Over $70T of inherited wealth over next decade will widen inequality, economists
138 comments
·November 4, 2025shoubidouwah
1) set a generous threshold over which your inheritance gets taxed, inflation adjusted (e.g, 2M not including the principal residence) 2) tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit
awakeasleep
There are many solutions, many ways to limit the magnitude of differences of wealth.
But America is so thoroughly owned by the wealthy that implementing one of these solutions is not desirable. The legislature in America only works on behalf of the ultra wealthy and any legislation that passes will be to increase the magnitude of the wealth gap.
jghn
Also there's the aspect of how many Americans view themselves as temporarily inconvenienced millionaires. The average person doesn't want rules like this because they're sure it'll apply to them someday.
JAlexoid
No... Most americans are just plain ignorant(not in a malicious way, just impossible to parse the signal through the noise on many topics).
A lot genuinely have no idea that there's a very high lower limit on inheritance tax... at the same time they hate the ultra rich.
This is genuinely a very schizophrenic country.
JAlexoid
There's a reason why countries, like Sweden, have scrapped the inheritance tax - it doesn't work like that anymore.
The benefits of wealth are exercised long before the inheritance can be applied.
Your first home down payment, your education, your wealth generation while being on support by your parents, etc. - will push you off the ground faster, than any inheritance in a world where people easily live to 80-90. Most people hit retirement age, by the time their parents pass away.
analog31
A straightforward wealth tax would address this.
boxed
> The benefits of wealth are exercised long before the inheritance can be applied.
Agreed.
But isn't that an argument FOR a strong inheritance tax? Because inheritance doesn't actually help your children anyway? That seems like it was your argument.
With that argument taking 100% of the inheritance as tax and taking 0% is exactly the same, as the wealth transfer was done before anyway.
JAlexoid
The only thing that I personally care about is the ability of ordinary people to build and retain wealth.
Wealth disparity doesn't grow because wealthy people are allowed to retain their generational wealth or not, it grows because the rest can't build and retain their wealth.
This isn't a zero sum game.
PS: I would also not trust the government or any political body to handle income from the inheritance taxes. So I would rather the children of wealthy people squander their wealth, than a politician transfer that wealth to their patron.
boxed
I'm pretty sure we scrapped it because the conservatives got into power.
SiempreViernes
> Leif Pagrotsky, som då var näringsminister, har i efterhand avslöjat att avskaffandet av arvsskatten var en eftergift från Regeringen Persson till Svenskt Näringsliv
Well, not quite.
JAlexoid
Cool.
Inheritance tax doesn't work anymore, in any case.
It's not the 19th century and we shouldn't try fixing 21 century issues with 19th century remedies.
tock
Why make it on inheritance then? Tax wealth 100% above 2M. I do think this would doom progress but would be a fun exercise.
dienstbier
This is, quite literally, the silliest thing I may have ever read.
Cool, cool. Work for 30 years, save up and have say $3M to retire on, based on stock market at an all-time high. You're not a robber baron or investment banker, just someone who worked a long time and saved and invested. Govt takes $1M away from you, you have $2M now. Market drops 25%. Now you have $1.5M.
Congrats, your "plan" resulted in someone like that having HALF of everything they saved up just gone.
Yeah, yeah, I know, "if you have $1.5M you don't NEED any more money." Sounds like something that only someone with something less than $1.5M would say.
You don't "need" your iPhone, or your flat screen, or whatever. The government should not be in the business of determining what you "need" and taking the rest.
blitzar
Wouldnt it be easier just to tax all income above say $200,000 (minimum wage in SV) at 100%.
If a net worth of $2 mil is considered outrageous then surely that kind of salary would be considered equally so.
JAlexoid
We have to reframe how taxes are viewed, by the wealthy.
There should be no wealth tax, but above a certain threshold - there should be a maintenance fee associated with the wealth. I get charged maintenance fee by my mutual funds, for example.
One of the purposes of the government is to protect and secure property... and that is what ultra wealthy are getting for a fraction of what they should be paying.
evandijk70
Most net worths over $2 mil are created by growth in share value, not by income/salary.
kachapopopow
I think the bigger issue is that people are hording wealth instead of spending it in general making money work for them and not for the greater economy which is the only thing giving their money substance long-term. Well, long-term is longer than human lifetime so I guess there's no real reason for them to worry about it either.
skippyboxedhero
I heard something on here about an investment bubble?
