Thursday, December 2, 2010

Rationale for Estate Taxes

Just a note on (something that interests me) the Republican demagoguing of the estate tax as a "death tax" and keying in on a microcosmic issue separating Ds from Rs. Some of the rationales for the estate tax go directly to where the Ds and the Rs stand apart.

These rationales start from the premise that tax provisions should, among other things, enhance equality of condition. Equity and efficiency are the broad criteria for evaluating tax laws. Part of tax policy ought to be, accordingly, resource allocation to lessen somewhat--not enough in any event-- gaps between rich and poor, with a view to funding human capital to help serve general welfare.

Death compels an accounting since the deceased is no longer alive to use his or her wealth. Redistribution reallocates some of it broadly, rather than allowing it all to pass into the hands of those who haven’t earned it. At death, entitlement sprouts up unconnected to the creation of wealth.

So estate taxes modestly, generationally, lessen wealth concentration. Wealth consolidation otherwise in the hands of the few can reasonably be redirected to help the less advantaged. Thus, these taxes help distribute wealth across society, serving distributive justice by helping the most poor to better their life chances.

Therefore, these taxes are also anti plutocratic by mitigating the hardening and entrenchment of class stratification coming from the passing of wealth through inheritance. So, estate taxes actually promote the efficient use of resources—therefore, promoting equity and efficiency.

As well, stable laws and institutions in a stable society are vital to the fair amassing of wealth. Accounting at death repays the state in recognition of its enabling role. Those funds then, as noted, support human capital expansion for others, leading, ideally, to refreshed conditions for new entrepreneurship, itself ideally promising a better life for others.


  1. These rationales start from the premise that tax provisions should, among other things, enhance equality of condition.

    But the premise is a mistake from the start. Second, if "equity" in the sense of equality is the goal, there's no reason we shouldn't pursue that quite apart from death -- i.e., this is not an argument for a death tax as such. Third, the jump from equity to efficiency (5th paragraph) can't be made logical just by prefacing it with a "So". Fourth, the state has already been paid for its "ennabling" role through taxes per se -- death taxes are then double paying. And fifth, if in fact "human capital expansion" is a good thing that promises a better life for others, then this in itself argues against "equity" understood as equality, since that would eliminate such expansion.

    So would one person's "demagoguing" be another's reason? And vice versa, as in the attempt to draw artificial lines to separate "the rich" from us middle class folk looking a lot like class warfare demagoguery?

  2. I think we've gone around this mulberry bush a few times before.

  3. We have indeed, and I won't perpetuate the dance -- just putting an alternative view, especially regarding "demagoguing", on record.

  4. See my email to you sent just a few minutes ago.