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Death and Taxes
This article originally appeared in The Daily Capitalist.
I've been meaning to write a major piece on the inheritance/estate/death tax for quite a while, but until then I wish to share some brief thoughts on it since the topic is front and center in the current tax debate in Congress.
First some background. The inheritance/estate/death tax came into being in modern times by the Brits in order to break up the large landed estates held by the leftover royalty. They really hated these families who had gathered huge estates from as far back as feudal times. The socialist Labor Party made class warfare a foundation of their party. After the nobles were hit, then anyone with money was their target in their goal of socialist leveling.
That great regressive president, Woodrow Wilson had such a tax passed in the US in 1916. Wilson was a "Progressive" and basically believed in social engineering. The concept behind the law had nothing to do with feudal estates, but more with class warfare, the enmity that demagogues stir up against the "rich" among needy voters.
The ostensible reason that Wilson had for the law was that "concentrated wealth" in his version of what capitalism should be was bad for America. There is no evidence, empirically or theoretically, that "concentrated wealth" is harmful to the economy. You hear this argument anew with people like Bill Gates, Sr. who has no clue what he is talking about. But he sure "feels" strongly about it.
In other words, they say, without the tax financial power is concentrated in the hands of the rich whose interests are obviously adverse to "society's" interests. Somehow they will use that financial power to gain economic and political advantage. What a crock. If that were the case then, every successful institution should be stripped of wealth in order to protect society from their harmful effects.
The other reason is, they wish to control the way you raise your children as part of a social experiment. Such inherited wealth is bad for your kids because they won't work hard. Instead, the State has a duty to step in and stop you from making decisions that they believe are socially harmful -- to your kids. And we can't have that.
The real reason for the tax is class enmity. It is an ancient view of wealth that equates entrepreneurial success with theft. Which it was in pre-capitalistic societies through feudal and royal privilege and government-created monopolies. Today in free market1 capitalist societies, wealth is created through the entrepreneurial process. Businesses don't steal your money, they earn it. But old ideas, like stubborn bacteria, are hard to kill.
Today there is another idea floating around and that "we can't afford" to "cut" the estate tax and give "the rich money." In other words they are saying it's OK to tax the "rich" because "we" (i.e., the government) need it. Which is another way of saying that "we have wasted the taxpayers' money because of our foolish and wasteful spending and don't care where we get the money as long as we get it. Screw the rich." As I heard on a news report the other night, politicians have been using the argument that we need this money to balance the budget for the past 50 years and they haven't been fiscally responsible yet.
One last thought. If you think about the theory of taxation, almost all major taxes are based on some economic event: earning money, selling something at a profit, paying dividends or interest. So when has death become an economic event? It isn't and that's why it doesn't make any economic sense (assuming any tax makes economic sense). You work a lifetime to build a business and you've become successful and wealthy. You have been paying taxes on earnings, profits, and gains over the years and now they want to take a big chunk of your wealth just because you died. It's just theft. How is that morally justifiable?
1I'm not talking about current forms of crony capitalism such as exist in our financial markets which has resulted from government interference and manipulation. Free market capitalism is something else entirely.
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"The state has to make money somehow."
Complacency Incarnate.
Consent to a tax and another appears. Consent to the withdrawal of a natural right, a freedom and another disappears.
The appropriate consideration at hand should be upon the spending of taxpayer monies rather than the source, for unless spent, there is no necessity for governmental revenue.
Taxation is Not a Right of a Government. Taxes are not Righted, they are Imposed.
Taxing the estate at 100% is no better than taxing a live individual at 99%
A death tax is the ultimate humiliation, you thought you where not a slave because you where taxed at 'only' 50% when alive, well guess again all your lifes profits go to the greedy government hands after you die(the estate tax might not be 100% now but honestly after paying 50% or more when alive + 50% after you die it adds up to > 80% anyway)
Taxing the estate at 100% is no better than taxing a live individual at 99%
A death tax is the ultimate humiliation, you thought you where not a slave because you where taxed at 'only' 50% when alive, well guess again all your lifes profits go to the greedy government hands after you die(the estate tax might not be 100% now but honestly after paying 50% or more when alive + 50% after you die it adds up to > 80% anyway)
And I thought Necrophilia wasn't legal , but the government can rape you even after you died
"The state has to make money somehow."
They made it off of the deceased throughout his entire life.
"I'd rather they tax dead people's gifts to their descendents than a live man's income."
What's next? Assessing a fine for the act of dying?
Some ecological oriented chap has suggested taxing air (yes, the same we breathe) in order to better help preserve the Amazon rain-forest.
I seen to remember some fellows in Cambodia doing essentially the same with plastic bags a while back.
"I seen to remember some fellows in Cambodia doing essentially the same with plastic bags a while back."
