There is quite the battle going on among our politicians right now. At least, there is the pretense of a battle. Part of the new tax-compromise legislation has to do with the Estate Tax (or, if you’re conservatively minded, the DEATH TAX, mwahahahaha!!!!). Under the current package, when you die, the first $5 million dollars in your estate goes untaxed. The rest is taxed at 35%. Democrats are up in arms because they want it to go back to the way it used to be (first $3.5M exempt and 45% taxed thereafter). I think both sides are out of their ever-loving minds.
Politicians are really big fans of talking about what a meritocracy America is. This is bullshit. In a true meritocracy everyone starts in the same place and then gets wherever they end up through hard work (and, of course, sometimes luck). If my parents leave me $5 million and yours leave you a funeral bill, this is not a meritocracy (obviously, there are plenty of other things that make America not a meritocracy, but let’s stay focused on just this one).
It is not a meritocracy because, for instance, it is a whole lot easier to start your own computer company if you’re brilliant AND have wealthy parents to help you out than if you’re brilliant and dirt poor. And yet, many people still refuse to acknowledge that rich people tend to beget more rich people and that poor people tend to beget more poor people and that this has, as much as anything, to do with the fact when your parents are rich, then you will, at some point, probably end up with all of their money (and power!) whether you have done anything to deserve it or not. Thus, allowing rich people to continue to pass all of their wealth down from one generation to the next does little more than create a wealthy ruling class. We might as well given them royal titles.
This is why we need an estate tax, but both proposed version seem absurdly conservative to me. The socialist in me wants to say you can either give to charity or the government can take it (let your progeny make it on their own merits), but that would never fly. So, this is what I propose (because anyone is going to listen to me): The first $200,000 is tax free. That amount of money is, for everyone who isn’t rich, life changing. You can pay off a mortgage with that kind of money and still have something left over. After that, it’s a 50% tax rate up to $1 million. This means, that if you die a millionaire, you can leave your kids $600,000 dollars. Again, that is one hell of a chunk of change. After that it’s 75% the rest of the way up. Why? Because there are too many people in America who don’t get the opportunities wealthy people give to their children. There are too many people who have to wonder where their food comes from instead of which absurd college prep academy is best for their kid.
If you want to live in a meritocracy, you can’t have a ruling class. The two are mutually exclusive.