We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Samizdata quote of the day

What is the difference between a landed family’s trust fund and a dole recipient’s benefits? I’ll tell you:

One of them is an income derived from a piece of territorial property, assigned by accident of birth, originally acquired by forcefully expropriating the previous owners but now generally regarded as legitimate and which is only paid by people who choose to occupy the estate in question instead of living somewhere else…

…and the other one is a landed family’s trust fund.

– Typographically challenged commenter ‘fjfjfj’

11 comments to Samizdata quote of the day

  • Paul Marks

    Contrary to the “liberatarian left” there are hardly any estates in England that go back to the Norman Conquest (and even if there were, in neither the Roman Law tradition or the Common Law tradition does land have to be peacefully occupied from the time of Adam and Eve for it to be rightfully owned).

    Anyway the “libertarian” left are hypocrites – as I found out when I produced an example of an estate that went back to BEFORE the Norman Conquest (yet the same anti “landed interest” bullcrap still contiuned).

    If people say they can not tell the difference between money from a private trust (including a trust based on land) and welfare payments – then I say they are either liars or morons (or both).

    But why do “trusts” play such a major role in Britain and the United States and a much lesser role in (for example) Germany?

    TAX LAW.

    In Gerrmany (at least before Warren Vampire Buffet started to have an influnece) people did NOT tend to leave their children income from a trust.

    They left their children the farm or manufacturing business itself.

    Expecting them to RUN the estate or factory – and earn their income from the profits of the enterprise.

    That is a vastly better system than “trusts” – and “trust fund kids”.

    But it depends on getting away from “inheritance tax” – the thing tat trusts are set up to avoid.

    And Comrade Barack? (of course I would put him into any comment).

    He is committed to INCREASE inheritance tax.

    So expect more “trust fund kids” – with parents who have sold off the family business (perhaps to Vampire’s corporation) and “invested” the money in tax free government bonds.

    Oh – of course, Comrade Barack wants Capital Gains Tax doubled and the Federal Income Tax put up to 40%.

    But, oddly enough, income from government debt (bond) would remain tax free.

    So rich “trust fund kid” leftists would not be touched.

    What an odd oversight.

    A taxpolicy designed to hit the “idle rich” – yet the idle rich (the trust fund people – with the money in government debt) will not be touched by it.

    And, of course, the deductability of State and local income taxes from the income open to Federal taxation will continue.

    So rich leftists in high tax New York and Califorina get to play with a stacked deck.

  • Richard Thomas

    Paul, interesting angle on the inheritance tax/Buffet thing. Perhaps we need to start tying these things together more explicitly. Te idea that Buffet is some enlightened rich philanthropist needs, to continue the vampire metaphor, be staked through the heart. If we can show that everything he does is from self interest, that will link policies he approves of to crony capitalism and expose the left for what it is.

  • RRS

    The “Buffet” reaction seems to overlook that what he does, other than for some sense of personal non-economic aggrandizement, is of no benefit to him or his heirs, is it?

    What has been going on is his assembly of assets that produce stable or increasing returns during the period (back to 1965) that returns on assets and returns on invested capital in the U S have been in steady decline (now down about 25% for the period). As it turns out, intended or not, he has not done this “all for himself,” in the ultimate accretion sense.

    Of course, what he has accomplished does not make him an ordained Political Philosopher; but then, what does?

  • Laird

    A few small corrections to Paul’s post: Interest income on US government bonds is NOT exempt from federal income tax. Only the interest on state bonds is so exempt. And (assuming that the estate is large enough to be subject to the tax) there is generally an estate tax “hit” on private trusts, other than ones established for the benefit of one’s spouse (since bequests to a spouse are generally exempt anyway). If the beneficiaries are children there may be no immediate tax on the corpus (the income will be taxable, of course), but if the trust extends beyond that it will likely fall within the “generation-skipping transfer tax” rules which are specifically designed to prevent such tax avoidance schemes. The only trusts which truly escape the estate tax* are charitable trusts.

    Thus I suggest that if there really is greater use of trusts in the Anglosphere over Germany, it is motivated primarily by factors other than the estate tax.

    None of this, of course, is intended to defend anything done by that snivelling weasel Buffet.

    * A point of pedantry: In the US the “estate tax” is at the federal level (although a few states have one, too), and is levied against the estate itself; “inheritance taxes” are at the state level and are levied against the beneficiaries. Thus the estate tax is a tax on the privilege of dying, whereas the inheritance tax is a tax on the privilege of receiving property from a decedent. They get you coming and going.

  • Laird

    Incidentally, the reason I posed that question which prompted fjfjfj’s witty response was not that I don’t understand the difference between the two but that I wanted to see if PfP did and, if so, where he was going with the comparison. And from his subsequent response it appears that while he does indeed understand the difference he would very much like to eliminate it, by “us[ing] the wealth we’ve acquired to make everyone independent rather than dependent.” In other words, to treat the combined wealth of all members of society as communal property so we can create “trust funds” for everyone. Charming thought.

  • Richard Thomas

    RRS, whilst I have not studies the man or his finances particularly and am aware that it’s veering sharply into conspiracy-theory territory, I would not be so sure that Buffets aims, while appearing to go against his interests financially did, in fact, turn to his financial benefit. There is money to be made on the downs, as well as the ups. A rising tide may lift all boats but if you can skim 2% from a falling tide, you probably have it made.

  • Paul Marks

    My apology for my error Laird.

    Of course it is just State government bonds that are except from the Federal income tax – which is why there is still a market for State government bonds (even though, by any logical examination, States like California have a totally unsound fiscal situation – which does gets worse if one projects into the future).

    As for W.B.

    He is the corporate welfare king of America – so many weird government policies (such as blocking the Keystone pipeline so that oil has to be transported on trains) “by chance” benefit his corporation.

    He also (again “by chance”) tends to buy shares of enterprises (on a large scale) just BEFORE it is announced they are going to get a Federal bailout.

    Doubtless this is all a coincidence.

    Of course the term “vampire” has been used by others in relation to Warren.

    For example “Warren Bufett: Vampire Squid” by Philip Delves Broughton in the Spectator of 10th September 2011.

  • Paul Marks

    By the way – traditionally the strength of family owned business enterprises in Germany HAS INDEED BEEN very much about tax law.

  • Laird

    Paul, I thought “vampire squid” referred to Goldman Sachs! Can there be more than one? 🙂

  • RRS

    Richard Thomas:

    Current in the U S among Libertarians and “Conservatives” is the thesis that when (U S) “Liberals” (now “progressives?”) have no arguments they turn to personal attack (ad hominem). I am sorry to see that on display here, particularly from those whose depth of observations impress me at this late age.

    Disclosure: I am a bit older than Buffet; have followed his annual statements for many, many years; and am one (eensy-weensy) of the investors in B-H. Graham, Dodd and Baker was my IBA text in securities analysis, I spent many years in the reinsurance field (U S & Foriegn), which has become his main resource. I think I understand his financial approach. I don’t claim any insight into what he may be, but certainly what he is not.

    He is not a “Vulture Capitalist;” and the “Vampire” epithet can not be justified; and he is not a Political Philosopher.

  • Laird

    RRS, in the past Buffet may indeed have been a model investor, but in recent years he has become the quintessential crony capitalist, trading on (and profiting from) his political connections rather than his investment expertise. I respected him once, but no longer.