Language, as george Orwell famously observed, is a good sign of political mischief. I’m not quite sure when the words “estate tax” morphed into “death tax,” but the shift speaks volumes. The words “death tax” belong up there with “hate crimes” and “affirmative action” as newspeak for pernicious political agendas. No matter what George W. Bush says, there is no “death tax” in America. Dead people can no more pay taxes than they can vote (Cook County excepted, of course). Nor is anyone’s death taxed. What is taxed is a dead person’s estate; and the point of this tax, as with all taxes, is to raise money for the government.
Is this an awful way to raise revenue? No. In many respects it is the least offensive tax we have. The most offensive–the progressive income tax–penalizes success and work. The better you do for yourself, the more the government punishes you for your efforts. The Social Security tax is almost as bad: The government absconds with your money before you even have a chance to look at it–and then pours it into an investment scheme no sane person would ever choose for herself. But then almost all taxes harm people, drain wealth, encourage inefficiency, and generally drag down the level of human achievement. Think of tariffs, which discourage trade, or sales taxes, which discourage buying and selling. Taxes are still necessary, of course, because, in an imperfect world, government is necessary. But taxes, even many liberals agree, are almost never good in themselves; they almost always substitute bad collective oversight for good personal judgment.
The estate tax is one of the few exceptions. In a meritocratic democracy, such a tax, in addition to raising money, actually does tangible good: It diverts resources out of familial, aristocratic channels into civic, democratic ones. And it does so only after a person has kicked the eternal bucket, sparing him or her the burden. What’s not to like?
The significance of estate laws and taxes to the maintenance of American democracy was put best by Alexis de Tocqueville, the French aristocrat who knew the alternative as well as anyone. Tocqueville saw the essence of the American Revolution in the abolition of primogeniture, the English property scheme that ensured that land was kept whole within any particular family by passing it on intact to the eldest son and to no others. America’s revolutionary abolition of this system helped disperse wealth and discourage the indolence of aristocratic inheritance. It was a subtle but vital change that, in Tocqueville’s eyes, was the essence of the American democratic experiment. “I am astonished,” he wrote,
that ancient and modern political writers have not attributed to estate laws a greater influence on the course of human affairs. These laws belong, it is true, to the civil order; but they ought to be placed at the head of all political institutions, for they have an incredible influence on the social state of peoples…. [I]n a way, they take hold of generations before their birth…. By virtue of estate law, the death of each property owner brings a revolution in property; not only do goods change masters, but they change, so to speak, nature.
What Tocqueville means by this reference to nature, I think, is that property ceases to be an emblem of birthright, of status, of nobility. It becomes a good like other goods, to be bought and sold in a democratic marketplace. For Tocqueville, then, estate laws in America “made equality take its last step.” They were for him, as they should be for us, an integral part of what American democracy means.
Estate taxes, of course, go one step further. They don’t just break up unified familial property, they substantially reduce its value. Introduced in 1916, they were designed to counteract the soaring inequalities of the robber-baron era. But their spirit is the same as Tocqueville’s. The kind of wealth our current estate taxes target–and its relationship to the wealth of most Americans–is far greater than that envisaged by Tocqueville. Merely ending primogeniture is no longer enough to prevent a super-aristocracy from taking shape.
If anything, in fact, it seems to me there is a strong case for increasing estate taxes and, indeed, extending them to people who aren’t super-rich. Right now you have to bequeath $675,000 or more to pay the tax. By 2006 that will be raised to $1 million. A better system would be to make anyone bequeathing more than $500,000 liable to an estate tax and to increase the rates so that anyone bequeathing more than $10 million sees the remainder of his bequest go directly to Uncle Sam or to charity. (I see no reason why family farmers should have special exemptions. The government should be encouraging as many people as possible to quit the hopeless family-farm business, a racket whose subsidies already clobber taxpayers.) We should also do much more to ensure that the truly super-rich can’t hire super-expensive tax lawyers to evade their due share. Any money raised this way should be used to finance cuts in income taxes–the real levy on democratic work and success.
The reason for expanding the estate tax is Tocquevillian. No one can be in much doubt that the deepest crisis in American democracy in the foreseeable future is increasing inequality. Since much of this inequality is a function of the rewards of knowledge in a global market, it’s hard to solve. Punitive income taxes, the panacea of the 1970s, are like spitting into the wind of a social hurricane. But what we can do is mitigate some of the dangers of this inequality. We can invest in and improve public education; we can put an uneducated underclass to work; we can maximize stock ownership to spread the wealth; and we can make sure that vast fortunes are not handed down in European aristocratic fashion. We already live in an age of growing political dynasties, rampant nepotism, and creeping aristocracy. Keeping and expanding the estate tax is a small way to fight back.
I wish Bush understood this. He’d have an easier time winning support for his admirably broad tax cut if he didn’t kowtow to plutocrats at the same time. Leftist demagoguery about the “wealthiest 1 percent” would also be undercut, and the entire package would look far fairer if it weren’t for a tax break for the super-wealthy. For good measure, trillions in future tax revenue would be retained rather than frittered away on Bill Gates’s kids, helping prevent deficits that could tar conservatism for a generation.
And don’t peddle me the family-values line. If rich people care about their kids, they should spend money on them while they’re alive, not wait till they’re in their graves before family values kick in. Better still, tell the kids to work for a living and give money to people who really need it, in donations to charity. Thus truly compassionate conservatives should have little truck with efforts to abolish the death tax. Conservatism should be about rewarding work, not inheritance, and encouraging success, not genetic dumb luck. One might think that a man who owes his office in part to his own bloodline might be sensitive to such arguments. But, then again, his willful obtuseness on the matter kind of proves the point, doesn’t it?