Monday, April 13, 2009

Tax All Inheritance 100%

This is my all-time favorite show-stopping plank. Everybody thinks of their darling orphaned children, little realizing that even in the land of Horatio Alger, it still takes on average five generations for someone who is poor to become rich or the less-desirable reverse.

American economic mobility is not what most people think. The streets of America aren't paved with gold. Indeed, they never were.

As we all, know, the United States arose because a group of wealthy bewigged landowners and businessmen was too cheap to pay taxes for the defense of their holdings from Indians. Just as they and their heirs have been to cheap to pay for slaves, indentured servants, industrial workers and everyone else who made their fortunes possible.

Why not, then, abolish all inheritance, plow it into a common pot from which the biblical widow and orphan shall be provided for generously and well? What we could fund with the fortunes of the 400 richest Americans, who had a combined net worth of $1.57 trillion in 2004 (or $3.9 billion on average)! And that's just the tippy top.

Imagine a wisely husbanded fund of several trillions devoted to care for all parentless children and all surviving companions unable to work. Imagine returning the 80 percent of all assets, owned by only 20 percent of the people, to 100 percent of the people. Imagine sharing.


Anonymous said...

I see a couple problems with this.

First, this will probably be a strong disincentive on work for the rich, people being what they are. The super rich are obviously interested in money far beyond what they can spend. The question is whether this is more about status or wanting to provide inheritance. Of course, it is some of both.

Second, I think you're more likely to see money frittered away than to see the government get a ton of money out of this.

Finally, I can see a lot of ways that this would just not be technically feasible. Can I still spend money on my children while they are living? What if I buy them gifts, like houses, that are essentially large transfers of wealth? It seems like there would be countless ways to get around this.

However, I agree with you in principle. Inequality of opportunity is a huge problem in America and elsewhere. I think encouraging the rich to put their money into charitable foundations is probably a better policy than 100% tax rates.

Anonymous said...

Right on!

Anonymous doesn't get it that the rich already are "encouraged" to put money into charity. That policy has eliminated poverty, hunger, homelessness and lack of access to health care, right?


Joan19 said...

Another problem with this is it removes an incentive for ordinary people (not very wealthy) to spend money on the care of their elderly parents if these monies will not return to them through inheritance. If there is a state pot of money, then let the state pay. Only if the state has to support those who might previously have been supported by their children, the costs continually increase, even *beyond* what the common pot can pay.

Cecilieaux said...

I appreciate the enthusiasm Anonymous/Tony, but let's be respectful of other opinions. (Nah, they're wrong ;-) )

Seriously, Tony does bring out my problems with the arguments put forth by Anonymous. Charity has never worked for much other than to assuage the guilt feelings of the few who have more than their fair share.

Joan19 brings up a problem that has many levels. Are most relatives of the elderly caring for them in ghoulish expectation of an inheritance? Actually, in my experience, an admittedly nonscientific barometer, people who care about inheriting are more often than not uninvolved with the person who might provide it.

I would agree, however, that the state should pay. Assessing all inheritance, in effect abolishing inheritance, would return to the common pot proceeds to do so.

Anonymous said...

Let's not forget that many of the wealthiest Americans got there through lying, cheating and stealing (e.g., Wal-Mart cheating employees, Oracle and Microsoft cheating competitors), through unethical though legal practices (e.g., real estate "development", casinos) or through producing nothing (stock traders). To his credit, Warren Buffet has said that he will not leave much to his children (where "not much" is still in the 10's of millions). That seems fair to me: 80% to 90% inheritance tax for anything over about $100K. We children should earn our own way.