The Preventing Paris Hilton Act of 2013

I am a Norquisian when it comes to taxes, but the estate tax is something that even I would support. I would put it more like this:

40 percent Federal levy on any inheritance over $5 mm. Max 50 percent, so the states can tax up to 10 percent. The states can also tax on inheritances between $1-5 mm, but the Feds can't.

And also, most importantly, some sort of provision to make sure that small businesses don't have to shut down or be divided up because of an estate tax issue.

What do you say about the people that work so hard to leave their estate to the future generations? Seems a little unfair that you can fully dictate what I can or can't do with my ENTIRE wealth.

If I ever generate significant wealth, I plan on gifting what I'm leaving to my future generations to my parents/trustees/other offshore individuals so they can set up an offshore family trust and name my children/grandchildren beneficiaries. This way I can circumvent whatever estate tax exists here in Canada. (BTW, just so you know, a lot of very wealthy Americans, including some of those who you hear about in the news, have been doing this for years)

Just for the record, Paris Hilton would be impacted by this law but the Kardashians would not (as Robert Kardashian generated all the wealth). Life's a bitch.

No offense, but Paris has probably generated more money from her ventures (clothing, fragrances, night clubs, beverages just to name a few) than most of the WSO community members combined. The fact that she is an awful actor/singer doesn't change the fact that she is extremely good at marketing herself and her brand.

I'll admit Eddie, reading this made me want to punch someone in the face in anger, but unlike most arguments for the estate tax I respect your argument even though I don't agree whatsoever with what you are saying. I'll give you an SB anyway.

Eddie, I may be mistaken, but I thought I've heard you argue for a simplification of the tax code. This misses the boat big time there.

I believe that there should be no estate tax, but I realize that it's inevitable. However, this plan would be a disaster in my opinion.

Not saying I don't like the intent behind the idea, but I can assure you that it won't work. All of your provisions (and, in your defense, probably any provisions created by memebers of congress) are easily evaded by the formation of various types of trusts (as well as any number of other strategies).

I really can't get behind any estate tax. I theoretically favor equality of opportunity, but the freedom to distribute my money how I see fit takes precedence.

The only reason I'm doing finance is to make enough money to ensure that future generations have a better quality of life. I don't have expensive tastes - my marginal utility for additional income drops like a stone after $60k. But I want to be able to send my kid to Exeter and possibly buy his way into my alma mater.

The estate tax does not make sense to me - it is double taxation (maybe triple, depending on the source of the wealth). And I think it is unnecessary. If the heirs really are dumb, they will have squandered their inheritance soon enough. And I think Paris Hilton is smart. She might act dumb, but she has managed to create an actual brand based on her image. I respect her more for doing that than if she had just pursued a C-level career in hotel management.

Always nice to watch the decline of a once great empire. What a disgusting nation we have become. A person works their entire life only to watch the government take what they have earned because they deem it fair.

I suggest people with great wealth simply leave the country, liquidate their assets and continue to file, while never paying, their tax returns.

Listen up boys. It is your true American duty to do all that you can to minimize what you pay into this diseased and parasitic government. Any nation that doesn't respect property rights is a nation doomed. To think brave Americans died protecting the ideals of this nation to now watch it destroyed is sad.

The estate tax is 100% wrong and immoral. Honestly, I would liquidate my wealth and burn it before I would give it to the government. Just make sure you go bankrupt right before you die. Anything is better than giving the money to this country.

That would work great ... up until every family farm got killed off by it.

Eddie,

There are still ways around it and loopholes to be had. Structuring access to capital without directly passing it on is still feasible under your plan. I can already see it now.

I think you guys might be missing the intent here.

I'm dead set against any estate tax, I merely wrote this up to get your input on what a "fair" estate tax might look like. Instead you guys are looking for the loopholes.

For the sake of further commenting/conversation, just assume that all the loopholes have been closed and that it is impossible not to give up 100% of your estate (with the exception of the noted exemptions) when you die.

Look at it this way: you're not gonna need the money when you're dead. And I understand wanting to give your kids a better life than you had, which is why I included the one-time exemption for your kids. But let's be honest: you're at least once removed from your grandkids, which is why they're only gonna see $1 million from you each at the most. Beyond that (great grandkids, etc) you're not even gonna know those jamokes, so they're on their own.

Awful idea,

1) There would be little means to enforce this, you would see capital flight out of the U.S., more shadow banking in the Caymans , etc.

2) Consider this:

"Consider the story of twin brothers – Spendthrift Sam and Frugal Frank. Each starts a dot-com after college and sells the business a few years later, accumulating a $10 million nest egg. Sam then lives the high life, enjoying expensive vacations and throwing lavish parties. Frank, meanwhile, lives more modestly. He keeps his fortune invested in the economy, where it finances capital accumulation, new technologies, and economic growth. He wants to leave most of his money to his children, grandchildren, nephews, and nieces.

Now ask yourself: Which millionaire should pay higher taxes?... What principle of social justice says that Frank should be penalized for his frugality? None that I know of."

