In The Name of Capitalism: Bring Back The Estate Tax For The Super Wealthy
In writing the Declaration of Independence, Thomas Jefferson penned the self-evident truth that “all men are created equal” and thus captured what untold millions have since fought for at the bully pulpit, in the courtroom, and on the battlefield: the essence of the ideal that is America. The United States was to be the great level playing field for humanity. A place where all men are born equal and given equal opportunity to do, invent, create, achieve, and be; where all the castes, fiefdoms, and classist orders of the old world were rejected. A place where men are born equal, but free to set themselves apart from equals and to enjoy the fruits of hard work, creativity, and natural gift. Our forefathers began the greatest experiment in democracy and meritocracy - a marked departure from the contrived social order of the old world in which lineage dictated one’s potential and future.
While by no means did the Founders successfully implement this ideal 230 years ago, it seems today we are moving away from it, rather than towards it. Increasingly our social and political structures look like the ones they were supposed to supplant. Ever more, America’s boardrooms, courtrooms, and cloakrooms are filled with men of the same last name. In the last presidential election, the country did not have a choice but to vote for a candidate belonging to this new vein of American royalty: both candidates came from old families with old money and old power - which does not necessarily imply they are not the best qualified for the job, but without competition, how can we ever know? And if they are the best qualified, is that not saying something about who has access to elite education and opportunity? US citizens still have the ability to choose their leaders, but only those with the right names, the right connections, and the right bank accounts can break in to the rarefied pool of candidates.
How is this so? Over the years, families with great concentrations of wealth are able to protect, grow, and pass that wealth through the generations. Money equals power, or at least access to it, and there are now entire generations of American royalty born with the right name that gives them access to incomprehensible sums of money and the levers of power. Sure, there are still exceptions, but every new individual achieving the American dream of success and wealth can ensure their descendants will be American royalty for generations to come.
Of course those of extraordinary genius, courage, and innovativeness should and deserve to be rewarded for their gifts, achievements, and risks – they are the ones who cure our disease, bring us to the outer reaches of our universe, and invent the technologies that improve the quality of life for billions of people. Of course they should be able to make a better future for their family and future generations by passing their hard-earned wealth along.
What they should not be able to do is dub their future heirs permanent royalty by virtue of inheritance. The accumulation and stagnation of power by idle idols will always lead to oppression. This is evident in the recent spate of television shows (“The Simple Life”, HBO’s “Born Rich”, MTV’s “Rich Girls”) celebrating America’s newest uber-heirs. The delusional misogynic, classist, and racist comments of these deluded teen idols would not be so scary if they did not have the access and influence their fortunes afford (or will soon afford) them.
Do I wish I had inherited their kind of money? Absolutely. Do I think I would be better off because of it? Absolutely not. To the contrary: the hunger for the security and freedom that such wealth will afford me and my family will hopefully lead me to achieve things that will benefit society.
The repeal of the estate tax should be lauded for the positive impact it has on American families, farmers, and business owners. If shows such as “Born Rich” and “Rich Girls” serve no other purpose, they serve as commercials for the very real need for the reinstatement of the estate tax on the super wealthy. The exact numbers and margins are unimportant. What is important is for the estate tax to allow families to pass their farms, businesses, and wealth from generation to generation while preventing the further establishment and perpetuation of the American royal class.
posted by CK at 9:16 PM
5 Comments:
Why should anyone work a lifetime creating wealth while teaching their kids to have a strong work ethic only to see the wealth wasted by governmental greed. If one plants an orchard or a garden should they not be the ones to enjoy the fruit of their labor?
In socialistic regimes around the world those with political power aquired wealth through the labor of others. There will always be the wealthy and the poor. The estate tax punishes the mom, and dad that work a lifetime building a business for their family,. It never punishes the wealthy or those in power.
