Better
Off Without Them
PERSONALLY, I DON'T particularly
mind taxes. I am not inclined either to quarrel with or
to try to avoid them. I recognize the blessings in my
life and the substantial benefits of government-based
protections, structures, and safety nets. I even accept
the notion that some of those benefits include some degree
of pure wealth transfer. I am not ranting against taxes.
At the same time, I do
mind violence, I resent stupidity, and I detest waste-
and taxes involve all three. So I believe we must ask:
What are we doing when we tax and why are we doing it?
Taxing authority is ultimately
coercive authority at the highest level. Tax enforcement
necessarily implies an awesome exercise of governmental
powers fraught with extraordinary potential for abuse-this
means guns, prisons, armies, police, confiscation, and
destruction. The exercise of such authority requires compelling
and justified reasons for it. Those reasons, ideally,
should be based on well-developed philosophies of government,
not just on temporary political advantage or perspective.
Over the past 3,000 years we have seen more than a fair
measure of governments I would be loath to trust. This
has more than occasionally included the government of
the United States of America and its governmental subdivisions.
"Progressive"
taxes are morally grounded in these beliefs: (1) numerical
equality (i.e. everyone having the same amount) is socially
superior/desirable, and (2) government is both peerless
steward of resources and ultimate lawful owner. In contrast,
free markets presuppose the integrity of property rights,
honor individual decision-making, and are relatively blind
to human tragedies or needs. These twentieth-century presumptions,
applied inconsistently to estate taxes, lead to the conclusion
that property rights are malleable based on quantity alone.
Yet, individuals frequently prove to be superb stewards.
Is it not ludicrous to
conceive of the government as the object of effective
philanthropy? Moreover, government confiscation, in my
view, is always scary. I ask: Are heavy estate taxes the
best use of collective capital (a scarce resource)? Is
government dominion the best social policy? Are personal
rights at all meaningful? Are individual property rights
important? Can we encourage and anticipate effective private
stewardship? Can government itself be trusted as an effective
steward? Why? Can we build from this obsolete dialectic
(capitalist/communist) into integrated money discussions
serving twenty-first-century needs?
One consequence of estate
taxes is that estate planning becomes entirely focused
on tax avoidance, consuming enormous amounts of financial
and intellectual energy, with little worthy discussion
of either the benefits or responsibilities of capital.
Estate taxes gut private
capital, forcing strange and difficult decisions, as property
is transmitted from one generation to the next. What was
already built is destroyed. What could build even more
is diverted for other purposes. Would society as a whole
be better off cultivating in its citizens a solid sense
of stewardship and an expectation that wealth can serve
as a creative resource-a source of answers and solutions,
not just of problems? Or are we better off forcing sales,
liquidations, and the break-up of functional concentrations
of capital? I would argue that, from the point of view
of the collective good, the energies wasted and the wealth
not generated as a result of estate taxes is huge.
-Dick Wagner
Dick Wagner, J.D., C.F.P.,
is principal of the financial advisory firm, WorthLiving,
LLC.
Protection from Plutocracy
IF IT'S TRUE-as libertarians
like to remind us-that all taxes are collected at the
point of a gun, let us also note that the finger on that
trigger is our own-the collective will of the American
people, as enacted through the democratic process. Of
course, this is ultimately the case with all our laws,
enforced by the sovereign power of the state, which is
likewise a creation of the people of the United States.
Some two centuries ago, a constitutional convention was
convened in order to "form a more perfect union,
establish justice, insure domestic tranquility, provide
for the common defense, promote the general welfare, and
secure the blessings of liberty to ourselves and our posterity
. . ."
Of course, conditions change
over time, and U.S. revenue collection- originally based
on land ownership, tariffs, and excise fees-eventually
gave way, at the beginning of the twentieth century, to
a more uniform and democratic tax code based on personal
income. From its inception in 1913, the federal income
tax has been structured progressively, where those who
can afford to pay more do so. Spurred on by the work of
muckrakers like Ida Tarbell and Upton Sinclair, who exposed
the ruthless effects of unchecked capitalism in the boardroom
and on the factory floor, Congress and the courts woke
up to the danger of entrenched wealth and power in the
modern age.
On its ratification at
the end of the eighteenth century, the American Constitution
explicitly forbade the conferring of titles of nobility
on its citizens. By the end of the next century, it had
become clear that this country's democratic experiment
could be jeopardized not simply by the increasingly archaic
institutions of monarchy and aristocracy, but from the
quintessentially modern development of plutocracy-government
by the wealthy. Not for nothing was the late nineteenth
century remembered as the age of industrial revolution,
as technological advances fostered quantum leaps in productivity-and
with it, the creation of unprecedented private fortunes.
