[ExI] Paris Hilton's inheritance (was Re: Friedman and negative income tax)

[Tom Nowell]

Actually, Paris Hilton may not be the best example for your inheritance examples. The founder of the Hilton hotel chain grew up seeing his dad nearly run a hotel into the ground. He tried to do better, and in the wake of the Great Depression he was able to sell his ideas on how to improve hotels to bankers who'd give him mortgages on hotels that were available at knockdown prices following the crash. When he built his fortune, he was worried that leaving too much to his kids might spoil them, so he didn't leave much in the will. His son challenged the will and got a huge chunk of money, leading to his family being loaded and Paris being free to spend her money on designer dresses, partying and cryonics. Chalk this one up as a victory for American justice for people who don't think Daddy left them enough.

Inheritance taxes do leave room for some interesting economic stimuli - by taxing money left to people but letting charitable donations be tax-free, it allows people to weigh up how much to give their folks (and give the govt a chunk) or whether to blow it all on their favourite cause, just to deny the taxman his share.

In the UK, a few things get special treatment for Inheritance tax - shares of at least 25% in a family firm (encourages their continuation, not necessarily economically efficient but voters feel comfortable with it), farms (the family farm being an instituion seen as worth preserving), and forestry - as deciduous trees can take longer to mature than an investor has to live, people wouldn't grow them without a tax break.

Did Australia abolish its inheritance tax a few years back? I remember reading that one state abolished it locally, and the government was considering scrapping it nationally. I'm sure one of our list Aussies can give the example from their home country.