Posted on October 29, 2020
Dr. Neil Sharma, a fellow member of the World Future Society, posted this statement today: “Wealth inequality exist[s] because parents want to pass on the wealth to [their] children. There should be a cap on the wealth that can be passed on in absolute monetary terms rather than percentage so that concentration of wealth doesn’t take place. It will eliminate inequality to a great extent.”
While I like the sentiment of his assertion, I wanted to do some research and introspection to see how I actually felt about the issue.
What is an estate tax?
An estate tax is triggered by the death of an individual and is levied on the value of the property they own on the day of their death. This can be contrasted with an inheritance tax, which is levied on the recipients of the property. While many different countries have their own versions of estate taxes, I will be focusing on the United States in this blog post because 1. I am an American, and 2. all of this website’s activity has been from the United States (so far).
Traditionally, estate taxes are defined as percentages. In 2020 in the United States, the estate tax is 40%. However, the first $11.58 million worth of estate value are excluded from this percentage. Thus, less than 1% of Americans actually have to deal with this tax.
Analysis of estate taxes
The article I gathered some of these statistics from takes an incredibly “anti estate tax” standpoint. It does highlight that current estate taxes levied at death have a large number of exclusions. Something worth noting is that the US has the fourth highest estate tax among countries in general, yet we still see this incredible amount of inequality here.
Other articles I’ve read point to numerous loopholes that can get around the estate tax – when millions (or billions) of dollars are on the line, wealthy families are incentivized to pay as much as possible to try to save their wealth from the clutches of the government through the form of tax lawyers and loophole engineering.
After a certain level of wealth, it doesn’t make sense to continue following the rules – I’m not trying to “vilify the rich” here, I’m trying to point out that humans follow incentives. When there is great incentive to try to save the VALUE that you’ve extracted during your life, you’ll do it! If I were them, I’m sure I’d do it too.
Discussion of Value
I’ve been thinking a lot about the value of human activity recently. Here’s a tweet I wrote about a week ago on the subject:
Money is an abstraction of the value that you’ve provided to humanity. This system works and would not warp, except that this value can be passed from generation to generation. In the long run, this inherently causes caste-like hierarchies to emerge in free market economies.— David Smith (@slimdaveyy) October 24, 2020
Analyzing the language of this tweet can illuminate a solution to the problem it reveals. In the tweet, I wrote “this value can be passed from generation to generation”. I meant that this value would be passed WITHIN A FAMILY from generation to generation. If value could be distributed to EVERYONE from generation to generation, then everyone in every generation should be doing just fine (theoretically).
Our current capitalist economy is the way that we’ve decided to distribute this value, and estate taxes are one of the methods we use to do that within this system. However, this happens through the filter of the government (because the government is the only institution with enough power to force individuals to abide by its tax laws). While it is well intentioned to have this type of redistribution, as soon as money becomes involved within the government, waste happens and corruption emerges.
Justification of an ideology
To continue, I need to employ (and attempt to justify) an ideological assumption: I assert that value created should be distributed relatively “justly” to all current and future humans. This is not to say that there should be some state-mandated redistribution solution that would take currency as an abstraction of value and simply give it to everyone – as I said above, doing things like this through the government usually leads to waste and corruption. Rather, I am going to refer to some ancient words to describe this distribution:
“I was hungry and you gave me food, I was thirsty and you gave me something to drink, I was a stranger and you welcomed me, I was naked and you gave me clothing, I was sick and you took care of me, I was in prison and you visited me”Jesus Christ; Matthew 25: 34–35
Through invoking the words of a religious symbol, I may have ruffled your feathers in one direction or another. Either way, rather than seeing this as a baseless assertion of the existence of a god or the strategic usage of a deity to try and make a point about the concept of taxes, see it as a guideline for what being a good human means.
I can foresee someone thinking this: “But look around yourself, David! Things aren’t all that bad – most people have food, most people have water, and most society is doing pretty decent if you ask me. We are well on our way to achieving the reality that Jesus told us to live.”
And to that I would respond: the good that is coming from our society does not align itself with the aforementioned biblical lesson. Jesus’s point is that people should want to give out of their own pockets – each individual is meant to have the motivation to feed the hungry, clothe the naked, and tend to the sick. I doubt that these would be relegated to taxpayer funded programs in Jesus’s ideal reality. And EVEN IF THEY WERE, what does that have to say about all these tax loopholes that people keep using?
All things considered, the end-goal distribution I’m assuming we should aim for is as follows: every human everywhere (and everywhen) should be justly cared for and not taken advantage of while avoiding waste and corruption inherent to traditional governance systems.
So how would this work?
Ok, great. People should “want” to help other people. As to what extent you believe that help should go, I urge you to decide for yourself (and then have a conversation about it with someone who disagrees with you). But as our current system stands right now, this isn’t happening in the least.
Humans are inherently selfish animals – Peter Singer, an ethical philosopher, points out that it is our moral duty to give to those who are less wealthy than ourselves, yet we do not see this happening for a plethora of reasons (which you can read about near the bottom of that linked article).
In order for humanity to achieve the level of charity, selflessness, equality, and harmony that Jesus Chris suggests we should aim for, this selfish MINDSET is what has to change. And I’m no closer to that than you, my friends, or the nearest billionaire.
So how do we change our mindset? How do we make ourselves something “more than human” while we’re stuck inside these pesky bodies? How can we ALL choose to give rather than keep? And how can we do it without having some faceless institution force us to do it?
I don’t know yet, but one thing is for sure: the traditional governance structures we’re using now aren’t about to start doing it for us.