Inheritance taxes don’t work
@ 2:41 pm I’ve said it many times: Inheritance taxes only affect families who don’t have the flexibility to structure their finances to avoid them—legally, of course. They also ensure that capital wealth resides outside of Finland. That means all profit generated from that capital will also be taxed outside of Finland, thus leaving we the little Finn-workers with all the tax burden of funding the infrastructure.
You can have all the ideological reasons you want, but ultimately inheritance taxes only ensure that the poor—i.e. those who can’t avoid paying them—stay poor.
On the bright side, as with other misguided policies such as Finland’s forced publishing of personal income information, general overtaxation, etc., it provides a nice boost to people of—e.g.—developing Asian economies. Finland’s loss is their gain. We don’t mind helping them at our own expense, do we?
Oh, Kristian, undaunted by any factual arguments you just beat on… Anyway, here we certainly would need to abolish the tax for normal fortunes, say with the threashold of 300 000 - 500 000e, and thereafter a sliding scale should be used, which would never rise to very punishing levels though. That would be both a practical and just solution. The current tax is truly a travesty of justice. What has this got to do with Asian economies then is of course beyond any reasonable person.
Comment by mjr — Wed, Apr 25th, 2007 @ 3:06 pm
Inheritance taxes only affect families who don’t have the flexibility to structure their finances to avoid themâ€â€legally, of course. They also ensure that capital wealth resides outside of Finland.
This probably means that Finland’s inheritance tax is well below that of other countries. Usually Kristian, after all, gets the facts kinda up-side-down.
Comment by Anonymous — Wed, Apr 25th, 2007 @ 3:17 pm
I’ve said it many times
Yes! so many times, your views are clear already!
It is tiresome to have you endlessly looping on these matters.
Comment by mog — Wed, Apr 25th, 2007 @ 3:19 pm
How about one of the ‘taxers’ explain why there should be an inheritance tax? Really, it is not like these assets have not been taxed already? (in some cases year after year)
An inheritance tax is an incentive AGAINST saving just like the wealth tax is(or was?).
Finns should get more into the attitude of ‘me too’ when they see someone doing well instead of ‘get that f*er.’ Really, where is the incentive for anyone to try harder for a better living when everyone knows what is waiting for them if they do. It is just like having the opportunity to do overtime. I have never seen a society so against overtime. And why? “Because the Government will get the extra money.” That is just wrong.
One more thing against the inheritance tax. When the asset is something like a farm. The child are often forced to sell it or take a new mortage out on it solely to pay the tax on the property. Sure you can also sell a piece of it, but who is going to buy a small parcel from a farm? It is not very useful, except to the neighbor, who just happens to be another farmer with a similar problem.
Comment by Fred Fry — Wed, Apr 25th, 2007 @ 3:33 pm
“When the asset is something like a farm. The child are often forced to sell it or take a new mortage out on it solely to pay the tax on the property.”
That’s ok Fred. We’ll just pay them extra farm subsidies LOL!
Comment by Kristian — Wed, Apr 25th, 2007 @ 3:36 pm
No, it’s simple: we should be careful about a hereditary elite being born around accumulating fortunes. I think we are basically seen some of the effects of this in the USA: political system is throughly monetized, at least semi-corrupt, with millions of people pushed out of fair social competition. Too steep differences of wealth are not good for free social competition in the long run. Inheritance tax is then just one precaution against the selfish, irrational and shortsighted human nature - but in Finland it has been very counterproductive and unjust, so reform is really much overdue.
Comment by mjr — Wed, Apr 25th, 2007 @ 3:47 pm
How about one of the ‘taxers’ explain why there should be an inheritance tax?
Well, William Gates (Bill’s father) thinks that not having them would make the American society even more aristocratic than what it already is. But then again, worrying about the upward mobility or the influence the rich have on politics is of course just liberal nonsense.
Comment by Anonymous — Wed, Apr 25th, 2007 @ 3:56 pm
How about one of the ‘taxers’ explain why there should be an inheritance tax?
How about Kristian explains why rich and lazy kids should be allowed to freeride on whatever wealth earlier generations have accumulated? After all, even if we pay 99% inheritance tax, it’s still money for nothing.
Comment by N. Siinistö — Wed, Apr 25th, 2007 @ 4:24 pm
“Normal fortunes of 300 000- 500 00 euros”
Since when has that been a normal “fortune?” For crying out loud, it’s not even enough to buy a half decent detached family home in most larger cities in Finland. When will you wake up to the fact that it is 2007, the economy is globalized and times have changed. We either catch up or drop out…
Normal fortunes………… Now that’s funny
Comment by Punter — Wed, Apr 25th, 2007 @ 4:36 pm
Freeride? My mother died in September and after years of busting her ass as a doctor and saving and investing her money she left behind a sizable estate…of which my sisters and I will pay taxes only on her retirement accounts when we retire and withdraw that money, just as she did when she withdrew it. She worked hard for it, paid plenty of taxes on it and her gift to us has been much appreciated. It’s not like it’s enough to quit working for the rest of our lives and retire to the south of France. Why should the state have the ability to come in and take half or more of that?
Does this mean the state should get your house when you die since your slacker ass kids didn’t work for it and they should be forced to struggle for every penny so that the government can take that away when they die as well?
