Go out into the world and preach the virtues of Meritocracy. Will you convert the world? Perhaps not. You will, however, be confronted with a number of common arguments against Meritocratic ideas.
The following are a number of arguments against the 100% Inheritance Tax that I have encountered. It should be apparent that many of the arguments lack a degree of depth, which suggests that the 100% Inheritance Tax is a rather novel concept to most people.
A 100% Inheritance Tax Would Deny Businesses Funding
Yes it does, in the current system. Many business owners get their initial funding from their dead parents. This argument, however, should be a red-flag that success is still very much a function of privilege. This should be a sign of how we do not live under a meritocracy. Strangely, in the U.S. it is the Right that tends to trumpet the virtues of “Equality of Opportunity over Equality of Outcomes”. This sentiment is, of course, inconsistently applied, as evidenced by this argument.
That said, how, exactly is inheritance a good system for business financing? It does not appear that it would be terribly hard to improve on it. Something as crude as a state lottery for folks with business ideas would be an improvement. At least then you would have to at least claim to have a business idea. With inheritance, no requirements exist at all. With inheritance, heirs are perfectly free to spend their wealth on a business or splurge on something senseless. This being the case, any form of alternative would be an improvement.
Taxing Inheritance Would Grant Too Much Power To The State
What power would this be? What power would this grant the state that it either did not have before or that was held by a more ‘trust-worthy’ entity? All the powers that I see this giving the state are powers that it already has or powers that previously were held by private wealthy families.
I’ve heard it argued that a 100% inheritance tax would, itself, be a novel power granted to the government. This is hardly true. This is nothing the state (or at least the United States) is not already at liberty to do. It already has the latitude to establish any tax it requires for its upkeep. There is also nothing novel about taxing inheritance specifically. This is already done. The question here is more a matter of degree.
I’ve also heard it argued that removing the role of inheritance in business financing would be granting the state veto power in starting businesses. Again, this is hardly true. Venture capital and ordinary sources of income remain options. The only powers being granted to the State in this instance are powers that were previously held by private wealthy families, and these families are far less accountable to the people than the State ever was.
I would encourage anyone who makes such claims to be specific about what powers they are worried about. They ought to state explicitly what power is being acquired and how it is new.
Taxing Inheritance Would Be A Form Of Double Taxation
OK. So who, exactly, is getting taxed twice? Who is the flesh-and-blood human that is being compelled to pay taxes twice?
There is no such person, of course. The person who earned the estate was taxed in their lifetime by existing laws. A 100% inheritance tax would not kick in until after that person had died, at which point the people who are being deprived are only this person’s offspring. Unless you consider families to be ‘persons’ with rights, then double taxation is not taking place.
A 100% inheritance tax might be considered to be the codification of the truth that families are not morally equivalent to flesh-and-blood individuals. By taxing inheritance at 100%, a state is making the assertion that every person is accountable for his or her self. It is stating that no person may hide behind the accomplishments of their ancestors. I would tend to believe that this was an uncontroversial opinion in modern society, but the complaints about “double taxation” suggest to me that it may be more controversial than appearances would suggest.
A 100% Inheritance Tax Is Arbitrary
No. On the contrary, it is probably the least arbitrary tax that could possibly exist. This is a blanket proposal that derives its justification from principle. The principle here is that all wealth transfers should be conducted for a legitimate purpose. Either a legitimate need exists or a legitimate service is performed. In either case, there is a reason for it. To allow for inheritance, however, would be to allow for one of the most arbitrary institutions that ever existed (the lottery of birth). Receiving an inheritance depends entirely on blind luck.
We can contrast the 100% inheritance tax with nearly any other tax in existence and find that it is less arbitrary. Off the top of my head, the Virginia State tax is 5.75%. Why 5.75? Why not 4% or 7%? There are no firm principles governing the numbers of most taxes. A 100% inheritance tax, however, is derived from principles that everyone can understand. These principles leave no room for discussion, which is probably what people are really concerned about when they call it “arbitrary”. They are not afraid of the caprice of those in power. On the contrary, they are afraid of universal principles that leave no room for their own caprices. Tyranny for them is not caprice, but absolutes.
A 100% Inheritance Tax Will Affect The Middle Class And Poor
So, what? What is it about a small inheritance that makes it more legitimate than a large one? Nothing. Do the poor and middle class do anything to deserve their inheritances that the wealthy do not? No. Inheritance is, by its very nature, unearned income. As such, it is always illegitimate.
Now, there is something to be said about lower income individuals being saved from destitution by inheritance. In the circumstances where this happens, we are confronted with a legitimate problem. This situation, however, does nothing more than highlight a serious problem. If an inheritance is somehow necessary to escape poverty, then that should be a red-flag for a situation with arbitrary outcomes. In these circumstances we should be marshalling the power of society to solve the problem rather than depending on a mechanism that would more often go to benefit those who hardly require it. A universal basic income for example, could resolve issues of destitution for poorer families.
At the end of the day, the principles which oppose inheritance are pertinent regardless of who is receiving it. It is not of substance how heirs are otherwise disadvantaged. If it is the case that they have disadvantages outside of inheritance, then those should be dealt with accordingly. This does not grant them license to secure unfair advantages for themselves to offset their disadvantages.
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The 100% Inheritance Tax is a proposal that derives from principle. When the principles behind it are understood, the objections are quite simple to deal with. This is because the objections universally illustrate a form of disregard for these principles. It should be noted that many more objections exist than those listed here. Those not mentioned, however, are easily countered by appeal to the same principles. Therefore, to understand the rationale behind this proposal is everything.
Jason Calhoughney writing for the Apollo Institute of Reason AIR Review©