The Occupy Movement is dormant for the moment. Cold temperatures and aggressive police forces have forced tents out of parks and financial districts in major cities around the world, but there are still rumblings. Occupy Oakland is still highly active,Rick Santorum was glitter-bombed by Occupy Tacoma yesterday, and there is a global general strike planned for May Day this year. Furthermore, it seems unlikely that Barack Obama will be able to mount a successful presidential campaign without at least acknowledging the goals and complaints of the occupiers, and so it seems that the ninety-nine percent have a definite chance to start to influence policy by the end of this year. This means that we need to take some initiative and start investigating, debating and proposing specific policy proposals which will start to reverse the current trend of increasing income inequality.
Unfortunately, this is not happening in a vacuum. The Tea Party, the Harperites, and the Daily Mail are not going anywhere, and neither is the neo-liberal ideology that informs their beliefs and actions. Neo-liberalism has been proven to originate from flawed assumptions about people and the world, and the hyper-capitalism it encourages has been shown to have some distinctly inhumane results, but people tend to cling to their political beliefs long past when evidence demands that they let go, and so there is no realistic hope of a significant number of libertarians abandoning their views for social democracy. To make matters worse, libertarians not only vote in large numbers; they also talk to their friends and family and convince them to vote for regressive, free market policies. The bottom line is that neoliberalism has a pronounced influence on government policy, and this is unlikely to change any time soon.
This means that we are going to have to compromise. We need a set of economic policies that are radical enough to truly begin to place financial power in the hands of the ninety-nine percent, but conciliatory enough that the inevitable shrill howling of the world’s free market think tanks will not gain sufficient traction to be a major barrier. We need some way to sneak fundamental economic change around the ideological roadblocks put up by libertarians, because engaging their ideas head-on will not work. This is not an easy task. I’ve been mulling the problem over in my head for a few weeks now, and I think I have a personal answer: an aggressive estate tax aimed at the super rich.
The nice thing about estate taxes is that they do not really impose on anybody. By taxing the wealth of the dead, the government can avoid the claim that it is unfairly appropriating the wealth of those who worked hard to earn it. Once the person who worked to earn the wealth has died, the only person who serves to lose out from an estate tax is their heirs, who did nothing to earn the money besides being born into the right family. Reasonable people can disagree as to whether Justin Bieber is entitled to hang on to his $85 million while there are families that cannot afford to feed themselves, but no serious person can believe that the distribution of wealth in a country should be determined by the deceased. Regardless of what afterlife (or lack thereof) you believe Steve Jobs to be currently inhabiting, there is no reason that he should be allowed to posthumously dictate the allocation of his $8.3 billion net worth.
Conservatives frequently parrot the catch-phrase “equality of opportunity, not equality of outcome“. This is a nice sounding idea, and it would be great if it were ever realised. Evidence shows, however, that kids born into privilege are far more likely to be financially successful-particularly in countries with high income inequality. If it were spent on programs designed to help children, teenagers and young adults get a good start in life then a strong estate tax could help achieve equality of opportunity while appeasing conservatives by not trying to enforce equality of outcome. Ideally, the deal would be this: everybody, regardless of family wealth, is guaranteed government support for their health, personal safety, and education early in life, and they are free to take advantage of this early boost according to their abilities and motivation. Adults are allowed to do what they please in a free market, and if successful, they are allowed to enjoy the fruits of their labour. Once death has rendered them incapable of spending any more of their money or, for that matter, caring how it is spent, the money they earn is recycled through the estate tax to give another child a fair start.
In practice, an increased estate tax will probably have to give some concessions to the wealthy to be politically palatable. This can be accomplished while still maintaining the policy’s aggressiveness by giving everybody a ceiling of $100 million, beyond which estates will either be minimally taxed or not taxed at all. $100 million is a lot of money. Beyond the $100 million is where my idea gets radical, because the tax rate on the value of an estate above $100 million would be 100 percent. Every single penny above that threshold would be recycled into government coffers, to be used to fund social programs.
At current interest rates, it can set 10 of the deceased’s friends and families with trust funds comparable to the income of many lawyers and doctors. Alternatively, $100 million placed into a charitable foundation that could give out more than two dozen scholarships every year. Basically, there is no reason for anybody to complain about receiving even a fraction of this amount upon the death of a wealthy relative.
I am, of course, neither an economist nor a tax lawyer, so there are details here that would need to be hammered out. Some form of compassionate waiting period, perhaps of one year, would have to be afforded so that federal revenue agencies are not hounding grieving families. There would also have to be a provision for the continuation of family businesses, and a way to close loopholes created by trust funds and offshore accounts. That stuff is for the experts to figure out. My case is for the ethical core of the policy, which says that the rich and their heirs lose any special claim to their wealth once they have died.
I ran some numbers on this for my usual three test nations: Canada, the United States, and the United Kingdom, and the results are very encouraging. In all three cases, the potential income is significantly underestimated, due to the fact that readily accessible statistics tend to start with the wealthiest individuals and go downwards; meaning that not everybody who would be paying this estate tax has been accounted for. Here are the results:
The personal net-worths of the 100 wealthiest Canadians range between 21.24 billion and 600 million. By capping inheritances at $100 million as I have suggested, the Canadian government stands to earn a total of $183.23 billion from this group. Assuming that everybody here is over the age of fifty, it is reasonable to assume that this sum will be collected over a forty year period, meaning that the average annual income from this tax will be at least 4.5 billion dollars-more than enough to give free post-secondary tuition to every student in Canada while lowering simultaneously lowering the fiscal deficit.
In the United States, the Forbes 400 range in wealth between 59 billion dollars and 1 billion dollars. The total estate tax income from this group would be a staggering 1.44 trillion dollars, or approximately $36 billion per year if the same assumptions I made for Canada are applied. This would be worth approximately 27 percent of the current United States Federal budget deficit.
Canadian and American dollars are approximately at par as of this writing, but for the United Kingdom it was necessary to adjust the tax threshold to a personal worth of 65 million pounds. Using this number, the 100 wealthiest Britons (ranging between 17.5 billion and 707 million pounds in personal net worth), would provide a tax revenue of nearly ₤209 billion. Spread over 40 years, this would amount to at least ₤5.2 per year. This would be enough to eliminate the need for the upcoming NHS reforms, which propose to save 4.5 billion pounds by fundamentally changing the face of British health care.
The total number of people who would pay into this proposal from all three cited nations is a paltry six hundred, who would be forced to give up most of their earnings once they are no longer able to spend them. Compare that with the 49.9 million Americans who don’t have health insurance, and are therefore just one serious illness or injury away from death or bankruptcy. Or the 3.5 million Canadians who currently live below the poverty line. Or the one in ten 16 to 18 year olds in Britain who aren’t currently attending any form of education or training. The needs of the living many outweigh those of the dead few.
This policy is not a silver bullet-it will not raise enough money to achieve all the goals of the left. But we need to start thinking seriously about this kind of thing, because money is the biggest barrier to what progressives want to accomplish. It is impossible to provide quality healthcare, universal post-secondary education, a fair legal system, adequate social services, or effective foreign aid without a source of funds. We need to stop treating ‘tax’ as a dirty word, to be shied away from in order to avoid the ire of the neo-liberal populist talking heads. I therefore humbly submit this proposal for consideration.