The Unlikely Supporters of Estate Tax
Requests often come from the most peculiar places. You wouldn’t guess, for example, that some wealthy, influential families supported the implementation of the estate and gift tax laws around the turn of the previous century.
It’s true. Although the concept of an inheritance tax can be traced to biblical times, the modern estate tax first took form in 1906. In that year, Republican President Teddy Roosevelt addressed Congress, advocating a progressive tax structure. He stated, “The prime object should be to put a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of no benefit to this country to perpetuate…”
The great influx of immigrants in the early 1900’s created gaps between the “haves” and “have-nots”. Politicians worried that a class of ne’er-do-wells could create a situation much like that found in revolutionary France. It wasn’t only the politicians worrying, however.
Somewhat earlier than Roosevelt’s speech, in a magazine article supporting estate taxes, Andrew Carnegie stated, “…men who continue hoarding great sums all of their lives, the proper use of which for public ends would work good to the community from which it chiefly came, should be made to feel that the community, in the form of the State, cannot thus be deprived of its proper share. By taxing estates heavily at death, the State marks its condemnation of the selfish millionaire’s unworthy life…” John D. Rockefeller published a compliment supporting his friend Carnegie’s views.
That period’s wealthiest families were concerned that unless Congress taxed their estates, the wealth would do more harm to their children and grandchildren than good.
Present Day Fight Against the Wealth Gap
Which brings us to today, with a bill sponsored by Senator Bernie Sanders (I-VT) to reduce today’s generous federal estate tax exemption from $11.7 million to $3.5 million. Media have pounced on our nation’s growing inequality of wealth and income, so this legislation is not entirely unexpected. Is it the right thing to do?
From a revenue-generation standpoint, the federal transfer taxes, (gift, estate and generation skipping) generate less than one percent of total revenue. Even with a more aggressive transfer tax system, redistribution of this wealth from the rich to the poor can’t possibly solve our current inequality problems. The transfer tax system was never intended to do so.
Instead, the transfer tax system’s intent is to limit a class of inheritance-privileged citizens. It presupposes that it’s dangerous to have a class of citizens born into wealth, who have no need to work, and who can, with that wealth, exert enormous political pressure.
History of Wealth Hierarchies
Before the birth of democracies in the seventeenth and eighteenth centuries, societies were built on hierarchies. The emergence of highly stratified societies came with the development, first of agriculture, then of cities. These societies were headed by a “divine” ruler on top, who were surrounded by a royal court, beneath which was an administrative elite, and at the bottom an illiterate mass that was conscripted from time to time either as an army or as a corvée, a labor force used in the construction of monumental buildings.
What kept the structure in place was an elaborate doctrine of hierarchy whose origins were told in myth, whose architectural representation was the pyramid or ziggurat, a massive building broad at the base and narrow at the top. The belief in this hierarchy was universal and lasted into the development of early western societies. Aristotle thought that some were born to rule, others to be ruled. Plato constructed a myth in The Republic, in which class divisions existed because the gods had made some people with gold, some with silver and others with bronze.
American Equality
America, in contrast, is supposed to be a land embodied by Jefferson’s declaration, “…that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness.”
That we are created equal doesn’t mean that we are to be equal. Many take Jefferson’s words to define America as a land striving for equal opportunity. A country where an individual is free to maximize what one does with one’s own natural and developed talents.
So it’s complicated, isn’t it? A capitalist democracy is, as we’ve discovered after two and a half centuries, exceptional at creating wealth, but not for all. How it moves forward while striving for equal opportunity for its citizens proves to be a more difficult problem to solve.
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