3) You would be massively distorting investment decisions. Made $10 billion? Better blow it quick.

Plus a ton of economic literature against it: http://www.minneapolisfed.org/research/QR/QR2331.pdf

http://jeffreyalanmiron.typepad.com/jeffrey_alan_miron/2006/06/estate_t…

http://www.nber.org/feldstein/wj071400.html

Of course there are some economists for it:

http://www.nytimes.com/2010/11/07/business/economy/07view.html

Brad DeLong, etc.

However, I know of no one in favor of a 100% estate tax, while several economists are in favor of a complete repeal.

Bottom line your program would be just awful for the economy (no offense I hope).

Every discussion about estate taxes ignores a very important element. The gestapo, sorry, IRS, calculated your assets and then levies a tax. Many people have illiquid assets, such as homes, farms, etc. Unless a person has an appropriate life insurance policy or savings to pay for this they have to liquidate these assets.

I really think we are watching the true failing of Democracy. A government for the people by the people has one very massive flaw. It relies on people. This is why everyone needs to pay taxes to the government and needs to have skin in the game. When you have a nation of free riders electing people who promise to take from those who pay to simply gain votes you create a vicious cycle.

Do whatever is possible to pay less. Every dollar sent to the government, at least Federal, is a wasted dollar.

Seriously why can't every government be like the Swiss government?

If Paris wasn't rich she would be some dime piece living a decent life. I'll never understand how we can extol that we are the land of opportunity and shouldn't punish a child for the sins of their parent, but if that parent is rich and provides for their child it is fair game to shit on them.

I spend no time thinking about Paris Hilton's wealth. Wealth is not finite. The people who give a shit are simply jealous, a weak and distasteful emotion. Frankly, I can tolerate Paris being a spoiled bimbo, but I absolutely hate whining and pathetic people envying her wealth. Go make some of your own and stop looking toward the government to solve all your problems.

Yeah I mean laundering Nazi gold is pretty sweet and all.

I would rather let a dumb rich kid waste their money than watch the federal government do it. I realize that taxes are going up no matter what and probably need to, but I wish there was some way for people to monitor a return on their money when the government wants to take more of it...

What property rights do you have when you're dead?

While I don't agree with it, I respect your point. America has a tendency of breeding some of the most useless, morally devoid, reprehensible humans in modern history.

That being said, in the long term, I believe the consequences of implementing said inheritance tax will significantly outweigh the benefit. Perhaps I'll get shit on for this, but Americans--whether rationally or not--do not like paying taxes, and love the notion that grandfather's textile manufacturing firm is their own, wealth and prestige included. I'm sure you've already witnessed first hand the flight of wealth from France after their recent wealth tax hike. What you're positing is no different than a deferred wealth tax. In the face of a 100% wealth/estate taxation, people will more than happily take a 35% cut and move elseswhere, just as Gepardieu and surely hundreds of wealthy French are doing.

And no inheritance from funds generated from seed capital? This one makes my blood pressure rise a bit, but I respectfully disagree. The 'lucky sperm club' argument is invalid here because it presumes that a child receiving an inheritance chose to be born in US. So who deserves their family's wealth more: the government, or the grandchild of a successful entrepreneur? The "same starting line" notion is pretty neat and fuzzy and all, but it's one America has never endorsed through policy. A tax code based on "deservedness" is a slippery slope. Not to mention, the premise ignores the millions of folks who inherit money and wind up more productive and hardworking than those who don't.

And all this for the sake of what? On my scale of important issues facing the US, the precluding of rich socialite media whores falls somewhere between Amendment 64 and Herman Cain's existence. Won't happen, especially if you expect Congressmen of all people to implement it. $.02

I just never understand the increase taxes to help the poor argument. It is purely utilitarian, which is fine, but helping people who provide a marginal benefit to society is counter utility. If you want to increase taxes to fund innovation or pay for school for smart kids, fine. But to waste it on government expansion and social programs beyond basic safety nets is negative utility production.

We need some limits on Democracy. Especially with a populace that is largely uneducated and not contributing to the tax coffers.

Eddie I was going to say this is worst thing I've every seen written by you but I saw it was just a hypothetical and not that you just been spending too much time in France.

As someone said property rights need to exist, this isn't Elizabethan times when the crown can just seize Somerset house.

Worst case scenario a billionaire keeps their money in the bank then the bank takes the cash and invests in assets or stores it back with a central bank creating jobs and money flow. If they wish to produce a yield to combat inflation and also an income that is net positive they also invest in higher risk reward assets which that also creates jobs and money flow.

You see as generations pass usually their 'nestegg' starts to become negative cash flow and eventually lose it all or if gets handed down to many relatives and disburses out from there. Very very few families hold on to it for many generations or it slowly inflates down in real terms. Simply having two kids essentially halves the money per person (math right?).

If the world wealth is zero sum game it's the role of other participants or entrepreneurs to take existing or new resources and create a bigger yield taking money from the spenders to them. This adjusts wealth all the time, never has it been easier to be born into a card board box and end up sipping Armand de Brignac at Le Louis XV.