And mjr, take Kristin’s point…the really wealthy know how to shelter their money and assets before death…the only people inheritance taxes punish are those who either don’t prepare ahead of time or who can’t, i.e. those same people you think the taxation protects.
Comment by hfb — Wed, Apr 25th, 2007 @ 4:46 pm
Kristian, you keep on about some of us on here being “communists”, the follows of which are known for spouting rhetoric rather than facts. Yet, ironically that is exactly what you seem to do in post after post.
We are lucky to live in a society that has and gives comparatively high chances of success to all in it; it’s not just the rich in Finland who can afford to go to university, people who have no health insurance are not let to die.
I strongly believe that the market is vital, however it should not be allowed to be untamed so as we reach a stage where absolutely everything is dependent on how much money you have. If that means that our tax burden is higher and our spending power lower than in some other countries, so be it. I don’t need 3 Porsches on my driveway to be happy.
Comment by JG — Wed, Apr 25th, 2007 @ 4:50 pm
“Too steep differences of wealth are not good for free social competition in the long run. Inheritance tax is then just one precaution against the selfish, irrational and shortsighted human nature”
- Sorry, but some of these ‘poor’ souls are poor for no reason but their own actions. You want to be a jobless hippie, or go have fun instead of going to university fine. But don’t get pissed off becsue others make more of the time they have and end the end benefit from it.
- Be sure to tell your lawyer, doctor, dentist what capitalist pigs they are the next time you need their service.
Parents naturally want to leave assets to their children. Taxing them most likely encourages them to save MORE in order to accumulate enough that the remainder is meaningful. My dad is over 70 and only retired last year. He could have done so years ago, but liked his job and want to leave something for his four children. We will never get much, if anything. But at least it will be divided four ways and not 5. (Provided he does not take our advise and spend it now.)
Comment by Fred Fry — Wed, Apr 25th, 2007 @ 5:15 pm
“Inheritance tax is then just one precaution against the selfish”
Uh huh. Seems more like a precauction against keeping money in a country that has inheritance taxes.
“need to abolish the tax for normal fortunes, say with the threashold of 300 000 - 500 000e”
Yup. Above that amount move your money out of Finland to avoid the tax.
Comment by seeker of truth — Wed, Apr 25th, 2007 @ 5:34 pm
Hmmm. Inheritance taxes is one reason why I have a job. Actually, it is more accurate to say, people’s actions to avoid inheritance taxes provides me with work.
So keep the high taxes. It is good job security.
Comment by Fred Fry — Wed, Apr 25th, 2007 @ 6:13 pm
Hmm, once again the counter arguments revolve somewhere else than in the observable reality. What we need for a fair society is a level playing field for people to compete based on their individual ability. Thus taxation is needed, and having it progressive gives a double benefit of having a brake on forming hereditary elites that always, naturally, aim to close the door behind them. So, no slum schools, no sky-high university fees, no non-universal health insurance, no total abolition of the inheritance tax. Simple, isn’t it`? Thus a healthy level of social competition is assured and the parents’ or the foreparents’ status in life is not inherited, at least not automatically.
Comment by mjr — Wed, Apr 25th, 2007 @ 6:25 pm
Having seen the adverse effects in my immediate social environment, I would say that the most difficult issue with inheritance tax has to do with, for instance, death of a spouse. Whether or not the property is practically dividable so that children will be given their share, say, of the death of their father or whether it will all stay with the still alive spouse, the children will have to face the taxation, which may cause immense difficulties in less well-off families. Is one supposed to sue one’s parents? Gruesome. And lacking in logic.
Comment by Tulta syöksevä lintu — Wed, Apr 25th, 2007 @ 7:08 pm
I have a deed from 1962 when my grandfather died; and of the lot - “inheritance tax” was paid. It was a sum, 2% “paid to the poor of the county”. So the origins of it were sensible. My grandmothers deed from 1968 still has an itemized list; one black skirt, value 20 marks, a pair of shoes, value 10 marks…
So paying off the odd 4 grand for the lot wasn’t as bad as paying off my sisters.
Comment by Hank W. — Wed, Apr 25th, 2007 @ 7:58 pm
“What we need for a fair society is a level playing field for people to compete based on their individual ability.”
- Sorry, but there is no shortage of people on this planet running well under their ability, deciding instead to accept a State handout and be lazy instead. (To be clear this is a different group from the small minority who does need a handout/assistance.)
- Finland offers adult education in skilled trades. That is a playing-field leveler. Sure many of these jobs are tough, technical and stressful. That is why they pay better. That is the incentive. However, too many people are more interested in trying to suck a few extra Euros out of the Social Welfare system. How about getting some FREE USEFUL TRAINING instead.
The shipyard in Turku is hiring. Training included. Fine, don’t take the job. They have started to give up on Finns as they are now hiring foreigners.
Comment by Fred Fry — Wed, Apr 25th, 2007 @ 8:19 pm
Generally, the ultra-rich favor inheritance taxes. Why?
Simply because they can easily structure their finances to avoid paying them. There are many competing economies throughout the world that are more than happy to provide safe havens for their capital—legally. In fact, you don’t even need to be ultra-wealthy to utilize them. Just regular-wealthy will suffice.
