Following from my post of yesterday about the attacks on inheritance, and attitudes around equality more generally, I took another look at the Lewis Goodall attack on inheritance. Goodall, a journalist, argues that he is in favour of capitalism – he wants to cut income taxes – and therefore he is not just some malcontent Leftie who wants to hit people on the head with tax.
There is also a sort of intergenerational justice argument going on here. Quantitative easing and other forces have inflated asset values; Boomers have, to some extent, enjoyed final-salary pensions and been able to retire in their early 60s, if not before. Most Gen X (that includes me), Millennials and the Zs will have to work for longer. (Given hopefully rising healthspans, that might not be a bad thing, however.) True, those who were young adults in the 50s, such as my Dad, had to do military service, and there were other nasties to deal with that we younger adults did not have to handle. But still, there’s a sense of grievance that those who had “never had it so good” got to have the best of times, and their offspring have got the dirtier end of the stick. That’s certainly part of what is driving some of this anti-wealth/inheritance narrative.
Switching gears here, there are structures that people have, over the centuries, sought to form to stop inheritors becoming obnoxious and lazy, and also to hold families together so that they don’t fall out, as in the HBO series, Succession.)
For years, in my day job, I have wrestled with the trend of a multi-trillion dollar/equivalent transfer of wealth from the Baby Boomer generation. In the wealth management sector, particularly in the US, there’s a whole field of advisory work that goes on to help guide ultra-wealthy families about how not to spoil their children. The debate is often framed in the question of “how much is too much?” in transferring wealth.
We have seen the rise, in their thousands, of what are called family offices. These are structures – operating around the world – that act as a sort of trusted point of control for a family’s private wealth. FOs operate in North America, continental Europe, the UK, Singapore, United Arab Emirates, Australia, and other developed countries. (I predict a big expansion in India, as many businesses there are family-owned.)
Sometimes FOs emerge from the executive suite of a family-run firm; they run the liquid wealth of a family, and that becomes a sole focus once a firm is sold or floated on a market. FOs are designed to hold families together – they even have their own “constitutions” and governing procedures – and create a sort of structure through which families handle payments to different members, run investments, deal with philanthropy, personal and cybersecurity, bill payments, and more. Once obscure, the family office industry is a large, multi-trillion sector. The original FO was, arguably, founded by J D Rockefeller, the oil tycoon. Today, the likes of Michael Dell and Bill Gates have them, as do the founders of Google, the governing family of Walmart, Home Depot, shipping dynasties in Denmark, Mittlestand firms in Germany, and many more. (Germany has many family offices, most of which are obscure.) Families that are far less wealthy than the foregoing can create family offices, although they aren’t economically efficient to run if assets under management go under $100 million.
Another structure for we lesser mortals is the trust. These are creatures of the English Common Law, and are extensive in the UK, Australia, New Zealand, Singapore, and biggest of all, the US.
Trusts remain an incredibly useful tool for ensuring orderly transfer/control of assets by families. If people such as Lewis Goodall are worried that inheritors become spoiled brats and lose a work ethic (if that is his genuine concern, it is a fair one to have), then trusts can, or could, be structured so that a beneficiary only receives payouts from it if certain terms and conditions are met.
Governments sometimes try and clip the wings of trusts. In 2006, UK Chancellor of the Exchequer Gordon Brown moved against the trusts sector, on the specific issue of inheritance. The use of trusts in the UK has, on balance, shrunk, but they retain their uses.
If people fear that inheritance saps the ambition and energy of inheritors, then trusts and other structures can be set up by parents and others to avoid that from happening. In a way, this sort of discussion is not so different from those that come with Universal Basic Income – what happens if we turn the entire working-age public into a bunch of loafers?
To some extent, considering the impact of inheritance on inheritors – or UBI recipients – are empirical questions, based on an understanding of incentives, behavioural issues, values and so on. The morality of it is a different one. UBI is funded via tax – a coercive move of money from the individual to the State. Inheritors of legitimately acquired wealth are receiving something that was legitimately held and transferred by consent of the transferrer.
All very interesting, Jonathan, but we are not talking about parents with $100 million. The rumours suggest the attack will be on ordinary middle class people with north of £500K.
I started out as an apprentice with literally nothing. I worked very hard clocking up 60-70 hour weeks for decades. According to my accountant, I’ve paid £2.5 million in income tax and national insurance in my working life in the private sector.
I scrimped and saved; I brought up four children – all gainfully employed taxpayers now; I paid into my pension; and I moved up the housing ladder including paying the ridiculous mortgage rates.
