“I have no respect for the passion of equality,” Oliver Wendell Holmes Jr., one of America’s great jurists, once declared, “which seems to me merely idealizing envy.”
But envy, and its sister vice, greed, are very much back in fashion today when it comes to the progressive Left. Just listen to President Joe Biden, who wants $2 trillion of new taxes, mostly paid by millionaires, so that the rich will “pay their fair share.” In seven blue states, including California, Illinois and New York, new wealth taxes and higher income tax rates on people such as Bill Gates, Warren Buffett and Taylor Swift have been proposed by liberal lawmakers.
Biden said billionaires aren’t “paying their fair share” and shouldn’t be paying a lower tax rate than a firefighter. That’s a ridiculous claim. The richest 1% of Americans pay 42% of the income taxes in America. That’s near an all-time record high.
The Tax Foundation reports that if all the new wealth, capital gains and income tax surcharges under consideration were to be enacted, the government could snatch up to as much as 70% of a millionaire’s savings or assets. Does taking two-thirds of someone’s lifetime savings sound “fair” to you?
Liberals seem to forget that we already have had a grand experiment with a wealth tax in America: It’s known as the “death tax.” This tax on gifts and estates has been around for a century. And it has caused far more migraine headaches and problems than it has solved.
The current tax rate is 45% on estates above $12 million. When including state levies, this means the government can help itself to nearly half the assets of a family-owned business at the time of the owner’s death.
The estate tax was originally proposed by Karl Marx. It was and still is touted as a Robin Hood plan to redistribute the “great hoards of wealth” amassed by the Rockefellers, the Fords and the Carnegies to the lower-income Americans.
But guess what? It has never come close to working. Over the past 50 years, it has never accounted for more than 3% of total federal revenues. Amazingly, in 2020, the latest year for which we have complete and accurate IRS data, the estate tax raised $17.6 billion out of the $3.5 trillion in federal revenue. This is roughly enough revenue to pay one day’s worth of federal spending.
Another way to appreciate how fiscally inconsequential this wealth tax is, it represents a microscopic one-half of 1% of all federal revenue collections. The preliminary numbers for 2021 show the same pattern. Roughly $20 billion was raised out of a $4 trillion budget, or again close to 0.5% of tax collections.
Yet America’s tax on estates and gifts is nearly three times higher than the charge in most other industrial nations. Sweden, even with its large welfare state, abandoned its estate tax many years ago as counterproductive.
Why don’t wealth taxes work? Because the rich don’t generally get rich by being stupid. They have found myriad ways around paying it. They hire the planet’s best estate tax planners, lawyers and lobbyists to keep their fortunes two arms’ length away from the tax collector. The most obvious example is that multibillionaires Mark Zuckerberg, Jeff Bezos, Buffett and Gates have stashed almost their entire fortunes in perpetual foundations from which the government will never collect a penny.
More to the point: There is a moral and ethical reason to hate greed and envy taxes such as this. What is wrong with achieving the American dream and getting rich? Accumulating wealth by building a world-class business and, on the way, employing thousands of your fellow citizens or achieving new heights of greatness in arts, entertainment, sports or medicine is not a vice to be punished but a virtue to be celebrated. Taxing the rewards of that pursuit of excellence is a fool’s errand.
The real-world harm of this “wealth tax” is immense. Family businesses get clobbered by this tax because oftentimes, the founder of the enterprise, who spent his waking hours building up the business, typically never gave a second thought to “wealth tax planning.” Remember: Every successful big business started as a small business. As a consequence, many heirs have to sell the family business, farm or ranch just to pay the taxes. That’s un-American.
Let’s get rid of envy taxes that punish those who chase their dreams and catch them. Biden wants a $7 trillion government and wants the rich to pay for it all. That doesn’t seem very fair, and it doesn’t seem very democratic. And history proves it never works.
Stephen Moore is a senior fellow at the Heritage Foundation and a co-founder of the Committee to Unleash Prosperity. His latest book is “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”