But that in itself doesn’t explain why the ultra-rich favor inheritance taxes. This does…
You see, the only real political opposition against the ultra-wealthy is the middle class. Inheritance taxes cause the middle class to lose much of its power to challenge the political preeminence of the ultra-wealthy.
And let’s remember that the ultra-wealthy don’t need to live in your particular country to influence its political process. The only question is whether you—as a member of the middle class—have enough financial resources and political clout to counter them.
Comment by Kristian — Wed, Apr 25th, 2007 @ 8:26 pm
No, obviously the inheritance tax can’t in any way be punitive and the greatest fortunes will escape it anyway in most cases. But it is one useful tool among many - too bad that in Finland it has really been used in a silly and counterproductive way. Fred, I tried but could not find a coherent point in your rejoinder. Obviously there will be people that won’t compete and might even be abusing government handouts. What does that have got to do with maintaining a universally accessible high quality educational system where pupils compete based on their intellectual and other abilities and not based on their parents’ wealth?
Comment by mjr — Wed, Apr 25th, 2007 @ 8:56 pm
“What does that have got to do with maintaining a universally accessible high quality educational system where pupils compete based on their intellectual and other abilities and not based on their parents’ wealth?”
- That is what we have in the US, and most every high school graduate who wants to go to college can and can get funding and/or student loans to do that. As a bonus, they get to study whatever they want. Neither is possible in Finland for all. However, everyone cannot go to Harvard or Yale, but neither can everyone go to the Helsinki School of Economics either. however, in both countries you can go to school regardless of your parents wealth.
- Now for those who are not making enough money. The incentive should be higher education to provide skills to get a better paying job. It should not be punishment of those with money by an inheritance tax. Really, what is to stop people with high income from showering their relatives with gifts and leaving nothing behind when they die, other than debt? In the US, parents can give their relative up to $40,000 each, every year, tax free. (With the thought that they just paid taxes on the money.)
- This does not create an elite. It creates a healthy middle, upper middle class.
Comment by Fred Fry — Wed, Apr 25th, 2007 @ 9:16 pm
Nope, the elementary education is wildly varying in quality the US - in the worst slum schools mere physical survival can be a priority. In Finland it is common, has been common, that even wealthy parents’ children get a similar education than what is offered, say, in an ala-aste in Mellunmäki. University education is virtually free, so even for working class parents it is no kind of a burden to put their child into the best university of the country - should he or she qualify in the entrance examinations. Of course you have scholarships and theoretically open educational paths in the US, it is just that money and the lack of it for the worst hit areas of public education are talking increasingly loudly, certainly, much, much louder than in Finland. That’s largely why we have so much higher social mobility: poverty is not inherited, you can quite easily get ahead based on your personal abilities, and not be a special case at all. This is what the libertarians in effect want to abolish here: the structures that keep the playing field reasonably level.
Comment by mjr — Wed, Apr 25th, 2007 @ 9:24 pm
I have nothing to add, mjr said it all. I fully agree.
Comment by Passer-by — Wed, Apr 25th, 2007 @ 9:29 pm
What the hell? I thought this issue has been covered thoroughly a couple of times before and the discussion is still fresh in the Tax Circus post. Are you just trying to get the last word, Kristian? Cheap trick if you ask me, at least I don’t have the energy to say the same things over and over again.
Done and out (waiting for Phil to post something worthwhile).
Comment by Pave — Wed, Apr 25th, 2007 @ 11:21 pm
“should he or she qualify in the entrance examinations.”
- That is the real kicker though, isn’t it? Even worse is that you might have a good enough grade to get into one school, but sorry, you took the exam at HKKK and did not score high enough to get in there, so you go to no school that year. This might be one example of why there is a play-it-safe mentality in Finland. How many would qualify for the school but go to lesser schools to be sure that they get in somewhere. That I think is more unfair than the US system. As was covered here before, most anyone in the US who wants to go to college can get student loans to do so. There are even more options available for the poor, not to mention scholorships. Sure each graduate is burdoned with school debt when they graduate, but they also walk into higher-paying jobs, at an earlier age.
Sorry, but the path to college is not theoretical in the US as you mention above. Colleges actively recruit the poor and minorities. They recruit the poor because rich graduates contribute to scholorships for their schools and the schools cannot touch the money unless it is used as wished. As for minorities, colleges actively recruit to improve their student population statistics. Let’s just call it reverse discrimination.
If anything, it is Finland shutting out students from the education they want, due to the comment you made above.
Phil,
You commented on this before.
Comment by Fred Fry — Wed, Apr 25th, 2007 @ 11:41 pm
No, again: positive discrimination will in fact be just window dressing if there is no guaranteed access to universally high quality basic education for all. I repeat: for all. (I’m personally against quotas anyway - or at least simply to have quotas won’t change the fundamental factors and it might even hinder needed reforms.) If the whole system is tilted against the very poor, you won’t change it with gimmicks. The university system in Finland is somewhat different from the college based system of the US for reasons unrelated to any issues of libertarianism - so I don’t really have much to say about the entrance examinations in this respect. They certainly are often difficult, but on the other hand, shouldn’t it be quite difficult to get into a university? Here it’s not a monetary problem - university education is virtually free in Finland - but an intellectual problem, which to me is ok.
