Three Cheers for Death Taxes?

I saw this the other day on Maggie’s Farm. I can’t recall how many times I have had debates with people over death taxes. Everyone is always shocked by my position on the issue. I guess it is just assumed that Progressives like inheritance taxes so anti-Progressives must be against them. That’s generally the assumption on all taxes and tax policy. Once again, we see how the Left’s hive mindedness shapes public discussion.

Taxes are necessary if you wish to have a government. Government is necessary if you wish to have a state. Even libertarians get this. The question is, what do you tax in order to fund government? The amount of taxing should always track the amount of spending. The great disaster of late 20th century American conservatism is the uncoupling of taxes from spending. The modern Right is just a different brand of liberal, offering a free lunch in exchange for a vote.

It seems to me that taxing the dead is a great way to fund the state. After all, the dead have few spending needs. They have no rights and no claims on the living. Taking the property of the dead is well within the traditions of western people so it’s not like we are breaking new ground. Throughout history, failure to properly name an heir meant your property was awarded to the state upon your death. To date, the dead have never petitioned their government for redress of death taxes.

The only snag is when it comes to property held in association with others, like a business or jointly held lands. If your business partner dies and the state takes ownership of his shares in the business, you now find yourself in partnership with the government against your will. Worse yet, the state could auction off that ownership stake and you end up out of business entirely. But, key-man polices have been around a long time so there’s a remedy.

A key-man policy is a type of insurance policy. If one partner dies, the policy pays off so that the other partner can acquire the shares of his partner from his estate. Putting that into law so that the state gets the insurance money rather than the company stock is not terribly difficult. It would protect the rights of the living without giving rights to the dead.

The thornier problem is property or a business sort of owned by a family. The patriarch builds up a company and has his kids join in the business. Before they are ready to gain a share of the business, the old man gets hit by a bus. There’s no insurance policy to cover the business so the tax obligations would wipe out the family business. Again, this could be addressed with minor changes in the law such that life insurance could cover this sort of calamity.

The only sensible objection, it seems to me is one of equity. The guy who works hard, saves his money and builds up a fortune ends up paying a greater tax than the bum who never bothered to save. Bill Gates, according to some, should have the right to give his great fortune to his children if he chooses. It should not be confiscated by the state.

There’s nothing to prevent Bill Gates from giving his fortune away. He would just have to do it while he is alive. If he wants to set his kid up with a billion dollar gift, that’s his choice. That option exists now. Whatever is left upon his death will go to the government. People have been doing this sort of planning for generations.

The counter to this is the modest, middle-class family cannot take advantage of these laws. The folks who have their wealth in their primary home, maybe a vacation spot and the family business cannot be expected to liquidate before death and give away their money. As a practical matter, it must be done at the time of death. At the risk of sounding callous, life is unfair like that sometimes. No tax is without its unfairness.

That’s the thing I come back to when it comes to the death tax. No one likes paying taxes. There is no tax scheme that makes everyone happy or everyone equally miserable. Every tax irks someone more than others. The dead have bigger problems than the disposition of their property so taxing them strikes me as the least harmful of the possible taxes.

Unlike most other taxes, death taxes have the benefit of breaking up large fortunes. Concentration of wealth is the number one enemy of civilization. There’s nothing wrong with someone getting fabulously rich through his own initiative. There’s an assumed link between the fortune and the talent. Inheriting a fortune and the power that comes with it is hitting the lottery. Worse yet, it subjects the rest of us to sortition, thus pegging the fate of society to the mating choices of the long since dead.

In conclusion, taxes are about paying for the current operations of government. The best taxes are those that retard the normal functioning of society the least. No one escapes death so taxing it will not get less of it. It’s not perfect, but no tax is perfect. It is the only tax that has any plausible social benefit.

 

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Walter Sobchak
9 years ago

“Unlike most other taxes, death taxes have the benefit of breaking up large fortunes.” This is simply not the experience here in America, nor anywhere in the first world. The reason is simple, the existence of the death tax gives enormous incentives to the owners of capital for the use of trusts, foundations, and other artifices to avoid the tax. Because of the cost of such things, they concentrate wealth that might otherwise dispersed. If you want to break up large fortunes. You should observe what in fact does break up large fortunes. The first, and most important think that… Read more »

Roger
Roger
9 years ago

I actually agree with Z. Taxes are a reasonable way to pay for public goods. So the question becomes how best to tax in the most efficient and least disruptive way. I would suggest taxing large fortunes at time of death makes total sense. Personally I would set a high tax rate with a high exemption (say five million dollars). The reactions I usually see against the idea seem to revolve around the opinion that government already taxes way too much. Agreed. I would suggest inheritance taxes instead of most other types. I realize progressives really just want more taxation… Read more »

trackback
9 years ago

[…] took some grief for my position on death taxes. I am not surprised. The tax debate in America has been so cluttered with group-think there’s […]

juice.qr
juice.qr
9 years ago

You’re way off on this one, Z. What gets me is you make several points about how ‘if it such and such was implemented’ , ‘if it was done this way’ … problem is none of your brilliant fixes have been implemented, or are likely to be.

tex
Member
9 years ago

So, Z, ya want a system under which the gov’s financial interest is the death of its citizens?

