Tuesday, October 28, 2003
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Defending the idle rich?
My evidence? Consider the imminent onslaught of popular culture devoted to the idle rich. According to Newsweek:
Maureen Ryan writes in the Chicago Tribune that there's an excellent reason for this new-found attention:
Another example: this faux Hilton sisters blog -- at least, I think it's a faux blog.
These pop culture sneers do reveal a libertarian dilemma: to put it delicately, defending the right of the idle rich to inherit their wealth in its entirety is one of the knottier positions to advocate in public. This resentment of the inheriting class is particularly acute during a slow economy. It's easy to defend property rights in the abstract. It's harder to defend the property rights of those who are perceived to be dumb-ass dilettantes.
Take me. Readers of this blog know that I think concerns about economic inequality are misplaced. However, whenever I see a promo for the Hilton sisters on television, I find myself reflexively muttering under my breath, "they'll be the first ones up against the wall when the revolution comes." [Even when they're dressed like this?--ed. Bad, distracting editor!! Besides, they don't hold a candle to my celebrity of choice.]
Beyond the philosophical arguments in favor of property rights and against double taxation, are there pragmatic reasons to say that the sneering towards those who inherit vast sums of money is misplaced?
Oddly enough, Timothy Noah provides a partial answer in a series of Chatterbox columns during the debate over the estate tax, posted here, here, here, and here. I say this is odd because Noah starts off saying:
However, as Noah dug deeper into the question, he found mixed evidence for this assertion. There is limited evidence that inherited wealth contributes to social and psychological dysfunction. However, Noah also quotes the following from The Millionaire Next Door:
One final thought: after watching "Born Rich," it was harder to sneer at these people. Of the 12 individuals in the "Born Rich" documentary, I saw one raging asshole, three or four obnoxious but potentially redeemable personalities, and seven or eight nice but slightly withdrawn individuals. Drag a random dozen people in off the street, I'm betting you get the same distribution. It's true that the inheriting class has done nothing to "earn" their millions. But the people off the street haven't either.
There are valid arguments in favor of keeping an estate tax, and I'm not unsympathetic to all of them. However, part of me wonders if those sympathies are driven in part by our culture's occasional tendency to ridicule the idle rich.
Just a thought.
UPDATE: Jay Drezner has some thoughts on this issue.posted by Dan on 10.28.03 at 10:23 AM
Let me preface my remarks by saying that I am the 4th generation of a wealthy family that made its fortune outside of America.
The saying of "rags to riches to rags" in three generations is true. That's the dynamism of the American free enterprise system. Unfortunately, what I see in tax policy today (tax free dividends, the "death" tax fight, etc.) entrenches the power of these dynasties. This protects those who were born with wealth at the expense of those who work hard.
If this were allowed to continue, then the result would be very much like many parts of Europe and developing countries, where a few powerful families control those economies, which throws up barriers to higher productivity and innovation that has been the signature of the American productivity miracle of the last century.
Creative destruction must be allowed to work.posted by: CH on 10.28.03 at 10:23 AM [permalink]
I'm afraid I missed the debate, so I'll catch up. But in the mean time it seems to me that there's a valid case to be made for increasing the number of people with sufficient inherited wealth that they could afford to do something besides nine-to-five for a living. This would suggest a policy that does away with inheritance taxes, but limits the amount that can be bequeathed to any one individual, to something that would fund an annuity or trust that could provide a reasonably handsome lifetime income. Even if only a small percentage of these people took up tasks that needed doing, but for which there might not be a current career-sustaining market, society would be far better off. Perhaps a few more "trimtabs" wouldn't be a bad thing.
One problem with completely unrestricted inheritance, observed long ago by reformer Louis O. Kelso who invented ESOPs, is that such wealth concentration has a "morbid" quality. It means that a certain percentage of the wealth gets backwatered and stagnated, and even worse at has no other function than to further concentrate wealth and control of capital. And according to his analysis, the inevitable outcome of such a system is remedial socialism, to redistribute what the market is otherwise unable to touch.
Am I way off here? I admit I'm not an economist, though I have taken a couple of seminars with James Buchanan.posted by: Scott on 10.28.03 at 10:23 AM [permalink]
...it seems to me that there's a valid case to be made for increasing the number of people with sufficient inherited wealth that they could afford to do something besides nine-to-five for a living.
Ok. I'll bite. What is the case for increasing the number of freeloaders in society?
I'm all ears.
For bonus points, you can explain why it's better to have these people selected by birth parents, rather than, say, a competive qualification system or a lottery.posted by: uh_clem on 10.28.03 at 10:23 AM [permalink]
And the charity bears further analysis. Most of the giving of the inherited rich goes to their alma mater or giving their art to a museum. Very little goes to the Salvation Army or Unicefposted by: bob mcmanus on 10.28.03 at 10:23 AM [permalink]
Perhaps the question is not so much of the idle rich as it is the question of idleness itself. The main objection to welfare is not out of disdain for the poor, but a resentment that someone else cand remain idle and live off the fruits of your own labor, tempered at least by compassion for the less fortunate.
The idle rich, viewed in this light, become just plain offensive. They also live entirely off the fruits of others' labour, but do so in such an extravigant and ostentatious manner.
It makes me think back to Weber's 'Protestant Work Ethic' - I place great value in labour for its own sake, and actually feel some resentment for those who do not. I do not begrudge Bill Gates for his wealth, because he earned it by working his tail off for it (albeit by producing inferior products. grrr!).
On the other hand, something in my gut cringes at the thought of the idle rich. This actually brings us back to another Brooks topic - what does one contribute to society? Call me a cynic, but in the case of the idle rich, I don't see anything besides a lavish lifestyle from the efforts of their betters, followed by breeding another generation of vacuous nitwits to carry on the tradition.posted by: George on 10.28.03 at 10:23 AM [permalink]
Okay, I'll have a go....