Comment by mjr — Thu, Apr 26th, 2007 @ 12:14 am
This simply out of curiosity:
Dear Kristian, are there any taxes that do work to you?
That is to say, what do you want to tax? Incomes? Property? Inheritance? Capital? Energy? Consumption?
Most economic liberalists, to my understanding, would argue that taxing property, consumption and death “works” better - or is fairer - than taxing income and capital, yet in your considerably politically inclined posts you never seem to offer any alternative tax schemes, vis-a-vis the current one. Maybe you should.
If you simply want to agitate that all taxes are generally bad, then why not to list what chunks of public expediture we should slash to afford the cuts?
Free higher education? Universal public health care? Social transfers?
Comment by Aapo — Thu, Apr 26th, 2007 @ 12:59 am
Aapo: “Dear Kristian, are there any taxes that do work to you?”
Sure. A combination of income and consumption taxes should be used to fund universal healthcare, universal education and social transfers to those who need them.
But the rates need to be competitive with those of other countries. Otherwise, we’ll just lose capital and talent to them.
I focus heavily on capital because we’re already near peak labor productivity. I mean, should we work any harder and give-up our nice summer vacations just to increase the tax base?
I hope not.
Instead, capital should be used to achieve the same objective. Capital generates profits when invested. Profits get taxed; hence a broader tax base and lesser overall tax percentage for everyone.
I don’t take credit for the idea. It’s a political issue being discussed worldwide—Sweden, Singapore….Switzerland’s done if forever, etc.
My argument against inheritance taxes is that they only weaken the middle class and ensure that the rich get comparatively richer. They work against the whole idea of funding universal healthcare, education, etc.
Comment by Kristian — Thu, Apr 26th, 2007 @ 2:21 am
Are you just trying to get the last word, Kristian? ”
No, it was in the news today. What was I supposed to do, ignore it?
Comment by Kristian — Thu, Apr 26th, 2007 @ 2:22 am
If you don’t like the damn LAW change it…and stop all the damn bitching…do some thing about it…get rid of those gold diggers in office…but you wont will you ? nope. i didn’t think so. If your not going to do something about it, you should pay, and pay heavy. If you not going to do something about it..i hope they take it all from you.
DO SOME THING FOR DAMN SAKE !!!!! amazing how the RULERS of the world dictate what to take…for crying out loud man…DO SOME THING ABOUT IT OR GIVE THE MONEY UP…
Comment by Hill billy — Thu, Apr 26th, 2007 @ 3:02 am
I personally don’t see what’s so particularly altruistic or desirable about universal health care or free higher education, in the world of scarce resources, but never mind. Perhaps you’re a brainwashed commie.
Inheritance tax certainly hits the middle-class, no doubt. That’s why they will lower it. Yet if you consider that by giving it up you trade off the possibility to slash income taxation - which would help lower-income tax-payers to climb into the middle-class, and further - I think it’ll be a silly move.
Any thoughts about that real estate tax, then, or the Finnish keenness to sponsor home ownership in general? How much economic sense does it make in this country to invest your spendola in property?
If it makes some sense, might it have some effect on how much money is invested in stocks and funds too?
Comment by Aapo — Thu, Apr 26th, 2007 @ 3:02 am
“university education is virtually free in Finland”
- For those who get in. Not all do. In the fine print of the Finnish Education system, you are only guaranteed education until 15. (And someone told me that you have to buy the books. Not exactly free.)
- You keep saying that the US education system is tilted against the poor. But where is the evidence?
I am somewhat surprised that there are so many in favor of inheritance tax. You should be careful what you wish for. Lets see what your opinion is when the government wants to collect it from you.
Comment by Fred Fry — Thu, Apr 26th, 2007 @ 3:09 am
“I am somewhat surprised that there are so many in favor of inheritance tax.”
There really aren’t. It’s only the usual suspects. You know, the same ones who are always automatically against anything we discuss on this blog
Otherwise, inheritance tax is known to be unpopular in Finland. I just hope it gets axed entirely for everyone—not like in Sweden where reforms seem to be taking somewhat of a half-assed direction.
Comment by Kristian — Thu, Apr 26th, 2007 @ 3:54 am
“Perhaps you’re a brainwashed commie.”
Yes, me and mjr
“giving it up you trade off the possibility to slash income taxation”
I think that’s on the agenda regardless thanks to a mandate from the OECD. Autovero also needs to go. There’s lots of work to be done even after that. Should’ve been started long ago :-/
“Any thoughts about that real estate tax…”
I don’t have any opinions on real estate tax for now.
But I find it amazing how many people in southern Finland still live in flats. In eastern Europe, the trend has long since shifted toward single family housing. Many empty flats to purchase—cheaply.
