My Photo
Blog powered by Typepad

April 2020

Sun Mon Tue Wed Thu Fri Sat
      1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30    

« Best effect of the estate tax: It shakes things up | Main | 9-11 Commission chairman: NYT ruined important anti-terrorism tool »

June 29, 2006

Comments

Nicholas

Frank, you know the problem with this logic is that a lot of people simply won't be bothered to work as hard if they know they can't pass their wealth on to their children when they die.

Well, I don't know it's a lot of people but it certainly applies to me. Given the choice between working hard and earning money, versus taking it easy and getting by, I'd rather just take it easy. One major reason I don't is that I want to have children one day and I want to pass a reasonable legacy on to them. Not to make them live like kings and/or queens, but enough that they can live well despite the very high cost of living. I would expect them to have jobs and take care of themselves financially, but that's not enough these days in order to live comfortably. For example, house prices around here are in the millions (and this area isn't that fancy!) and I probably won't be able to afford a house unless my parents leave me money. Similarly if I have children they probably won't be able to afford a house unless I leave them money too, even if they work hard.

Now, we're not talking about 2-4 million dollars here, so I suppose in my case this particular tax you're talking about wouldn't affect me. However, I imagine it would have a similar effect to what I am describing upon the people one rung up the ladder. And, I think discouraging working hard and gathering wealth is unhealthy.

By the way, any guess on how many people's estates are going to be worth $3,999,999.95? :) Or is the money below $4m not taxed, even if the estate is worth more than that.

Frank Warner

Yours is an interesting perspective, Nicholas. It helps me understand your thinking.

I guess I could argue you'd still be able to work hard for your children and give them a lot even if inheritance were outlawed.

It seems legislation is never going to go one way or the other on this. It reaches a compromise.

But geez, housing prices in your area of Australia are in the millions, and that's not even fancy? I know an Australian dollar is worth only about 75 U.S. cents, but that's not that big a difference. Maybe you're limiting yourself to the North Shore of Sydney. Or maybe your expectations and worries are slightly out of kilter.

I was thinking about this while I was mowing the lawn today. (It's a good time to think.) If you raise your kids well, speak proper English in front of them, regularly let them know you love them, send them to decent schools, make sure they have healthful extracurricular activities and subsidize their college education, you probably have guaranteed they'll be in the top 1 percent of earners on planet Earth. Probably the top .5 percent.

After all that love and care and parental investment, should you be expected to give more? Forget the argument over inheritance or non-inheritance for the moment. But just how personally irresponsible would these kids have to be to blow that kind of headstart in life?

Nicholas

Well, I can understand both sides of this debate. I think I would agree with you more, if there was some kind of an age limit. If, say, your estate was only taxed if it was over a certain amount and you died at the age of 65 or later. Otherwise, you might die in a car accident or of a heart attack well before then, and before you have a chance to pass some things on to your children. That would be unfortunate. Otherwise yes, you might as well give them most of your posessions while you are still living.

No I'm not talking about the North Shore, that's even more expensive. I prefer to live somewhere a bit more "happening" though. I'm on the south side but fairly close to the city. Within 5 minutes walk is shopping, a movie theatre, lots of good restaurants and other amenities. Here is an example of a house on sale around here that I picked mostly at random. 2 bedrooms, 1 bathroom, and not very large by the looks of it, yet they're asking $850k. You can see how you can get over a million if you want something a bit bigger for a family.

Of course you can go out into the boondocks and buy a house on a plot of land for around $200k but the idea of living way out there doesn't appeal to me much. Then again I spend most of my time indoors so it wouldn't be too horrible. But I think it's nice to be able to live in an area you like. I just happen to have expensive tastes for real estate I suppose, in the location sense :)

I agree with you on the rest of what you said. My parents sent me to a good school (after I got a scholarship) and gave me a pretty decent start. I've paid my way pretty much since I left home, with occasional help from them. I don't NEED anything more from them. However if I have children, once they become self-sufficient, I would still want to be able to give them something like an apartment or house so they can be more comfortable and don't have to worry about paying rent or a mortagage. I've been much happier since I got my own place.

And yes, the main reason I want children (besides the fact I like them in general) is because I feel that we need more people in our society like you describe. I see so much selfishness, greed, callousness, ego and lack of empathy. I also see a lot of people who are too lazy to use their brains. It's sad.

I suppose you shouldn't read too much into my description of how an estate tax might affect me. I'm not representative of the general population. Never have been, for some reason.

Frank Warner

You're obviously a rare bird, Nicholas, and good for you!

Man, real estate is expensive there in Australia. That modest house is going for $850,000. That's about 640,000 U.S. dollars.

We Americans (and you know us) all are pretty sure that our real estate is far overpriced right now, but that Australia price is about double or triple the price anyone would pay here in even the nice suburbs. (There may be a few exceptions around New York or Boston. So move to Philly.)

The free market should take of that problem, too. If few can afford those houses, the price will fall.

Nicholas

Yes, sales have dropped significantly of late, mainly in response to the prices.

I think the reason is that most of our country's population is in 4-5 big cities. So, real estate near the core of those cities is in high demand. Plus we traditionally like to live in nice houses (similar to the situation in the US), only our architecture tends to be more expensively put together. Most houses here are brick or concrete, few are made of wood.

Our economy is booming though (as far as I can tell), so while the prices are probably a symptom of that, it also means we can afford to pay a fair bit.

We certainly live in interesting times. I wonder if the current period of low interest rates, moderate inflation and growth is going to continue for long. I'm certainly glad I live in one of the few places where taxes, in real terms, are coming down rather than going up!

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)