The argument rages again on whether or not to re-instate the estate death tax in the USA. Knowing a bit of the real history of the origins of the estate tax and death taxes in general takes you a long way back in time. The word estate practically comes out of old feudal language itself. The term real estate refers to royal estate. That is land and property in general. In ancient times estates could be passed down from generation to generation but that usually did not include people living in the lower classes of the feudal system nor to serf level participants in society who themselves were part of estates. Estates in the feudal past included leases and lot rentals to peasants and they included property on the land that could include people as chattel property or as property of the land. Proper to the land. Feudal lords had almost god like status compared to the serfs, tenants and squatters that resided on their estates. Rental estates could be inherited to a new generation of tenants in the same family. It is a little like inheriting a McDonald’s Franchise in some cases because being a proper tenant was better than being a serf which was not much better than being chattel property attached to the land holdings of estates. Death inheritance taxes in feudal times were onerous because it could reduce tenants to serf status in society. Death taxes in feudal times would naturally be in conjunction with regular taxes , rent and service of debt so as to be a crushing blow to tenants. Royals and Lords could capriciously decide which tenants they favored and which they did not to use foreclosure procedures to re-invest in tenants who might be expected to be more productive in bringing in rent and taxes. The idea of fee simple ownership did not exist the way it used to in America before the progressives decided that private property rights were the root of most evil.
The modern estate death tax pretty much works the same way as the feudal estate death tax. It tends to apply to those least prepared for it to occur more than those well healed people with high quality expensive legal representation. The notion that the modern estate death tax benefits society as a whole more than just allowing family selected heirs to inherit wealth is really about allowing unrelated estates to be inherited by the son of Mario Cuomo or by sons of Senator Gore. There is no rational reason to believe that society as a whole benefits from increased taxation when you see how hierarchical the government positions are and how much they are allowed to be influenced by nepotism. Remember how George W Bush came after George H. Bush? That is relatively uncommon at the level of the office of president but it is not uncommon for offices at the state and city level where we see dynasties like the Kennedy’s owning offices generation after generation. Why is it that political merit is deemed inheritable by the party that is most for the death estate tax and financial merit is deemed inheritable? Those who want to act as feudal lords in our society usually are the ones arguing for the death tax or you have opportunists who see opportunity in estates having to be partially liquidated upon a death to pay a massive tax bill. The estates most worthy of taxing are those with the most property and not necessary ready cash in the bank. Opportunities to grab a big piece of a privately owned successful corporation can become available on the market just because of a forced estate tax sale. With the law in place the tax collector can essentially seize half the property and then to get cash might attempt to sell it on the open market to get cash or other goods to take back to the treasury. That puts huge pressures on viable businesses that can either cause them to fold or split up into separate businesses competing with each other or leaves them vulnerable to corporate raiders on wall street. Wall Street type people support the death tax because of estates can be forced to borrow money to transfer whole units of property to the heirs and the lenders of last resort are on wall street. Wall Street people don’t mind owning a half of a share in an enterprise or more in exchange for their cash contribution but that dilutes the ownership to the original family which cannot be shown to benefit society. What happens is the Andrew Cuomo gets to control the money in the treasury and waste it as badly as the worst of heirs would. It is a zero sum game once the money from the death tax is squandered. The question is if there is really any more benefit of having Andrew Como and his cronies and special interests squander it in terms of producing economic value by creating economic activity in society or whether the zero sum might not do just as much good for the heirs to squander ? There is however evidence that leaving a quality going concern intact instead of spitting it up or making it in debt or giving it new more indifferent owners from wall street cause economic dislocation and possible loss of jobs in those enterprises. Instead of expanding those enterprises forced to borrow money or cut themselves in half to pay off dead money to the government to squander leads to unnecessary debt, slower growth, less cash flow and less economic value of the enterprise. The investment banker vultures love the idea of having the chance to buy the next family owned Sees Chocolate company because the family is forced to sell a big chuck of the business to pay estate taxes. Be careful of listening to sob takes by wall street people about why the estate tax is necessary. They are looking for opportunity because the dead often were better at running businesses they established than the living. Businesses after a death are often handicapped by the loss of the primary person able to run those businesses so when the estate taxes hit it can be a double disaster for the business or the death of it all together. The higher the death tax and estate tax the more going concerns end up being liquidated. Competitors who are not closely held family companies are then immediate beneficiaries. You hear all these anti corporation people slamming big corporations as the root of all evil and calling for reinstatement or ever higher death taxes and they are actually benefiting the evil corporations first and foremost in spite of what they think they are doing. Corporations may be like individuals in a court of law but they are immoral by comparison. Estate taxes will not apply to a limited liability corporation where the ownership is public and diffuse. It may apply on the margin but it and the dilution of ownership creates a bureaucratic driven company that tends to benefit non owner management employees more than shareholders. That became a major unfortunate trend of the last phase of high estate taxes in America. You hear the argument that the death tax is fair. How so when it benefits the competition? With higher estate taxes people tend to leave less in the way of estates to heirs at death and find ways to transfer estates otherwise. The game is ancient so what is supposed to be fair and then benefit the public really never does. One can never actually be sure in your state or the federal government that money flows directly into the general fund once taken as a death tax. It is more complicated than that because government often ends up having to own real estate and can actually give it away for a pittance of its value before any cash ends up in the treasury. This more often happens with escheating of property when there are no heirs. Governments have set up an apparatus to maximize what they can from estates taken in non monetary forms. Most of the time an assessment of value is done and a bill is sent to tax payers essentially by reporting on IRS forms using accountants to figure out what is owed at a given rate with exclusions spelled out in the law.