Comment by Kristian — Thu, Apr 26th, 2007 @ 4:13 am
Well, it is true that you are not guaranteed a university place - you must in fact compete quite hard for it, it’s just not a major monetary problem. I thought that libertarians would like fair competition, but I guess they oppose the situation were the wealthy don’t have such a huge headstart against the poor than is the situation in more libertarian oriented societies. I quite like this situation were you have access to good education regardless of your social background (not that the situation would really completely fair, and it’s not certainly trending for more fairness, or that there would not be cultural factors hindering social mobility). But in any case it’s good to have as fair social competition as possible: you should make your own fortune in the world and not your Daddy’s or your grandparents’…
Comment by mjr — Thu, Apr 26th, 2007 @ 10:34 am
[sarcasm] Perhaps FFT should add a rule against double posting? (Actually, make it a triple.) Or automatically obscure the dirty words like ‘tax’? [/sarcasm]
I assumed Kristian has took the points I made on how taxation does not necessarily keep or repel the financial investment (or the rich, for that matter. E.g. Swedish billionaire Hans Rausing in UK. Good accountants are highly paid for a reason.)
For any sensible/rational/intelligent investor, s/he will consider multiple factors before an investment, such as the financial/political stability, the potential growth, the skill market, tax and many more. It is a balancing act, and slashing tax would contribute as an attraction but certainly not the only factor. Otherwise we would have seen a lot of tiny low-tax countries being the technological/economical leaders in the world.
Inheritance is a personal financial gain to the beneficiaries, and it is seen as a gift in some countries. (So this is really less about “investment”.) In the case from parents to children, the emotional attachment and the reluctance are understandable. However, I agree with mjr’s points, on the basis that money itself does not guarantee the success of a child’s life. The old saying about teaching someone how to fish rather than merely giving him/her a fish, still echoes some truth. The money should rather be used to equip the child(ren) with skills, which probably have a long lasting effect, than them waiting some tax time-bomb to explode in the future. (Tax law is almost changing every year, so is the political / social environment, which can cause money to be worth nothing more than the print on the paper.)
I disagree one point that Fred Fry made about job opportunities. (Actually more, but no more time and the margin is too small to fit) Being intelligent or any other good quality does not automatically make one employable - there are million of graduates pumped out of the universities around the world, it’s reasonable to assume that not all of them get a job even after a year of searching. I find it unreasonable to quickly label people as lazy, when the job market is limited and the competition is fierce. Further, getting a job sometimes has to do with being at the right time and the right place. I am sure many would have the experience of having a somehow-seemingly-less-qualified boss at their work.
Comment by David — Thu, Apr 26th, 2007 @ 11:32 am
I think that’s on the agenda regardless thanks to a mandate from the OECD.
Why in the world do you keep referring to the OECD, when you obviously never read anything from them?
The OECD’s outspoken view is that Finland can’t decrease its tax base any longer, if it doesn’t cut public expenditure at the same time. Public debt and demographic changes do make a difference, believe it or not.
Their second point is that Finland could find more margin by shifting the emphasis towards property taxation, but that message has been systematically disregarded in this country.
But I find it amazing how many people in southern Finland still live in flats.
My own perception is quite the opposite. I find it amazing how stubbornly Finns still stick to their ideal of owning a house “by the lake, close to the forest and preferably in the cente” - leads to long commuting times and awkward urban planning.
In eastern Europe, the trend has long since shifted toward single family housing. Many empty flats to purchaseâ€â€cheaply.
You can’t call the current house prices in east Europe cheap, unless you’re a broker and want to seduce potential clients. Ever heard of that property boom out there?
Many people were living in commune sort of appartments during socialism, with shared kitchens and bathrooms, and after the collapse the situation has been gradually normalising. Call it a “trend” if you will.
Comment by Aapo — Thu, Apr 26th, 2007 @ 12:43 pm
“Inheritance tax certainly hits the middle-class, no doubt. That’s why they will lower it.”
No. They aren’t lowering it for the middle classes, they are abolishing it for the owning classes - farmers, stockholders. You who get most of your money through regular income will keep on paying the tax.
Kepu at it’s finest
Comment by Anonymous — Thu, Apr 26th, 2007 @ 12:53 pm
I am somewhat surprised that there are so many in favor of inheritance tax.
Well, some people just have the ability to see things in a wider context than their own little bank account.
Lets see what your opinion is when the government wants to collect it from you.
Why would I (or you, or anybody else) care at that point anymore? I hate to burst any bubbles, but we are obviously DEAD when the government comes for the inheritance tax.
Comment by N. Siinistö — Thu, Apr 26th, 2007 @ 1:15 pm
MJR,
“Well, it is true that you are not guaranteed a university place - you must in fact compete quite hard for it, it’s just not a major monetary problem. I thought that libertarians would like fair competition,”
- Thank God I am not a Libertarian. The question is, why is it hard to get into a University in Finland. While it may be hard to get into a specific one in the US, most everyone can find a University spot at their second or third choice, with the Government ready to subsidize the expense. I have yet to hear how the US system is unfair.
David,
“I find it unreasonable to quickly label people as lazy, when the job market is limited and the competition is fierce. Further, getting a job sometimes has to do with being at the right time and the right place.”
- Both Finland and the US has low/no unemployment for many skilled sectors/positions. There is training available in Finland for people to be qualified for those jobs. With all the unemployed people in Finland it makes no sense for the Shipyard in Turku to be recruiting from other parts of the EU. OK, it is hard, physical work, and people excuse themselves from taking a job that they will actually have to do something. I saw it in the Port of Helsinki. It was how I got a job. Nobody wanted the position even though it paid more. (You know you have a job when the interview consists of explaining why I should stick it out and see him if there are ever any problems, and not to quit!) The stevedores would rather work two hours in the morning when the ferry arrived, sit around all day long, then work two hours in the evening when the ferry left. This is the same type of people that thinks the rich should be taxed left and right because they make more. How about shutting up and working instead.