Rep. Alison Clarkson (D-Woodstock)has got your back. In 1/21/15 Committee meeting to discuss ways of raising state revenue he said: “There is some virtue in the number of people dying,” and expressed some hope that Vermont’s aging population would translate into more revenue for the state coffers.”

james wilson
james wilson
9 years ago

The problem of funding government is not that revenue is scarce, it is anything but. Any tax or scheme which raises more money for the beast is worse than money wasted, it is money earmarked for our destruction.

If I received $15,000 I would pay off all my debts. If USG received 19 trillion, it would increase it’s debt.

guest
guest
9 years ago

You need to start your own blog Joseph K!

Joseph K
Joseph K
9 years ago

Forgotten founder Alexander Hamilton is the true “Father of the Country”. His economic system, formulated, systematized, and promulgated as the American School by politician Henry Clay, economist Henry Carey, and the Whig/Republican Party, was grounded by the protective tariff and led directly to American economic dominance in the latter 19th century. German economist Friedrich List emigrated to the U.S. in the early 19th century, studied Hamilton, and developed his National System of economics concurrently with Clay and Carey’s work. List went on to influence Germany under Bismark, Japan during the Meiji Restoration and again after WWII, and China under Deng… Read more »

Joseph K
Joseph K
9 years ago

The estate tax is the single biggest cause of the rise and dominance of Progressivism in the 20th century. The formation by business magnates of massive charitable foundations in order to save their fortunes from government depredation created a massive slush fund for the financial support and promulgation of every lunatic Progressive idea in existence. Without the Ford, Rockefeller, MacArthur and other foundations, Progressive lunacy as we know it would not exist. Heck, PBS and Sesame Street, which poisoned the minds of innocent children with liberal dreck for generations, would not exist. Taxation, particularly the estate tax, wrecked the landed… Read more »

Bryan JR
Bryan JR
9 years ago

So HL, you’re saying we’re no better than multi generational welfare recipients? I can live with that.

HL
HL
9 years ago

Pretty good examples of the conservative got mine, fuck you attitude here. I view it more as a tax on hubris than anything. Its unfortunate that american conservatives are so wary of the state that they’d rather entrust their leadership to sociopathic capitalist billionaires than attempt to have a healthy relationship with the government.

Bryan JR
Bryan JR
9 years ago

I have a dog in this fight. My only hope of a reasonably comfortable retirement is what I’ll inherit from two close relatives (along with what I’m saving, and just living frugally). Neither were “rich”, but are practical, frugal people who saved modest amounts of money over time (both members of the greatest generation). These fortunes were created from income that had already been taxed. For generations past, isn’t this what the state expected people to do? State funding of social experimentation or warfare should be funded in real time and debated by living citizens. As Z-man said, the disaster… Read more »

grey enlightenment
9 years ago

this should be filed under ‘badder thoughts’ as in a really bad idea.

james wilson
james wilson
9 years ago

I’m convinced Z-man is putting us on.

James LePore
9 years ago

Estate and inheritance taxes are not taxes on the dead. They’re taxes on the heirs who receive the deceased’s assets by will or intesttacy laws.

Kathleen
Kathleen
9 years ago

I meant to say, wasn’t our country founded on the REJECTION of these very things. Z, you should have an edit option in comments.

Kathleen
Kathleen
9 years ago

Totally disagree. Tripletap and Mike Martin have it right. Why does the government have a right to my property when I die? Presumably, most or all has been previously taxed by the government. You can’t be tried twice for the same crime, yet the government thinks they can tax me twice? Private ownership and the legal dispersion of those assets upon death is one of the bedrocks of Western civilization. In theory, the State would have nothing other than which we choose to cede to it. Government budgets should be determined by basic functions of government as established by our… Read more »

Mike Martin
Mike Martin
9 years ago

Tripletap – you beat me to it. 1 – The money has already been taxed (probably), 2 – the people who are inheriting the money are better able to use the money for economic growth, and 3 – why can i leave my furniture, and my golf clubs, and my dishes, and all my material goods to my kids, but not my money? Sorry, Z, i agree with you on most things, but not on this. Death taxes are wrong.

BAM
BAM
9 years ago

Foundations?The Gates family won’t pay any death taxes.

Tripletap
Member
9 years ago

I generally agree with your positions on most topics but here I think you are off base. First, the government has enough taxing schemes, enough taxes and the focus should be on less spending and lower taxes. Secondly, so taking the money out of the hands of citizens and giving the money to politicians is better than letting it aggregate in the hands of heirs? At least in the hands of heirs it has the possibility of capitalizing growth and industry, in the hands of the government it is always wasted to a large degree. I think it does not… Read more »