We are developing the social individualist meta-context for the future. From the very serious to the extremely frivolous... lets see what is on the mind of the Samizdata people.

Samizdata, derived from Samizdat /n. - a system of clandestine publication of banned literature in the USSR [Russ.,= self-publishing house]

Class war sentiments in the US

Estate taxes – or what are called inheritance taxes in the UK – have been an issue in the public sphere lately. Russell Roberts, who writes over at the Cafe Hayek blog – a fine one – has an article criticising such taxes in the New York Times, typically a bastion of Big Government “liberalism” (to use that word in its corrupted American sense). Check out the subsequent comment thread. Here are a couple of my favourites for sheer, butt-headed wrongness:

“There should be 100% confiscation of all wealth at death; except for a family owned business, not incorporated! Passing on wealth is a huge negative for society and probably and even larger negative for those who get the moola; they generally end up with pretty wasted lives! There is no value to passing on wealth except for the egos of the passees!! And there should be a liquidation of all existing foundations, trusts, and other tax avoidance schemes as well! I know so many trustees and administrators who have no economic value whatsoever; and most of these things just perpetuate the arrogance of the founders!”

“chaotican”, from New Mexico.

Here’s another, from someone called “jmfree3″:

Finally, there is the big government is intrusive arguement, which is most commonly made by cold-hearted conservatives (are there any empathetic conservatives or is it wrung out of you all in Young Republican meetings?). Wanting the most greedy people in America to be able to keep the fruits of their greed is not really defensible unless you believe, as most conservatives do, that people who cannot help themselves should be left to die in squalor before the government takes one penny from the more fortunate to help them. Fortunately, liberals care more for there fellow human beings and fight for those who cannot fight for themselves (which is how I know most Democrats in Congress are NOT liberals). After all, isn’t there something in the Bible about “as you treat the least of these”?

Okay, there are other comments from people which are more sensible, such as making the point that there are other examples, besides estate taxes, of taxing people twice. The double-taxation aspect of inheritance tax is not, in my view, the worst thing about it. Rather, it is a tax on the maker of a bequest; it effectively says, “We, the State, are going to ban you from giving all your legitimately owned money to whoever you want, and we demand that a large chunk of it should return to the State that nourishes you and protects you”. If you read the comment from “jmfree03″, that is pretty much what such people believe. They don’t, not in any rooted sense, believe in the idea of private property and respecting the wishes of the owners of said.

Now, of course, the NYT readership is not typical of US public opinion as a whole, if the recent mid-term Congressional elections are a guide. I would also wager that while there has always been a strong egalitarian strain in American life – more so than here – that it has tended to avoid a general denigration of someone just because they are born to rich parents. After all, everyone born in the USA these days is, on this basis, a very lucky person compared with say, someone born in the former Soviet empire, or large bits of Africa, for example.

I remember, many years ago before I started this blogging business, having a chat with Brian Micklethwait and we commented on the size and power of the left in parts of the US, especially in the big universities and other such places. A theory of Brian’s was that it is precisely because the US is so fabulously rich in its mostly capitalist way, that it can afford to support a large class of people inclined to attack it.

It is, of course, ironic that the left supports confiscation of inheritance, since a large element of the left in the US can be described as “trustafarians”; over here, as is sometimes noted, a lot of the Greens – such as Jonathan Porritt or Zac Goldsmith – are born to money and privilege. The Toynbees and the rest are fairly well minted.

Here is one such article here, back in October 2007, that addresses this whole idea that inheriting lots of money gives someone an “unfair” advantage in life over someone else, as if life were like a pre-defined race, such as the Tour de France. But that gets things entirely wrong. It is the fallacy of the zero-sum approach to life generally.

And here is another article by me on the same subject, responding to a letter in the Times (of London) newspaper.

30 comments to Class war sentiments in the US

  • Ian F4

    There should be 100% confiscation of all wealth at death

    You have to love this black-white argument, completely ignoring the fact that a lot of people don’t die of old age or natural causes.

    What he’s saying is if I got killed crossing the road my son would get nothing and be left to live off the state for the rest of his life ?

    What an utter shit.

  • John Cheeseman

    My response to the chaoticans and jmfree3s of the world is to ask them this question. “So tell me, what of your personal property, i.e. home, car, furniture, food, clothing, money, etc… belongs to me and when can I come by and pick it up?”

