25 FAMILY SUCCESSION
In some of my reading lately there has been reference to the importance of tax planning in passing on family assets to future generations. These tax problems all stem from the choice of the wrong tax base, that of income, and more particularly the complications that have been caused in trying to correct its damaging effects on the economy of our country. The very idea of Government taxes removing productive wealth from our economy to have it disappear as current account expenditure of Government in a fiscal year is unconscionable. Many small and medium businesses have been closed or been sold and lost from the productive sector of our country due to taxation. Many would continue and grow if passed to the next generations. This trend is particularly harmful to the rural and less prosperous areas where the big corporations buy them and just shut them down.
We should encourage the passing of wealth to the next generation. Much of the reason for entrepreneurs to continue their wealth creation is to be able to pass it to the future generation. If the inheriting generation is as smart as the last, or had been trained by them to carry on, the wealth would continue to grow the countries' economy and productive wealth. If the producers spend instead of accumulate or beneficiaries spend the inheritance on personal consumption, that is when the taxation should take place.
There should be no tax on capital gains as long as the value received is reinvested in productive assets. The receiver of the gains gets no use from the gain until they spend / consume. What they do not consume stays in our economy for the use of the rest of us. Tax what is taken out of our economy, not what is produced. Only by taxing what is consumed can there be fairness between the individuals in our society. Any other tax than on what is consumed decreases the productive assets in society to be spent by government and be gone forever.
In spite of claims that consumption is good for the economy, it can not be so. Consumption makes work for someone. But not for our young people, the work is done elsewhere, or by robots. Better that the work be to strengthen our economy, to create something lasting. What is the good of work that is unnecessary, for consumption that is unnecessary?
Governments have been discouraging production and saving, and encouraging consumption. Our personal and Governmental volume of debt has been enabling the importation of goods that should be produced in our country. At some point in time we, or our following generation, will no longer be able to go further in debt. Better we get rid of the Party Political system that is ruining our country, concentrating wealth in the hands of a few and encouraging excessive debt..