Hayek makes the case fairly strongly in "The Constitution of Liberty". He claims that the rich drive experiments in new ways of living, some of which will, through technological progress, trickle down to the masses. Most household appliances, modes of travel, luxury items, and other modern conveniences are examples. Without the early (rich) adopters, these would either have never been created, or would have been adopted much more slowly -- all to the (long-term) detriment of the rest of us. The quality of life improvements driven by aesthetics that Virginia Postrel is talking about in her new book would also probably qualify.
He makes similar cases for the need for rich "independents" (i.e. those who don't depend on employment for their living) to start risky ventures, support the arts, experiment philanthropically, etc.
He claims that the harms of the completely-idle rich (while an example of the kind of waste that often occurs in market systems) are outweighed by the benefits accrued from the few whose independence helps society.
As for why it's better to have them selected by birth rather than lottery. Both are random in the sense that neither would give the fortune to someone who is more deserving than those who don't have fortunes. But the former is more moral (in the classical liberal's eyes) because it respects the property rights of the parents. And, Hayek argues, it is more likely that someone born to a rich family will be raised, educated, and trained to be able use the wealth well. This last is a bit of a stretch, given the behavior of the "celebutants" but I wonder how much better the average lottery winner deals with their sudden fortune....posted by: Richard Vermillion on 10.28.03 at 10:23 AM [permalink]
Sorry... didn't address the competitive qualification system for handing out fortunes. Sticking with Hayek for the moment, he would claim that it would require the state to determine deserts -- who in all of society deserves the fortune. Hayek believes that this objective is fundamentally at odds with a society based on freedom (from coercion, that is). He claims that societies based on freedom can only distribute wealth based on value, not merit, because any attempt to distribute based on merit would involve the continuous intrusive and coercive involvement of the state, eventually leading to stagnation. Any attempt to measure merit perforce leads to arbitrariness rather than the general rule of law, with all of the attendant consequences. Any qualification system would privilege our current (or historic) ideas of merit and shut out any conceptions that might serve us better in the future when we are faced with new challenges, new technologies, new enemies, etc. The Chinese examination system and its focus on Confucian scripture would be an example of this last.posted by: Richard Vermillion on 10.28.03 at 10:23 AM [permalink]
The hypocracy of this argument is thick. If CH is so concerned about the inherint danger of generations of wealth, why doesnt he give everything away and try to make a fortune from scratch? I see Teddy Kennedy and John Hienz-Kerry bemoaning the death of the death tax as the next step to the feudal system, but who's money are they living off? You see, as with most liberalism, it is _those other people_ who are not to be trusted. Kennedy and his ilk know how to properly be superrich, know the proper amount of charity to give. Its those 'others' that we have to watch out for. Lead by example. If its such an evil give it all away.posted by: Mark Buehner on 10.28.03 at 10:23 AM [permalink]
Well, I'm in something of a bind for having put in my tupence. But, ss to the value of having people who don't depend on nine-to-five for basic support, Fuller's justification was that there are a host of functions that are "future oriented" that generally don't have enough current return to support careers, but that have enough potential return that they more than deserve a career focus. (For a somewhat different version of this, consult Ralf Dahrendorf's *Life Chances*, where he defines one of the elements of Popper's "third world" as "representative* in the sense that it represents future circumstances that have not been conceived by the "world of facts." Fuller's "projects" often assumed no appreciable adoption for at least 50 years. Of course, this sort of future-oriented work might very well have a low probability of return in terms of the number of projects that "make it." But since there'd be zero return without them, and the likelihood of ongoing complex problems with no solution (which is almost the definition of a "complex" problem), it's better to have as many people as possible focussed on this class of problem, without the constraining distraction of appealing to current markets. And, of course, since the original income and acquired capital was, in fact, earned, the notion of "freeloaders" isn't appropriate. They are producers. They just aren't producers through labor (in terms of current return). They're producers through capital, however.
The problem I have with this scenario is the control that's required to limit the size of inheritance, because it's superficially at odds with a libertarian value. But individualism is the heart of libertarianism, and the freedom of dynastiies just isn't dealt with appropriately in the philosophy. I don't even think Hayek dealt with it appropriately. And the alternative (if you assume that Kelso is correct that every step in the direction of concentration of capital ownership is ultimately a leap in the direction of socialism) is far worse than the minimal control involved in setting a demos-wide limit, not on the amount that can be bequeathed, but on the size of the packets only.
And finally, finally. If the project is to place liberty above all other values, and to assume that all intervention is evil, then how does that square with Hayek's and Buchanan's "generality principle" which, according to Buchanan, would allow the simultaneous imposition of a flat tax to fund a demogrant? Since it's governed by a rule that requires no interpretation on the basis of individual "need" it is a minimal intervention. And it can be optimized with minimal bureacracy through a system of competitive federalism, in which different jurisdicitions choose their own formulas.