  • PeterE

    Even if this came in, the children of better-off parents would still tend to do better in life as they would receive more help during their parents’ lifetimes. The logical conclusion is that all children must be snatched from their parents at birth and brought up in communal nurseries.

  • Laird

    There are quite a lot of people who believe that no one should inherit property. They might try to dress it up in utilitarian pseudo-arguments, as does Chaotician (a “huge negative for society”, bad for the recipient, etc.), which of course can be easily refuted, but fundamentally it’s mere envy. They didn’t receive such largesse so no one else should be allowed to either. Such people aren’t worth arguing with.

    But I actually have some sympathy for the latter part of Chaotician’s statement. I think that large trusts and charitable foundations do a lot of damage to society. They inevitably fall into the control of statists and the sort of person who thinks he is smarter than the rest of us and properly should be in charge of things. Better that such property be in the hands of people who actually have an interest in seeing that it’s used wisely (i.e., owners).

    In traditional Anglo-Saxon common law there is a “rule against perpetuities” which prevents the dead hand of deceased people from tying up their assets for entended periods of time (generally, a life in being plus 21 years). By that time the assets must be distributed to living people. Unfortunately, centuries ago an exception arose for charitable trusts, which are exempt from the normal rule, and I think that was a mistake. Either the dead hand of the grantor controls the assets far beyond any time for which he can reasonably have forecast their best use, or (more often) the purposes of the trust are subverted by the statists controlling it (abetted by compliant courts and legislatures) and the money is used in ways which the grantor would have abhorred (think of the Ford Foundation). That they are exempt from tax just pours salt in the wound.

    An especially pernicious form of this which has recently gained great favor in the US is the “green easement”. Development rights and similar uses are deeded by the (living) property owner to the government or some environmental foundation. He gets a charitable deduction from his income taxes, and the resulting diminution in the property’s value results in lower property taxes as well. That benefits the grantor today, but because the grant is in perpetuity it binds all subsequent owners of the property, forever. I have a real problem with someone in 2010 tying the hands of his heirs and successors for centuries to come; who knows what the needs of the people of 2110 or 2210 will be with respect to that property? I would put a strict time limit of 50 or 100 years on such easements, after which they would expire and the property be freed for uses deemed appropriate for the people of that time. I suspect that the courts of the future will be called upon to recast those easements when they become unduly burdensome on society, but they shouldn’t have to do so.

    I’m sorry to take this thread off into what must seem a complete tangent, but actually I think this is all part of the same larger discussion: what should be the post mortem rights of the dead with respect to their property (whether via testamentary devise or trust), and to what extent is it proper that they continue to manifest control from the grave? I don’t think it’s a simple matter.

  • Laird

    Incidentally (re Johnathan’s first sentence), in the US we have both estate and inheritance taxes. The Estate Tax is levied by the federal government on the estate of the decedent; it’s a tax on the right to bequeath property. The Inheritance Tax (where it exists) is levied by the state upon the heirs; it’s a tax on the right to receive property via bequest. Same property but different taxes. Just thought you’d like to know.

  • bradley13

    Well…I have to disagree. If the State is going to have taxes – and it is – then what should it tax? Taxes have effects on society, and I would argue that an inheritance tax has far more positive effects than an income tax.

    Taxing earned income is a disincentive to earn. Raise income tax high enough, and you substantially reduce people’s motivation to work hard and to be productive.

    Taxing unearned income does not have this effect. More: one of the problems that in increasing (at least in the USA and UK) is an increasing disparity in wealth, and the appearance of a moneyed class that passes wealth from generation to generation. An inheritance tax works against this.

    I would must prefer a high inheritance tax, in return for lower (or no) income tax!

  • Tedd

    After all, isn’t there something in the Bible about “as you treat the least of these”?

    You just know that, elsewhere, this person has posted a comment decrying the influence of religion on politics.

    bradley13:

    I would must prefer a high inheritance tax, in return for lower (or no) income tax!

    I’m not necessarily arguing against that idea, but you came to it by way of a faulty analysis. Inheritance taxes very definitely create a disincentive to be productive and, what’s worse, they also create a disincentive to save. People acquire assets by earning and saving, and they do it to ensure their financial security and the financial security of their descendants. Reducing the efficacy of inheritance therefore reduces the incentive to earn and save.