There is some kind of bizarre world that we live in that the article has a quote from Ramaphosa, the totality of his extraordinary wealth was generated by corruption, on the terrors of inequality.
Hoarding is, generally, not a real problem because it requires believing that wealthy people are not greedy. The problem is that most societies heavily incentivize irrational behaviour through disincentivizing investment. Strangely, these same places also have political cultures that focus heavily on inequality (again, there is no better example than South Africa) because genuine openness tends to be very disruptive politically.
There is no way to square the circle. The solutions are known, the problem is that human nature and political culture tends to prevent those solutions being realised (as it is more politically beneficial to continue to sell people lies: it is this group of people, they are the problem, if we can take their money and give it you then you will be rich).
kachapopopow
well that's pretty much it, people aren't letting their money go, they are only spending money with the sole purpose of making more money.
boxed
I've heard this take a lot and it doesn't make much sense to me. How exactly are ultra rich "hoarding wealth instead of spending it"? Afaik most of the net worth of the ultra rich is in ownership of companies (stocks) or loans (eg bonds). That money is all out there in the world working.
Isn't the fact that the ultra rich are using their wealth productively the reason we have growing wealth inequality? Because active money grows faster than inflation, which is why they get richer compared to the rest of us over time.
kachapopopow
It's more of a problem that the money is only used to make more money rather than being used for services or productive work.
bawolff
Not really. After all that is the point of inflation, to tax people who hoard money.
kachapopopow
They aren't hoarding it directly, they have it in stocks or other appreciating assets such as gold.
onion2k
6) wonder why this has no real impact as it only recovers wealth from people who are over $2m in wealth but below set-up-a-trust-to-move-your-families-money-to wealth, which is a fraction of the wealth. 7) See trust-as-a-service businesses boom until there's no additional revenue.
twoodfin
8) Create tons of dead-weight loss in the economy as you attempt to regulate your way out of (7) by being clever with the tax code.
bawolff
I think you'd have to be a bit more complex than that.
Most 80 year olds know they arent going to live forever and would probably just transfer their assets a little early.
brianwawok
So people put the money in a trust or use another way to dodge it. I don’t think it’s nearly as easy to collect ad you hand wave.
koolba
> tax 100% above it. (should only concern a fraction of a fraction of cases) 3) put all this tax's proceeds in a sovereign wealth fund 4) at 21, a citizen gets access to her redistributed generational wealth 5) profit
If you think you’ve seen zany tax schemes, just wait till they try implementing something as crazy as a 100% tax.
There’s also a moral question of why you feel entitled to not just a majority of the fruits of my labors, but apparently all of them.
ZeroGravitas
> If poor people knew how rich rich people are, there would be riots in the streets. -- Chris Rock
philipallstar
Wealth inequality is not an intrinsic bad, and it's not even worth striving to reduce. The only thing that matters is the average (pick your average) standard of living.
There's no point paying a fortune to have all the people who created the most value leave your country just so you can reduce a pointless metric, especially when all it does is get the state more money to spend on itself rather than reduce your costs or increase what you get for your costs.
einszwei
Where do you think the money that is accrued by the most wealthy will be spent/invested/parked? What will its effects be on the broader economy?
Assuming that the money is all used for altruistic purpose, I could agree with your point. But we know that this money is often used for not so altruistic purposes like investing in PE which asset strip the productive parts of economy or use the money to influence politics and elected representatives via lobbying.
kamaal
>>Where do you think the money that is accrued by the most wealthy will be spent/invested/parked?
In most advanced economies today, that's equity. The ordinary person thinks of wealth as money lying around in the bank, which the rich person refuses to spend on anything useful. And instead either hoards, or spends on luxury things which cause resentment to the remainder.
The real question is for most people today its easier than ever to invest and then give it to their children. Why aren't people doing it?
vorpalhex
Or building companies that employ tens or hundreds of thousands.
prmph
[delayed]
bryanlarsen
That feels like it should be true, but it's not. Humans are hierarchical social animals, not logical loners. Their well being and happiness is tied to the group.
