The birth of the American Aristocracy
I got into a heated discussion (or at least, my brain got overworked) about social democracy - the classical "How to tame capitalism?" dilemma. My friend, a middle of the road liberal (I mean, middle of liberal, not middle of the US spectrum) was about satisfied with the Canadian model and the level of inequality it leads to. I was positive that there are some ways to make it better, to find a way to keep the engine of capitalism running, but to better redistribute its benefits. I suggested a 100% estate tax. This means that all inheritances would be given to the government rather than to the relatives or descendents of a deceased person.
My friend was at first skeptical, saying that he would want to do all that he could to assure the future of his children. I can understand this. But isn't the best way to ensure the future of children to teach them to be resourceful and to make their own way through life rather than relying on daddy's accumulated wealth? This may sound like a very American perspective, since the US are champions of the "take care of yourself" approach. But apparently no: Congress is about to vote to repeal the current estate tax that affects only the richest 2% of the population - those who have more than 2 million USD to give in inheritance.
To understand how counterproductive that is, be it from a liberal or a conservative perspective, read Sebastian Mallaby's column in the Washington post.
posted by Mozza @ 9:39 AM
2 Comments:
Interesting idea. I understand Warren Buffet makes his children work so they don't just coast on the family wealth. And Paris Hilton is a good case study of how useless the children of the wealthy have the potential to be when they are never forced to work.
But(!), part of the reason people aquire wealth at all is with the intention of providing their kids with the upbringing they never had. This includes after their death, providing for their grandchildren, etc. We would experience a massive loss of productivity if people cannot aspire towards this goal.
Removing the estate tax entirely is foolish though.
I think that you are right that it would create some disencentives to productivity. I also think that mechanisms would appear to avoid that complete taxation, such as giving what you own to your kids before your death (if you see it coming at old age). I'm sure it happens right now.
I have not studied the estate tax much, so I can't get into a detailed defense of my own proposal here. But it goes to show that there is a plethora of ideas that can be discussed to better the way capitalism is providing wealth, and not just in the US.
Also, we have to ask ourselves when is it that productivity will be enough and that redistribution will be more important. I'm not saying that it's now, but I guess someday it will happen. And why isn't it now?
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