Comment by Fred Fry — Thu, Apr 26th, 2007 @ 3:30 pm
Btw, Phil, Kristian, you should check out the new purchase power survey (I believe by Taloussanomat), that should get your libertarian tongues wagging! Though of course the picture is far from simple and many other nanny states perform much better.
Comment by mjr — Thu, Apr 26th, 2007 @ 6:37 pm
mjr, can you please respond to the earlier post I made considering the value you mentioned of a “normal fortune” being 300 000-500 000€
and how you can think of that as a fair sum to tax at? I mean really, as I mentioned, it won’t even get you much of a family house in the greater Helsinki region or many of the larger cities of Finland. Do you really think that is a “normal fortune?”
Comment by Punter — Thu, Apr 26th, 2007 @ 9:35 pm
Oh, well, let’s say it would 0% up to 0.5 million euro and say 10-15% up to 1 million, so that would give 5-7,5% of tax for a property of one million euros, surely easily payable. I know apartments are quite expensive these days but most still fetch under half a million.
Comment by mjr — Thu, Apr 26th, 2007 @ 9:43 pm
Who is talking about apartments? I am talking about a family home on my own land. Now is that too mauch to ask for? Too posh maybe? Find me a family home (170 sq m) on a decent block of land for 500 000€ and then lets start to talk “normal fortune.” Wow, how rich we all are……….
Comment by Punter — Thu, Apr 26th, 2007 @ 10:09 pm
I feel for you, but what’s the problem exactly? In this form the tax surely would not be punitive.
Comment by mjr — Thu, Apr 26th, 2007 @ 10:44 pm
The most difficult situation is when the estate consists of a house but no cash. I think #16 above mentioned something about that. It could meant that a long-time family house would need to be sold to pay for the tax.
It makes no more sense to force the sale of a family house than it does to dilute a family business—as is discussed in the linked article. Just another reason for why the inheritance tax doesn’t work. Or otherwise stated: Why it only affects those who are too weak to avoid it.
Someone here or in another thread mentioned “fairness” concerning letting someone else inherit a fortune and not need to work. It’s typical jealousy-based ideology that only hurts society economically.
Instead, we should be glad that a person—or perhaps an entire family—doesn’t need to be supported by welfare payments; it lessens the burden to society. Yet the person still pays income tax—e.g.-on dividend income—and thereby increases the tax base just like a regular worker. Not to mention that he also adds to the consumer base.
All this without taking a job away from someone else. It might not sound relevant now that Finland needs workers. But that situation could change to the opposite at some point….and it probably will. The more people who can live-off their investment savings, the less the burden on the welfare state.
Comment by Kristian — Thu, Apr 26th, 2007 @ 10:53 pm
I don’t understand what’s the problem. Inheritances are already much less taxed than other forms of income.
Comment by Erik — Fri, Apr 27th, 2007 @ 12:12 am
It could meant that a long-time family house would need to be sold to pay for the tax.
Nobody has to sell anything, of course. Ever heard of mortgages?
And jealousy is one of the driving force behind capitalism and as such not altogether good. It can be destructive too if the society doesn’t feel fair. Take almost any Latin-American country, and it’s not altogether alien to the USA either. Abolishing inheritance taxes is certainly one step toward a society with more and more “class strifes”, i.e. more and more people not respecting the property rights because “you got it all in an unfair way so I don’t have to respect your rights”. Such steps should be taken with caution, unless the idea is to destroy the free market economy.
The new coalition will get the farmers and family firms off the hook. I suspect that it will not received well among those who have to earn their living contrary to those who first inherit, then sell, and then live on capital gains - and don’t even pay taxes. Probably the government next “have to” abolish all inheritance taxes. Not good.
Comment by Anonymous — Fri, Apr 27th, 2007 @ 1:53 pm
Abolishing inheritance tax is counterproductive for the rich in particular - in the long run. Quite a few of them understand this but the majority doesn’t.
Comment by Anonymous — Fri, Apr 27th, 2007 @ 2:19 pm
300 000-500 000€ [...] won’t even get you much of a family house in the greater Helsinki region or many of the larger cities of Finland.
If 200 m2 with a separate waterfront sauna and twenty minutes away from Turku is not much of a family house. And it’s not even 500 000 but rather 350 000 - 400 000 (according to the latest estimate we got a couple of years back). But yeah, the Helsinki area is ridiculously expensive. Move to Tammisaari before the housing boom gets there, if it hasn’t already;-)
Comment by Anonymous — Fri, Apr 27th, 2007 @ 2:40 pm
“Nobody has to sell anything, of course. Ever heard of mortgages”
- That is the most idiotic comment on this whole thread, but it at least illustrates how idiotic the tax is. Just why does it make any sense to force people to take a loan on their assets, just to pay the tax on it? Now if you took half a second to think this out, you might have realized that people are living longer, which in some cases means that people are dying in their 80’s and 90’s and leaving their property to their children in their 50’s and 60’s. Some of those people are going to be retired or unemployed. Just where are they going to get the income to pay off that mortgage? This tax turns a retirement house and turns it into a debt burdon.
