Huh, I'm starting to notice that people already do incredibly stupid things with their companies for short term gain already.

Now, I'm naturally willing to be proven wrong, but it looks like (from a cursory googling) that most firms only last about 10 years. https://time.com/3768559/company-mortality-rate-survival-stu...

You may think you're building an empire, but you're probably not.

Some people already do incredibly stupid things with their companies for short term gain already. Do we need more of them to?

Choosing a handful of successful winners in comparison to "most firms only last about 10 years" is a selection bias.

All of the original members of the DOW Jones industrial average have declared bankruptcy or been absorbed into other companies -- except General Electric! Oh wait, they were just removed from the index

"Most firms only last about 10 years" is selection bias because most firms don't even last 10 years. Infant mortality is very high. The firms that do last 10 years usually last 20 or more.

Meanwhile you're ignoring my point -- it isn't a question of how many companies are destroyed, it's a question of destroying even more of them. Some evidence that maintaining a stable company is hard is not an argument for making it even harder.

How is that selection bias?

> Meanwhile you're ignoring my point -- it isn't a question of how many companies are destroyed, it's a question of destroying even more of them. Some evidence that maintaining a stable company is hard is not an argument for making it even harder.

Sure. I'm not proposing we should make it harder

If you're publicly listed, it's not your company anymore.

> there's no reason not to run it into the ground for short-term gains before I die

Or, you could sell the business to the person most qualified to run it well instead of installing the boss's kid as the new boss. Nepotism is gross.

Or, you could distribute more ownership in the business over time to the employees that help build your wealth.

But no. If you can't pass the wealth to your kid, then there's literally no reason to do anything other than burn everything down.

In most of those circumstances, “installing the boss’s kid” isn’t “nepotism”, at least not in the common usage of the word. Giving a business to your children is not favoritism because there is no reasonable expectation for it to be based on anything other than the owner’s will.

That point aside, I think my first paragraph illustrates a big barrier to discussion on this topic. It seems like many commenters here are envisioning a multi-millionaire setting up their kids with huge trust funds and giving them a “no-show” job on the board of one of more public companies. Others are envisioning a small family business being passed down between generations.

This is one of those situations where both sides are correct. The legal structure for a huge corporation isn’t that much different from the construction contracting company down the street. Especially in cases where the business requires a lot of capital investment (like construction or farming), a relatively small family business ends up falling under the same laws as the giant company.

It’s one thing to say that the giant company should come with a 15% tax passed on to an heir; it’s quite another to say that the family business should. In many cases, the family business simply doesn’t have enough capital on hand to absorb those taxes, and the only resort the heir has is to liquidate all or some of the business to pay them. This means that small, well-run, multi-generational businesses are damaged or even lost completely.

At the end of the day, the effect is regulatory capture. The owners of those giant companies hire accountants, take advantage of the tax code in every way they can, and just plain have enough cash on hand to make this a non-issue. The owners of the smaller businesses don’t. Over time, it means that the larger a company is, the less competition it faces.

This is a great point.

But, this seems like a problem that can be routed around in any number of ways without just throwing up your hands and allowing generation wealth accumulation at worst or lifelong unproductive consumption at best. And, on a startup board, it goes without saying that this is a problem that we should solve throughout the tax code and not just in case of the death tax.

And I still think inheriting controlling interest in a private (or public) firm is nepotism.

Believe it or not, some people want to raise children who are properly incentivized to be productive members of society.

> Sure, you could argue on a bigger level because of the power concentration, but you are applying the same thought to a small biz.

The proposal here is about people with 8+ figures in personal wealth. That's not the typical small family business.

> go build something yourself.

I mean, this is literally the point of the death tax, that people should have to build wealth for themselves...

> The proposal here is about people with 8+ figures in personal wealth. That's not the typical small family business.

Depending on how it’s set up, “personal wealth” includes the business’s assets. I don’t know what your conception of a “small family business” is exactly, but there are definitely cases where a long-running business has a lot more “wealth” than it generates.

I don’t have an easy way to verify this handy, but I’m familiar enough with farming to assert with reasonable certainty that many family farms have several million dollars in assets while generating <$200k in yearly income. For a multi-generational farm, land value becomes a bigger and bigger issue.

For instance, my grandparents owned what most would probably consider a “hobby farm” in central Arkansas. I believe their parents purchased the land originally in the mid-1800s, when it was a rural area. It’s now very much in the middle of a small city and the land is worth many multiples of what it’s being used for today. My grandmother on that side passed a couple of years ago and to be honest I’m not sure who actually owns the land now - I know it’s still in the family because one of my aunts still lives in the original home on the property.

I don’t have a direct interest in this (I see no way I’d ever end up “inheriting the farm”), but I would very much be opposed to the state essentially confiscating the land that my family has owned for five generations. The land alone has likely increased in value in the past two centuries that its fair market value is more than $10m - but as far as I know my family has no interest in selling it, and as far as I know no one in my family has the means to pay taxes on that much value.

One reason for taxing property is to force productive use of the fenced-in commons. If your land isn't being used in a way that enables payment of the full tax burden, then it should probably be sold off to people who are willing to help society extract the full value of that land. And taxes on inherited land should be attenuated, in part, to ensure productive use of land.

Where you see an unfair confiscation of your family's birthright, I see an unproductive use of the commons. The whole moral justification of fencing off the commons is to enable more productive use; if that productive use isn't going to happen, then we should either take down the fence or let someone else manage the land.

Or, suppose that's not the justification for private property and everything is birthright. The just and right birthright to land settled in central Arkansas in the 1800s probably belongs to the Osage.

Well, maybe. Something can be publicly listed while being majority owned by one person. But the "short-term vs long-term" dichotomy was meant more as a commentary on valuations and discount rates in general.

> Or, you could sell the business to the person most qualified to run it well instead of installing the boss's kid as the new CEO. Nepotism is gross.

This is completely unrelated to ownership.

> This is completely unrelated to ownership.

So if the kid's going to sit back and not interfere then it's kind of irrelevant that it's your business. Might was well be a portfolio.

What's your incentive to do that if the government is only going to take the money you got from selling it too?

In fact, nepotism is what you get when you require that, because nepotism is an alternative way of transferring wealth to your children instead of inheritance.