;-)
Ain't dat sumpin...it's as if they are trying to starve trees of life sustaining CO2...the trees should be paying us!...LOL.
On this estate tax thing...it's incredible knukles...absolutely incredible...otherwise rational people can justify governmental theft as long as they are not the ones being stolen from. On other threads they rail against banks & government looting...but here they can justify it?
I will never have an estate worth even a paltry million (it seems at this stage of my life) but I've paid taxes on every damned cent I've ever earned.
It's mine...to do with as I please...if I want to spend it all at a titty bar, it's mine...if I want to give it to charity, it's mine...if want to give it to my family, it's mine.
You hit them with a reality 2X4 right between the eyes (give the government 35% of your fucking gold & silver) and the response is they are dead, it won't hurt? WTF?
They're giving it (inheritence is the same as charity) to their living families!
The only ones who ever get snagged are the hard working family types who don't do proper estate planning anyways. So they compound their cynical statist view of the world by trying to justify robbing the ignorant...the ill informed.
These people who advocate estate taxes are fucking immoral thieves...I've no use for them.
None.
I need to go cool off somewhere.
SeeYa
At last, someone who makes sense. Good comment, nmewn!
Thanks Jeff.
But it does go deeper in my view...it was a partnership between governments & elites who allowed this kind of ignorance to spread in our society...and around the world for that matter.
And for the record "wealth" does not mean "elite".
John Taylor Gatto has done a great service to our society that get's no notice.
http://www.johntaylorgatto.com/historytour/history2.htm
This is the source (or one of) their angst and their misery, I believe...yet like a dog returning to it's vomit they think there is some sort of value there after all this time of being steered in a certain direction and taught "just enough".
It's disheartening sometimes...some of those who think the way they do are genuinely good people...but it's always been right in front of them...in history, all they had to do is look.
Good post...it needed to get out there.
I agree on Crony Capitalism.
I knew you would...justice & morality are timeless.
Take care.
Word Up
States have to get revenue somewhere. In the large, the estate tax is a tax on those that accumulated wealth and want to give it to someone who didn't earn it. I'd rather overtax a dead guy that willed his stuff to somebody who didn't earn it than overtax a guy that's trying to make a living in capital gains or income tax. I hear so much crap about "small businesses will go under without the inheritance subsidy." Amortize the cost or find a new line of work.
I may feel differently if I have wealth to give my kids when I'm worm food, but I'm honest enough to say the change of heart is motived by greed. Perhaps one should take the tax hit themselves instead of passing it on as a gift.
Man, you certainly have some wierd ideas regarding taxes. We are being taxed to FUCKING DEATH. Even after we are dead. It's plain theft. I really is that simple.
Your argument of "passing wealth on to those who didn't earn it" falls flat. Just where in the hell is the government going to do with the taxes? Ever hear of transfer payments? Same thing, but these are people I don't even know. The very last thing I want to be forced to do is pay my neighbors bills, fund thier damned foodstamps, pay them not to work for years, etc.
THAT is just wrong.
An honest question: Are you a Socialist?
Good grief. An honest question: How do you feed yourself every day? I can't believe you are smart enough to tie your own shoe strings.
Nice ad hominem attack their dickdog, but anyway.....
I feed myself quite well thank you, and the valet ties my shoes for me.
Fuck off.
i like this one. the "rich actually pay their taxes" argument. by extension "handing money over to government must be an excercise in efficiency." since you "have no problem with the death tax" then "you must have no problem with the death of government even though we need that too." it's "hard to imagine the end of everything." that's why i watch ireland and greece so closely: for them "everything is ending."
The weirdest Obama experience I've had occurred on the day he was interviewed about job creation and said "I realize that government is not the only source of new jobs."
What these clowns don't realize is that every government job is a parasitic attachment to the business community, which is the ONLY part of society that creates wealth. Until politicians understand that fundamental axiom, we are fucked as a nation and will continue to go deeper into debt.
Labor creates wealth... not all businesses create wealth, some/many just suck it out of the working man.
I have something to report: when I see your (avatar) comment, my (pants) ideas distort. Keep (me) them coming.
Ditto.
Nothing makes a reader shakes his/her head in disbelief than a financial writing about taxes that ignores history, reality and human behavior.
Underwhelming, totally devoid of common sense, full of gratuitous innuendos are the most polite terms I can come up with.
I agree for the most part. Anyone who disagrees with the death tax in this day and age has lost their mind, or they are an extremely rich Republicunt. When will Bill Gates there wake up and realize that the average oligarch makes 5600x the average tax payer?
How else is one to level the playing field. Maybe, when our average oligarch makes 25000x the average tax payer will Mr. Gates understand!
