> Tax advantages are another reason. The high taxes on assets in France and the inheritance tax in the U.S. prevent the accumulation of capital necessary for the formation of a strong mid-sized sector.
Ya this is propaganda (inheritance taxes affect mainly the very wealthy, not the lower and middle classes). Germany's real secret is that labor still has voting rights within corporations:
And actually if you look at the history of the United States, the civil rights movement depended on a strong labor sector. They don’t teach this in schools, but Martin Luther King, Jr was a threat to the establishment more for his emphasis on unifying workers than for breaking down racial barriers:
The labor movements between WWII and Ronald Reagan’s election led to the US becoming the largest industrial superpower in the world, with some of the highest per capita incomes. The loss of unions and the decline of worker’s rights in the US (and accompanying stagnation of wages post-2000) coincide exactly with the loss of civil rights as we’ve moved to a more authoritarian society.
Things like the loss of habeas corpus under GW Bush and Obama just blow my mind, and I think if the electorate knew what was really going on they would not elect the people they do. But they don’t, that’s why capitalists have traditionally pushed for the privatization of public schools and funding propaganda (infotainment) to preserve the echo chamber. The more striated, divided and polarized a society is, the more wealth can be concentrated in fewer hands. Older nations like Germany have a better handle on this because they’ve seen it repeated in history so many times and are more aware of the dangers of unilateral thinking and monarchy. Inclusivity has paid off handsomely for them.
Yeah this sounds like a bunch of baloney. Inheritance continues to be the most likely way for people to get rich in both the US and France, and the tax is nowhere near the amount that would cause a serious dent in the assets being inherited.
I've heard the argument that, with high inheritance taxes, the heir of a family-owned company has to sell parts or all of the business in order to pay the tax. I don't know enough about the issue to say whether there is some truth to it.
The one direct exposure I have had to the issue of inheritance tax was with a small Midwest-based distributor. The owner was very old and wanted to pass the company to his daughters, who had actually been running the business for decades (and when I came along, his granddaughters were working the office).
His issue was that what the government decided his business to be worth could only be paid with more cash than his business generated in 5 years. This meant that his heirs would have to mortgage their shares to cover the inheritance tax, which places ownership into a different category of investment.
The owner could have gifted a small interest in the company
to each daughter, grand-daughter, and perhaps their spouses
in each year of those decades, letting subsequent value growth
and inflation accrue to the surviving family members.
And also, perhaps transformed the company ownership structure
into a limited partnership as well, claiming a lower market value
for the shares owned by limited partners.
tl;dr: First rule of US estate planning: Die broke.
This is exactly what should have been done, but requires a longer term commitment, as well as releasing _some_ control while still alive. (both of which I think are a good thing in context)
Note especially the discount from fair market value
for shares of interest in an FLP.
[usual disclaimers - not a lawyer, not legal advice,
see a qualified professional in your jurisdiction, etc.]
The problem with tax/estate planning is the same problem as insurance
- the time when you really want to have done it
is often the time when it is too late to get it.
(e.g., founder/owner is dying, building is flooding or on fire, etc.).
That sounds like a failure of tax & estate planning. If you wait until you are very old to give away your assets you are putting yourself in the pay-the-most-inheritance-tax position. If the daughters had been running the business for decades already, they would have had lots of time to shift the ownership. This isn't an argument against inheritance tax, it's an argument for better education about personal finances.
Yes, the primary focus of a business owner must be on tax planning, because this generates efficient operations, undoubtedly.
Also, laws change all of the time. My impression, every time I dig down with real people, IRL, is they have the same general opinion as you and others like you here, but have no actual exposure to the actual laws, as they implemented. The only occasion I come across this and I see that the business owner, with a small team tax attorneys and CPAs, can't seem to spend enough money to escape huge taxes.
I can only assume that the business owner is clueless and the Internet anons are the experts he should have hired.
Actually, a primary focus of a business owner must be on tax planning, because (assuming a successful business) it is going to be their largest expense by far.
Unfortunately, the way tax laws are applied usually makes it impossible to apply in retrospect - you have to build it into the business structure from before day 1; and often the non-monetary cost is prohibitive -- e.g., you can reduce your tax burden by 70% by moving to a different state / country.
As a successful business owner, tax is going to be one of your largest expenses. Makes sense to a major optimization target.
So you're saying it this is not an example against inheritance tax because the family could've used loopholes in the legislation to circumvent paying the tax?
I think the idea is that capital gets broken up into smaller chunks. When we're talking about creating middle-class manufacturing jobs, you obviously need to build, say, a factory to create those jobs. That factory requires a very large investment of capital, which becomes less likely when you start breaking up large estates.
I've no idea if it actually plays out this way in the real world, but that seems to be implication here.
The assertion that the peak of this curve is skewed towards the left (low tax rates), rather than the right (high rates)?
That is, that if the "job creators" don't keep enough of the margin on goods produced, they will just get pissed off, take their marbles and go home, rather than actually bothering to hire a few more people to grab additional marginal income?
The way the Laffer Curve was usually presented, was to give one the impression that there were marginal tax rates so high that they were somehow greater than 100% and ate into income earned at a lower marginal rate, which would otherwise have been retained had there been less of it.
Thus, "trickle down" being the idea that when the rich have more money, they will for some reason voluntarily use it to hire people to produce products and services, regardless of whether or not there is any actual demand, or anticipated demand, for them.
Yes, a marginal tax rate of 110% would be bad. Good thing we don't do that :-) (I guess I should be ready for some example from 1880 where combined locality through federal taxes did for some specific dollar amount - but hopefully such freaky exceptions don't really exist, or at least often enough to matter)
Edit: I realize that the Laffer Curve was primarily about tax revenues, BUT, a large component of the theory was that as the activity increased to generate the tax revenues, it was due to somebody doing the work that created the additional earnings.
There is a common misconception of the Laffer curve that is based on trying to interpret the data. However, what the Laffer curve demonstrates is that there is a curve, nothing else.
Please note that I do not consider anything from Wikipedia as evidence of anything, so if you are trying to get me to respond to something to do within a Wikipedia article, it just isn't going to happen. The number of times I have discovered serious issues with those articles, especially on political, philosophical, and academic topics is, frankly, disturbing.
There is a theory within some economic schools of thought that savings generates production, but this is not directly to do with tax rates or the Laffer curve, nor even rich people.
Thus, the "+". The article is fair in that regard - it's just an abstract curve, with no exact formula, let alone coefficients. In practice, though, when somebody brings up Laffer, they are going to claim constants that generate a curve that peaks with a low tax rate.
In one sense, you are likely right: there is probably no formal academic theory of "supply side economics. But we have been subject to hearing this interrelated line of argument over and over since Reagan.
Okay, there is no formal concept or hypothesis of trickle down economics. (However, most PhD economists use the phrase "economic theory," but you may have some insight into this that they have not yet been exposed to.)
Sure there is. The concept is that if you allow the richest to keep all their riches, they will spend it on things which will stimulate the rest of the economy. Of course, this has proven to be a seriously misguided theory, with the actual results being a lack of consumer spending and concentration of wealth to the wealthy. Is that succinct enough for you? Now, whether a bonafide economist came up with this, or RR just pulled it out of his butt is another question...
Really? How?