    I also think that there’s a qualitative difference between taxing an asset and taxing a transaction that involves an exchange of value. In my view, taxing a transaction is generally more just (or, if you prefer, less unjust). Again, I’m not arguing one way or the other on inheritance taxes, only pointing out some factors to consider.

  • Kim du Toit

    “Now, of course, the NYT readership is not typical of US public opinion as a whole”

    Understatement of the year.

    Interesting thing is that EVERY time the question of estate taxes is asked, most Americans hate it — and by “most”, I mean about two-thirds. Even more interesting is that when the response is stratified by HH income, most low-income Americans (who are least likely to benefit from low or no estate taxes) STILL do not support it, about 60%.

    Americans support estate taxes even less when they learn that the COST of collection is about $1.18 per $1 collected. Even the poor folks can do the basic accounting, it seems. Too bad the elites and gummint can’t.

  • thefrollickingmole

    I did a post fisking a rather dim article by a Guardian nobhead on death taxes before.

    They are immorral, they deny a pool of capital to investors, and they break the cardinal rule of governments.
    Never give them more money.
    I se a couple of people say “well if it reduces my taxes now…”. It wont. Its a new revenue stream designed to be pissed up the wall exactly the same as every other tax.

    http://tizona.wordpress.com/2009/04/20/death-taxes-are-morally-wrong-warning-swearblogging/

    A sample.

    “Traditionally, the left has tended to assume the moral arguments for inheritance tax and ignore the economic ones. But the fact is that raising inheritance tax from the current 40% over £600,000 (which only affects 3% of the wealthiest estates) makes economic sense. By using this budget to raise inheritance tax, the government could improve our fiscal position and create a fairer society.”

    What moral arguments do you have for confiscating 40% of what a person wishes to hand on after they are dead do you have you festering pin eyed waste of smegma? That money has been taxed multiple times before it came to be just “over 600,000 pounds”. There has been income tax, business taxes, fees for services, taxes on any employees paid, and a multitude of monies forked out before it was just “there”. And pray tell how will society be fairer by confiscating 40% + of money just because the person with it inconveniences the tax office by dying and no longer being able to produce lucre for them to piss up the wall?

    Death taxes are fiscal necrophillia.

    That said, charitable societies do need a shelf life, even if its only a “turn over” evey decade or so. Theres a huge well of leftist an expolitican “charities” around.

  • Will

    The problem with jmfree3s argument and that applies to those who engage in class warfare is this, they tend to ignore Exodus 20:17 which is Thou shalt no covet another man’s house, wife , servants,etc when they cherry quote the Bible to make a point to Conservatives and Libertarians.

  • Stephen Willmer

    This ‘chaotican’ must be quite something.

    Not only is he able, but the power presumably somehow inheres to him, in some way to determine and manage what constitutes huge negatives to society, how to stop people wasting their lives, what constitutes value, and so on.

    Like Tom Courtenay’s gimlet-eyed commissar in the film of Dr Zhivago, with a sweep of his pen….

  • Stephen Willmer

    Oh, and there’s this, from ‘jmfree3′:

    “Wanting the most greedy people in America to be able to keep the fruits of their greed is not really defensible unless you believe”

    So we must defend our property from him or he will take it?

    There’s a word for people from whom we mmust defend our property.

    L.O.O.T.E.R.

  • Laird’s comment is very good.

    On the post itself; while I do not favour inheritance tax (a person should be free to leave their assets to whomsoever they wish, on basic libertarian principle) I do think that

    that addresses this whole idea that inheriting lots of money gives someone an “unfair” advantage in life over someone else, as if life were like a pre-defined race, such as the Tour de France. But that gets things entirely wrong. It is the fallacy of the zero-sum approach to life generally.

    -is a bit fruity. “Unfair” in sneer quotes maybe, but it is indisputable that a large inheritance provides an immense advantage to a person, and whether or not that is fair is a judgement call. Capital is the greatest freedom there is; having capital behind a person allows them to take (entrepreneurial) risks that a person with no capital cannot. And there is the old saw that to borrow money, you have to already have money. There can be no doubt that a poor person starts at a significant disadvantage in the game to a rich person. I don’t think it helps libertarians much if we sneer at people who point that out.