Johnny:
I don't think I am anything you claim I am. How does taking away someone's assets level the playing field? The estate tax does no such thing. When confiscated it is just spent by government on some useless purpose and destroys valuable capital. To level the playing field wouldn't it be better for all to have more capital on the playing field? Or do you believe it is the government's duty to steal from the rich and redistribute wealth to the poor. That sure didn't work very well. Another question: why are you so antagonistic to people with wealth?
Thanks for your comment.
Thank you, Econophile. The socialist tendencies of some of these readers really scares me. On Zero Hedge for crying out loud!
..and Mr. "Tax-me-more-please!" Buffet? He found the loophole in the death tax. Charity. Nope. No duality here.
We level the playing field by reducing the barriers to entry (read: de-regulation). I mean real deregulation, and not the half assed California, dereg. public utility, beg Enron for overpriced power because NIMBYs won't allow building of new power plants (of any kind), then spend more money to fire your governor and elect another actor, style de-regulation. It has to be end-to-end.
Unfortunately we have created a Gordian knot, so good luck with any of this.
Bingo,
Mr. Gates, Buffett, even Turner, all who are for estate taxes have their assets tied up in foundations which have no taxes but are required to donate 10% of the foundations profits for the year for charity. Those managing the foundation (read every family member with a pulse) gets a nice fat salary, use of the Foundations jets, houses, boats, and so on.
All those hipocrits can F@cking jump off a cliff; there is no law that says you can write a nice extra fat check to "we waste other peoples money" guberment. Explain to me why you should pay taxes on the wealth you've created and already paid for because you die?????
And so what if you are lucky enough to be born in a family that has had success, I read some posts here saying they do not deserve to get any of that, who the hell are you the judge that?
That is such robbery. Perhaps my biggest objection to this, and all those who are so for the rich to pay for everything is that maybe if the government would show smarty money management it would not be so offensive. Any of you guys ever see the rankings of our reps, they all have several zero's in their bank accounts.
Its easy spending someone else's money and kicking it back to the buds who need a nice fat check for pork u lus 4.5X50.
Give me a break.
Anarchists are opposed to violence; everyone knows that. The main plank of anarchism is the removal of violence from human relations. It is life based on freedom of the individual, without the intervention of the gendarme. For this reason we are the enemies of capitalism which depends on the protection of the gendarme to oblige workers to allow themselves to be exploited--or even to remain idle and go hungry when it is not in the interest of the bosses to exploit them. We are therefore enemies of the State which is the coercive violent organization of society. --Errico Malatesta
Seriously? You're going to take the "confiscatory nonsensical taxes are okay as long as they're not pointed at me" side of the argument, and your foundations are common sense and an appeal to the reality of human behavior? Leave justice and Constitutional mandate aside; just use your common sense and surmise what kind of disincentive this sort of bullshit is given what we know of human behavior.
Yes. And there is a very big difference between an estate tax and all other forms of taxation.
The reality is this: Without an estate tax, wealth very quickly becomes generational -- and permanent class/caste structures form. Historically speaking, that record is quite clear. Wealth begets wealth. (Revolution, of course is the great historical equalizer which ultimately destroys those class structures.)
The question that we need to ask is this: Are we capitalists because we believe in building, growth and the merits of hard work, ingenuity and perseverance? Or are we capitalists because we believe in defending a permanent unassailable class structure? Remember, the former is the philosophy which is sold to Americans, and which forms a large part of the American ethos. We treat Edison, Ford, Gates and Jobs as heroes. Not some dick who lives in Greenwich and belongs to the club.
I for one, am a die hard capitalist of the (former) meritocratic flavor.
I believe that those who kick ass, should reap ass (so-to-speak).
I do not believe that those whose great, great grandfather kicked ass, should reap any significant "ass" at all.
To that end, I should add -- that I am a big supporter of estate-taxes -- and not much of a supporter of income taxes at all.
One can't help but notice that wealth is increasingly concentrated in America -- and mobility is slowing extremely rapidly. This is dangerous to a society -- and is antithetical to the principles on which this country was founded. Don't forget, we fought a revolution against a society not dissimilar from the one we are becoming.
Popo,
"To that end, I should add -- that I am a big supporter of estate-taxes -- and not much of a supporter of income taxes at all."
The state taking away from another and putting it in it's own coffers only increases it's wealth & power.
And this is one of the ways they do it...class warfare...they divide us.
"I believe that those who kick ass, should reap ass (so-to-speak)."
But, of course, it is right and proper for the state to use coercive violence to prevent you from using any of what you have legally and rightfully earned for the benefit of your own children, right?
Perhaps the omnipotent state should also mandate what each family may spend on Christmas/Birthday presents (food, clothing, personal attention, etc...) for each child?
Let's take it a step further. If your neighbor's son falls and breaks his leg, should the State break the legs of all his classmates, including your son, to keep everything "equal"?
You either support individual, inalienable human rights and liberty, or egalitarianism enforced with a gun to everyone's temple.
