Money for Nothing

One bulwark against the rise of oligarchy is the estate tax, a progressive tax on property (cash, real estate, stocks and bonds and other assets) left by dead people to their heirs. Only the wealthiest estates are affected because it’s levied only on the property in an estate that exceeds a specified exemption -- right now, $5.43 million per person (effectively $10.86 million per married couple). The estate tax helps to limit, a little, the large tax breaks that the extremely rich get on their wealth as it grows, income which otherwise can go untaxed.

Besides being an important source of revenue, estate taxes are intended to prevent gross economic inequality which, if left unchecked, can
poison a society. (Conservatives make a big deal about the “death tax,” but it affects very few people -- last year, because of the current high exemption, 99.8% of estates owe no estate tax -- by way of context, the exemption jumped from $650,000 per person in 2001 to $5.43 million per person now; even so, conservatives repeatedly try to get rid of it entirely).

The current exemption is too high, reflecting the influence of money on Congress, but, that aside, estate taxes are also too narrowly defined. If inequality is to be reduced, the tax on the transfer of wealth should be broadened to cover all wealth received in one’s lifetime, and taxed as income. This would reward people who give away their wealth broadly -- a social good -- and act as a brake on it piling up in the hands of the few.

If we as a nation want to counter inequality even more aggressively, we could use wealth transfer revenues to fund a minimal inheritance for every citizen to be paid when they come of age. Providing a more level starting point would result in a society with much greater opportunity.

Reading List:
-> "Let's be clear on this point. The tax burdens those who inherit the wealth, not those who produced it; it is a tax on Paris Hilton, not Conrad Hilton. And it does not conflict with the values of hard work, entrepreneurship and thrift.": It's Fair, and We Need the Revenue by Michael J. Graetz (Wall Street Journal).
-> The Three Fundamental Reasons Why We Need a Robust Estate Tax by Richard Phillips (Citizens for Tax Justice).
-> To Whom Much Is Given: Why We Need to Tax Inheritance by Jeffrey Mikkelson (Truthout).
-> Taxing Privilege More Effectively: Replacing the Estate Tax with an Inheritance Tax by Lily L. Batchelder (Brookings).
-> "Inheritance not only hands people valuable income in return for something we don't really want to further reward -- being born lucky -- but also, in doing so, it entrenches the least attractive feature of our economy: the fact that people who are born to affluent parents are much more likely to themselves be affluent than children born to the less well-heeled.  Lack of economic mobility is generally regarded as a bad thing that we should combat.": Why Do We Allow Inheritance at All? by Megan McCardle (The Atlantic).

Extra Credit:
By not dealing promptly with his Cliven Bundys, Founding Father #1 wound up with the Whiskey Rebellion: How Former President Washington Dealt With The First Real Tax Crisis In America by Kelly Phillips Erb (Forbes).
The Whiskey Rebellion: Frontier Epilogue to the American Revolution by Thomas P. Slaughter (Amazon).

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