The death tax comes out of property and funds that had , as it happens already been taxed for a life time on an annual or quarterly basis. So there is one more argument that it is not exactly fair. What is fair about taxing funds and property that have already been taxed. Once implemented the estate tax becomes an industry or people find means of avoiding it with charitable philanthropy that might be exempt. One does have to question if creating parasite jobs in society is somehow more beneficial to society than leaving it to the worst heirs to squander. I think about just how much good non profit organizations have done for me personally and can’t help but remember that going to a university that bills itself as a sort of charitable non profit tax exempt organization charged a fortune for me to attend the classes there on an annual basis. A business is a business so why should some be tax exempt and other for profit. It is even more difficult to understand how a tax exempt organization running a health insurance plan can cancel your health insurance because they say you have pre-existing conditions having missed a single payment because you were sick. You see the self interest is no better or worse than the most offensive for profit organization. The whole transfer of wealth to that shadow do gooding economy seems like a sham. It is a sham! There are so many examples of the certified tax exempt organizations taking on a corporate structure of hierarchy based on collecting non profit tax exempt donations and then running for profit businesses on the sides. In Oregon a completely private organization like the Oregon History museum gets itself on the ballot in November to receive money by an property tax assessment. This by a private tax exempt organization. This is somehow going to benefit the public? The bigger fuss in Oregon politics is about a private group that wants to build a casino in the city limits using their own money to build it and no tax assessment while promising to pay 25 percent of profits to the city and state in return for the special monopoly status they need to operate. Clearly the Casino proposal on the ballot is more honest than the money grab by the Oregon Historic Society that aims to make itself a defector government agency as a result of tricking the public into voting to give it a special property tax assessment. That is the death tax in a nut shell. It is billed as being the right and fair thing to do by proponents when actually it is just the opposite and destabilizing for society. It is just a slush fund for a new feudal lord clan that puts itself in the position of management.
You read about Andrew Carnegie , a man with no heirs, arguing that estate taxes should be astronomical for the public good but then you might read that he had no trouble putting down strikes killing a few people demanding extra benefits and pay. The picture you start to see is the ultimate feudal American lord in his time trying to force others to give the way he believe he should. The good Carnegie did is monumental but he did squander away plenty of money on his great place of peace scheme in the Haig. Carnegie’s investment in a world with out war did not stop world war two from happening and the palace of peace in the haig later became the site of international tribunals of world war two war crimes. The cold war was not prevented after that. Lots of curious jobs were created with benefits for people who are supposedly doing something for world peace that might have been better invested had Carnegie instead of wasting money on a palace of peace used the money to help rebuild Germany after world war one. It is like the strange liberal cause foundations that are trying to wipe out diseases like malaria world wide instead of trying to create industries with well paying jobs in the poor countries that most need them. Nothing is more sickening than listening to relief workers coming up with terminology of ” doing a feeding” as if they have humans on a feed lot with charitable intentions.
If you know some of your recent history you will remember that when the estate death tax was last active the government gave one big newspaper owning family a special tax waiver to help them minimize what they had to pay. That special tax waiver made it clear that the estate death tax is really about consolidating land holdings of the lords of the country and most of those lords it seems tend to be democrats. The hard facts about the death estate tax is that it hits small family farmers who are might have as an example 640 acres that yields the family a living and after the death tax they are forced to part with half their acres where they can only earn half their income or have to go in debt to keep the full number of acres. With all the so called liberals and democrats calling that fair it is amazing that farmers will keep voting them into office probably for farm price supports or other forms of farm welfare. The net result for small farmers who happen to die with too much many taxable assets is that the farms get broken up and add pressures for farmers to sell out to developers because you need large tracts of land to get enough income in order to keep agriculture going. The democrats who harp on the fairness and need for death taxes don’t like the environmental consequences but they are for the ideal of Marxist collective farming. That has not ever worked anywhere. Not even on a Kibbutz. Ultimately the only thing the death tax is good for is bankers , real estate brokers, developers, speculators and what are essentially a class of professional carpet baggers looking to cash in on someone Else’s unfortunate circumstance due to a tax that is supposed to be fair. So why should the sons and daughters of farmers be allowed to inherit their families farms? Because people in cities who never will move back to the country don’t think it is fair that anything stay in a family just because of heredity but those same people keep voting people back into public office who name is part of a political dynasty. Which is why There is a second governor Como, a second Gore and Forth or Fifth Kennedy. Oh it is just based on merit! Feudal Death Estate taxes were more closely based on dynasty considerations than wealth or just on brute force. Karl Marx claimed that capitalism was the outgrowth of feudalism but the truth is the political and legals systems we have are more closely related to feudalism once you see how things really work. Capitalism did more than anything in history to break the ancient bonds of feudalism. In Great Britain it created a whole new class of lords who were not landed nobility. Marxism has been a scam since it was invented especially when it decries feudalism as the greatest harm in civilization and yet supports it with death estate taxes.
The benefits of the death estate tax pass to the slush funds for political classes like Nancy Pelosi’s need to have the US Air force run a two million dollar air taxi service for her with full bars on board the plane. Or the money goes into bloated over cost schools where only 60% of the students have any hope of graduating. The public benefit is as unimportant to most of society as the family farm staying intact once you see how the city of Portland can blow 60 million dollars on a space tram to the space hospital and use public money for that and then run the space tram as a business charging the public to use what we already paid for. What is the benefit of moving private business wealth into businesses owned by the state that do nothing but waste money and then double tax the public? The Estate Death tax is already double taxation itself because those with substantial estates have already paid taxes year after year on their wealth. It may be important to Warren Buffet to blow his billions of dollars on feel good philanthropy projects run by a quasi private government agency but why should you contribute to such folly with your own smaller estate? What is wrong with picking your own heirs instead of giving the money to opportunists? Those people calling for public giving and much higher estate death taxes maybe ought to rethink their own folly before forcing it on everyone else.