One of the more fascinating phenomena of the last month or so has
been the flurry of defenses of the death tax that have emerged from the
woodwork. As votes in Congress have suggested the possibility — despite
veto threats — that the federal inheritance taxes might actually be
repealed, certain elements of the political establishment have responded
in a fashion almost resembling panic. A federal tax might in fact drop
by the wayside, be eliminated from the arsenal of weapons through which
federal authorities harass our people and eat out their substance? Time
for a full-court press
to defend against any such dire eventuality.
Thus we have seen Al Hunt of the Wall Street Journal lamenting the
possibility that such a drastic step as eliminating the death tax might
be taken. The editors of the New Republic have editorialized and had
contributors write about what a foolish thing it would be to get rid of
this tax.
Interestingly enough, both those who want to eliminate the tax and
most of those who want to keep it have been skirting around the core
issues, playing with numbers rather than getting to the root of the
matter. Advocates of repeal, by and large, have stressed that a death
tax is a tax on money that
has already been taxed, that the tax brings little money of real
consequence to federal coffers, that (in some arguments) it costs the
government more to collect inheritance taxes than is brought in.
Opponents of repeal have argued that talk of middle-class families
losing farms and small businesses
is a cover, that repeal would benefit only the very wealthy, that only a
tiny percentage of Americans (3 percent to 5 percent) actually pay
federal inheritance taxes, that repeal would help the rich while hurting
the government.
Both sides — with some allowances for exaggeration, number-juggling
and stressing some aspects while ignoring others — are essentially
correct. Inheritance taxes do constitute only a tiny portion of federal
revenues, in part because not that many people pay them (although an
entire industry has
been built around avoiding them). But a tax on inheritance is much more
important as political symbolism, as a statement of ideological belief,
than as a revenue source.
The explicit purpose of inheritance taxes, when they were begun, was
to break up large family fortunes. Those who advocated them and lobbied
for them argued that it was a bad thing, an anti-social thing, for some
families not only to have vastly more money than the average American,
but to be able to pass it along to their descendants when they died.
That would not only create pockets of privilege, it could only lead to
the formation of a de facto system of nobility rather than a democratic
society of equal citizens.
Inheritance taxes haven’t come close to breaking up large American
family fortunes — in fact, the profligacy and foolishness of heirs who
grew up knowing (or believing) they would never have to work a day if
they didn’t want to has probably done more to dissipate concentrations
of wealth than
anything the government has done. Those who wanted to use the force of
law to impose egalitarianism underestimated the ingenuity of those who
wished to keep their family money out of the clutches of the government,
and their ability to get legislators to create exemptions, exceptions
and special procedures (what some call loopholes) to minimize the
taxman’s bite.
It is interesting that people who fervently believed — even as they
deplored the fact — that money can be translated into political power
seemed to think that simply passing a tax designed to reduce
concentrations of inherited wealth would work simply — that those
affected would not use money and political influence to neutralize the
intentions of the “reformers.” Those who seek to reduce the wealth and
power of others through taxes and legislation are forever shocked —
deeply shocked — to find that people they see as incessantly evil and
grasping actually do use their influence to lobby for “loopholes”
against legislation whose deep intention is simply to seize their money
for the government.
Or maybe there never was an intention actually to break up family
fortunes, but simply to use them to promote class envy and perpetuate
political games.
Perhaps the conflict and the resentment that can be generated against
bloated plutocrats is the real essence here. If egalitarian reformers
actually got what they claim is their wish — elimination of inherited
wealth and some rough equalization of wealth throughout society — they
might be more disappointed than anybody else.
What is important to understand here is that the desire to defend the
death tax, the near-panic at the prospect that it might actually be
eliminated, bespeaks a deep-seated (if seldom acknowledged) ideological
commitment.
Whether the commitment grows from resentment at the wealth or success
of others, from a sincere belief that great disparities of wealth lead
to social friction and social instability, or from some other motive, it
expresses an essentially old-fashioned socialist desire to whip the rich
into line, to use the power of the state to prevent some from
outdistancing their fellows in the economic game.