There, that should get someone started...posted by: Scott on 10.28.03 at 10:23 AM [permalink]
I like the estate tax.posted by: Don on 10.28.03 at 10:23 AM [permalink]
I do not begrudge wealth, and I respect those who have worked their way up and become self-made millionares. What I have a problem with is people who are not only born rich but have no understanding of what it is like to not be rich. There are a few girls in one of my classes who are constantly complaining about people who get scholarships, saying that giving scholarships to those who can't afford to come here otherwise is a form of reverse discrimination. I do not know this for a fact, but from talking to them I get the sense that none of them has ever had a job and that they don't understand why everyone can't just be born rich. I know plenty of rich people who understand that not everyone has had it as easy as they have, and I do not begrudge them at all.posted by: Laura in DC on 10.28.03 at 10:23 AM [permalink]
I just have a major problem with this whole mindset. First, lets call a spade a spade. This is about jealousy. Who wouldnt want to be superrich and never have to lift a finger? We are trying to draw moral judgements about this that simply dont work when taken to their logical conclusion. Would the world be better off with the Rockefellers of Kennedys? Would another highway project or agricultural subsidy really help society more than a Rockefeller Foundation or Kennedy Center? I think there is a major debate to be had over whether wealthy families contribute more through altruism than would result from our ever efficient government programs. So the real issue here isnt pragmatic, its emotional. Do we want to use the club of government to right some perceived unfairness in society? And how much so? At what point does a trust fund baby and a family farmer passing on their land overlap? Do we really want the IRS the tool making these decisions? Ultimately this is about class envy, and its always existed and it always will.posted by: Mark Buehner on 10.28.03 at 10:23 AM [permalink]
This is about jealousy
No, this is about tax policy. Why should a plumber who is self employed have to pay 28% Fed plus 15% Self Employment tax on the money he earns clearing sh*t out of people's pipes, while an heir collects money for nothing when his father dies?
Further, after the tax-free inheritance, the heir can invest the money in tax-free dividend-based instruments, or lower tax capital-gains-based instruments.
The point is that there is a heavy tax burden on people who work for a living, and a much lighter burden on people who don't earn their money.
Why do we as a society reward wealth more than work?posted by: uh_clem on 10.28.03 at 10:23 AM [permalink]
I have mixed emotions concerning the taxing of inherited wealth. My rather libertarian inclinations fail to provide me with a crystal clear conclusion. The taxes should not be the 90% range, but where should we draw the line?
A serious problem with the sons and daughters of the filthy rich is that they often become political radicals. People innately feel guilty about receiving unearned wealth---and therefore may be easily guilt tripped into embracing extremist “share the wealth” economic policies. It seems that this situation may worsen in the third or fourth generations. The Kennedy family, for instance, has caused enormous damage in the last thirty years. Since the early 1970s, the Kennedys have done far more harm than good for the country.posted by: David Thomson on 10.28.03 at 10:23 AM [permalink]
A greater socioeconomic problem is that of capital gains taxes. In order for a capitalist system to work, some people must be able to accumulate large amounts of capital in order to use them in economic endeavors. The concept of the idle rich is pernicious not because they are rich but that they neither "earn" it, are "worthy" of it, and generally squander the potential inherent within the Capital. It is hard to resent some of the richest men in the world - Bill Gates or Warren Buffet - simply because love them or hate them they did it by their own "strong right arm". Merit is the real key.
Lowering capital gain taxes may seem like a good way to entice investment, but most of this money goes into established companies or lending money (bonds) at fixed rates of return. If the Capital gains tax was *at least equal to that of earned income* from a business or a job, there would be no disincentive to using one's capital to start a business.
In other words, the capital gains tax if lowered thoughtless can discourage entrepeneurship - the very heart of the American capitalistic system. We did not buy into America in order to support the concept of Trust Fund Babies. We buy into capitalism in order to provide the opportunity for the Gates and Buffets to create enough wealth to help the rest of rise up out of the muck. There's nothing wrong with old money as long as its making money and not sitting on its ass earning interest.posted by: Oldman on 10.28.03 at 10:23 AM [permalink]
Easy solution: get rid of inheritance too. Once you die, it's first come, first serve on your stuff.posted by: alkali on 10.28.03 at 10:23 AM [permalink]
Would they be more socially useful if instead they were the idle poor ?
Would they be more socially useful if instead they were the idle poor ?
Hmm. The wealth of the idle rich is tied up in investments and expenses, and they spend far more than they would earn in a real job.
High-schoolers taking a limo to school provide a job to a driver and some work for mechanics. As they age, they become radicals, buying guns and ammunition from shops owned by entrepreneurs, hold up banks, and get shot; their wealth is confiscated. Or they hire plumbers to clean the sh*t out of the pipes in their many bathrooms.
Richard V.’s recitation of Hayek’s arguments is spot on. Do we want Dennis Kucinich or John Ashcroft to decide who is entitled to what wealth? (Okay, how about Barbra Streisand or Mel Gibson? Cher or Dennis Miller?) The defect inherent in socialism is that we can all decide what’s fair and good and right, but some craven human will claw his way to the top to take over the decision-making process to benefit his comrades, tribe, or relatives.
As for concentration of wealth and estate taxes, if we are to tax capital gains, let us do so consistently and at the same rate as income is taxed to preclude gaming -- I like 18% for income and capital gains, but that’s another story.
The concentration of capital requires a political entitlement of sorts and implies some sort of protection. The US and a few other countries spawn wealthy folks because politics generally neither favors nor protects one investment over another, letting the marketplace choose winners, except if ethanol is involved. The dynamism of our markets spells chaos for inherited wealth not carefully managed. Ted Turner has lost more money than any of us will ever see.
Do the striving workers and the self-employed pay a higher percentage of overall taxes than the wealthy? Perhaps, but the rich who live well pay a lot more in taxes, even in Florida and Texas. And their expenses are awesome. Because they have little concept of what it takes to earn a buck, those with inherited wealth spend their bucks less wisely than we who work do. We know the joys and pains of Target, Wal-Mart, getting a suit on sale at a higher grade department store, working our rear ends off to get a really great present for our spouses, treating everybody who has a job with the respect that can come from having done challenging jobs and menial tasks well, and knowing at the end of the day that we did something really well without some sycophant telling us.
Hey, we’re all rich, no? So why shouldn’t all of us rich folks – those with a lot of loot and those with a different kind of wealth – pass on whatever we want to those we want to? Or should we let Cher decide what's best for us all?
As we get farther and farther in time from the period in which childhood diseases like whooping cough were common and dangerous, we find parents opting not to vaccinate their kids against what must seem like a phantom threat. Naturally, we're seeing outbreaks of such diseases, spread by unvaccinated people.