What happened to the wealth of Russians after the fall of Csar Nicholas? Those with means fled to other countries keeping their wealth. The communist then created a new class of wealthy families that were communist party members. Look at the old wealth still in the hands of the few families throughout Europe. Wealth does not spread in Europe like it does in the US. Why not? Taxes, and Government Intrusion! Who benefits from the Estate Tax system? Those that depend on Government to support their lives.
2:42 PM
The elite families of the U.S. don't worry about the estate tax. They have teams of highly skilled and knowledgeable lawyers, insurance specialists, CPA's, etc who can advise them on how to pay the estate tax for pennies on the dollar. Family foundations, family limited partnerships, GRATS, GRUTS, survivorship life insurance, intergenerational discouning methods, irrevocable life insurance trusts, inter-family loans (to trusts), gift tax leveraging, etc.
Now, for the smallish family business, $2-$15 million in value, these things may be too exotic and/or expensive to implement. But make no mistake, the estate tax doesn't hurt the Heinz's or the Hilton's of the world. It does hurt the guy next door who started a dry cleaning business 35 years ago, worked 12 hours a day, six days per week, and now has 12 locations.
4:05 PM
If you go back and read the essay, I specifically advocate eliminating the estate tax for everybody except for the super wealthy, e.g. individuals worth tens or hundreds of millions of dollars. The entrepreneur, the farmer, the grandma who saves her pennies and invests in Microsoft, all of them should not be subject to the estate tax. Even the super wealthy should be allowed to make sure their family is well off to a certain degree as a result of their hard work. The point is we should not allow a permanent royal class defined by lineage to emerge in America - it breeds oppression and stifles innovation. I think Sam Walton's family would have survived just fine with $1B out of the $100B he left behind. Our tax law should exempt everybody except for the fabulously wealthy and close the loop-holes that enable them to dodge taxation today.
9:46 PM
I agree, but the point of my comment is that the super wealthy may pay estate taxes, but at a highly discounted rate using other people's money. The estate tax has been around for over two hundred years and it has not stopped the emergence of an entreprenurial class from developing among every generation. It has also not kept certain families from becoming, in effect, financial dynasties. A loan to an irrevocable life insurance trust has been deemed at this point not to be a gift. So, why not loan your ILIT $10,000,000 to buy a $100,000,000 life insurance policy which is owned by the trust and therefore out of your estate. When you die the trust has $100,000,000 to pay estate taxes. That is just one very simple technique. The super wealthy's lawyers have dozens of these types of techniques. In terms of closing loopholes, the problem is as soon as your close one a smart estate planner discovers another, so it's a never ending process. TP99, don't get me wrong, our firm generates alot of revenue from these types of techniques, so I am all for an estate tax. I hear that the most likley compromise which will be voted on in the Senate in September is a 3-5 million dollar exemption per person with a top tax rate of 35%.
9:35 AM
I think everybody in America should have an equal chance at succeeding, which is how I interpret Jefferson's writings. I think Walton's future generations (or the current Kennedy's or Bush's for that matter) will have privilages (and will not be treated with equality when compared to the average American) for eons without having to contribute anything to society, simply because of their last name. The last time I checked, that is called royal lineage/feudalism/or whatever you want to call it. America should stand as the antithesis to that, not the new breeding ground for it.
When Jefferson penned that line, it was legal to own slaves (and he did so himself). A modest leap of logic would imply he saw keeping Africans as slaves as being consistent with "treating all men equal". Do you still think we should strictly adhere to the letter of his writings, or do you think it better to interpret the spirit of his writings based on our modern society?
And let me ask you this - do you really think that two white New England sons who both attended Yale and were Skull and Bones members (all because of who their family was, not because of any achievement of their own) were the two best candidates America could have fielded for president in the last election? I absolutely do not. I do not think that coming from a wealthy family should automatically disqualify somebody for higher office (regardless of what you think of his policies and how he exercises the powers of his office, you cannot deny the fact that Bush is very good at his job), just as I do not think coming from a wealthy family should automatically qualify somebody for higher office, which is clearly the case today.
11:14 PM
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