aren't even worthy of having a roof over their heads, all while it deprives them of their right to build their own roofs (with regulations).
Our system loves to blame individuals for its oppression and it loves it even more when they blame themselves for it; it seizes any opportunity it can to demonize beaten-down intelligent people who understand the mechanics of its oppression and it idolizes egotistical idiots who have never experienced struggle and who therefore don't have much difficulty in taking full credit for everything (good) which happens to them...
It's not difficult to take full responsibility for your situation when only good things happen to you... But watch how these people behave when things go belly-up. They're off to the Caymans, never to be heard from again... The system is remarkably lenient on them.
They'll have an epidemic of geriatric domestic terrorists on their hands.
According to the same people. Passing $1mil to your children is immoral and should be banned.
I suspect they love expensive shiny things and hate their children.
For those who say this is the only way people get ahead, you are correct but you're missing the point. That shouldn't be the case and it's non sustainable. In the 1990s, the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society).
I've come to believe that this century will see a point where there's simply nothing left to exploit, nothing left to transfer from the working class to the ultra-wealthy. And as has always been the case historically, that's going to end with a more violent form of wealth redistribution (eg French revolution, Russian revolution).
10x in 35 years is compounded rate of return of under 7%, which is not far off the average mortgage rate over that period of time. Add in some maintenance and that might even represent a loss in real terms over that period of time.
Wages aren't 10x in that same period. All the increasing house price has done is transfer wealth from the younger generation to the older generation.
The underlying problem for the UK is wages - workers make less in real terms and pensions paid to the older generation go up by the highest of all the rates.
Taxation is the transfer of wealth from the younger generation to the older generation - the older generation paid less in and are getting more out.
People keep saying things without understanding what that means. Only reason why anyone even wants a home is because its profitable to them on the longer run. Else renting works.
Either way the demand for home ownership will be way less if you simply tell people they will make big losses on that purchase.
That said, now imagine how housing works in a world where no one wants to buy a home, but everyone wants to rent one. That is you want to rent a resource which no one is building at the first place.
There's no point paying a fortune to have all the people who created the most value leave your country just so you can reduce a pointless metric, especially when all it does is get the state more money to spend on itself rather than reduce your costs or increase what you get for your costs.
Assuming that the money is all used for altruistic purpose, I could agree with your point. But we know that this money is often used for not so altruistic purposes like investing in PE which asset strip the productive parts of economy or use the money to influence politics and elected representatives via lobbying.
In most advanced economies today, that's equity. The ordinary person thinks of wealth as money lying around in the bank, which the rich person refuses to spend on anything useful. And instead either hoards, or spends on luxury things which cause resentment to the remainder.
The real question is for most people today its easier than ever to invest and then give it to their children. Why aren't people doing it?
You mean the workers? Why would they leave if inequality is reduced, that would mean their standard of living would increase?
Anyone who wants to leave is free to, people are tired of the threats, just do it already. The people who leave will be spiting their own faces, and the people who stay behind will fill the demand vacuum.
Do you really think a world with extreme power inequality is anything good?
It's in the 263th position, alongside posts from 4 days ago, and keep rapidly going down. Really weird.
The classic one is the changes in Sparta’s inheritance system that essentially caused their downfall.
Originally every citizen had an equal plot of land, the economic base that allowed him to be a hoplite (Sparta help ~80% of their population as slaves, helots, as state property). But as Spartan men died in wars, inheritance laws were forced to let daughters inherit and merge estates through marriage, wealth, and land, and thus it all concentrated fast. By Aristotle’s time, nearly half the land was owned by women outright, and the number of citizens had then fallen to a few hundred as citizenship was tied to these land plots. The result was that the city that once fielded the most formidable army in Greece simply ran out of Spartiates to fill the ranks. Perversely, they all kept this going instead of breaking up the consolidated plots, as citizenship was tied to freedom and voting power. So, the less of them there were the better off the rich were, as they had more voting power and wealth at home (wealth was land, as Sparta forbid money in it's borders, well, sorta). So, power domestically was inverse to foreign power. And we all know when countries get into these situations they always go towards domestic power over national security.
farseer•3h ago
kwanbix•3h ago
cynicalsecurity•3h ago
Drakim•3h ago
blargthorwars•3h ago
Greed is an innate human trait.
Drakim•3h ago
JAlexoid•3h ago
Those are not the same, but too many don't know what's the differrence.
cynicalsecurity•3h ago
JAlexoid•3h ago
BTW: Most of the world lives under state capitalism, not capitalism, not socialism, not any other form of economic system. The state has an unrestricted claim to any and all of your wealth.
dekken_•2h ago
amelius•3h ago
If this were universally the case, open source would not exist.
dekken_•3h ago
esarbe•3h ago
European social democracies are among the top of the wealthiest countries in the world.
[1] https://en.wikipedia.org/wiki/Social_democracy
cynicalsecurity•3h ago
esarbe•47m ago
You seem to confuse capitalism with market economy. Germany's social market economy was conceived as an alternative to capitalism; a market economy with strong focus on unions and social fairness/justice. In other European countries is very similar.
Socialism core principles have always been égalite, solidarity and democracy. It's pretty silly to think that a highly hierarchical, unjust and undemocratic system has anything to do with Socialism.
Hint; it doesn't. It might say so on the marketing material ("Socialist Republic!") but that's just that - marketing to fool the numbnuts.
b3lvedere•3h ago
u_sama•3h ago
Argentina (the end game of social democracy) pre-Milei had a huge array of taxes and regulations which lead to the state misusing that money to actually enrich a small elite of politically aligned. Similar things and arrangements (under the form of subsidies to companies) will happen under Trump and levying more taxes will just give more opportunity for corruption.
andrepd•3h ago
Hence the proposal by many economists that the only solution is a broad agreement on a global progressive wealth tax, with at least the major blocs of the US and EU on board. See e.g. "A Brief History of Inequality".
u_sama•3h ago
The same proposal is also criticized by many economists too, who argue that inequality has not risen as sharply as Piketty's crew claims, or that the bulk of that inequality is linked to the real estate, for which the only solution is build more houses and destroy the capital accumulation of older generation to the profit on newer ones.
1: https://www.brookings.edu/articles/deciphering-the-fall-and-...
andrepd•3h ago
But I would argue that the situation in housing is actually a consequence, and not a separate phenomenon, of the broader issue of inequality-driven asset price inflation.
u_sama•2h ago
JAlexoid•3h ago
The problem with countries like UK is that real estate is the only way of obtaining, growing and keeping wealth there. And I mean the only.
analog31•2h ago
Bissness•2h ago
CogitoCogito•3h ago
JAlexoid•3h ago
u_sama•2h ago
In France wealth tax was repealed in 2017 I think but will be soon reintroduced under a new form.