On the Inheritance of Tax Obligations

I think there’s a difference between an inheritance of a business in which the heir is actively involved and one of which he is a passive beneficiary. I would be disingenuous to say that there should be no inheritances – I want to leave something for my son to make him more comfortable in his later life, just like I want to be able to give him something to help him get a good start in life.

I think it’s a terrible idea for family farms and small businesses, for example, to be passed to the next generation with such burdensome taxes that they have to be sold or leveraged into a non-viable situation. That deprives the family of a livelihood and makes it easier for larger, wealthy corporations to gobble them up. Corporate-level farming is not very good for owners responsible for land stewardship. Independent farmers morph into seasonal laborers because they can’t pay a tax. Plus, corporate farming is terrible for the land, for water supplies increasingly polluted by farm chemicals, for the continued existence of pollinators, and for the diversity of our food supply. Plus, business corporations can indeed get so big by consuming their smaller rivals that they effectively undermine the free market.

Does inheritance create a dynasty? Yes, if there’s enough of it and the heir doesn’t squander it. If the second, third, and successive generations are up to the task, then they benefit. If they aren’t up to the task, the “dynasty” is over pretty quickly. Given the fact that the generations tend to get exponentially larger as time goes by, even competent heirs that come along later get a smaller piece of the overall pie until, at last, it’s gone. A lower percentage of each successive generation can participate in the operation for it to remain profitable. Like later-born children throughout history, one takes over the helm while the others find their own ways, or else the entire realm is cannibalized to give each heir a relatively smaller portion. If that portion is too small to be of benefit, the heir sells it to someone who adds that portion to his own, and the building of an empire starts all over again.

Problems arise when a monopoly is created by this process – if smaller operations are taxed just because of the death of their progenitor, they are left with no option but to sell out. In the strictest sense, neither unbridled capitalism nor strict socialism really works. A healthy society must strike a balance between the two.

Let me be clear about where I stand on other relevant taxes, though: I have no problem with a capital gains tax tagged to the actual income tax rate for the person receiving that capital gain. I have no problem with higher taxes on wealthier people. I certainly have no problem with a graduated corporate tax rate and eliminating subsidies for operations that make significant profits. In fact, I think it’s obscene for vastly profitable corporations to be supported by the government. What is the point of subsidizing a company with millions of dollars when it makes billions of dollars in profits? Unless there is some overarching public interest that is actually served by the subsidies (affordable food for the entire population, for example), subsidies should not exist.

Under the scenario I describe, I would pay considerably more in taxes than I do now because I was fortunate enough to receive an inheritance from which I receive passive income. I would really like those taxes to be put to work, improving the lives of my fellow citizens. Feeding the hungry, providing safe places for everyone to live regardless of income, providing education for anyone who wants it regardless of their ability to pay, rehabilitating substance abusers, job training for anyone who wants it, universal health care, rehabilitation of criminals, and scientific and technological research and development would be excellent uses of my higher taxes. It would improve not just their lives but also my world.

Last Updated on October 16, 2024 by