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Death Tax and Democracy

Posted By Hannah Sternberg On November 30, 2010 @ 3:00 pm In Economics | Comments Disabled

The fate of small, family-owned businesses hangs in the balance as Congress decides whether or not to finally put the crippling 55% death tax [1] in a coffin. The toll the death tax takes on family-owned businesses [2] has been clearly documented as has its infeasibility as a federal budgetary tool [3]. But just as important as these concerns is the erosion of individual liberty that this tax presents.

Alexis de Tocqueville recognized the role of inheritance laws in a free society in his Democracy in America:

Through [inheritance laws] man acquires a kind of preternatural power over the future lot of his fellow-creatures. When the legislator has regulated the law of inheritance, he may rest from his labor. The machine once put in motion will go on for ages, and advance, as if self-guided, towards a given point. When framed in a particular manner, this law unites, draws together, and vests property and power in a few hands: its tendency is clearly aristocratic.

The “aristocratic” laws that de Tocqueville refers to specifically are the Old World laws of entail, which, as any fan of Jane Austen knows, were laws that restricted the ability of landowners to split up their estates, requiring them instead to pass complete estates to the oldest son or closest male relative. Not only did this concentrate wealth and freeze class distinctions, it also severely restricted personal liberty, as de Tocqueville seems to have perceived by remarking that when a legislator has exercised power over a person’s ability to control his own estate after death, “he may rest from his labor”—in other words, he has governed his constituents’ personal fate as intimately as he possibly could.

Liberals constantly argue that the death tax is necessary to prevent the concentration of wealth in a limited number of families. The truth is the exact opposite, however. The death tax is actually a stern government mandate on legacies that erodes the freedom of society. Like the law of entail, it hardens economic distinctions by making it more difficult for families to make their legacies mobile and flexible, leaving that privilege only for those wealthy enough to hire the expensive estate lawyers and accountants necessary to protect their funds. In the meantime, it severely restricts the ability of regular families without the resources to pay for expensive estate planning, especially those with small businesses, to pass along the business accomplishments of their lifetime to be built upon by the next generation. The death tax is even worse than entail because the government confiscates the hard-earned returns of families. At least under entail the government didn’t benefit directly. What better discouragement to the entrepreneurial spirit of the middle and working classes than to ensure that the fruits of their hard work and ingenuity can’t be passed on to the next generation?

The death tax is more than minor point of squabbling between economic policy wonks. Resisting the return of the death tax means protecting a critical element of personal liberty.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/11/30/death-tax-and-democracy/

URLs in this post:

[1] the crippling 55% death tax: http://www.bloomberg.com/news/2010-11-29/return-of-estate-tax-looms-as-final-impediment-to-extending-bush-tax-cuts.html

[2] The toll the death tax takes on family-owned businesses: http://abcnews.go.com/Business/estate-tax-uncertainty/story?id=12213050

[3] its infeasibility as a federal budgetary tool: http://www.heritage.org/Research/Reports/2010/07/The-Economic-Case-Against-the-Death-Tax

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