As we get farther and farther in time from the period in which Europe was ravaged by warfare between Protestants and Catholics, when the Quakers and members of other minority sects were repressed and persecuted, we find people saying that America was founded as a Christian nation, ignorant that Christianity is not a happy monolithic faith - something the founders were well aware of, leading them to specifically not create a Christian nation.
As we get farther and farther in time from the period of European aristocracies, we forget why at least some founders felt unrestricted accumulation and inheritance of wealth was not healthy for a nation, and some begin to pine for precisely the return of an aristocracy.
Damn, people are stupid, aren't we?
Lots of folks like the estate tax on principle and lots of folks hate it, but dammed few understand it.
I do not claim to be an expert but i think I know enough to know that this debate is being pulled along by ideas that do not square with the real world.
First the estate tax is voluntary. No one is required to have estate. If you consume your wealth or give it away (there is a gift tax but that is another story)it is not subject to the estate tax. This thought may seem trivial, but it is the ur-insight on which all estate planning is based.
Second the estate tax is not a tax on the very wealthy. The very wealthy, who have assets far in excess of their possible consumption needs, can and do avoid the estate tax by retaining only so much as they will consume and giving the rest away to heirs, trusts and foundations. This is why there are wealthy Rockefellers, duPonts and Kennedys.
A corallary to this fact is that the tax is only paid by the unsophisticated or the unlucky (died before they had worked out a plan).
Third, the real problem with the estate tax is not its mere existence, but its rates. The tax had a top rate of 60%, the top rate of the income tax has been less than 40% for almost 20 years. Furthermore the capital gains tax, which some see as a near relative of the estate tax, has a top
If estate tax proponents had put a major rate reduction on the table as alternative to repeal they might have been able to save the tax. As it now stands the tax will be repealed in 2008 but reinstated in 2009. If Bush is re-elected with a republican majority in both hoses the tax is doomed.
However, even if it goes away, please do not worry , ntohing will be changed.
posted by: Robert Schwartz on 10.28.03 at 10:23 AM [permalink]
"It's true that the inheriting class has done nothing to 'earn' their millions. But the people off the street haven't either. There are valid arguments in favor of keeping an estate tax, and I'm not unsympathetic to all of them. However, part of me wonders if those sympathies are driven in part by our culture's occasional tendency to ridicule the idle rich."
Come on! The whole point about justice is that it's the belief (from the beginning of the human race) that people who have behaved equally honorably should receive equal treatment. Why the hell SHOULDN'T we be indignant at some people -- because of sheer luck, rather than because of either hard work or useful cleverness -- getting huge amounts of unearned loot while the rest of us do not? Particularly since the non-rich undeniably need that money more.
Hey Mr. Moomaw,
Let's face it, the Hilton sisters are hot. As a person who's had the pleasure of dancing the night away with some local American Princesses, let me say that despite their attitude problems they are well worth keeping the company of. Let's not go overboard trashing the "idle rich". It's more important to reform the Capital Gains tax in order to give incentives to entrepeneurship rather than fixed income investing - blue chip dividends and insured credit. If their money makes money for themselves and others, then Capitalism has achieved its goal. Social redistribution is a necessary evil - like codfish oil to be taken only when prescribed for strict health reasons.posted by: Oldman on 10.28.03 at 10:23 AM [permalink]
Is it incorrect to say that the spectacle of the super-rich is enough to make the "hands-off-my-stuff" libertarians countenance some good-old fashioned redistribution?
But, if one accepts the judgement of the marketplace as to what and who should be valued, why should the most extreme cases obviate this judgement? I don't believe the problem is only with the generational transfer - would contempt be levied as readily towards someone who otherwise lucked into wealth?
Or is this another example of capitalism for the masses and socialism for the classes?
I'd bet almost all who comment here earn more than the median in the US (~30,000/yr., 40,000/household) and righties and libertarians would, I presume, be the first to defend the logic of the marketplace on them and those below them in the distribution...
Some people's lives are just worth more, obviously, since income=money/time and life=time. It's most visible with, for instance, nannies raising rich people's children while their own kids are (relatively) neglected.
I thought free-market proponents were okay with this, after all, we live in a meritocracy, right. Rewards are not given out arbitrarily, or tied to your upbringing. We all earned what we've got...
So, the "prices" we draw in the market are fair for the poor, middle class, and upper class. Just not for the idle rich and, maybe some overcompensated CEO's. I got it. In every other respect, the market judgements are highly efficient, and tied to productivity.posted by: andrew on 10.28.03 at 10:23 AM [permalink]
andrew writes: "Some people's lives are just worth more, obviously, since income=money/time and life=time."
But for someone like the Hilton sisters, it's not so much their income as the income generated by accounts held in their name.
The income has nothing much to do with them, apart from their having legal ownership of it.
Are you suggesting that an investment account has a right to life?posted by: Jon H on 10.28.03 at 10:23 AM [permalink]
It's interesting that this thread, like Drezner's original post, dwells mostly on how we should look at the rich and how much we should tax them, and doesn't discuss much the idea that having wealth imposes very significant responsibilities that preclude idleness.
It may be because no one believes this idea has any validity at all, and there certainly has never been a consensus of any kind that it is true. However, at one time many Americans thought the rich did have responsibilities -- for philanthropy or public service, or a combination of the two. Theodore Roosevelt, whose career was made possible by his inheritance, thought idleness in people much wealthier than he odious, and the people themselves beyond tiresome. Andrew Carnegie made himself among the richest men in the world, but believing "the man who dies rich dies disgraced" devoted his later years to philanthropy on a massive scale.