Everything I have I have worked hard for and I have never inherited anything. Oh and I still work part-time, and pay lots of tax, even though in my 70s, mainly to stop myself going to seed.
I don’t have a lot – I’m comfortable – but I certainly come within the scope of the rumoured cash grab by Rachel from Accounts. I want to leave it to my children. I object very strongly to any cash grab so this totally incompetent Labour government can p*ss it up the wall.
Finally, on principle, I find my self incandescent at the thought we should pay tax and national insurance all our working lives, and then have it all taxed again when we die. And as for Lewis Goodall, he can f**k right off!
By his own logic we should collectivise Lewis Goodall’s wealth. Because the idea his success in journalism is based solely on his own merit is completely ludicrous.
Comrades, deal with this deviationist promptly.
FWIW, I find myself yelling “Hell YEAH” to everything @YetAnotherChris says.
But the logic Jonathan describes in the OP is “rich people might spend their money badly, so the government should take it.”
The idea that the government, the GOVERNMENT FFS, should complain about spending money poorly is like a hooker complaining her client is cheating on her. The idea that the government, the GOVERNMENT FFS, should complain that giving people money who didn’t earn it might be destructive to their lives is so drowning in irony one is surprised it isn’t pronounced with a gurgle.
But at the most basic level, the idea that the government should somehow have the right to decide what I do with my money that I earned with my own blood sweat and tears, even including giving it to my alleged slacker children leaves me to strongly agree once again with @YetAnotherChris: they can “f**k right off”!
Unfortunately, although I might want them to “f**k right off”, they never do. They are relentless. They don’t actually want the money for any good reason, as if they were acting in good faith. They want it to enrich themselves and gain more and more power over other people’s lives.
Fraser Orr and Yet Another Chris, I agree, they should F-Off. But as Fraser points out they won’t. They ARE relentless. They are ruthless. They are all about their own power.
And “they” are the only choices on the ballots these days. So, what can we do?
The ballot box solution has essentially been nullified.
The Social Compact has been broken, the pieces ground into powder, and the powder shoved down our throats with the barrel of a rifle.
But of course, we have to take it. We have no choices left. There is no possible way out.
Or am I wrong in such a dismal assessment?
I know that in the US, we still have a solution at hand. I just hope it doesn’t get used.
OK, secretly, I hope it DOES get used, good and hard, against those most deserving. But when such solutions get unleashed, there are a lot of innocents affected.
Or imagine their reckoning in the afterlife: “you destroyed the greatest human achievements ever attained, resulting in the death and suffering of billions, and you did it for the most venal reasons. Here is your reward: ___________________”
For what it’s worth, choices that aren’t on the ballots aren’t reliably against things like confiscating inheritance. GregWA clearly knows this — “But when such solutions get unleashed, there are a lot of innocents affected” — but I thought it worth pointing out explicitly.
Even if the revolutionary leader who comes out on top started committed to free markets, they might need to buy support from subordinates or pay debts to allies to stay on top. Large inheritance packages could provide a convenient place to find transferable assets to tax… Plus, if I managed to successfully execute an armed revolution, I’d feel entitled to a bit of extravagance. What, you think armed revolutions are easy? I ain’t doing it for free!
Part of why the American Revolution didn’t completely collapse is because it was a colonial government cutting ties with its founding government. Once the split became official, the previously-colonial government was still able to adjudicate not too differently than before, run by people who had experience with the problems designing & running large organizations (and it still had lots of growing pains: The Whiskey rebellion, switching from the Articles of Confederation to the Constitution, etc.) If you want to start a revolution against a national government inside its own nation, you’re going to have very little of that.
All very interesting, Jonathan, but we are not talking about parents with $100 million.
Is that a Royal “we”?
I gave the example of how mega-rich people deal with the “spoiled brat” problem, but of course there are other ways this is addressed.
I agree with everything else you wrote, by the way. I am in a similar position.
If people fear that inheritance saps the ambition and energy of inheritors, then trusts and other structures can be set up by parents and others to avoid that from happening. In a way, this sort of discussion is not so different from those that come with Universal Basic Income – what happens if we turn the entire working-age public into a bunch of loafers?
You said yesterday in your update that Lewis Goodall opposes inheritance because he opposes “unearned” wealth. As you point out today, that makes the whole idea of welfare a bit of a problem.
Also, logically, if inheritance is “unearned” and therefore not permissible, the receipt of wealth by the government by taxation is equally “unearned.” As someone suggested the other day, the only solution to this problem of “unearned” wealth is to burn it.