But the estate tax was meant to do more than bolster budgets and aid charities. From its inception, it was meant to ward off the emergence of a hereditary aristocracy in the United States. Established in 1916, the tax was a populist response to the excesses of the Gilded Age. President Theodore Roosevelt justified it by arguing that society has a claim upon the fortunes of its wealthy. Roosevelt pointed out that “most great civilized countries have an income tax and an inheritance tax. In my judgment both should be part of our system of federal taxation.” Such taxation, he noted, should “be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.”
The difference now and then is that when the death tax was instituted there was no federal income tax (and mostly no state income taxes). Today there are a variety of confiscatory taxes in place to deal with issues like this.
And yet wealth continues to accumulate only at the top, a group that has captured essentially all of the economic growth in the US economy over the past several decades. Those who pay estate tax rarely see the majority of their wealth ever subject to the “confiscatory” income tax - if it’s taxed at all it’s taxed at the far lower cap gains/dividend rates. One can agree or disagree with the rationale spelled out above around ensuring that wealth in the US is (by and large) something that has to be created rather than inherited, but I think it’s indisputable that the estate tax is a critical mechanism for implementing that vision should we as a society choose it.
(Source: azspot)