Comment by Fred Fry — Fri, Apr 27th, 2007 @ 3:50 pm
I’m not sure I understand what’s idiotic about not having to sell if you don’t want to. Do you often think objective facts are idiotic or was it just this one?
Let’s pretend that I’m the only child inheriting an apartment worth 100 000. I would have to pay 16 000 for taxes (or in fact less, but let’s not get into that). If I didn’t have the money and didn’t want to sell the apartment, I could get a loan. And even if I was retired I could then pay it easily back unless I’d been living in a tent earlier - or even then by renting out the apartment for a couple of years.
Comment by Anonymous — Fri, Apr 27th, 2007 @ 4:20 pm
“If I didn’t have the money and didn’t want to sell the apartment, I could get a loan. And even if I was retired I could then pay it easily back unless I’d been living in a tent earlier - or even then by renting out the apartment for a couple of years.”
- OK, for starters, why should you have to now rent out a place just to pay off the taxes. Maybe you want to live in it, or perhaps you already are and the inheritance is just a transfer of ownership.
- One aspect of getting a loan/mortgage is the ability of the borrower to pay. Now in the US, some banks will loan to most anyone, including giving a 30 year mortgage to a 100 year old man, but that is not possible in Finland.
- You also forget that there will be property taxes due as well. It is not like the property is obtained fully free.
- I am glad that you can easily pay it back, but that is not possible in many other cases. How about inheriting a farm or house worth 500,000 euros. How about paying the tax off on that? Children should not be gived with debt, especially since tax has already been paid on everything.
Comment by Fred Fry — Fri, Apr 27th, 2007 @ 6:08 pm
why should you have to now rent out a place just to pay off the taxes.
Because I had been living in a tent, don’t you remember. Had I not I would either get some money by selling my apartment or stopping to pay the rent. In a tent, though, I think it definitely would be a improvement to get 84 000 in cash or wait for a couple of years and get to move indoors. You, by the way, seem to have this impression that everybody should have everything according to their needs. Sorry, but socialism has been tried and it doesn’t work.
Now in the US, some banks will loan to most anyone, including giving a 30 year mortgage to a 100 year old man, but that is not possible in Finland
I don’t know about the USA but in Finland a 100 year old man can get a mortgage. It’s not the man, you see, who has the liability in the end, but the property.
You also forget that there will be property taxes due as well.
For a 100 000 apartment? Sorry, no. For a _one billion apartment_ … sorry, it’s still no. In oterh words, Finland doesn’t have property taxes
How about inheriting a farm or house worth 500,000 euros. How about paying the tax off on that?
So the problems grow bigger as the property grows bigger. That’s an interesting angle … Hey folks, if anybody out there has inherited way too much I’m willing to take part in the burden. Lets say just 100 euros. No? 10 000 euros? OK, just send me one billion euros and I promise to cry on my way to the bank.
Comment by Anonymous — Fri, Apr 27th, 2007 @ 8:28 pm
Apparently I got caught in the spam filter (or whatever that thing is that arbitrarily prevents posts from showing). Let’s see what happens with this one.
In short, you’re wrong on all counts:
If you don’t have money you’re not worth much in this system of ours (called capitalism) … but if you get 86 000 you’ll be better off in all likelihood. And you _can_ rent out if you rather keep than cash in.
In Finland a 100 year old man can naturally get a mortgage, it’s in the nature of that particular loan.
There is no property tax in Finland.
And of course the problems don’t increase while the the money you inherit increases. Claiming otherwise is absurd, unless you refer to the fact that the rich are on average pretty unhappy folk (yes, it’s been studied).
Comment by Anonymous — Fri, Apr 27th, 2007 @ 9:11 pm
Fred Fry:
“How about inheriting a farm or house worth 500,000 euros. How about paying the tax off on that? Children should not be gived with debt, especially since tax has already been paid on everything.”
This double-taxation myth is so annoying it makes me wanna puke. If some money/wealth is passed from one person to another it is normally taxed. Whether that wealth (salary income e.g.) has been taxed before or not. If I - using my taxed income - buy groceries in the local CM, it will end up being double-taxed in the shape of salaries to workers, profit to the owner, or then (non-taxed - to avoid the only sensible so called double-taxation there is) to suppliers, where it again will go through the same process. While money circulates in the economy, it is taxed, and taxed, and taxed, and taxed. But this is the same thing all over the world, like it or not.
Why are inheritances (effortless income) to be tax-free while income earned on your work efforts is to be taxed? Inheritance wealth - typically - is gathered over a life-time. That income - normally - has been taxed (in any heavy manner, at least) once, but then - in practise - never again. Now, if one says that taxing the inheritance is double-taxation, then this is simply absurd. Most other money has been taxed 100 times before the inheritance tax hits the inheritors.
What if you want to be a farmer, but start from scratch? Why should that be economically very risky (you need to loan those 500000e to even start) for the self-made (wo)man, whilst inheritors can start out without any financial risk whatsoever?
