The Free Market 13, no. 9 (September 1995)
Left-liberals hate the idea, but the prosperity of everyone in a market economy depends in good part on the rich. The capital they have earned and saved generates investments and creates jobs. Their savings keep interest rates low. Their actions are philanthropic in every sense. In their professions, they help everyone prosper. In their charity, they help the poor, and allow the arts and education to thrive.
So, naturally, the rich suffer disproportionately in a time dominated by the statecraft of envy. They are vilified by the media and taxed to death by government at all levels. Some have even left the country. Last year, about 1,000 even gave up their citizenship rather than have their earnings further looted by a grasping federal government.
In the last year, we’ve lost Harding Lawrence, past chairman of Braniff International, and his wife Mary, the founder of the innovative advertising firm of Wells, Rich, and Greene. New York violinist Yehudi Menuhin and former Heinz executive Joseph Bogdanovoich have had it too.
We used to shake a finger at foreign countries like Britain that taxed the successful so severely that they went into exile. Now the U.S. is doing it, and causing a capital drain and a brain drain too.
I run across people all the time who say: That’s it, I’m leaving. And some do. They are making grave sacrifices: pulling up their roots, leaving their extended families, forfeiting what’s left of the greatness of American freedom and culture. No one makes the decision casually.
But for many people of large means, the costs of sticking around are too high. Taxes at all levels, on all kinds of income, are too high.
Neither political party has gotten the message. The Republicans want to tax these victims of fiscal expropriation another ten years after they’ve given up their citizenship and left the U.S. But that implies that the citizen is an indentured servant of the state, and the expatriate a mere fugitive slave to the tax police.
If the Republican plan is horrible, the Democratic plan is downright tyrannical. The Clinton administration proposed to confiscate the assets—with a special expatriate tax—of anyone moving from our high-tax country to a lower-tax one. The New York Times feigned astonishment that such a reasonable tax hasn’t passed yet.
Neither party considers how embarrassing it is for the land of the free to develop an emigration problem. Everyone used to want to come here, to escape the tyranny of the old world. Now we’re becoming the old world to the new world of North Asia, Eastern Europe, Latin America, and even Britain, not to speak of various tax-friendly islands scattered about.
While our immigration and welfare laws have subsidized what the Statue of Liberty’s poem calls “wretched refuse,” our tax law has run our best citizens out of the country. Immigrants are lured by the lavish welfare state, while emigrants are repulsed by the confiscatory taxes necessary to fund it. The fiscal candle is burning at both ends.
If the rich—who also tend to be the smart—want to go, we should try to keep them through incentives. If they still insist, a free country would let them go in peace. To confiscate the assets of expatriates is not only immoral, it is beneath the dignity of a free people. But nothing is beneath the dignity of the current government.
With less onerous tax laws, we could not only prevent the trend towards emigration from the U.S., we could attract well-to-do families and entrepreneurs from other countries. Who can argue against old-fashioned capitalist aristocrats?
One way to keep the rich and the smart, and attract even more, is to repeal federal taxes on inheritances and bequests. This grave-robbing tax has already destroyed too many good families and businesses.
The inheritance tax hits the rich the hardest. But nowadays it can even destroy middle-class folks whose families have accumulated property in businesses, farms, or ranches that have to be sold to pay the tax. The federal inheritance tax is the enemy of these people, and the enemy of every man who thinks ahead to the welfare of his children and his children’s children.
As Murray N. Rothbard long ago showed, everyone should be exempt from this most socially damaging of taxes, to stop the long, bloody breaking up of family fortunes for the basest of egalitarian reasons.
The inheritance tax was instituted in the Progressive Era in a fit of envy and socialism, to destroy an old, private elite and replace it with a new, state-connected one. The tax went up until the Reagan administration, which did not cut it nearly enough.
The wealth lost to the inheritance tax has been incalculable. It will raise $14 billion this year, but this is “high-powered” capital, taken from the hands of people who know how to use and invest it properly. Who but a Marxist could argue that it should be spent by Bill Clinton and Newt Gingrich, instead of the families that have worked hard and prepared for the future?
Democrats and Republicans should stop trying to pick the pockets of people who have had enough of big government. Likewise, they should scrap the inheritance tax. That would allow people to plan for the future. Savings would not just be for retirement, but for grandchildren’s retirement, and for educational organizations and other charities whose work should be carried on into the future.
The mark of civilization is the desire to think and act with an eye toward the very-long term. The tendency of big government is to discourage us from this, for its own gain. If D.C. had its way, the only rich people would feed from the Beltway trough, and exercise unchallenged power with their ill-gotten gains.
We should, as a blow against this monstrous idea, repeal the inheritance tax, and begin to restore a great American tradition: free-enterprise dynasties with deep roots and enough wealth to challenge our masters in Washington, D.C.