There are wealthy people who follow this tradition today. My question is whether wealthy people who do not -- whether they have earned their money or not -- should be subject to any moral censure on that account. Personally I think they should, irrespective of how we decide to deal with the estate tax or whether we laugh or not at wealthy people on reality shows.posted by: Zathras on 10.28.03 at 10:23 AM [permalink]
Thats the point Zanthra, I think the argument is do we want the IRS and our ever judicious congress to be the instrument of 'moral censure'. To address the fairness issue, its wrong to say this money isnt taxed. It was taxed when it was earned. The interest or dividends it earns are taxed. If it is property it is taxed. It is hit with sales tax when it is spent. It is hit with luxury taxes. Lets not pretend its some sort of dirty, untouched money, and lets not pretend that the superwealthy keep it in a giant money vault ala Scrooge McDuck. The truth is that the more wealth a person has, the more productively that money is liable to be invested. Do you think Bill Gates has his billions socked away in CDs and savings accounts? He has businesses and stocks, things that fuel the economy far more than Joe Sixpacks savings account. Secondly, as has been pointed out, the truly superrich are the least likely to pay any signficant portion of this tax. Its too easy for people with infinite monetary resources to avoid it. Its the family farmer and the small business owner that get hit. Dont forget that this is a cash tax on an entire estate. If your family business is worth 10 million dollars (facility, equipment, inventory) your heirs need to cough up 6 million in cash. You know of many businesses that can do that?posted by: Mark Buehner on 10.28.03 at 10:23 AM [permalink]
As long as we are given the capacity to judge, the "idle" rich are going to be found wanting. Lots of money put to no good use is like a waste or abuse of talent.
When it comes to idle rich babes, I think I'd rather have Carole Lombard in My Man Godfrey than these Hilton gals...posted by: appalled moderate on 10.28.03 at 10:23 AM [permalink]
David Thomson writes: "A serious problem with the sons and daughters of the filthy rich is that they often become political radicals. People innately feel guilty about receiving unearned wealth---and therefore may be easily guilt tripped into embracing extremist “share the wealth” economic policies. It seems that this situation may worsen in the third or fourth generations."
It's not just a problem on the left.
Some rich people fund efforts to impose an undemocratic, un-American Christian theocracy on the US. And rich people have also used their money to fund right-wing white supremacist groups.
There's probably some southern old money funding the CCC and similar groups as well.posted by: Jon H on 10.28.03 at 10:23 AM [permalink]
What the estate tax does is punish the accumulation of wealth. Is that a "good" message for the government to send?
Oh, just thought of something, since "marriage" is becoming a very flexible concept these days I guess it will not matter in the future. People who want to by pass estate confiscation will just "marry" their surviving daughter or son.
I don't know if anyone here has considered the possibility that repealing the estate tax could (in my opinion, will) have the unintended consequence of breathing fresh life into socialist and far-leftist politics in this country. In other words, by taking a chunk of change from the cold dead grip of rich geezers for the past few generations, Uncle Sam has not only boosted national coffers but tamped down what were historically very vigorous class tensions (or doesn't anyone watch old movies from the 20s and 30s?).
This is one of those instances where the current Republicans are catering to a greedy but shortsighted constituency which cannot comprehend that a little bit of bowing to the "public good" today saves their heirs a whole lot of "revenue sharing" later on.
Anyone care to comment?posted by: Kelli on 10.28.03 at 10:23 AM [permalink]
I had no idea Salma Hayek was such a deep thinker.posted by: Mr. Lee on 10.28.03 at 10:23 AM [permalink]
Happy to Kelly. You make the mistake of thinking that there is some level of taxation that satisfies those of the socialist mindset. This is demonstrably untrue. There will always be a gap between rich and poor, and there always will be. Hence, Marxists will always be on the warpath. This is a movement not willing to take half a loaf of anything. I would, in fact, make the opposite argument. The less cash the government confiscates to poor into its wasteful nannystate programs, the more cash will be invested in the legitamate business world creating wealth (which equals jobs). Remember it isnt the level of wealth that the working classes have that matters, but its relative level. Everyone in the country could drive Lexus's but so long as Bill Gates is riding a limo the revolution must come.posted by: Mark Buehner on 10.28.03 at 10:23 AM [permalink]
Again with the "redistribution" idea. It isn't redistribution when you (or the state) take my property and give it to someone else, its theft. I don't mind paying some income, sales and social security taxes along the way but if I am smart about how I save and invest my money and protect my other assets I don't see why, other than capital gains taxes on transactions, the state should get another shot at the basic value of the wealth I have accumulated.
"These pop culture sneers do reveal a libertarian dilemma: to put it delicately, defending the right of the idle rich to inherit their wealth in its entirety is one of the knottier positions to advocate in public."
There is no dilemma. The right at stake is not the right to inherit but rather the right to bequeath. Why shouldn't an individual be free to give his property to whomever he chooses?posted by: John T. Kennedy on 10.28.03 at 10:23 AM [permalink]
The hypocracy of this argument is thick. If CH is so concerned about the inherint danger of generations of wealth, why doesnt he give everything away and try to make a fortune from scratch?
Mark must have missed the details of the post. I am 4th generation, "rags to riches to rags in three generations"...
My parents landed in Canada in 1967 with about USD 30K, without knowing the language very well. I was 10 at the time. I got a good education and I am reasonably well off.
The money that I made was the classic immigrant experience. I got a moderate step up from the family wealth, but not overwhelming.
Apology accepted.posted by: CH on 10.28.03 at 10:23 AM [permalink]
I understand that the Marxists among us with never be happy until we all ride bicycles and wear little mao caps. My point is simply that those whackjobs get little traction in today's world because there is a perception that a certain level of fairness (certainly not equality, but rough justice) exists in this country. Above all, there is not much of a hereditary elite. Let's face it, the Hilton sisters are a vacuous couple of hotties who work pretty well as a novelty act, but people would feel different about them if they were in the vanguard of a new aristocracy (which, who knows, they just might be).