ModernMech
> the people who created the most value leave your country
You mean the workers? Why would they leave if inequality is reduced, that would mean their standard of living would increase?
Anyone who wants to leave is free to, people are tired of the threats, just do it already. The people who leave will be spiting their own faces, and the people who stay behind will fill the demand vacuum.
bawolff
Why would this increase inequality? Inheritence generally goes from rich person to rich person. I would normally assume the rate of equality would stay roughly constant in the face of inheritence.
Amorymeltzer
The Slate Money podcast had a recent episode of their "Money Talks" series that interviewed Ray Madoff, author of the new book The Second Estate. It was an interesting listen—could've been longer, IMO—and I appreciated the discussion about the history of the inheritance tax in the US and how it has become useless, largely through political inaction refusing to close tricks/loopholes. I'll be checking out from my library (once it's in the system!).
prmph
Why is this post buried, I wonder?
It's in the 263th position, alongside posts from 4 days ago, and keep rapidly going down. Really weird.
christkv
Inheritance is in most cases the only way young people in a lot of European countries can even own their own home
317070
That sounds like a lottery for housing, with extra steps? Hypothetical scenario: we have 100 houses, and 200 young families looking for one. Your solution in effect is: let's give 100 houses to the 100 young people with an inheritance. That sounds arbitrary.
Lack of housing is a disconnected problem from inheritance taxes.
ghuffed
Did you skip biology class? There's nothing 'arbitrary' about it. There's no lottery system for assigning children to parents.
317070
Eddington is a fictional community, with 2 people: Ed and Sue. Unfortunately, due to lack of housing, they only have 1 house. The decision is made to hand it to Sue, because Ed's _parents_ were alcoholics that drank their life away.
The decision is not necessarily wrong. But the reasoning to base someone's fortune on the merits of their parents is very arbitrary. Why not base it on their own merits or needs?
einszwei
Your analogy is plain wrong. To start with people with inheritances can and do own multiple homes.
317070
I'm sorry, I genuinly don't understand your point. Could you expand a bit?
kfterrg67
How is it arbitrary? You realise these are the offspring of the deceased? Children are not randomly assigned to taxpaying citizens.
JAlexoid
> Inheritance is in most cases the only way young people in a lot of European countries can even own their own home
Only if you don't build enough new homes in places where people desire to live, because you can own a home - just not where you want to actually live.
skippyboxedhero
That is a problem with housing and supply-side in European countries.
The reason there is an issue with housing is the same reason why these articles appear declaiming the political risks (notice, Stigliz only says the risk is political...his friends losing office) of inequality.
This will continue forever, it is ingrained in human nature, it is why it took tens of thousands of years for economic growth to happen from the birth of modern human society.
mdrzn
Let's just make the first million (€/$) "tax free", everything else increase progressively up to 100% over 100 millions or any other value.
risyachka
Maybe thats why we need to focus on the underlying issue instead of using inheritance to postpone it/burden next generation with it.
And what do you suggest for those that don't have any inheritance?
mft_
That observation is correct, but I'd challenge the implication that "therefore inheritance must be allowed to continue in its current form".
Why are houses so expensive? Alongside challenges and inefficiences related to permits and building (as plenty discussed elsewhere) housing is also used as an investment asset by people with money to invest. This ranges from individuals buying an apartment to rent out, to large investment and private equity firms buying up whole swathes of real estate. When the global money supply is increased (e.g. post-2008 crash, post-Covid, etc.) a lot of it ends up with the rich, who then invest directly or indirectly in asset classes including housing. (Also see how e.g. classic car prices have increased since ~'08).
Until this mechanism is recognised as the cause of asset appreciation and measures are put in place to reverse this trend, the current cost-of-living issues will continue to worsen. Sadly, most politicians are already rich enough to benefit from this situation, and so --in the unlikely event that they even recognise this as a cause-- are unlikely to strongly advocate for measures to address it. Additionally, politics in many countries is too intertwined with big business to mean that such a revolutionary concept would be entertained.
tl;dr: addressing the huge progressive accumulation of wealth by the rich --of which inheritance is one aspect-- is what is needed to address the continual appreciation in so many asset classes, including housing.
