The estate tax is the most capitalist tax that exists. Capitalism, which some seem to think is based on people inheriting assets from their relatives, is not. Capitalism is based on the concept that each person gets to receive rewards for their work.
Long before Adam Smith, noble rich passed on their wealth to their heirs. It was not Capitalist then and it is not Capitalist now.
Unfortunately many seem to have skipped economics in school and accepted the claim that Capitalism is about protecting the rich. They seem to believe it is a tenant of Capitalism that those that have the gold make the rules. That is in fact a risk that Capitalists must protect the economy from, not something Capitalist approve of. Those who believe in the wealth being passed from those who earn it to those who they like, believe not in Capitalism but in the state not taxing the idle rich but instead taxing those who don’t have millions given to them. While many have come to believe that such idiocy is Capitalist, it is not. People should read the Wealth of Nations by Adam Smith to get a much clearer idea of what Capitalism is about than those in Washington DC have.
You have to have some taxes to run the government. The income tax is a poor tool, as it is a direct disincentives to positive economic activity. The best tax is one that doesn’t take anything from someone who earned it. And that is exactly what the estate does, tax a portion of the millions someone is given.
The income tax, however, is the largest source of income and therefore it will not disappear. But if you are going to lower taxes, that is the tax you should lower not one on people being given millions of dollars. You might want to replace the income tax with a value added tax, but that is an issue for another day.
The idea that you would cut the estate tax when you have taxes like the social security tax and income tax is very poor economic thinking. The only reason to cut the estate tax would be if you collected more than enough money to run the government from the estate tax alone (you had already eliminated all other taxes).
It is a shame to see so many fall for the 1984 Orwellian doublespeak, where protecting the rich offspring of those who earned money is seen as Capitalist. Capitalism is about the free market and allowing the invisible hand of the market to direct resources. Capitalism is not about protecting the wealthy. It is a shame, but not surprising, to hear so many political leaders speak as though Captialism were intended to let those with the gold make the rules.
Adam Smith knew the wealthy would try to setup rules to distort the free market. One of the important roles of the Government was to protect the free market from collusion by the wealthy to distort the free market. The powerful trying to set rules where they, and their friends, benefit and those who don’t have the power lose (are taxed), is new.
Marketplace (a great economics program on NPR) had two commentaries on the topic of estate taxes: Robert Reich and Steve Moore.
The idea that Capitalism is about letting someone not work a day in their life and live off the wealth of their ancestors annoys me. I think Capitalism is a great system for improving the living conditions of humanity. But such poor thinking by our politicians threatens to cause great harm. My favorite charity shows how Capitalism can improve lives. Trickle Up is a charity that helps the lowest income people worldwide take the first steps up out of poverty, by providing conditional seed capital, business training and relevant support services essential to the launch or expansion of a microenterprise. Thousands take that opportunity and change their lives and the lives around them.
I find it frustrating that we have political “leaders” that claim that taxing some of the millions of dollars a relative of some millionaire is giving them is anti-capitalist. That such claims are not ridiculed is infuriating.
- Estate Tax Myths, Washington Post Editorial, July 24 2005.
- 5 Big Myths About the Estate Tax, MSN Money
Estate planning can reduce the tax bite. If you’re rich enough, however, your estate will eventually face taxes unless:
* You die in 2010, the one year in which the estate tax is scheduled to be totally repealed, or
* You give everything to charity, or
* You give everything to your spouse
Now, if it is a death tax, why, if you give the money to charity when you die there is no tax? Oh maybe, it isn’t a death tax at all but instead a tax on those recieving millions from the person that earned it.
- Myths and Facts about the Estate Tax, United for a Fair Economy
- Rich Americans Back Inheritance Tax, BBC quoting Warren Buffett
Comments
13 Comments so far
“Taxes are awful, but necessary. Let’s have them where necessary, but only when necessary. And so why not have them to extend the term of an existing copyright? BECAUSE THIS IS A TAX THAT CANNOT ‘INCREASE THE BOUNTY’…”
…I doubt the politicians that take huge payments from huge dairy cartels to stop competitors from selling milk are doing so because they believe the market is incapable of delivering milk just as it delivers soda, water, hamburgers, cereal, pizzas, soup…
Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent…
[…] Huge deficits created by spending tons of money that you don’t have, is just taxing your grandchildren. […]
[…] Warren Buffett and Bill Gates are two of the richest people on the planet (though many are gaining on them recently). Both have pledged to give away nearly all (over 99%) of the money they have earned to charity […]
This is not the way the story is normally told. Social Security is actually in good shape for at least 30 years…
New rules will be put in place. Plenty of people will pay politicians plenty of money to assure their methods of subverting the intent of those rules are allowed to continue. To change things you would need to vastly improve the intellectual rigor of decision making…
[…] I have said previously, capitalists support the estate and inheritance taxes. Not those that see themselves as nobility, and call wish to be called capitalists, that want to […]
The very ill advised tax shifting from those earning money in 2001 – 2011 to those earning money later should not be extended. Even calling them cuts is not true. You cut taxes by cutting spending. If you run a deficit all you do by “cutting taxes” is shift the tax from today to your kids. We shouldn’t do that…
[…] the strong support for policies to elevate trust fund babies in the USA have created a society where economic wealth in the USA is now greatly defined by how […]
[…] but still are getting big cuts from before the Bush tax cuts were made. And the recent trend of treating trust fund babies as the absolute most favored taxpayers was continued (though a few of the absolute richest trust fund babies will have to have some taxes […]
[…] I would do silly things like give huge tax breaks to trust fund babies, but those kinds of changes won’t amount to much. You have to fix the health care system. We […]
[…] worst tax policy change that can be made. I have explained previously how bad an idea this is: The estate tax is the most capitalist tax that exists. The trust fund baby favors should be reduced not increased. I would roll back to the Reagan […]