    It isn’t any kind of “zero sum fallacy”. It is just much harder to climb out of the gutter than to stay out of it.

    You know me. When I’m not on about puritans, I’m on about the class system. So in that vein, I’ll state that one very good analysis of the Statist system is that it’s a system designed by wealthy, privileged people to keep the wealth and privilege in their hands. Our society benefits a minority at the expense of the majority, who are held in bondage of various kinds. I believe that in a true free market, the wealth would significantly redistribute itself via market forces. But we don’t live in that society. We live in a farm, and most of the population are the farm’s livestock. On that basis, in this statist system, I really would play only the tiniest violin if Prince Charles or “Zac” Goldsmith had had all their parents lucre denied them (not to mention the Willy Wonka ticket to the ruling class) and they’d had to go out and get a normal fucking job like the rest of the cows have to do.

  • I am making a wild guess here that charitable societies would die a natural death whenever their time comes, if not for the government keeping them alive. Am I wrong?

  • Thus spake Ian (after being unsmited?):

    Capital is the greatest freedom there is

    and:

    On that basis, in this statist system, I really would play only the tiniest violin if Prince Charles or “Zac” Goldsmith had had all their parents lucre denied them (not to mention the Willy Wonka ticket to the ruling class) and they’d had to go out and get a normal fucking job like the rest of the cows have to do.

    thus denying the likes of Charles and Zac the greatest freedom there is simply for the misfortune of having been born to rich parents. Should I bite and comment? Nah.

  • Laird

    Alisa, IanB is indulging in a bit of hyperbole but he makes a fair point: being born to wealth is a significant advantage, and it makes no sense to deny it. But then, so is being born with above-average intelligence, or physical beauty, or extraordinary athletic skill or other talent, or even simply being born in the relatively free West. Of course, none of that is any justification for stealing someone’s property merely because he is inconsiderate enough to die before having consumed it all.

    However, even when allowing for hyperbole I think this sentence is a bit extreme: “Our society benefits a minority at the expense of the majority, who are held in bondage of various kinds.” I disagree that it is “at the expense” of anyone merely to deny him some comparative advantage, and I also reject the notion of “bondage” (at least, to the extent that it connotes involuntariness). In the West almost anyone with sufficient motivation can escape such “bondage”. Indeed, it seems to me that most people like being ruled (as was discussed recently in another thread). If they prefer to live as domesticated animals, who are we to deny them that privilege?

  • Kevin B

    The likes of Zac Goldsmith inherit Daddy’s wealth in order to squander it in a much faster and ‘fairer’ way than Gordon or Dave could ever do.

  • “You know me. When I’m not on about puritans, I’m on about the class system.”

    Well, Ian you’re gonna love my latest at CCinZ.

    For the record what Laird said. It is a tax on not dying broke.

  • Laird, Alisa, this pretty much articulates the way I see the world, and history so far-

    http://www.youtube.com/watch?v=Dkdur94d5Z8

  • Tedd

    IanB:

    Laird, Alisa, this pretty much articulates the way I see the world, and history so far-

    I think there’s a lot of merit in that film, but it falls down badly on two points.

    The first is the idea that the chattel-like arrangement the film describes is the result of some deliberate strategy by the ruling class. This is ridiculous on its face, since no ruling class has ever been anywhere near that clever. Everything to do with the modern state and its development is the result of natural forces working together with the natural human tendency toward self interest. Individuals may have influenced it from time to time, with varying degrees of altruism and self-interest, but the idea that it’s the product of any one group’s design is absurd. The rise of state capitalism is both more mundane and more interesting than the banal, faux explanation of this film implies.

    The second area where the film falls down is the idea, toward the end, that “depression and despair begin to spread as the reality of being owned sets in.” This is just a bit too obviously designed to flatter a particular kind of viewer. In reality, it’s prosperity beyond a certain level that divorces happiness from material well being, leading to angst for some and frenetic pursuit of even more material wealth (or status) by others. This is also why the phrase “pursuit of happiness” is so poorly understood these days.

    Like Marxist theory, this film fails not because the core idea is wrong or foolish but because its proponents try to make that idea carry far more load than it possibly can. This becomes painfully obvious in the final moments of the film, when they try to tie everything from drug-based psychiatry to the war on terror to this one idea. It’s a shame, really, because the core idea is actually quite good — much better than Marx’s core idea.

