Luckily, I have a bit of contrarianism that I've wanted to air, and a series of Kevin Drum posts on using estates to pay for Medicare that has inspired me to make (drumroll please) . . . the case for the 100% estate tax.This is one of those ideas which combines a leftist desire for leveling of economic and social classes with a strongly individualist line of thinking: Sure, your parents saved up a lot of assets, but what does that have to do with you?
No, really, I'm serious. After all, why should kids be allowed to inherit? I know, you are about to say something along the lines of "I worked hard so that my kids could . . . " That is a noble emotion. But at the point at which this question becomes relevant, you will be dead. And dead people don't have rights. They don't own property. They don't get to make decisions.
In a world in which each person is a social atom, the idea of money or property being handed down through families is necessarily repulsive. If you didn't earn it, why should you have it? Perhaps this is why this particular leftist idea has a certain appeal to McArdle's libertarian sensibilities.
Although conservatives and libertarians often find themselves treading similar paths in the modern political landscape, this is a sensibility I find pretty unappealing. More appealing to me is the sort of economic aspirations one sees among Austen's characters -- building up and successfully stewarding a family fortune which allows a degree of stability and leisure for future generations. I'd much rather see people working to build a stable legacy for future generations than taking a "I'm going to make as much as I can and blow it all before I die" attitude.
This individualistic view is characterized with startling clarity in this paragraph later in McArdle's piece, in which she considers whether the motive of "earning" an inheritance might encourage some socially desirable behaviors:
Plus, adults hoping to be left something in the will might be performing valuable services for society, like visiting Mom in the nursing home to make sure that they haven't tied her to a bed and left her to die. (on the other hand, there are the rich people who get tied to a bed and left to die by their heirs so that they won't be able to change the will. Which effect is more powerful?) The trend towards a society based more on interactions with strangers, less on kinship ties, is generally a good one. But the family still serves useful functions that we don't want to get rid of. If we mess with inheritance, are we disrupting an institution that's tremendously important to both individuals and to society? [emphasis added]It strikes me that a mass society based primarily on interactions with strangers rather than kinship ties is precisely the sort of thing which results in all sorts of dehumanization and bad behavior of the sort that conservatives interested in subsidiarity seek to avoid. By chance, I read today one of the most egregious possible examples of the way in which large, centralized organizations and stranger-based interactions can lead to really undesirable and expensive results: The state of New York has been spending $1.8 million dollars per patient per year to put developmentally disabled patients into large state-run institutions which are so negligently run that hiring and re-hiring ex-cons is common and abusing and even killing patients is tolerated. The situation was exposed through just that thing we haven't quite learned how to live without, kinship ties: The family of a patient killed by one of the people employed to take care of him and a whistle-blowing employee who was seemingly unique at her facility in wanting to actually help the patients because her own son suffers from developmental disabilities, and so she didn't see the patients as the "retard" objects of ridicule and abuse which many fellow employees did.
Kinship in the broader sense is one of the most basic ways in which human beings are made to interact with one another. Instinctually, we look out for people to whom we feel kinship in ways that we don't necessarily do for those whom we see as "other". Thus, while it's important to try to broaden this tendency and encourage people to look out for all those they interact with rather than having an exclusionary, tribal approach to social interactions -- it's invariably going to work a lot better to work with the human tendency to take care of kin than against it.
This doesn't touch on the question of whether we should "let" people with assets stretching into the billions pass that money on to their heirs untouched, but the proposals which McArdle and Drum are talking about are much more wide-ranging: basically getting rid of all inheritance (even very small ones) in order to pay for Medicare. On the contrary, it seems to me that if one of our major problems in the economic realm is short term thinking, whether it's people mortgaging their houses to the hilt or playing the stock market for short term gains, then going to a "use it or lose it" approach to wealth would only make things worse. The grandmother who's hoping to leave a stable portfolio of investments and a paid-off house in the suburbs to help pay for her grandchildren's college is going to be much more of force for social and economic stability than the high-living stock flipper who dutifully burns through all his money and dies in debt.
I generally like Megan McArdle and believes she tries to think through issues rather than declare talking points; however, this quote is out there:
ReplyDeleteThe trend towards a society based more on interactions with strangers, less on kinship ties, is generally a good one.
Do we really need internet comboxes writ large all over society? Because that's where that line of thinking leads.
So if my husband and I pass away with dependent young children, we couldn't leave them any inheritance? I would hate to saddle my friends and family with the financial burden of caring for my young children. When these folks think about inherited wealth they imagine Paris Hilton not family farms and small businesses. They also fail to realize that the "American Dream" is usually a multi-generational accomplishment. Yes, there are those who come to America with nothing and become billionaires. But most of the time, it takes 2 to 3 generations to move up the social ladder. Inheritance is a part of that. I'm opposed to all inheritance taxes. The money has already been taxed.
ReplyDeletemrs. zummo-
ReplyDeleteI think you may have stumbled on the problem.
