The Estate Tax and the Social Contract
Had my first talk radio show co-host experience Monday morning. It’s a fun experience, and I enjoyed a spirited but civil discussion with the callers and with Wade and regular Monday guest Mike Ivey, an accountant.
There were several stand-out moments, and I want to share just one of them with you here today. We were talking about capital gains tax and the estate tax, both eternal targets of the Republicans. (The argument from the right goes something like: “these taxes punish success and hurt growth, so they should be done away with.”) I said something to the effect that an estate tax was OK because society lets people be rich, which got a bug-eyed reaction from Wade and Mike. So, I’m going to blog about it here in the hope that I can get my thoughts out more completely.
We forget the social contract. Out in the “state of nature,” material wealth is taken by force by whoever can take it. In civilized society, you keep the wealth you generate. Removing all pretense, the taxes paid on wealth are the cost of remaining in civilized society, and they are a bargain compared to the alternative of barbarism. This is a justification for progressive tax structures in general: the wealthier you are, the greater benefit provided by living in a civilized society.
Additionally, we forget the ways that we use our government to create an infrastructure for people to pursue material wealth in many forms. Our system of private property, our markets, and the corporation as a legal entity exist because we the people put them there and guarantee their existence through the force of our government. It is reasonable to expect some return to the public coffers in exchange for all these wealth-generating tools provided by the government.
With the estate tax in particular, there has always been a faction of those wealthy and powerful people who essentially want to take it with them, establishing their own legacy. We don’t need kings and queens in America, but, once again, life (and death) in a civilized society makes legacy-establishment possible to a degree. So, it’s reasonable to collect a tax in exchange. (Also, I typically find it hard to talk about the estate tax with people, because it’s easy to get either emotional when death is involved.)
At any rate, some topics go deeper than you can get in the fast pace of a morning talk show with lots of callers (great calls, by the way!), and this is one of them.
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