Third Party & Independents Archives

Taxation and the Artifical Aristocracy

Since the objective of every market is the creation of wealth and since the power to increase or decrease taxes implies the power to either encourage or discourage economic behavior, tax policies must reward those behaviors that tend to enhance its creation. Conversely, these policies should also prohibit those economic activities that do not facilitate the creation of wealth. In other words, the most logical and effective tax policy would be to tax the most productive economic activities the least, and the least productive economic activities the most. Thus, because income is not homogeneous, our federal income tax policy must consider the nature of that income and adjust the rate of taxation placed upon it according to its relative economic value.

In general terms, people and organizations receive income legally from three disparate sources: earned income from work and labor; earned income from the investment of capital and property; and unearned income from gifts and inheritance. The first activity is the most productive economically, and should be taxed the least. Although it does yield economic benefits, the second activity is less productive than the first, and therefore, should be taxed at a higher rate than the first. The third activity generates no economic productivity whatsoever and should be taxed at a confiscatory rate.

Congress must revise our nation’s tax laws to send a clear signal to its individual and corporate constituents: that the United States values progress over plutocracy and efficiency over inertia. Or, in the words of Alexis de Tocqueville,

"What is important for democracies is not that great fortunes should not exist, but that great fortunes should not remain in the same hands. In that way, there are rich men, but they do not form a class."
Thus, Congress must place a lifetime tax-free limit on the amount of unearned income that any person or group can receive from any other person or group at $100,000 and tax any amount in excess of this limit at the rate of 100%. Two exceptions to this policy should be adopted simultaneously, however. First, reasonable child rearing expenses such as food, clothing, shelter, education and healthcare must not qualify as gifts or inheritance. Second, that portion of the deceased's estate that was acquired during a marriage must be transferable to a surviving spouse tax-free. Nevertheless, perpetual cross-generational transfers of massive amounts of unearned wealth are the antitheses of the American dream and must be eliminated.

Because the ownership of massive amounts of property denotes economic power, excessive gifts and inheritance are inherently aristocratic. In a nation where all people are created equal in the eyes of the law, those who possess social, spiritual, political, and military power must acquire that power themselves. Why is economic power exempted from this democratic process? If it is aristocratic to transfer social or political power to one's progeny perpetually through the inheritance of titles of nobility, why is it not equally aristocratic to transfer economic nobility to one's progeny perpetually through the inheritance of massive wealth? If children are not entitled to inherit their parents’ vocations, why are they entitled to inherit the proceeds from those vocations?

In order to prevent the perpetuation of an elite genetic class of citizens based upon the superfluous criteria of familial relationships, the United States Constitution in Article I specifically prevents both the federal government in Section 9 and individual state governments in Section 10 from conferring "Title[s] of Nobility". The transfer of massive amounts of wealth within families is simply the perpetuation of economic titles of nobility based upon genetic criteria.

Forbes magazine publishes a list of the wealthiest people in the world annually. In 2004, twenty-seven of the fifty wealthiest people in the world were Americans and possessed aggregate personal fortunes worth more than $400 billion. Most significantly, fourteen of these twenty-seven richest Americans had acquired their phenomenal wealth simply by inheriting it. Forbes estimated the worth of these fourteen inherited family fortunes at $174 billion, or nearly $12.5 billion per person. Yes, you read that right: that's billion with a "b". Not only does this transfer of massive unearned income perpetuate an economic aristocracy within a society that was intended to prevent the passive genetic transfer of cultural power, it is logical to presume that this tendency will increase as the current owners of self-made fortunes pass their wealth onto their progeny. If the United States is to remain true to raison d'etre as a society in which "all men are created equal" and if each of us possesses an inalienable right to pursue "happiness" equitably, then we must abolish aristocracy in all of its pernicious forms: political, social and economic.

Earning wealth requires activity and effort; receiving it engenders idleness and stagnation. This is why the liberal anti-poverty programs of Lyndon Johnson’s Great Society in the 1960s failed: gifts yield inertia. If providing the indigent with modest amounts of unearned capital (such as welfare payments) and unearned property (such as public housing) is economically counter-productive, isn't it equally counter-productive for the affluent to receive massive amounts of unearned capital and unearned property in the form of gifts and inheritance? If welfare and public housing engender sloth and indolence, why don't gifts and inheritance? Does the source of the unearned property alter its affect upon the recipient? Gifts have less value than earnings because people value that which they have earned much more highly than that which they have been given intrinsically.

Racist and sexist societies classify groups of individuals based upon irrelevant genetic criteria such as race or gender and then inhibit any realistic possibility of economic success for that class of individuals. Massive wealth transfers based upon the equally superfluous genetic criterion of familial lineage are simply the flip side of the same economically inefficient and morally reprehensible coin. Instead of precluding economic success, massive gifts and inheritance ensure it.

Although they disagreed about virtually every issue affecting the nascent United States during their careers, John Adams and Thomas Jefferson, began a remarkable correspondence after they had retired from public life. As these two former presidents discussed and reflected upon the world in which they lived and the nation they had helped to create, the question of the existence of a "natural aristocracy" within a society arose. In 1813, Jefferson wrote,

"I agree with you that there is a natural aristocracy among men. The grounds of this are virtue and talent. . . . There is also an artificial aristocracy, founded on wealth and birth, without either virtue or talents. . . ."
In his subsequent letter Adams replied,
"We are now explicitly agreed, in one important point, vizt. That 'there is a natural Aristocracy among men; the grounds of which are Virtue and Talents'. . . .

When I consider the weakness, the folly, the Pride, the Vanity, the Selfishness, the Artifice, the low craft and meaning cunning, the want of Principle, the Avarice, the unbounded Ambition, the unfeeling Cruelty of a majority of those (in all Nations) who are allowed an aristocratical [sic] influence; and on the other hand, the Stupidity with which the more numerous multitude, not only become their Dupes, but even love to be Taken in by their Tricks: I feel a stronger disposition to weep at their destiny, than to laugh at their Folly."

Although Jefferson, Adams and their fellow revolutionaries were largely successful in precluding the aristocratic transfer of social and political power within the United States, they were less fortuitous in doing so economically. The United States Congress must complete their journey. Virtue and talent must supercede wealth and birth within every segment of our society. Genetic discrimination, regardless of whether it bestows the economic advantages of aristocracy or the disadvantages of peasantry upon its recipients, is diametrically opposed to America’s cultural maxims of autonomy and the equality of opportunity. It is the antonym of Americanism.

Because the primary economic goal of federal taxation must be to increase the nation’s economic productivity, excessive unearned income in the form of gifts and inheritance must be proscribed. Quite simply, the tax policies of the United States must be predicated upon the principle that Americans deserve to retain as much of the property that they earned through the dint of their labors as possible. Nevertheless, if the principle of deserving to keep what you earn is both economically effective and socially just, then the converse must be equally effective and just: you don’t deserve to keep what you didn't earn.

Posted by Chuck Hanrahan at August 18, 2005 4:22 PM