At the end of both the
nineteenth and twentieth centuries, the world experienced
technological explosions, powered largely by American
ingenuity, which increased material productivity so quickly
that its effects were experienced nearly universally in
less than a generation. For those who were talented, shrewd,
or fortuitously located enough to participate in this
explosion, unimaginable personal wealth has resulted.
But, as in the heyday of the Robber Barons, this past
century has also witnessed the dangers of unchecked monopolistic
power resulting from such vast accumulations of wealth.
"Unchecked" is a misnomer, since the most egregious
case of monopolistic power in our time-that of Bill Gates
and Microsoft, Inc.-was indeed finally checked by federal
intervention.
We can be thankful that
our democratically- elected government expresses the will
of the people and the vision of its founders by reigning
in the excesses of accumulated wealth. Just as anti-trust
legislation has provided a curb to corporate rule, so
the income and estate taxes have provided a modern mechanism
with which to help prevent rule by the rich. While mainstream
economists, politicians, and pundits proclaim the last
decade the greatest period of economic expansion in history,
the majority of Americans who did not significantly participate
in the expansion are left to wonder: economic boom for
whom?
Democracy means one person,
one vote. As wealth at the top further accumulates and
our electoral process descends into a morass of soft money,
it is clear that the greatest thing that stands between
the people of the United States and their being ground
beneath the well-heeled shoe of the affluent elite is
their electoral rights. If they are foolish enough to
have voted for politicians who have sold their votes to
the highest bidder, the people will learn soon enough,
as the infrastructure of the social contract dissolves
beneath them. As America crumbles into a divided nation,
a coterie of the superrich may well have constructed for
themselves a gated enclave in which to play out a fantasy
in which they can control all the players to flatter their
interests for a while. But if the vision of the Founding
Fathers has lasting merit in the history of human liberation,
it won't be long before true democracy rears its beautiful
head again.
Meantime, I would suggest
that the estate tax continues to serve as an admirably
progressive and eminently prudent check on the insidious
encroachment of plutocracy.
- anonymous author
The author is a documentary
filmmaker, currently working on a film about growing up
with privilege. He serves on the steering committee of
United for a Fair Economy's Responsible Wealth project.
Rights and Responsibilities
WHAT IS A "FAIR"
tax rate, and how do we measure it? One could argue that
the federal government is becoming increasingly reliant
on taxation of America's wealthiest earners. In 1979,
the richest ten percent of Americans paid 41 percent of
the federal income taxes, but now their share is more
than half. Meanwhile, the share of taxes of the lowest
60 percent dropped from 21.7 percent to 16.5 percent.
But we also know that the
U.S. is currently experiencing wealth disparities of historic
proportions. The average after-tax income of the richest
one percent of Americans surged 157 percent from 1979
to 1997, but for Americans in the middle of the economic
spectrum, it rose only ten percent; for those in the bottom
fifth, it actually declined slightly. The
wealthiest one percent now possess as much wealth as the
lower 94 percent.3 Clearly, tax policies over
the last two decades have been increasing-not decreasing-our
country's income gap.
Tax reduction is often
posited in terms of individual rights and self interest.
The money belongs to the taxpayers, not the government,
the argument goes, and individuals should have the right
to dispose of their money as they please. The assumption
is that given the choice, all Americans, especially the
wealthiest, would choose to have the lowest possible taxes.
However, those Americans
who have more than enough resources to make themselves
and their families comfortable might well view tax policy
less in terms of rights than responsibilities- the responsibility
of the government to ensure basic economic and social
justice to all Americans; the responsibility of a tax
system to impose its burdens equitably and not privilege
unearned income over working income, as it currently does;
the responsibility of the affluent to use some of their
resources to aid those less advantaged. If we believe
that the government has abandoned some of its core responsibilities
by passing tax polices that favor the wealthy, then it
is up to us to pick up the slack, to act in ways that
we wish our government would act. It is up to us to take
personal responsibility to try to "even the balance"
with our own wealth.
- anonymous author
The author
is the foundation relations and advocacy associate at
Pathfinder International, an international family planning
organization. She serves on More Than Money's outreach
committee.
1, 2 Congressional
Budget Office,
Historical Effective Tax Rates
,
1979-1997, Preliminary ed., May 2001, presented in Center
on Budget and Policy Priorities, "Pathbreaking CBO
Study Shows Dramatic Increases in Both 1980s and 1990s
in Income Gaps Between the Very Wealthy and Other Americans,"
May 31, 2001.
3 United For a Fair Economy,
www.ufenet.org
© 1990-2005, More Than Money, All rights reserved