On the Distribution of Wealth

I've seen variations of this demonstration before:

http://www.youtube.com/watch?v=QPKKQnijnsM

but I don't think it goes to the heart of the issue. If you ask people how to fix it, they have no clue. They don't realize that the wealth accumulates over a lifetime. By the time someone dies, they've grossed MUCH more than the tax man will take away.

At a growth rate of 5%, it takes 14.4 years (72 / 5) to double your money. Over an 80 year span, you should be able to double your money 5.5 times - a multiplier of 47 times!

Here's the current law (if I'm reading wikipedia correctly): The first $5 million given at time of death is estate tax free. Everything after that is taxed at 40%.

That's right: If you have 2 kids and give them $5 million each, the tax man doesn't get a penny and your kids will never have to work a day in their lives.

The child of the guy who multiplied his money 47 times will only pay 40%. That's still a multiplier of 28!

So how do we fix this? How do you let the farmer bequeath his $10 million farm but prevent the Walton family from owning the world? How much SHOULD the Steinbrenner children have paid on their $1 billion inheritance?

The trouble is, every time you talk about raising the inheritance tax, even poor people freak out. I can't figure this out. It's like they're suddenly going to jump from middle class to having billions and they're poor children are going to have to, God forbid, give some of it back.

So how about this? How about we have a HUGE exemption - like $100 million - and a "huge" tax rate for money over that - like 80%? Mr. Multiplier STILL has a 9.4x multiplier.

Until people see this fact - that estate taxes are paid for a lifetime's gain - we will never have a "fair" rate and the rich will keep getting richer.