JAlexoid
> Until this mechanism is recognised as the cause of asset appreciation
What do you mean "until"? It's the core of many of European "dreams".
Take UK for example, where there's a concept called "property ladder". This property ladder is the promise of ever increasing property values, to build wealth(it's a pyramid scheme). This "always appreciating" promise is not just subtextual, it's literally the core of the method for becoming wealthy.
Whole economies in Europe are built around this constant real estate appreciation and first-home-buyers' support.
This is becoming the case in US as well, to lesser extent. US has a much more dynamic property market, than the wealthy Europe.
Politicians will bend over backwards to protect this "dream"... and at this point it is screwing over the new generation.
farseer
That is the way of the world, capitalism specifically. The only way to counter is a fair tax system and good spending on education up to college level.
kwanbix
100% agree with you.
u_sama
Counter-example: All the European, and world countries who have implemented the various inheritance, wealth taxes and heavy redistribution yet the inequality is still widening. Take France, Norway or Sweden as the ideal social democracies.
Argentina (the end game of social democracy) pre-Milei had a huge array of taxes and regulations which lead to the state misusing that money to actually enrich a small elite of politically aligned. Similar things and arrangements (under the form of subsidies to companies) will happen under Trump and levying more taxes will just give more opportunity for corruption.
CogitoCogito
Sweden has no inheritance or wealth tax.
u_sama
There was one until 2007, many countries had wealth taxes. Also in 2005 inheritance tax was repealed.
In France wealth tax was repealed in 2017 I think but will be soon reintroduced under a new form.
JAlexoid
Specifically because those don't work at all. Not because some evil rich people decided to scrap them.
andrepd
Unlike people, capital has no nation. It can just move effortlessly from France to Switzerland to the Cayman Islands. That's why single-country initiatives to e.g. tax wealth (or even tax extremely profitable companies) are doomed to failure: those assets are easy to transfer and hide; if the UK passes a progressive wealth tax, all those global billionaires will just sell their empty houses in London and buy empty houses somewhere else.
Hence the proposal by many economists that the only solution is a broad agreement on a global progressive wealth tax, with at least the major blocs of the US and EU on board. See e.g. "A Brief History of Inequality".
u_sama
This is basically a prisoner dilemma on a global scale where the incentives are for single marginalised nations to leverage the fact of being tax havens to survive globalisation. The dream of a single global tax is as possible as making China/US respect any of the agreements they have signed regarding trade and environment.
The same proposal is also criticized by many economists too, who argue that inequality has not risen as sharply as Piketty's crew claims, or that the bulk of that inequality is linked to the real estate, for which the only solution is build more houses and destroy the capital accumulation of older generation to the profit on newer ones.
1: https://www.brookings.edu/articles/deciphering-the-fall-and-...
JAlexoid
Selling empty homes in London will increase supply of housing in London and lowering the price of housing, allowing less than wealthy people to accumulate wealth.
The problem with countries like UK is that real estate is the only way of obtaining, growing and keeping wealth there. And I mean the only.
analog31
Does all of this capital really do anything for a country if it's just being parked? Would we miss it?
cynicalsecurity
Capitalism creates inequality, but in a socialism/communism economy there would be either no money or no goods. Everyone would be equally poor, not just some.
amelius
This is the argument made by people who would not work without getting paid for it.
If this were universally the case, open source would not exist.
dekken_
And yet unpaid internships are still a thing as the point is education, not direct financial compensation.
Drakim
Why would there be no money under socialism?
blargthorwars
No money is a bit of hyperbole, but fundamentally, nobody really wants to work hard for the exclusive benefit of everybody else.
Greed is an innate human trait.
dekken_
Money only works when there is a base level of trust that later, money accepted will have some similar utility.
cynicalsecurity
Because it would be stolen by the government. Ask people in post-Soviet countries about how Soviet governments were stealing money from their bank accounts, from all citizens collectively. No one believed in money under socialism in the USSR. The government could always pull a funny trick called "and now... it's gone". Be happy, comrade, that only your money is gone, you could also be in prison.
esarbe
Social democracy is Socialism[1].
