In editorial in today’s New York Times, Ray Madoff (Boston College) argues in favor of treating inherited wealth as income:
[I]nstead of getting into any further arguments over rates and exemptions, Democrats would be better off conceding defeat. They should allow Republicans to get rid of the estate tax altogether — but at the same time arrange for inherited wealth to be subject to income tax.
In its first 60 years, the estate tax, along with other progressive policies, went a long way toward accomplishing this goal. By 1976, the amount of the nation’s wealth controlled by the richest 1 percent of Americans had fallen from more than 50 percent to only 20 percent. And this greater dispersal of wealth fostered a strong middle class. * * * Today the wealthiest 1 percent own more than a third of the country’s wealth, leaving 80 percent of Americans with just 16 percent of it.
But Americans seem little inclined to resist wealth concentration. Efforts to impose taxes geared to the wealthy are lambasted as promoting class warfare. * * * Few Americans may realize that money received by gift, inheritance or life insurance is entirely free from income taxes. Of course, this made sense when there was a strong estate tax. But there is no other reason inherited wealth should not be taxed the same as wages, lottery winnings and all other forms of income.
The full piece is available here.
1% of Americans have more than 1/3 of the country’s wealth. These inequalities skew our democracy. How can we have a participatory government that is for the people and by the people when so many people are worried about feeding their families? How can entrenched power structures ever change when so few control so many of the financial resources?