One component of the President’s tax cut plan is eliminating the inheritance tax. This is a huge mistake, both for society and the economy. You may be confused because you know about it as the ‘estate tax’ or after years of conservative yakking ‘the death tax.’ But it is actually a tax on inheritances. And though it is far from sufficient, a robust tax on inheritances is a critical part not only of combating wealth inequality but also creating a productive economy.
The fact that this has to be said is a testament to how far we’ve strayed from any actual understanding of the mechanics or aim of taxes on inheritances. Vast wealth perpetuates itself. This is obvious. Yes, there are wastrel generations that throw away vast fortunes. But they are the exception. Vast wealth tends to perpetuate itself and grow over time. It is not at all a sufficient way to combat wealth and income inequality but creating some brake on the perpetuation and compounding concentration of wealth over the generations is a key part of the equation. There are also many reasons why intergenerational wealth concentration is bad for productivity and economic growth, rather than just having the negative social and values effect of wealth inequality.
Getting rid of the tax on inheritances will be a disaster because more than any time in a century we need more public policies to combat wealth inequality, not fewer. To that end, a key part of the equation is getting back to what inheritance taxes actually are. Dead people don’t pay taxes. They’re dead. This is literally the case. Inheritance taxes only come into play once someone has left the plane of earthly existence. It is a tax on people who inherit vast sums of money.
Don’t get me wrong. Most everyone wants to pass things on to their children and heirs. If you’re a great money-making success in life, you want to pass things on to your children and heirs. That’s great. You should be able to. And you can. But every tax decision, which is embodied in public policy, is one based in equity and capacity to pay. People who inherit large sums of money have a high capacity to pay, certainly more than middle income earners who are already falling behind in economic terms. You don’t have to demonize people as leisure class wastrels to understand the basic fact that a tax on inheritance is critical in public policy terms and simply fair in equity terms.
Everyone should do everything they can to stop this.