European social democracies are among the top of the wealthiest countries in the world.
b3lvedere
European countries did not get wealthy just because of their social democracy system. There is a lot of very painful history as well.
cynicalsecurity
I was unlucky to see and live in socialism. European democracies are not socialism by a mile. They are capitalist countries with some socialist elements. Yes, it makes sense.
puretruth81
inheritance taxes are just mafia theft, no matter how you rationalize it
Ekaros
Well, everyone is member of this mafia. The problem is that lowest on the totem pole are not served by it.
shigawire
According to many on this site. All taxation is theft. This desensitize me to this argument.
blitzar
According to many on this site. All taxation on their 500k salary and 3mil in stock is theft.
According to the same people. Passing $1mil to your children is immoral and should be banned.
I suspect they love expensive shiny things and hate their children.
ghuffed
If I was nearing the end and I knew the state would be taking all of my assets upon expiry, I would make sure to go out with a bang if you catch my meaning. A few million could buy a lot of bang.
They'll have an epidemic of geriatric domestic terrorists on their hands.
conception
The (actual and would be) aristocracy loves this take.
blitzar
its actually grave robbing, the person is litterally dead.
jmyeet
Many in the US expecting an inheritance from their baby boomer parents are in for a rude shock. Why? Because their assets are going to get eaten up by retirement living and end-of-life care. If you still own your assets when you go into care, Medicaid is going to use up all those assets before paying for it and this could be tens of thousands a month with long-term medical care. You can avoid this is you plan ahead. Medicaid has a 5 year lookback on gifts so you need to transfer assets 5+ years before you need to pay for care but most people haven't done that.
For those who say this is the only way people get ahead, you are correct but you're missing the point. That shouldn't be the case and it's non sustainable. In the 1990s, the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society).
I've come to believe that this century will see a point where there's simply nothing left to exploit, nothing left to transfer from the working class to the ultra-wealthy. And as has always been the case historically, that's going to end with a more violent form of wealth redistribution (eg French revolution, Russian revolution).
blitzar
> the average house price in London was £70k. Now it's >£700k. It doesn't have to be this way. It shouldn't be this way (for a healthy society)
10x in 35 years is compounded rate of return of under 7%, which is not far off the average mortgage rate over that period of time. Add in some maintenance and that might even represent a loss in real terms over that period of time.
jmyeet
Houses shouldn't be investments.
Wages aren't 10x in that same period. All the increasing house price has done is transfer wealth from the younger generation to the older generation.
blitzar
Wages havent kept up with the cost of a bag of rice either, I wouldnt suggest that rice has transfered wealth from the young to the old.
The underlying problem for the UK is wages - workers make less in real terms and pensions paid to the older generation go up by the highest of all the rates.
Taxation is the transfer of wealth from the younger generation to the older generation - the older generation paid less in and are getting more out.
kamaal
>>Houses shouldn't be investments.
People keep saying things without understanding what that means. Only reason why anyone even wants a home is because its profitable to them on the longer run. Else renting works.
Either way the demand for home ownership will be way less if you simply tell people they will make big losses on that purchase.
That said, now imagine how housing works in a world where no one wants to buy a home, but everyone wants to rent one. That is you want to rent a resource which no one is building at the first place.
Aside: Inheritance laws are one of those little thought of things that end up making huge differences in a society.
The classic one is the changes in Sparta’s inheritance system that essentially caused their downfall.
Originally every citizen had an equal plot of land, the economic base that allowed him to be a hoplite (Sparta help ~80% of their population as slaves, helots, as state property). But as Spartan men died in wars, inheritance laws were forced to let daughters inherit and merge estates through marriage, wealth, and land, and thus it all concentrated fast. By Aristotle’s time, nearly half the land was owned by women outright, and the number of citizens had then fallen to a few hundred as citizenship was tied to these land plots. The result was that the city that once fielded the most formidable army in Greece simply ran out of Spartiates to fill the ranks. Perversely, they all kept this going instead of breaking up the consolidated plots, as citizenship was tied to freedom and voting power. So, the less of them there were the better off the rich were, as they had more voting power and wealth at home (wealth was land, as Sparta forbid money in it's borders, well, sorta). So, power domestically was inverse to foreign power. And we all know when countries get into these situations they always go towards domestic power over national security.