Inheritance Tax: Making Death Fair(er)

"The fairest death tax rate is zero" The Wall Street Journal argues once again today. I would revise their statement to say, "The government should not be among a citizen's heirs." The Journal backs up its position with a bogus supporting argument: "because the money was already taxed when it was earned." The Journal's sword has all the piercing power of a wet noodle.

By the Journal's "logic," if I have a net $1,000 after paying taxes on my income, and then I pay that $1,000 to a carpenter to build a deck, the carpenter's income should not be taxed because I already paid tax on it.

The carpenter, at least, earned the $1,000 by exchanging labor and talent for my money. Most heirs have done nothing except they were begat by the right parents. For the child, conception is a supremely passive act requiring neither talent nor labor on its own part.

Large inheritances do create significant inequalities in opportunity. All of us who were conceived by parents who were poor when they made us and continued to be poor until they left us can list numerous important inequalities of opportunity. Like Andrew Carnegie, I am against inheritance. I am equally against government taking any portion of wealth left by a dead citizen.

Government itself, meaning politics, is all about distributing opportunity unequally. That is exactly why politicians want to rifle the pockets of the dead--so they can distribute opportunity to their favorites.

I propose some examples of how we might create more equal opportunity with what the dead could not take with them.

Let the rule be that inheritance can consist of a house and funds for higher education but no more. If an heir has earned part of the family business, let that ownership be established before the parent's death and bear some recognizable equivalence to work and talent. Make reasonable provision for keeping the business in the family by allowing the heir to pay tax on the remaining ownership interest out of profits or by selling sell it. Require that all wealth remaining after such inheritance be distributed in one of the following ways:

--as a pro-rata tax reduction for all Americans

--as a donation to the qualified charity of the deceased's choice

--paid into an independently operated national endowment whose income would reduce interest rates on student loans or venture capital for first time entrepreneurs

To make this politically popular, call it The Fair Death Stimulus Plan.