It should be illegal to inherit anything?

Megan McArdle at the Atlantic is really impressing me these days. Check this out: she argues that people should not be able to inherit anything. If rich grandaddy wants to give me money, he has to do it while he’s alive: he’s got to give me a gift. He cant’ just hold it in abeyance and have it turned over to me after he dies.

This isn’t really that new of a concept, and in fact some libertarians endorse it as a way to make people entitled to only what they “earn.” (scare quotes because what you earn is really hard to determine I think). Many liberals also like it because it seems to go after rich people and takes all their money away before they can give it away to their spoiled grandkids.

But there are a lot of issues. McArdle looks at the economic effects and claims that such a tax might be economically non-optimal because parents will work less hard because they can’t give away the excess that they don’t use when they die. Of course, kids will work harder, because that pepsico heir taking Econ 001, “the economics of being rich as hell” will have to get some real skills and make his own way. McArdle rightly says that parents are more productive than kids so the fire that is lit under the asses of kids would hardly make up for the slacking that would result from adults. But even that is a little deceptive. What if parents, rather than working less, expend more money on their kids while they’re alive. For instance, I could see a no-estate tax world filled with colleges that provide healthcare, career services, guaranteed jobs on campus after school, and a pension. These colleges would cost 400,000 over four years, but parents would pay them as a way of making sure their kids are safe and protected after they die. This transfer from savings to increased investment while alive would almost surely be economically inefficient. Better to save money to be used when needed rather than find ridiculous uses for it all before one dies. Think, if you had to spend all your money tomorrow, how happy could you really make yourself than if you could spend it over a period of a year, for example? Your happiness wouldn’t increase that much after you bought that first new car and the penthouse suite at all the las vegas casinos. There is only so much you can consume at once.

But one really good effect that McArdle doesn’t talk about, is that rich people would all of a sudden become very interested in the wider social world. If you can’t guarantee that your kid will live off your money, you might start to care about medicare and social security and take an interest in these policy problems. At the margins, you might even start to care more about things like the public school system (if you have a young kid and are afraid you might die soon). The public world would likely benefit from elite attention rather than indifference (or would elites make things even worse if they trained their eyes on social problems?)

There are a bunch of deeper philosophical questions too. One is: is the problem with rich people giving their money to their kids that they are giving some people a leg up who didn’t work for that leg up, or is it there something special about the way inheritance goes to people I value and not other people in need. What if, when I died, I put in my will that my fortune was to be given to a random person living below the poverty line. Should the government be able to tax away to its coffers. It really reinvigorates the whole debate about people’s entitlement to their money in any case. A 100% estate tax would basically that any money I don’t spend is de facto tax money. But why? What if I want my fortune to go to HIV research and not the USFG? See, I think the 100% estate tax gets some of its umph from the idea that people who benefit their own kids are blue-blooded selfish bastards who want to perpetuate a family lineage where a lot of people have first names like “Dale” and “Sebastian.”

HOWEVER, as I’ve argued many times on this blog, I think society should be thought of as a competition. Not a cutthroat, war of all against all type of competition, but like a basketball game; a fair but somewhat antagonistic arena where greatness can emerge and each participant can be honored for their good faith attempt to be great. So, I think an estate tax would further that goal, of making sure each person was put into a position where they are pushed to succeed for themselves. For the same reason I cringe when I see a parent spoiling their kid, I cringe when I see someone getting inordinate resources from their parents, and this means I cringe many times at myself, since I’ve been the beneficiary of their generosity. I’m not saying everyone has to fend for themselves. I think welfare, education and medicare, and on and on are similar to salary caps and free agent restrictions: they ensure everyone gets a shot to compete.


1 Response to “It should be illegal to inherit anything?”

  1. June 12, 2011 at 6:52 pm

    Well. Money, in the end, is really just something that symbolizes social value. People have been inheriting their parents’ and grandparents’ social influence and value long before the advent of money. I think there are legitimate biological and social reasons for that. I don’t necessarily believe that giving all or even a great portion of your money to your kids is the greatest idea though.

    With that in mind, don’t you think preventing ANY form of monetary inheritance would be a bit harsh in our society? Since social value, unlike in hunter-gather and other prehistoric human societies, is so tied up in physical money in our society, eliminating this would be quite a shock. I think there would definitely be a massive cultural adjustment period.

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