I would just call your attention to the historical record. Before estate taxes were enacted in this and other western countries last century, a more or less hereditary upper crust acted as a brake on economic progress, a thorn in the side of the democratic system, and a RED FLAG to Marxists and fellow travellers.
The idea behind estate taxes was less to redistribute wealth per se than to break the stranglehold of this largely parasitic class (sure, there were some noblesse oblige types but the Hilton sisters are probably more the standard model to keep in mind). Guess what, it worked. The economic and social success of a Great Britain today would have been unthinkable before Lloyd George established the estate tax. Read David Cannadine's "Rise and Fall of the British Aristocracy" if you want to learn more.
We forget the lessons of the past at our own peril.posted by: Kelli on 10.28.03 at 10:23 AM [permalink]
You are absolutely correct. Buehner in his less than infinite wisdom is conflating two very different type of people. He is bringing up the Gates and Buffets - both of whom intend to give away philanthropically most of their wealth and support the estate tax - who have earned their wealth by being entrepenuers and making money for the rest of us as well. But he is citing these capitalistic paragons to defend the truly "idle-rich" or more accurately those investor classes who invest their money in relatively stable fixed income or mature companies.
In this country, the gap in incomes is going up. Furthermore as we inspect the performance of corporate CEO's and the like, we find that most of them do not do anything special to earn their money. They are not even skilled managers like Jack Welch, but are more like Bernie Ebbers or Ken Lay in spirit.
It is one thing to richly reward competence and merit. It is another to ensure high income to idiots who mismanage large organizations and actually destroy wealth.
It is not merely the estate tax, or even the capital gains tax, that is the answer. A whole new philosophy of what it means for America to be a capitalistic meritocracy and all the attendant issues needs to be evaluated.
It is not 'redistribution' in the sense of a zero-sum game. If a rich man pays more in taxes toward education for instance, he also benefits proportionally more because these same schools will produce his future employees and whose education will be put toward making him money. The same thing for roads, etc. A rich man has more opportunity to make money from a good highway infrastructure system than a common man.
There is a social contract involved that must be renewed. As long as we continue to act in short-sighted ways we will all become poorer. We will be like the cronies of Mugabe in Zimbabwe- the rich getting a bigger and bigger piece of a pie that is getting smaller and smaller. The public good is the rich man's good. For though he may sacrifice a greater share of his wealth, in absolute numbers it will increase anyway. And the common good will be increased because though there will be some who are richer, all will benefit by their actions.posted by: Oldman on 10.28.03 at 10:23 AM [permalink]
Also don't forget the most critically acclaimed show of the new season which starts Sunday, Arrested Development, which seems to get much of its humor from making fun of the idle rich.posted by: HH on 10.28.03 at 10:23 AM [permalink]
"Why should a plumber who is self employed have to pay 28% Fed plus 15% Self Employment tax on the money he earns clearing sh*t out of people's pipes, while an heir collects money for nothing when his father dies?"
He should be free to keep his money, too.
Happy to help clear that up for you.
Ha. Even if the heir's father is the plummber they'll still want a third swipe at the loot.posted by: John T. Kennedy on 10.28.03 at 10:23 AM [permalink]
Not withstanding Oldman's pointless swipes, lets examine his points. I am not equating Gates and the Kennedys. However they do share similiarities. I can assure you that the Hilton and Kennedy fortunes are not stuffed into their matresses. The rich, however they got their money, invest. It is the only realistic way to handle those amounts of moneys, much less to pass it on to your Aristocratic offspring destined to rule the world. So, if as Oldman suggests, this is a case of 'social contract' (an odd term, as I dont ever recall signing one)let us examine where that money pragmatically does the most good for society. Does old money donate in general? Rockefeller, Rothchild, Kennedy. Yeh, I think they do, _a lot_. Is there money doing something productive in society? Obviously. So the question is are their billions doing more good in their hands or in the hands of the US Congress? So we return to my question, from a pragmatic standpoint, what does more for society: Huge private charities with megaresources, coupled with huge stock investments/businesses/luxury purchases, or good ol farm subsidies and parking lots named after senior senators? Thats the real point here, do we trust individuals (granted rich, silver spoon type) to spend/donate/invest their money in a way that benefits society. The liberal answer is obviously not (even the Kennedys amazingly). There is a great liberal fear of 'people', specifically that they might do things in a way the left doesnt approve of. The conservative retort is that people left to their own devices will spend their money more wisely than the fat cats in Washington. Looking at where the money ends up, its hard to argue.posted by: Mark Buehner on 10.28.03 at 10:23 AM [permalink]
Kelli, Oldman, and others are making the mistake that those in government know better and will do a fine job of redistribution. Zimbabwe Bob Mugabe is a fine example of the theft that sort of thinking results in; he and his have a better way to spend the wealth the “rich whites” have accumulated by working hard. That better way is to give it to themselves, relatives and political supporters.
It’s bad to put wealth distribution under the control of anyone, especially the government. Libertarians and, to some extent, conservatives understand that the chaos of free-market capitalism, where craven humans work to benefit themselves, provides the greatest chance for wealth to all members of society.
Well, this thread wandered a bit off topic. I don't hold a particular brief for or against the estate tax. Practically, if you don't want a tax evaded, you should set it at a fairly low level, and just have a large number of taxes, so that you don't go run 300 billion dollar deficits.
But I think someof those who argue so vehemently on this subject seem to propound a view that the "idle rich" owe nothing to society at all. In doing so, they make the Hillary Clinton "It Takes A Village" mistake of conflating government and society.