Historically speaking, the ONLY thing that can truly bring about a permanent class/caste system is the State.
Pick a side.
(If anyone's interested in this type of thing, there was a fantastic adaptation of Vonnegut's Harrison Bergeron called 2081 that came out last year. I'd recommend it to all. http://vimeo.com/7898284 )
I swear I saw a bunch of marines violently assembling at fort. But I guess that's alright now isn't it because that law doesn't apply to them.
If there is ANY exception to any law by any group. I will not ever feel bad for breaking it.
"There is no evidence, empirically or theoretically, that "concentrated wealth" is harmful to the economy."
I guess it depends on what you call "the economy" There is plenty of evidence that concentrated wealth is harmful to society, unless you enjoy living in constant fear of robbery, violent uprisings and revolts. There are plenty of countries you could move to that have very limited government if that's what you really want. Somalia, Liberia and many other under-developed nations with weak or corrupt governments are pretty much a free-for-all paradise for tough rich guys.
"to prevent you from using any of what you have legally and rightfully earned for the benefit of your own children"
Um, this would only be the case if the estate tax was 100%. Since you used the word "any". Just sayin
Maybe... But "concentrated wealth" is not something that can exist for a long period in a democratic system. History shows that it is something that goes back and forth.
Personally, I think it is theft to take income taxes from the very individuals who are the ones that are working to build an economy. I believe a happy middle ground position would be low taxation for the wealthy, but strong laws preventing large generational transfers of wealth. In a democracy, everyone should to be given a chance for the same opportunities. This does not mean that socialism is best when history clearly shows otherwise. However, concentration wealth transfers between generations strips wealth from the producers who built it to their offspring that may or may not have such abilities..
Human nature and DNA being what it is, wealth passed on to successive generations would be spread around if the artificial constructions to keep it as an entity were disolved. Trusts created to keep wealth impounded should be eliminated except in the case of a truly incapacitated heir. Otherwise, some heirs will blow it, spend it and waste it and others will use it to create more wealth.
Shirtsleeves to shirtsleeves in three generations was a mantra my grandmother used to chant.
Estate taxes are irrelevant anyway, there are so many ways around them that it makes this whole argument moot. The article states categorically that there is no harm in having highly concentrated capital... really, that is one of the most retarded things I have ever read on this site. Look at ANY third world country... what is the capital and wealth distribution? Fucking moronic.
The argument that taxes are theft is true, but unless we want to return to feudal warlordism we need a formal central government. That government needs revenue. It can do this in one of three methods, 1) Tax its citizens on their economic output, 2) Compete with its citizens in economic production, 3) Collect "tribute" from conquered regions as well as "protection" money from those not yet conquered. Most governments follow some form of all of the above three options.
Since we assume a state is necessary, though there is argument for a stateless society, I cannot see how human nature would let a stateless society to exist for long, some form of taxation is necessary. How much is taxed and what forms of wealth are taxed depends on what type of society you want.
The main issue with estate taxes is that they are so easily circumvented. Just "give" you children all of your wealth just before you die, problem solved. However, a strongly ensconced wealthy elite is not beneficial to any country.
Terminus:
It is not the case that it is easy to evade/avoid such taxes. This is something of which I have a fair amount of knowledge. Third world countries do not operate as free capitalistic societies, so it is an incorrect comparison. Most of the wealthy in those countries used government as an ally to destroy competition by gaining some advantage from a corrupt government. This article isn't about funding government through taxes, but the fairness of a confiscatory tax.
Thanks for your comment.
Theft?? Estate taxes are a tool to prevent building a caste based system. The core of democracy exists on the principle of everyone having a fair chance to succeed. Allowing wealth to be transferred from the individual who earned it to others who did not prevents this from occurring.
In short, history is very clear on this. The lack of estate taxes (or some mechanism) do nothing but to lay out a long term guaranteed path where future generations who were not born wealthy to have little chance of ever achieving it no matter how hard they work or how smart they are.
Popo
"The question that we need to ask is this: Are we capitalists because we believe in building, growth and the merits of hard work, ingenuity and perseverance? Or are we capitalists because we believe in defending a permanent unassailable class structure?"
Please, like most of the people have an economic philosophy. You are Capitalists so you can have your piece of the crust. Nothing more. It isn't like soul saving. It isn't like the early Union movement to help Labor out of the deep dark hole owners kept workers in.
Fuck dude, even Vegans have more of an inherent to the bone belief than 99.5% of the posters here.
Most of you all are greedy fucks who didn't really give a shit when farms went under and factories closed. Now that your sorry asses are being impacted you all piss and moan because your little shiny toys MAY be taken away and you MAY suddenly become no different than the great unwashed masses.
I tell you, sir, the only safeguard of order and discipline in the modern world is a standardized worker with interchangeable parts. That would solve the entire problem of management.
Jean Giraudoux