Adam Smith… and the Death Tax…

With this post I am starting another series which will be cataloged as American Aristocracy. The basic foundation for this series is that if nothing in done to prevent it our nation will likely move from a democracy to an aristocracy in the coming decades, maybe even years.  The first installment in this new category is about the “Death Tax”

 

 

The quote above came from Adam Smith. His book entitled “The Wealth of Nations” written in 1753 is considered the bedrock modern economics.  Here is a little of what Wikipedia says about him:

Smith laid the foundations of classical free market economic theory. The Wealth of Nations was a precursor to the modern academic discipline of economics. In this and other works, he expounded upon how rational self-interest and competition can lead to economic prosperity. Smith was controversial in his own day and his general approach and writing style were often satirised by Tory writers in the moralising tradition of William Hogarth and Jonathan Swift. In 2005, The Wealth of Nations was named among the 100 Best Scottish Books of all time. It is said former UK Prime Minister Margaret Thatcher carried a copy of the book in her handbag…

Smith is cited as the “father of modern economics” and is still among the most influential thinkers in the field of economics today…

Alan Greenspan argues that, while Smith did not coin the term laissez-faire, “it was left to Adam Smith to identify the more-general set of principles that brought conceptual clarity to the seeming chaos of market transactions”. Greenspan continues that The Wealth of Nations was “one of the great achievements in human intellectual history”.

If we are a nation built on Smith’s principles, how did we get it so wrong on the idea of inherited wealth. Smith very plainly says here that wealth should not pass from one generation to another. Each generation must find its own way in the world. Wealth belongs to the people in general and the way it passes is by an inheritance tax. How did that tax become so viciously attacked by the Republican party?  The GOP proudly pronounce  that the free-market theories of  Adam Smiths are the bedrock of their party. Smith’s quote “a power to dispose of estates forever is manifestly absurd”. What is the answer to this dichotomy? Of course it is that the rich pretty much now control the GOP and even to a large extent the Democratic party. Money is becoming the epitome of power in our system of government, even above the individual vote. Sadly money buys votes often through untruthful advertisements in an uninformed democracy.

Let’s bring in another source of economic theory and that is from the original natives of our country.  Native Americans did not believe in property ownership. The land and everything on it is only used while by us, never owned..  Inherited wealth is yet another example of where things have morphed absurdly beyond our original foundations. This is a prime example of  the coming American Aristocracy if we do nothing to prevent it.

Monarchy……

Dutch King Willem-Alexander and Queen Maxima appear on the balcony of the Royal Palace with their children, in Amsterdam, The Netherlands, April 30, 2013. Willem-Alexander is not only the monarch of the Netherlands but also the Dutch Caribbean territories of Curacao, Aruba and Saint Maarten. He holds several military titles but requested an honorable discharge.

Source: Dutch Abdication: Willem-Alexander Becomes Europe’s Youngest Monarch | The Netherlands New King | TIME.com.

I just can’t understand the allure of a monarchy but I know that many are infatuated with them.  My wife stayed up into the wee hours of the morning to see british royalty weddings. Maybe I am just too American to understand why people would voluntarily pay taxes to keep particular families living in utter opulence. I’m sure King Willem and the wife and kids appreciate all they are given  by the people of the Netherlands but I just think they need to go out and get a real job. 🙂

One of the things that has made the USA successful democracy is “Equality of Condition” at least that is what Alexis De Tocqueville concluded in his book entitled “Democracy in America” in 1831. (BTW, this is a great book to read if you are interested in some of the core reasons we became what we are as a country.) He believed that the lack of a history of privileged classes is what allowed us to prosper as a democracy where many other failed. I will be talking much more about this and other historical things related to our condition in a new blog coming soon.

We may not have an official aristocracy but we seem to be getting close to one via our tax codes. When we allow millions and in some cases billions of dollars to pass tax-free from one generation to the next we are building our own version of aristocracy.  Previous generations understood what Mr. De Tocqueville found and had a pretty stiff inheritance tax in place to prevent the passing of unearned income from one generation to the next.  But then came the spin of “the death tax” that too many of us swallowed hook, line and sinker.  Even if many of us don’t have the big bucks we irrationally dream that someday we just might and would also want to keep it all for our clan instead of going back tot he public domain from where it came.

So, here is to you King Willem. May you continue to live on all the welfare as long as you can….

You Never Know….