A Hilton sister is certainly free to be underdressed and flamboyantly idle if she so chooses. However, this is going to be seen as a sin/failure/waste under any moral system that values helping those who need help. And a society that subscribes to such a system is certainly free to make her pay a cost for her idleness -- in terms of mockery and unwanted attention.posted by: appalled moderate on 10.28.03 at 10:23 AM [permalink]
AM, that's the way it seems to me as well. The best designed system of government won't last very long if people don't live up to their civic responsibilities. People with money have more of these to live up to, and not just in terms of how they dispose of their financial assets either.
It isn't really about the estate tax at all. I understand, and sympathize up to a point, with arguments against it, but for me they fall over the issue of practicality. A requirement for revenue is most easily met through taxation of people who have money; higher taxes on the very rich (through the estate tax) are an acceptable alternative to higher taxes on everyone else, which is where estate tax aboltion leads. I do realize, by the way, that it does not lead there if we radically reduce the size of government, say by ending Medicare and abolishing the Marine Corps, but that's not on the table.posted by: Zathras on 10.28.03 at 10:23 AM [permalink]
I appreciate the indictment of socialism or past attempts at it, anyway cronyism and corruption inevitably follow when some elite wins the prerogative to designate the "deserts" of the citizenry.
But we should make this much clear: any government worth its salt has that capacity, though in capitalist systems the designation of deserts is less direct and aggressive. It is important to recognize that property rights don't just happen. They exist only insofar as a government is committed to recognizing them and vindicating them, if necessary, by force. New Deal economists recognized this, and it furnished a rationale for greater government incursion into the economy. The conservatives among us, of course, would call it sophistry and propaganda, but I'm hanging it out there as something to think about, nonetheless.
A government that insists, as a legal or constitutional matter, that one should keep what he earns, has made a determination about deserts. That government may not micromanage or draft Five-Year Plans, but it is presiding in a meaningful way over the distribution of wealth. Corporate structures are formed and nourished under state law; these governments give their imprimatur to the principle that a going concern's profits are due for distribution to its investors, as opposed to, say, its workers. This isn't necessarily the way it "has to be" it's how the law and the state like it, perhaps because it proves most economically efficient, or perhaps because the law and the state tend to be run by investor-types (or financed by them), and not workers.
Treating property rights as themselves affirmative determinations of deserts permits a balanced comparison of alternatives free of the expectational or historical momentum that one alternative enjoys. Sure, it sucks to have to pay an estate tax, when Anglo-American law has for years cultivated the expectation that a decedent's heirs have a right to the fruits of her labor. The heirs of writers and artists, on the other hand, might view the extension of the copyright term as a windfall, and not recognition of an entitlement, a sense of which tends to accrue over time.
So let's look at our system: there are aggressive, reputedly anti-capitalist government incursions into the distribution of wealth: taxes and tax credits, subsidies, trade sanctions, etc. But there are subtler distribution mechanisms as well, and though they do not commit the crime of "redistribution," they reinforce existing channels of distribution. Our system tends to link money and power: the wealthy find their way into government directly, or they exert power through the tendrils of campaign financing. Suddenly record companies are dictating the copyright laws and Halliburton wins the right to rebuild nations after we destroy them (if not to decide whether we go to war in the first place). Just two examples, but they reflect the ways in which the government interplays with the economy to determine deserts.
Classical liberals object to having their property stripped from them for "redistribution" elsewhere. That's fair, but we should not overlook the mechanisms in our system that make the initial distribution unfair or economically inefficient.
That's my bid for reform, but not revolution even though the Revolution people dress better. I love the berets . . .posted by: phutatorius on 10.28.03 at 10:23 AM [permalink]
You are absolutely correct. Just because I don't mind people getting rich if they earn it, doesn't mean that it isn't apparent that people sitting on money squander its beneficial and more efficient uses.
We need a recommitment to a true equal *opportunity* for advancement, and a balance between the elites, burgeuois, and proletariat. Likewise the Plebes should have a say beyond appealing to demagogery in how laws should be made just and fair for all. It isn't "redistribution" for some to pay more if they also benefit more. Any government and economy can only work well if people pull together instead of each man for himself. Some will benefit more, but if a rising tide truly lifted all boats then there would be less complaint. The current controversies erupt because there is a perception of a zero-sum game where there are winners and losers. We must recommit to a civil cooperative society where the economy is a regulated even playing field where the rules are recognized as benefiting each person by being just to everyone.posted by: Oldman on 10.28.03 at 10:23 AM [permalink]
There is no collective agreement that any form of real egalitarianism exists or even should exist in our society. This is particularly true where the issue of monetary wealth is concerned.
Every American's dream is to live a comfortable life. Many take this goal even further to include accumulation of great wealth; the reward for enterprise and hard work.
I suppose "idle rich" refers primarily to those fortunate people whom providence has blessed with just the right parents. Great family names abound in America whose vast wealth has created generations of offspring living graciously on trust funds and generous allowances. They are often described in novels and portrayed in the movies and on TV.
Envy, jealousy and admiration are expressed by the outsiders looking in. For most of these people, the lottery represents the only way to obtain the same for themselves.
If you can't obtain the goal of wealth on your own or cannot rely on family lineage, than don't waste your time criticizing the idle rich. Remember that some of the money they spend on goods and services may be helping to pay some of your own salary. These folks aren't normally associated with the terms "frugality" or "spendthrift".
There is always the opportunity in our country for most anyone to start a whole new family dynasty of their own. You might just be able to help create a new generation of "idle rich".posted by: Marcel Perez on 10.28.03 at 10:23 AM [permalink]
As the economist Reuven Brenner has emphasized, one of the key distinctions between the U.S. economy and the economies of most European and Latin American countries is the existence in the U.S. of very large and well developed capital markets.
In traditional societies capital is typically available mainly from savings, inheritence and the government. This can make it prohibitively difficult for people who are not already wealthy or well connected to start businesses. But in the U.S. it's relatively easy for someone without money, connections or inherited wealth to finance a good idea by borrowing (e.g., "junk" bonds) or selling equity.