Even if it doesn’t work — as the current federal inheritance taxes,
which to the really wealthy are essentially an inconvenience and a
source of income for tax lawyers while imposing genuine burdens on small
business owners and people in the upper reaches of the middle class do
not “work” —
it is important to people with such an ideological commitment to keep a
tax in place as a statement of purpose, as a symbol of what they would
like government to do if a way could be found to do so successfully.
Socialists in the early part of the 20th century were quite frank
about their goals. They wanted to break up pockets of wealth, to punish
people for being too enterprising (or as, some were convinced, too lucky
or corrupt) when others didn’t have the same kind of advantages. They
wanted to make each generation start anew, with none of its members
having the built-in advantages that an inheritance would create. The
passion for equality was sometimes expressed in the desire to help the
poor improve themselves, but more often by the desire to punish the
wealthy and bring them down to the level of everybody else.
The early socialists’ ideological descendants (most of whom would
deny they are socialists or descendants, some of whom are actually
unaware that they are) share a similar passion for forced equality. Even
if a law doesn’t bring about equality, it is important to keep it in
place as a symbol of one of the major purposes of the modern state — to
strive for social and economic equality through legislative means. Equal
status before the state and something resembling equal opportunity to
strive and succeed — the values of the great liberal thinkers and
theorists who wrote our founding documents — is seen as a sham. The
state is failing in its purposes if it isn’t taking steps — even
ineffective and symbolic steps — to bring about equality of results and
equality of condition.
Against this implicit argument and firm belief that the government
ought to be using its power to slap down the successful and lift up the
unsuccessful, advocates of repealing the death tax have mustered few
arguments deeper than that the tax hurts some farmers and doesn’t bring
in much revenue. It might be useful to make some of the implicit
ideological differences between them
and the defenders of what by now has become the old order more explicit.
A society without a tax on inheritance, for example, is a society
that endorses success and creating something of value for future
generations. It is a society that values family ties and
intergenerational bonds. It is a society that approves of the idea that
even if you can’t take it with you, you can leave something for those
you love without hindrance from the authorities.
Perhaps more important, a society that permits the development of
great family fortunes also permits and implicitly approves of the idea
of creating independent centers of power within a society. The
beneficiaries of a well-managed family fortune don’t need to go begging
the state for permission to do this or that — whether expanding their
businesses or blowing the money on villas on the Riviera. Such a society
understands and approves of the idea that there is no central, essential
locus of power and authority on which all other citizens or would be
sources of influence ultimately depend. Instead, power, influence and
resources are to be diffused, with numerous individuals and
organizations possessing full authority to deploy them without begging
for permission first.
There are other ways besides accumulating wealth, of course, to
create centers of influence and groups and individuals who are truly
independent of the whims of central authorities. A good case can be made
that personal independence is much more a matter of intellectual or even
spiritual attitude than of any material factor. But we do live in a
material world and for better or worse material self-sufficiency is one
path to independence.
One way to express the ideal of a free society is that it would be a
society in which each person felt fully independent — which is not at
all inconsistent with being connected to others by numerous bonds — and
willing to accept the challenges, opportunities, joys, sorrows and
responsibilities
that come with independence.
I suspect that the image of such a society — the free society as
good society even though it is understood that economic inequality is
likely to persist — is more attractive to more Americans than the image
of a society in which central authorities constantly work to remake
society in their own
egalitarian image (and in the process wield the decisive power). It
might be helpful — even in building political support beyond those who
are likely to benefit most directly in the short run — to make the
ideological assumptions underlying a desire to repeal the death tax more
explicit.
I want the death tax repealed because it would diffuse power and is
in keeping with the conditions necessary for a free society to sustain
itself and even to prosper. It would be a statement (perhaps only
symbolic but important nonetheless) that America is a place that
respects private achievement and even private wealth and desires to keep
government management of society limited and under control. If that
isn’t more attractive to Americans than the desire to force equal
outcomes through state power, then so be it.
Is America prepared and willing to fight and win a war?
Ron Boat