    Tedd

  • Laird

    I basically agree with Tedd, although I think he ends up giving that film more credit than it merits. It’s a disjointed mixture of facts, a few reasonable interpretations and some utter nonsense. For example, it has the Industrial Revolution completely backward, claiming that increased agricultural productivity drove excess farm workers off the land and into the cities. In reality, higher wages and shorter (yes, shorter!) working hours attracted them into the factories. I’m not going to waste my time critiquing the entire thing. But if that’s truly how you see the world, Ian, I can understand why your views are sometimes so perceptive and other times so skewed.

  • Well, it’s polemic. It may overstate the case in places, but I think it’s basically correct.

    Tedd-

    The first is the idea that the chattel-like arrangement the film describes is the result of some deliberate strategy by the ruling class. This is ridiculous on its face, since no ruling class has ever been anywhere near that clever.

    Indeed, but your response confuses two things- an organised “conspiracy” and an informal one. What we generally face in life is the latter, not the former, which tend to end in Keystone Kops farce. Classes of people (any group with a perceived similar interest) naturally conspire without formally stating so- e.g. workers band together to seek higher wages. They will probably justify doing so to themselves (“we deserve more” “we will work harder” etc). Likewise ruling classes informally conspire to chattelise those over whom they rule (“we are better and deserve to rule them” “we are doing it for their good” “they are primitive barbarians, we are civilising them”. The outcome is the same.

    It’s a mistake to dismiss such informal conspiracy as a “conspiracy theory”. It is a very real effect, and is how the world works.

    On the more general point, it is indisputable that civilisation as we know it arose when successful bandits made themselves chiefs, and then kings. The earliest civilisations as slave farms is entirely accurate. All the “great” classical civilisations were powered by an economic model of theft and slavery. That’s why you build an empire- to steal stuff and subjugate people. That principle of civilisation basically held sway until the enlightenment and the likes of Adam Smith showing that it is a bad economic model.

    Laird-

    For example, it has the Industrial Revolution completely backward, claiming that increased agricultural productivity drove excess farm workers off the land and into the cities.

    It says, quite reasonably, that increased agricultural productivity was enabled by Enclosure, which drove the people off the land and into the cities. The enclosure movement was a typical ruling class theft, dispossessing the poor to enable greater profits for their former masters. It went from “you are my serf, but at least you have a bit of land and a hovel” to “you are no longer my serf, now you don’t even get them”.

    The labour force that powered the industrial revolution had been kicked off the land, Laird. That enabled economic progress which eventually in general benefitted everyone, but you’re indulging in a significant tidge of libertarian idealism to pretend that everyone joyfully cast down their ploughs to rush into the factories. They had no choice in the matter.

    To put it simply, if the serfs had been rushing off the land for the joy of factory work, the landowners wouldn’t have need to use State force to impose enclosure.

    Ultimately, I think the film is a very good polemic. We are, and have been since the birth of civilisation, livestock to the ruling class. If we were not, there would be no need for libertarianism, because we would already have it. I am tired of being milked, and so are increasing numbers of other people[1].

    I also as an aside take the view that well constructed propaganda like that movie is worth about a thousand talks on fractional reserve banking.

    [1] I hope one day you’ll come and join us, and the world will live as one[2].

    [2] Actually, as six billion individuals, at last.

  • Tedd

    IanB:

    That principle of civilisation basically held sway until the enlightenment and the likes of Adam Smith showing that it is a bad economic model.

    And it’s up to about that point where I think the film has the most merit.

    I don’t quite buy your concept of informal conspiracies. Not that I don’t think people act in the interests of whatever group they identify with, but rather I don’t think that’s an important phenomenon explaining how history has progressed since the enlightenment.

    What I believe has been happening since the enlightenment is a growing tacit agreement between what some might call the ruling class and the non-ruling class. There are a whole slew of reasons that the non-ruling class goes along with this arrangement, but they mainly reduce to most people being willing to exchange quite a lot of liberty for what they perceive to be gains in something else — security, the preservation of social norms, “social justice,” or what have you.

    Essentially, I don’t believe in the notion of a ruling class when there’s a system of popular government. I’m not so naive as to not recognize the kinds of things that go on that cause people to label part of society as the ruling class. It’s just that I believe that the majority of non-ruling-class people tacitly support those things, so that the concept of two separate classes isn’t particularly useful in understanding what’s going on.