I'm fundamentally against any estate tax, if there are too many net savers change the monetary policy. Doing this in a practical sense would rarely lead to changing your fiscal problems or evening out of society it would lead to a lot of manipulation and slow down the overall rate of growth IMO. You're not motivating society to excel.

Your hypothetical would also have big unintended consequences like in poker you have chip dumping you would have nest egg dumping between families etc or it would lead to excess risk or some form of transfer because as someone said it would be better to just burn the cash then give it to the government.

PS- Paris is an interesting example though because although you might say she is useless she actually has a high value priced in by society, she was paid $600k just for NYE in Sydney 2008 for one night, she is probably a massive earner same with the Kardashians (Kim 18 mill for a wedding anyone).

Yeah, I mean if the argument for transfer payments to the poor is that they spend the money right away, thereby stimulating the economy, imagine the level of economic stimulation Paris provides. Not to mention the state and local sales tax.

People are just haters in this society. Let them eat cake.

By the looks of it, it seems we have a large number of people planning on inheriting a bunch of money here.

If we have an amount of tax revenue we need to raise (not debating what that number should be), it seems that death/inheritance taxes are one of the least offensive and have the lowest impact on economic growth. Would you rather raise a dollar from income, property, sales, capital gains, or death/inheritance taxes, all else equal? Even if you are a libertarian, you still need to levy some taxes.

Sales or Income. Property rights are trashed in this country. The fact that you can "buy" property and then lose it because you fail to pay taxes on it is disgusting. Same with inheritance, money that was taxes as you earned it and taxes on the gains it made.

We have so much to cut that raising taxes is just blasphemous. When we have an efficient and pared down government, THEN we can talk about possible ways to increase revenue.

I take Eddie's post as tongue in cheek, but the points raised by his post are often the subject of serious discussion. Many people cite preventing the rise of trust fund kids such as Paris Hilton and encouraging an affinity for "hard work" among offspring as reasons for a confiscatory estate tax. I seriously question whether these are actually desirable things to encourage for two reasons.

First, I wonder if we are overstating the negative impact of "trust fund kids." Yes of course, Paris Hilton does some reprehensible things and we all know rich trust fund kids that are fuck-ups. But for each fuck-up there are also quite a few "rich kids" that add a lot of value to society. I've seen a few businesses successfully passed down from wealthy father to son and the son has taken this responsibility seriously and works just as hard as the father did. And I think we all know that statistically speaking, wealthier people generally have better educations, better work ethics, create better family environments, and raise more successful children than their poorer counterparts. Why that is the case is a separate discussion, but I raise it here to point out that I don't think wealth is this all corrupting force and that any kid with a rich dad is doomed to a life of cocaine and hookers.

Second, have we stopped to consider the full extent of the message we are sending to our kids when we tell them they are not getting squat and they should "work for it?" Yes you are telling them they will need to be self sufficient and industrious, which are certainly good qualities to instill. But we are also indirectly telling them that money is the most important thing in the world and should be the sole focus of their lives. You want to teach kids algebra because that's what you enjoy? Fuck you, that doesn't pay - be an accountant instead. You want to become a world class ice climber? Fuck you, get back to your desk and print more powerpoints so you can pay the mortgage like a responsible person. Why on earth, when we could give our kids the opportunity to have the absolute freedom to pursue what truly makes them happy no strings attached, would we condemn them to a life of sitting in a cube chained to a desk? To "teach them life lessons?" That's your job, not Bob the MD's at Goldman Sachs.

This famous quote from John Adams sums up why I'm opposed to the inheritance tax in principle:

"I must study politics and war that my sons may have liberty to study mathematics and philosophy. My sons ought to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture, in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain."

In the same way, I must study politics and business that my sons may study art and science [without being tempted away for want of money].

Back in the day you used to needed to have property or wealth to tax to vote. Boy did we go wrong. When some clown paying zero has the same say as me who pays 30% things are not as they should be.

http://en.wikipedia.org/wiki/Voting_rights_in_the_United_States

There will always be loopholes to avoid taxes

Man, DCD, I seriously love the fire you are bringing. Preach on brother!

And wealth is nothing more than taxed income, saved. Punishing people who save, just like the Fed keeping rates low.

The difference is property. If you work or purchase something you are actively doing something. Once that money is taxed it becomes your personal property to do as you please. When you tax inheritance, which is nothing but saved money that you are posthumously giving to someone or something, then you are infringing on property rights.

But I can buy less property if they tax my income or through a sales tax. Also, I believe property taxes have been around much longer than income taxes in this country.

wonderful, we can create another department to handle such tax issues. & creative money laundering : offshore tax shells to bankrupt Joe Sr's holdings, repatriation stateside back to Joe Jr's companies.

You can tax income and consumption. Once it is taxed it is yours, whether it be the remainder of your paycheck or the TV you just bought.

This argument is nuts! Eddie, where do you live? France?