Should We Be Building A Strong, Healthy, Egalitarian Society— Or An American Aristocracy?

Conservatives have been trying to get rid of inheritance taxes since they were first proposed and with Trump and a Republican Congress (and Supreme Court) they see their chance right now. On Wednesday, Jeff Stein reported that congressional Republicans are proposing to permanently allow wealthy families to pass on more of their assets tax-free, as the federal government all but abandons taxing large inheritances. Under current law, estates pay tax only on transfers above $13.99 million for single filers and $27.98 million for married couples. Those thresholds, doubled by President Donald Trump’s 2017 tax law… [b]ut in the tax bill before Congress, both the House and Senate versions would raise the exemption starting next year to $15 million for individuals and $30 million for couples, then set them to adjust for inflation in the future… When the federal estate tax was first imposed in 1934, roughly 8,600 deaths resulted in estate tax liability, or 0.9 percent of adult deaths. In 2019, the most recent year for which IRS data is available, only 2,100 deaths resulted in estate tax liability, or 0.08 percent of deaths. The proposed increases are expected to reduce that share even more... Republicans have for years sought its eradication.”

As you probably guessed, the idea of taxing inheritance vastly predates the United States. The concept has existed for millennia and has always reflected the deeper tension between private accumulation and public obligation, between dynasty and democracy. In Rome, the Emperor Augustus imposed a 5% inheritance tax, revenues going towards funding veterans’ pensions— a kind of social contract: “You want to pass on wealth? Pay into the system that kept the empire running.” This Roman tax lasted for centuries and influenced future European models of inheritance taxation. 

Conservatives are still pissed off about the French Revolution upending aristocratic privilege, a goal of which was to break up large estates. France has had progressive inheritance taxes since the early 19th century. Today, while still full of loopholes, its inheritance system is far more redistributive than ours. Britain began taxing inheritance in 1796 to pay for war with France. The modern version, enacted in 1894, thanks to progressive reformers, aimed to challenge landed wealth. Winston Churchill, oddly enough, in his younger years supported steep estate taxes to prevent the formation of “plutocratic dynasties… The great inequality of wealth... is a danger to democracy. Death is the great equalizer; taxes should follow suit.” Japan has one of the highest inheritance tax rates in the world (up to 55%), a legacy of post-WWII reforms designed by the U.S. occupation to prevent the reemergence of feudalism and zaibatsu-style industrial dynasties. 

Inheritance taxes have always reflected the same fundamental idea, namely that the right to property is not absolute, especially when it is unearned, and that passing on extreme concentrations of wealth can undermine social mobility, economic dynamism and political equality— in other words, a lever of civilization to maintain social cohesion and prevent the rise of entrenched oligarchies. That’s the polar opposite of what conservatism seeks to do, though even Adam Smith, godfather of capitalism, endorsed inheritance taxes, warning that: “A power to dispose of estates forever is manifestly absurd. The earth and the fulness of it belongs to every generation.”

Now, closer to home, the erosion of the state tax isn't just a technical tax policy shift as much as the purposeful  hollowing-out of a centuries-old democratic principle that wealth should serve the people— not the bloodlines of the powerful. The modern estate tax— what conservatives tarred as the “death tax”— has long served as a key battleground in the fight over economic power and democracy. While today's GOP is still trying to euthanize the tax altogether, it's important to remember, most Americans— even admitted Republicans— disagree.

The U.S. federal estate tax was first introduced in 1916, during the presidency of Woodrow Wilson, as part of a broader suite of progressive reforms aimed at curbing the rise of powerful industrial fortunes. It was meant not just to raise revenue, but to prevent the formation of a hereditary aristocracy. During the 1930s, FDR strengthened it, seeing it as a tool to fight inequality and consolidate national unity during the Depression. He famously warned that “great accumulations of wealth cannot be justified on the basis of personal and family security” and should not be allowed to “control the economy or the government.” Thinking in terms of the the enormous wealth of the robber barons of the Gilded Age and early 20th century and the modern-day tech billionaires and hedge fund tycoons is illuminating— and chilling. The scale of wealth and its dangerous influence on democracy remains hauntingly similar. In many ways, today's billionaires are even richer and more powerful than their predecessors… and even better at avoiding taxes and accountability.

The assault on the estate tax picked up steam in earnest under Reagan, who slashed top rates and legitimized the anti-tax, anti-government rhetoric that still dominates Republican politics today. Under George W. Bush, the estate tax was temporarily repealed in 2010 (yes, for one year there was no estate tax at all), before being reinstated with an inherently unfair, much higher exemption. Trump made it worse than ever in 2017 and the GOP plans to make it even more unfair now.

Who cares? Well… The central democratic rationale for taxing inherited wealth is to prevent aristocracy— a class of people whose political power derives not from talent, work or public trust, but from being born rich. If wealth remains concentrated in a handful of families for generations, democracy becomes nothing more than a façade.

As capital compounds over time, vast fortunes grow exponentially. The estate tax is one of the few tools designed specifically to intervene in that process. Without it, each generation begins life on increasingly unequal footing, locking millions of Americans out of meaningful economic mobility. The estate tax promotes meritocracy and entrepreneurship since by discouraging the hoarding of wealth within families, estate taxes should nudge people toward investment, innovation, and giving, rather than simply preservation of dynastic power. A society where fortunes are constantly recycled is more dynamic and fairer than one where wealth sits idle in trust funds. As Elizabeth Warren never tired of explaining when she ran for the Senate, the richest families benefit the most from the legal, financial and political infrastructure of society. Taxing estates is one of the most efficient and just ways of ensuring that they contribute to maintaining the system that protects their assets.xx

Lehigh County controller Mark Pinsley hasn’t announced his candidacy for Congress— at least not yet. But yesterday he told me that he supports “taxing extreme wealth because democracy can’t survive inherited power and the rich owning all of our assets. Mackenzie won’t take that stand, because  he is a pawn of the rich and powerful… I stand for the people.”

To the right, all taxation is a kind of theft— but estate taxes are especially galling. In the libertarian worldview, people have an absolute right to do whatever they want with their property, especially handing it off, untaxed, to their heirs. The estate tax, by interfering with that transfer, is seen as an assault on private property and family autonomy. Conservatives’ biggest donors are often heirs or soon-to-be heirs of massive fortunes. Estate tax repeal is a core donor demand, and virtually every Republican politician knows that loyalty to the ultra-rich pays off. The “family farm” myth is a smokescreen— there’s never been any epidemic of small farms being seized over taxes, but there is a multi-billion dollar push by wealthy families to shield their fortunes indefinitely. The estate tax is one of democracy’s last line defenses against feudalism. That it now affects fewer than 0.1% of deaths is a sign of its near-eradication, the quiet triumph of a conservative movement dead set on protecting wealth from the public good.