  • Thanks Ian, and what Tedd said.

  • Johnathan Pearce

    IanB writes:

    “it is indisputable that a large inheritance provides an immense advantage to a person, and whether or not that is fair is a judgement call. Capital is the greatest freedom there is; having capital behind a person allows them to take (entrepreneurial) risks that a person with no capital cannot. And there is the old saw that to borrow money, you have to already have money. There can be no doubt that a poor person starts at a significant disadvantage in the game to a rich person. I don’t think it helps libertarians much if we sneer at people who point that out.”

    I don’t think I was sneering here; what I was doing was challenging a widely held assumption, which even full-throated supporters of capitalism often make, which is that if you have a lot of money then you have got an “unfair” advantage in life over your less well endowed fellows. And that does assume that life is a sort of race. Now, in races, we frown on things such as athletes who cheat by taking performance enhancing drugs, for example. But in life, there is no such set race-track, with a starting point and an ending point; there is no predetermined prize, like a gold medal, for which we are all competing. That is why I regard the analogy of the “race” that is often used by people in denouncing inheritance and so on as wrong. It is a basic error.

    Of course, if it could be shown that inheritance really did create a self-perpetuating “aristocracy of wealth”, and that non-members were frozen out, then there would be grounds for complaint. But I see no such thing occuring. And in reality, there is often a cycle: you get the ambitious young busnessman, then his son goes off to a posh school and might try and run the family business, but less aggressively than Daddy; then you get the third, fourth and fifth generations, some of whom do very different things, blow their fortunes, etc. Some dynasties last a long time, but then that usually means that each generation is imbued with a work ethic to keep the family business going, which is hardly a bad thing. Think of the Rothschilds, or the Flemings, the Cazenoves, Pictets and Lombards in the world of banking, for instance.

  • tranio

    Charitable foundations are distorting commerce. The Tides Foundation is funding the banning of oil tankers off the Northern coast of BC so that oil will not be exported from Canada to Asia, rather that the oil can flow South and benefit the US instead. Evil.

  • Johnathan, I’m not sure about this rayse[1] metaphor of yours. It seems to be inadvertently verging on a straw man; you’ve created a metaphor which can be easily debunked. Life may not have a “fixed start and end point” but it is some form of a competition; success and failure, winning and losing, are real things.

    As such, an advantage at the start is very significant. I think it’s pretty far-fetched to deny that. Looking at one aspect; attending a public school and then top university may provide a better education, but that’s not the point of it. It is to provide the youngster with a network of contacts that will serve them throughout life. It imbeds them in the oligarchic class. Attending a top public school compared to Gasworks Street Comprehensive is an enormous advantage in the “competition” of life. That’s one way starting with money makes a massive difference.

    I also find the idea of major banking families like the Rothschilds being purely the result of a work ethic hysterically comical. Starting life with about a thousand trillion dollars and the knowledge you’re part of the family cartel, you know, that is quite an advantage in life. Considering that said “business” is part of a rapacious state-supported financial system designed to ratchet what little money ordinary people make into the bulging pockets of the likes of the Rothschilds, I feel no shame in feeling no admiration at all for their “success”, and indeed look forward to the day that the masses rise up and whip the bastards through the streets for a date with Madame Guillotine.

    Encore le terreur!

    [1] Trying to avoid the bot here.

  • Paul Marks

    Yes Ian being born rich is an advantage.

    Not everyone born rich stays rich, and some rich people were born poor (even some billionaries can be born in cardboard houses and no what is to do without food into the adult years).

    However, on balance, being born rich is an advantage in life.

    True – and also utterly irelevant.

  • It would be irrelevant in a free market Paul. It would be irrelevant if we were not subject to an oligarchy. Well, not irrelevant, but just “one of those things”.

    For instance, if we had a free money system, then banking would look very different and be just a business, not a cornerstone of political power. So as things are, rather than as we would like them to be, being born a Rothschild is a hell of a big advantage. And from a libertarian perspective, decidedly “unfair”.

  • Laird

    Actually, it would not be irrelevant in any market, free or otherwise. A head start doesn’t guarantee you’ll win, but that’s the way to bet.