Comment by Thomas — Fri, Apr 27th, 2007 @ 10:15 pm
Fred Fry”- That is the most idiotic comment on this whole thread”
I couldn’t agree more.
Astute countries know that inheritance taxes only discourage well educated and talented people from moving to them.
For example, a well educated person could move to Finland to work (and perhaps he is also married to a Finn). But if he were to inherit money from his family abroad, he wouldn’t be able to move that capital to Finland for fear of losing it to inheritance taxes.
To really play it safe, and depending on the circumstances, he’d have to move (himself) away from Finland completely.
It creates a hurdle that causes qualified people to seek residences elsewhere. A country shouldn’t chase-away talent, especially if it comes with ‘free’ working capital. That talent and money can be used to employ people and increase the tax base. It makes no sense to chase it away.
Comment by Kristian — Fri, Apr 27th, 2007 @ 10:37 pm
I couldn’t agree more.
Of course you do. Hell, facts are for suckers.
Comment by Anonymous — Fri, Apr 27th, 2007 @ 10:54 pm
Kristian:
“The most difficult situation is when the estate consists of a house but no cash. I think #16 above mentioned something about that. It could meant that a long-time family house would need to be sold to pay for the tax.”
Similarily, if it consists merely of cash, it could mean a beloved - long-time collected - stash of cash turns into a smaller stash. Like the “family house” turns into a smaller house. Besides any - “liberal”, and whiney - hard feelings about the “family house”, what’s the fucking difference?
“It makes no more sense to force the sale of a family house than it does to dilute a family businessâ€â€as is discussed in the linked article. Just another reason for why the inheritance tax doesn’t work. Or otherwise stated: Why it only affects It makes no more sense to force the sale of a family house than it does to dilute a family businessâ€â€as is discussed in the linked article. Just another reason for why the inheritance tax doesn’t work. Or otherwise stated: Why it only affects those who are too weak to avoid it.”
Well, if you aren’t the businessman enough to start up from scratch, will you be it, if you cannot event start “half-way”?
What you say about “Why it only affects those who are too weak to avoid it.” may have some truth in it. But, that is not the cause of inheritance tax per se. That is the cause of loopholes etc., which make room for tax planning and such. One GIANT loophole will be opened by the dream-government of yours, that you had so high hopes for in a - relatively - recent post.
Loopholes could be CLOSED, instead of getting rid of the inheritance tax. But then poor Fred Fry would be out of business ;-). Maybe that’s why he bitches here, and not where it could affect him (aren’t you living in the states Fred?).
“Someone here or in another thread mentioned “fairness†concerning letting someone else inherit a fortune and not need to work. It’s typical jealousy-based ideology that only hurts society economically.”
Why is that? The market economy is supposed to - by means of competition, and all kind of other hugely “nice” libertarian features - bring out the best in companies, and people. Why should these aristocratic inheritors be exempt. Shouldn’t their effort be brought out by means of competition - other than competing with who has the nicest - inherency paid for - yacht? You seem to imply that inheritors are all dumb. That’s strange. You would probably say that monarchy would be a good thing for Finland, since prince charles has a great wealth (not to mention the queen), and what not.
“Instead, we should be glad that a personâ€â€or perhaps an entire familyâ€â€doesn’t need to be supported by welfare payments; it lessens the burden to society. Yet the person still pays income taxâ€â€e.g.-on dividend incomeâ€â€and thereby increases the tax base just like a regular worker. Not to mention that he also adds to the consumer base.”
Ever heard of zero-sum games?
“All this without taking a job away from someone else.”
Whose jobs was at stake?
“It might not sound relevant now that Finland needs workers.”
Haven’t you claimed there is unemployment? What workers do we really NEED at the moment?
“But that situation could change to the opposite at some point….and it probably will.”
This kind of economical ANALysis I can read from the financial papers day in, day out. But where is the content. “It probably will”? Because Kristian from Espoo - the beer importing half-german says so. Ha ha.
“The more people who can live-off their investment savings, the less the burden on the welfare state.”
Isn’t that what so-called “wellfare-state burdens” do? They live-off the investment savings of the collective state (to which they have often - at some point - contributed). One of the financially most sound. One that is NOT net-indebted. Unlike your favourite states.
Comment by Thomas — Fri, Apr 27th, 2007 @ 11:13 pm
Hey Thomas I have to ask. are you a dumbass, a jackass or just an ordinary ass?
Inquiring minds need to know.
Comment by redman — Sat, Apr 28th, 2007 @ 1:26 am
“For example, a well educated person could move to Finland to work (and perhaps he is also married to a Finn). But if he were to inherit money from his family abroad, he wouldn’t be able to move that capital to Finland for fear of losing it to inheritance taxes.”
- Actually, if they are in Finland for more than six months they are considered a permanent resident as far as the tax authorities are concerned (regardless of their actual immigration status), and the inheritance would be taxable in Finland regardless of whether the assets are ever moved to Finland. How do they know that you inherited something? You tell them. (This was their response to a question I asked a couple years back.)
Comment by Fred Fry — Sat, Apr 28th, 2007 @ 2:46 am
redman:
Concerning you: it’s obvious. Your’e an idiot. Welcome to the club.
Comment by Thomas — Sat, Apr 28th, 2007 @ 3:00 am