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Thursday, July 8, 2010

Wealth and Commonwealth: Why America Should Tax Accumulated Fortunes

One of the Worst Books Ever Written

When the father of the world’s richest individual and the cofounder of an outfit called United for a Fair Economy get together to write a defense of the estate tax, the result is one of the worst books ever written in American history about a public-policy issue.

Although Gates and Collins have written a tract that pays lip service to individual achievement, liberty, and free enterprise—the foundations of America’s prosperity—they nevertheless embrace egalitarianism, the redistribution of wealth, and the welfare state as indispensable policies and institutions. Moreover, in their passion to maintain the estate tax, they assert that it “helps make America great.” This is the first time, to my knowledge, that anyone has argued that this tax has been partly responsible for the American people’s prosperity since 1916, when the federal tax was instituted.

The authors’ defense of the tax rests on several dubious assertions, to say the least. They claim that the estate tax will reduce the “concentration of wealth and power” in the United States; forces individuals of great wealth to “pay back society” for the enormous “investment” in our public institutions; strengthens “equal opportunity” in our society by putting a “brake on the accumulation of hereditary wealth”; will reduce the disparity in income levels that is so corrosive to democracy; will “level” the playing field, so that “runners start at the same starting line”; is a good tax, because “for us, the progressivity of the tax system is a core principle”; provides an incentive to charitable giving. Without the estate tax, wealthy families would reduce their charitable contributions.

They also argue that the three great religious traditions—Judaism, Christianity, and Islam—support the tax. They contend that it must be maintained because, after all, “taxes are a privilege in a democratic society, a necessary component for sustaining the common good.”

Gates and Collins repeat ad nauseam that the “concentration of wealth and power” is a grave threat to the Republic. They argue, for example, that “fewer than ten multinational media conglomerates dominate the American mass media landscape.” So what? Americans are tuning out network broadcasting and turning to cable and the Internet, the latest frontier of information freedom.

In reality, it is the concentration of political power in Washington that is undermining the American people’s natural rights and prosperity. Taxes, monetary debasement, regulations, trade restrictions, out-of-control spending, overseas military adventures, and the military-industrial complex have eroded any chance of a sustainable prosperity.

The authors believe that the wealth of the “rich” could not have been created without the “investment” made by governments at all levels, particularly the federal government. In fact, the creators of wealth pay for so-called public services throughout their lifetimes in the form of income, sales, property, excise, and other taxes. Why should the federal government also confiscate up to 50 percent or more of their estates when they depart this world? How much is enough for the federal Leviathan?

Another of the authors’ assertions, namely, that the estate tax will increase “equal opportunity” at birth is simply ludicrous. Even if Melinda and Bill Gates, Jr., donate all their wealth to their foundation, their children will always have more opportunities than the children born to any other couple in America, or for that matter anywhere in the world. The offspring of the very wealthy are the beneficiaries of their parents’ genes and successes. The estate tax cannot change that.

The authors’ true colors are revealed when they say that progressive taxes form the core of their beliefs. Marx is smiling in his grave. In the economy, the law of one price governs virtually all market transactions. Only when it comes to taxation do seemingly intelligent individuals parrot the “ability to pay” mantra as if it were a divine decree.

In the final analysis, William Gates, Sr., Bill Gates, Jr., Warren Buffett, George Soros, and the other wealthy supporters of the estate tax should keep making money and giving away as much of their fortunes as they see fit. America does not need an estate tax. America needs more economic freedom and the restoration of the liberties that Gates, Collins, and others are willing to compromise in the name of the “common good.”