In the kind of economy that the U.S. has, inherited wealth (except as invested) is not a major driver of innovation and growth. Most companies that were successful enough to become big financed their expansion by borrowing and/or selling equity, not by cash infusions from the founders' parents. By the same token, one of the reasons for the relatively poor performance of many European and Latin American economies has been their relatively limited ability to finance the expansion of successful companies on reasonable terms, so that entrepreneurs are forced to rely on family or government capital or, more typically, not to expand their businesses for lack of capital.
The way to remedy this situation is not to tax inherited wealth more in the U.S., it is to encourage development of capital markets in other countries.
All these fine arguments about the estate tax (or, as I prefer to call it, the "death" tax) miss a central point.
Any property earned by an individual is his property, to be dispoosed of as he wishes (investment, spending, bequest, whatever).
A person's property is not the State's, to be redistributed by the State (ie. with a tax) on his death -- he has already paid taxes on his wealth, in some cases many times over.
All the twaddle about the "idle rich" and people "sitting on their money" is just envious claptrap, and propaganda designed to make the theft of private property more palatable.posted by: Kim du Toit on 10.28.03 at 10:23 AM [permalink]
It is late and I do not want to go on at too great length, but I want to make a couple of points.
First the wastrel (idle rich) and the miser are stock figures of political/economic discourse. The miser was criticized for withdrawing his capital from the economy and the wastrel was criticized for dissipating capital and withholding labor.
The true miser (Scrooge McDuck) who keeps his capital in unproductive forms is not a feature of the modern economy. Such a person would left in the dust of a dynamic economy. Just ask anybody who has been a long term investor in gold.
The wastrel has always been the target of opprobrium, particularly in the context of a protestant society such as that of the United States. However, without some sociology to back up the anecdotes, I would be hard pressed to think of this as a real problem. For all that I know the Hilton sisters may actually working very hard to produce a return on their human capital (which the picture above reveals to be considerable). The real wastrel may be a very effective agent of social leveling but this is conjecture not data. It may very well be that the rates of self-destructive behavior are no higher among the wealthy than they are among the poor or the middle class.
In both cases, I do not know that anybody has demonstrated that there is a problem that needs to be solved.
As a matter of general principal, I think that the less the state attempts to monkey with the ownership of property the better off its citizens will be. Mugabe, whose name has been mentioned above is only the most recent example of that truth. For more information on this point, see,
On a more theoretical point, inheritance is a fact with which liberal political theories have had a hard time. By liberal political theories, I mean the class of theories that begin with Locke and Kant and have been developed through thinkers as various as Friedman and Rawls. These theories all begin by positing individual human beings who live an abstract existence outside of history. They break down when they enter the realm of real men embedded in history. Ethnic strife is an area that those theories have not been able to say anything useful about (See Tony Judt’s article in the New York Review, which Nelson">http://europundits.blogspot.com/2003_10_01_europundits_archive.html#106697512383837531">Nelson Ascher and Victor">http://www.nationalreview.com/hanson/hanson200310310840.asp">Victor Davis Hanson have eviscerated).
Likewise, the problem of inheritance is difficult for liberal theorists to deal with. On one hand they justify private property as an incentive to hard work and risk taking. The liberal judgment of property distribution is based on the fairness of the distributional process. The logical consequence of the liberal commitment to private property and personal autonomy is that property owners can give their property to whom they wish and they can raise their children as they wish. This means that some children will join the fray with more capital or better education than their fellows.
We are then left in the uncomfortable position of saying that the only way of creating a fair system is to limit the fundamental rights of property and autonomy, which undermines the moral basis of liberalism in the first place.
I do not see anyway out of this box. My own disposition is to say that all theories have their limitations and are only so good. In this case the proponents of limiting inheritance underestimate the rate at which capital depreciates and overestimate the efficacy of formal educational systems. I think that private property and family are institutions that have proven their value over time and should not be denigrated in the pursuit of a justice that mortal men will never be able achieve.
One final note about the Estate Tax. As I said above the Estate Tax is simply not structured in a way that will achieve any change in the distribution of property. Furthermore, I am not sure anyone can maintain that any aspect of the Federal Tax system has had an impact on the distribution of property and income across American society. Over the last century tax rates have gone up, and have gone down, various "loopholes" been opened and been closed, but the net effect on distribution has been about bupkis.
Now in ordinary circumstance when you are riding a horse and it dies, you should get off. Why proponents of the current federal tax system continue to promote it on distributional grounds must be evaluated in psychological not political terms.
The assumption of ownership of anything, wealth, property or title, being something irrevocably ours to do with as we please is a myth.
Do you really have total and infinite control of any asset if government can, by simply passing a statute or law, take it from you or at least effect some real degradation in it's value?
That makes "ownership" a relative term that is subject to a changing reality. This is not, and never could be, a libertarian society; and our property will always be on loan to us, subject to the whim of others more powerful than we are.
All we can do is try to make smart use of it while we still have a measure of control. The focus of our discussion, the idle rich, seem to understand that wealth can be a transient possession and they enjoy consuming it in the way they see fit for themselves. This issue is really a non-issue anyway, because most every one of us is talking about a status we don't or may never enjoy. By the volume of commentary, it obviously is a topic of interst anyway.posted by: Marcel Perez on 10.28.03 at 10:23 AM [permalink]
If the death tax did what its proponents hoped Ted Kennedy and the Hiltons would be flipping burgers. They aren't because careful planning allows the "old rich" to deflect much of the death tax impact. The death tax supporters like to think it hits families like the Kennedys, and the Hiltons. But the death tax has the greatest impact on smaller families who have not planned properly. These families have years of hard work and sacrifice gutted by the IRS. I guess this makes some people happy, it disgusts me.
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