Dependency

By Simon Grey, on August 9th, 2012

Some hack is complaining about how people who were promised that the government would take care of them are relying on the government to take care of them:

How much do senior citizens rely on Social Security? Even more than you might think. A new study finds that more than 46 percent of Americans die with less than $10,000 in financial assets, with many spending the end of their life strongly dependent on the government.

There’s a lot of stupidity in this first paragraph.
First, since you can’t take anything with you when you die, what good is it to have any assets left at death?  Yes, you could always leave an inheritance for your children, but if leave a certain amount of wealth to your kids, the government takes half of it, unless you’re crafty enough to spend a sizable portion of your wealth on lawyers in order to not spend a sizable portion of your wealth on bureaucrats and their politician lackeys.  Furthermore, your kids could waste your inheritance because you were a terrible parent who didn’t raise them right, so there’s no point in leaving anything to them anyway.
Second, the whole point of having government programs was to pay for people to not have to worry about paying for things in their old age.  The government was supposed to provide for them.  How could anyone possibly expect others to refrain from receiving government benefits when the whole point of said benefits was to give them to as many people as possible?  (I, of course, refer more to social security than other programs, though I’ve yet to hear of any social spending program turn down money because it wasn’t interested in increasing its scope.)  Why begrudge people for taking advantage of a system that asked to be taken advantage of.

Why should low financial asset levels be a problem, then, if these seniors’ income seems to remain steady? After all, you can’t take it with you. With almost no financial assets, these seniors “have little capacity to pay for unanticipated needs such as health expenses or other financial shocks or to pay for entertainment, travel, or other activities.”

Again, the whole purpose of having government programs, like Medicaid or Medicare, or, recently, ObamaCare, is so that people don’t have to worry about unexpected health expenses.  The government promised to step in.  Why should anyone be surprised when people start acting like the government is supposed to step in?
Also, a lot of the things on the list are completely unnecessary.  Travel, entertainment, and other activities?  Yes, these things cost money, but is it really so heart-rending if some old fart can’t buy tickets to Batman?  Or can’t go see the Grand Canyon in their own RV before they take the eternal dirt nap?
Really, this is a story about a non-issue that only matters now because the government is going broke and is going to have to find a way to cut the budget.  Of course, it’s hard to feel bad for those currently lamenting the problems seniors face today when a lot of these problems were easily predicted by those who opposed the government welfare programs in the first place.

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Negative Impact of Estate Tax

By G.L.C., on February 20th, 2009

In economics, inheritance means transfer of unconsumed assets from one generation to the next. The goal of estate tax is to reduce the volume of such transfer. Adam Smith in his work, The Wealth of Nations, commented that all taxes upon the transference of property of every kind, so far as they diminish the capital value of that property, tend to diminish the funds destined for the maintenance of productive labor.

Estate tax is nothing but another tax on savings and investments which are already under heavy taxation – income is taxed when it is earned, interest derived from investments and savings is taxed, appreciated value of an asset is taxed (capital gains tax).

A study by well-known economists Henry Aaron and Alicia Munnell concluded that estate taxes are unfair, raise little revenue, impose excess burdens, and have failed to achieve their intended purposes.

Estate taxes reduce the amount of capital available in the economy and thereby reduce the wealth ultimately available to the society. It encourages consumption and discourages savings. It reduces the after-tax return on investment. This causes the capital stock growth to decrease. Capital is vital to economic growth. Estate taxes impede the accumulation of capital. This has a negative impact on economic growth.

Estate tax liquidates and transfers to government control privately held assets which could otherwise be used for maximizing economic efficiency. Instead they are transferred to consumption-intensive government uses.

Estate taxes discourage entrepreneurial activity, hinders entry into self-employment, and breaks up family-owned businesses – a critical component of the U.S. economy. For people of lower income households to move to higher income groups, entrepreneurship is the key. Estate tax prevents upward income mobility by disrupting the transmission of a family business to succeeding generations.

Studies have shown that the estate tax continues to be a primary reason why small businesses fail to survive beyond one generation. Many heirs have cited the need to raise funds to pay estate taxes as the reason why their family business failed. Planning for estate taxes reduces the resources available for investment and employment. Business owners tend to keep liquid assets available to pay off future estate taxes. Estate tax imposes large cash demands on family businesses that generally have limited access to liquid assets.

In a tax system that is fair, individuals with fewer resources pay less taxes than those with greater resources, and all taxpayers with the same amount of resources pay the same tax. However, the rich can afford to use various estate planning options to reduce or avoid estate taxes, and the poor who cannot afford estate planning end up paying more. There are many tax avoidance options available to the general public. To avoid estate taxes, capital owners shift resources from their most productive uses into less efficient but more tax-friendly uses.

Estate tax is extremely primitive and can result in inefficient allocation of resources. The maximum rate for estate tax is presently 45%. It discourages savings and investments and lowers the after-tax return on investments. Estate tax violates the basic principles of an efficient tax system.



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