My wife and I are looking for lake front property up near Higgins Lake Michigan. There's not much lake front property now. Not surprising given the law of supply and demand. But the realtor told me something telling -- the reason there's not much land available is due to multi-generational inheritence. That is, 150 years ago people bought land up there and simply hand it down from generation to generation. Family land. How can that be bad?
At first glance, such generational property ownership might sound like a good thing. And I think it is good -- to a point. But on the other hand, as a society, how fair is this? When talking about limited resources, such as water front property, how "fair" is it that one family gets to live on the beech simply because their great great grandfather bought the property a century or more ago?
Or more often, ancestors who squatted on the land. I am a strong believer in things being kept in the family. But I am also an opponent to concentrated unearned wealth. Sometimes the contradiction becomes an issue. At some point, a society has to make some tough decisions. If we want an upwardly mobile system, then there has to be a mechanism in which generations can't simply inherit wealth and sit back and do nothing generation after generation.
The lake front example is just that -- an example of such stagnation. Without inheritence taxes, the natural resources of society really comes back to being a "whose ancestors got there first"? I tend to think that our society should give everyone an equal shot.
I don't think the government should be confiscating land from people. However, I do think that inherited wealth should be treated as any other type of income. Like most people, the money that puts food on the table comes from my labor. The income from that labor is then taxed.
When someone inherits money from a friend or relative, it's still income. In fact, it's more than income, it's unearned income. I don't see why it shouldn't be taxed at the same levels as regular income. This has all kinds of benefits for society and if we're going to tax people's hard work, why not tax income that came from simply being born? The benefits include ensuring that we don't stagnate society.
In an egalitarian society such as the United States, much of the American dream is premised on the concept of hard work leading to great reward. Anyone can make it. But if the children of successful people can simply inherit immense wealth wholesale without having earned it that strikes me as not being good for society. This is especially true when it is property -- land holdings -- that are being inherited.
That said, I am not in favor of massive taxation of inherited income. I don't agree with the whole "that money has already been taxed" argument at all, however. After all, money gets taxed as it passes hands all the time. Why would inherited income be treated differently? It's still income. What I would like to see is a healthy balance between what is good for society as a whole and what is good for individual families in particular.
I'm all for people at Higgins Lake being able to have cottages that pass on to their next generation. But that next generation should have to put something up too to get it so that there is at least the hope that other citizens may have a shot at buying that property to pass on to their children too.
Post Notes:
Some people are reading this article as "Oh greedy Brad just wants cheap land." Sigh. I was using thiis example to illustrate a general point. I have no problem with inheritence, I am simply saying that inheritence should be taxed as any other income at the same rates as other income. So technically speaking, I'm in favor of LOWERING the inheritence tax but I still support there being an inheritence tax.