Isn't libertarianism usually messed up in dealing with family? Kids especially? (Very few, sadly, will go the 'sex is entering the contract' route-- makes things too long term.) Really ruins the whole "I depend only on myself, I owe only those debts I choose to take on" thing if you realize how much you owe to your parents, and the pay-it-forward thing is a bit off on tone.
I would support inheritance laws in which the first $100k is untaxed and everything over that is taxed at 100%. Warren Buffet and Bill Gates set good examples in this area.
ReplyDeleteJoel
Oh please with the Warren Buffet and Bill Gates bit. Their children have benefited and will benefit from their parents' extreme wealth with or without an inheritance. All the leftover money gets given away, so what.
ReplyDeleteWhat about a family business where all the wealth is wrapped up in the business? Who does it benefit to destroy the business to make sure the children don't get any 'unearned' monetary benefit.
I'm pretty sure Megan is playing devil's advocate, but maybe not. I don't know *any* libertarians that seriously favor the estate tax in any form.
ReplyDeleteJenny wrote:
ReplyDelete"Oh please with the Warren Buffet and Bill Gates bit. Their children have benefited and will benefit from their parents' extreme wealth with or without an inheritance."
This is the most consice explanation I have ever seen as to why large inheritances should not be allowed. The children of the rich already have huge advantages in life - elite educations and, perhaps more importantly, Rolodexes full of the names of people in high places. If that isn't enough to get them ahead in life than no amount of money will help either. No more Paris Hiltons, please.
Joel
Grats on utterly ignoring the point Jenny made--Who does it benefit to destroy the business to make sure the children don't get any 'unearned' monetary benefit?
ReplyDeleteOther than jealousy, why do you care if the "rich" are able to give their children an advantage the kids "didn't earn"? What other advantages should folks have stripped because they didn't earn them-- should beautiful people be mutilated? Clearly, family businesses should be destroyed rather than passing down, too. If the good example isn't enough of a foot up, why should they get an extra leg up?
(All of which utterly ignores the mangled mess this makes of basic things like the right to one's property and labor.)
Incidentally, Paris Hilton wouldn't be touched by this. Last I heard, her grandfather-- that Hilton-- was both very much alive, and had removed her from the will.
Is "being rich" the real offense?
The super rich avoid inheritance taxes almost entirely by setting up trusts and other financial vehicles. This really only adversely affects the sort of rich, upper middle class business owners etc. You know the people who employ most of the country, give most to charity, and pay the most taxes. Those bastards.
ReplyDeleteOr the not-at-all-rich-until-the-tax-appraisers-decide-the-family-farm-is-worth-millions folks.
ReplyDelete(Local story: A young couple, in the 40s, bought a little horse farm for $4000. They were still working as a place to stable your horses until last year, when the city tax appraisers decided that their land was better evaluated as a bunch of little plots, giving them a YEARLY tax bill that was several times what they'd paid for the land...and retroactive for a few years.)
Joel is correct in that the children of the super rich don't actually need the money. But what are we willing to destroy in order to prevent a handful of Paris Hiltons?
ReplyDeleteYeah, I guess my thing is: Sure, the kids of the super rich don't "need" to get a billion instead of a few million, but then when you get down to none of us "deserve" our good fortunes in the absolute sense. One could, I suppose, write an estate tax which leaves family homes, farms, businesses and such alone, but otherwise confiscates 100% of the inheritance above some fairly high amount, but the public purse wouldn't get all that much money as a result (the super rich are also pretty good at tax avoidance, after all) and I don't really like the idea of specifically gunning for the assets of some very small group of people just because we don't like them much.
ReplyDeleteAs for McArdle's suggestion that all inheritance be confiscated -- while many people don't leave much inheritance, I think if anything our society could use a lot more emphasis on building lasting value for one's heirs on less on debt and selfishness. I think it would be better if more people were focused on leaving something worth having to their kids, and families/communities more generally.
On Joel's suggestion of a 100k cap to inheritance -- that's pretty foolishly small. To provide a concrete example: Not long before my father died, his mother (whom MrsDarwin and I were living with and caring for at the time) died, leaving a fully paid off house in the 50s era suburbs of Los Angeles. That house sold for nearly half a million, and the interest on that money (along with a very modest widow's share of the state pension from my dad's three decade's teaching) is what allows my mother to provide for herself and my disabled (unable to work) sibling who still lives at home with her -- despite the fact that her earning power is low (after thirty years out of the work force) and she is only able to work half-time (while caring for her parents and an aunt who are all in frail health.)
If that kind of very modest inherited "wealth" is considered a problem by some people, they're simply asking to trade inheritance for welfare in such cases. I don't see that it would be a net gain, and we're clearly not talking about "trust fund kids" and "Paris Hiltons" in such cases either.
Given that every time this topic comes up, somebody drags in Paris Hilton, doesn't that suggest that the "Hilton effect" is actually pretty darn rare? If it was common, wouldn't other names be mentioned?
ReplyDelete