My father sent me off to college with plenty of money. What he wouldn't give me, his executive assistant (called a secretary in those days) did. She wrote all his checks. Apparently I wasn't ready for all that freedom, personal and financial, because it wasn't long before I found myself wandering through a variety of academic institutions on my way to entering law school with a wife and two kids. By then, I think Dad had decided I needed some skin in the game. So I wrangled a little scholarship money and about twice that in student loans and rolled into L.A. for my new job at a law firm with fumes in the gas tank and plans to feed my family at all-you-can-eat buffets until my first paycheck.
My kids also went off to college with plenty of money. I'm happy to say that none of them wasted their time the way I did. I don't know why. Good mothers, I think. So my personal experience teaches me little about the virtue of struggle, or the curse of wealth. Some of us try harder. Some of us find ourselves sooner rather than later. I know of plenty of wasted lives at both ends of the socio-economic spectrum.
It is with this in mind that I have been lately thinking about income inequality. The rich have a head start. No doubt about it. That seems unfair, and in some general way I suppose it is, but it's not a sin that can be preached out of us, it's just a fact.
It bothers us, though, and lately we are again wondering out loud whether inequality threatens our way of life. Can we be the America of our collective mythology, the land of opportunity, if we have such an un-level playing field, if the bottom rung of the ladder of opportunity has been raised out of reach of most?
We don't seem to think so. Although it's worth pointing out that there was a lot of immigration to America during the Guided Age. So opportunity is relative.
But the Gilded Age is not a time we long for, or not most of us anyway. And now that economists like Thomas Picketty and Joseph Stiglitz are writing that we are headed back in that direction, it has become popular to talk about beefing up that old by-product of the Gilded Age: the estate tax.
I believe in robust social welfare programs. To a point, I am a redistributionist. But I'm also a capitalist. I believe that free enterprise is the economic engine of increasing productivity and broadly improving living conditions. The estate tax is like a narrow wall I walk along from which I see below on one side green fields and plenty and on the other fallow land and scarcity. The trouble is, I'm not sure which side is which. I'm not sure whether the estate tax helps or hurts in achieving our objective of a just society with opportunity for all who are willing to do their parts in making successes of their lives.
There are generally two stated objectives of the estate tax: raise money from the rich to fund social welfare programs; and prevent political domination by plutocrats. I'm not sure it does either very well.
Inherited wealth gets wasted quickly: seventy percent by the second generation; ninety by the third. This has been true for so long that many cultures have an expression for it: shirtsleeves to shirtsleeves in three generations; clogs to clogs; barn to barn; rice paddy to rice paddy.
Two or three generations isn't long for a political dynasty. Plus, Bernie Wooster didn't care about politics any more than any other rich wastrel. And as to helping the poor, if the rich are plowing almost all their inherited wealth back into the economy in two or three generations, that's a pretty good economic stimulus program.
There are other ways to raise tax revenues to support social welfare programs. Income taxes have been much higher in the past. Dividends and capital gains today enjoy almost hallowed low-tax status. We don't need the estate tax to fund the government; last year it contributed less than one percent of federal tax revenues.
There is a lot of Puritan in our DNA. And we love Pete Seeger songs about labor unions. The rich are an easy target. But what do we get for going after them? What are we saying about the kind of people we want to be, the kind of state we want to have?
Class warfare is not a good idea, going in either direction: see, eg, slavery on the one hand, the French Revolution on the other. But the national psychological problem with the estate tax is even deeper. You can't be a nation of great opportunity if you don't let people keep what they earn. In that scenario, we are all only renters. (Which may be true philosophically, but we're talking economics here.)
I don't care how much you want to help others, the notion that the government is going to take a big chunk of your property when you die grates. That's what dictators do. Communists. We rebel at that, even if we aren't the ones being looted. It goes against deeply ingrained views of property rights and justice.
The other thing is that many of us don't have much confidence in government to be a good steward of the money it confiscates. Government may have good intentions, it may be the only practical resource for helping many of the poor, but it is not that good at it. It's inefficient in the best of times, corrupt and wasteful in the worst. So when it proposes to take money from someone who has proved to be just the opposite, someone who has been efficient and productive in amassing her fortune, it seems a particularly foolish policy. Maybe the heirs will just blow the money, but that's not a good reason for the government to take it. Indeed, it's good reason for it not to.
As to the political dominance of the plutocracy, the estate tax is a sledgehammer when only a scalpel is needed. We don't need to dismember estates, or metaphorically chop off heads, we need to keep their money out of politics. Having money is not a sin; using it to buy political influence is. That is the problem that should be addressed. The fact that we have failed to do so, at all levels of government, including the modestly paid Supreme Court, apparently means we aren't serious about it. Maybe we secretly like being told what to do by men like Lord Grantham. Who doesn't like a man who is so nice to his dogs?
In Baker v. Carr the Supreme Court established the principle of one man one vote. If we're standing around letting rich men and women essentially buy the votes of others, we have some collective soul searching to do. But I don't think it's necessary to burn down the castle.