“This is a great country. You never know where our heroes will come from.” – Will Rogers, 7 June 1933

One of the great things about this country is that anyone who is fortunately enough to have just the right circumstances come about can be a hero for future generations.  Many have sports heroes who they admire for their ability to do a particular thing like putting a ball into a hole, hitting it with a stick, throwing it to a teammate. I can’t say that any of those qualities make someone a hero to me. But to each his own when it comes to heroes.

My heroes are more of the intellectual or humanitarian nature. Obviously, to anyone who has read much of this post knows that Will Rogers, Thomas Jefferson, Woodrow Wilson, John Steinbeck, and Gandhi are among my heroes. This group range across the spectrum as far as wealth and influence go. Some came from poverty, some from privileged  classes. Most just went about their daily business with other people’s welfare in mind. Those are my kind of heroes.

I, like many others, have become a big fan of the british TV series entitled “Downton Abbey”. It is a story about an early twentieth century aristocratic family and all the “commoners” who served them. The intertwining of all their lives is what makes the show endearing.  I must admit that I am an antagonist when it comes to a privileged classes especially inherited wealth.  So, it somewhat surprised me to be attracted to this show.

Even up until recently many of the countries in Europe were very class oriented. That is if you were born into a particular class that is where you stayed for your life.  Moving outside of your class was just unheard of in those days. I’m sure this continues to some extent even today but I think it is quickly disappearing; at least I hope it is.

The United States is a country that has always been about opportunity for all. Anyone can go as far as their drive, ambition, and intellect allow them. That is what makes this country great.  I am troubled by the current trends toward aristocracy in this country that is taking place due to inherited wealth. The top one-percent of the population control a very large percentage of the wealth of the country.  This troubles me greatly some times.

Monied Corporations…. Even Then….

I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.  — Thomas Jefferson

These are powerful words for today and it is absolutely amazing that they were actually spoken more than two hundred years ago! It is no secret to those of us who are studied in American history that Thomas Jefferson was not a big fan of corporate interests. He believed in giving the power to the people; he was the first real Democrat in that regard.

I think Mr. Jefferson’s words have finally come to pass in this country. Especially with the recent Supreme Court decision that corporations are people and therefore have an unlimited right to spend whatever they want in our electoral processes.  At least they haven’t “yet” given corporations the right to vote. It is yet to be determined the full extent of corporate pollution in our democratic processes but I fear the result will be ugly indeed! Will the upcoming flood of negative ads put out by the corporate interests turn a whole generation away from the management of our country?

Getting Enough to Eat….

Ten men in our country could buy the World, and ten million can’t buy enough to eat. -August 16, 1931  Will Rogers

Sometimes it is almost eerie to see the similarities between the depth of the Great Depression and today.  The last time we were not able to break the grip of our aristocracy’s absolute control of wealth. Maybe we will this time around? After all they do say practice makes perfect. Or at least get them to paying their fair share. Let’s not put all the burden on their secretaries to pay the higher percentage of taxes.

But what do I know….

Poor Little Rich Kids…..

This excerpt from a Wall Street Journal article peaked my senses. It seems the rich, who we give massive tax breaks,  are aware that their kids will probably blow through their inherited wealth after they are gone.  What a bind to be in!  I bet they take all this planning and  trustees as tax deductions. It seems very ironic that while most of us are just trying to stay out of the poor house, and in any other house at all, there are those who worry about the other end of the spectrum.

Instead of “cleverly written trusts” and “carefully chosen trustees” how about just letting them make their own way in life like the other 98% of us do? Who knows, maybe Paris Hilton would even be a productive member of our society if she had not inherited so much of granddaddy’s wealth. 🙂 Up until recently (the 1980s that is) the government taxed wealthy estates so that a significant part of the accumulated money could go back for the common good.  Our country was even established around the ideas that aristocracies are a drain on society. They thoroughly renounced the European version when we formed our country. In fact it was not long after our revolution that the French also rebelled against their aristocracy in a very bloody fashion.  So how is it now that we do so much to retain our version of aristocracy that makes up the top 1% of our population but controls almost 50% of the country’s wealth?

OK, here I go again with the “Walters plan” for accumulated wealth.  I know we can’t force the super rich to allow their children to make their own way in the world. But let’s treat the money they pass on to their children as “income” and therefore subject to the usual income taxes.  To me income is income no matter where it comes from. If you get money that you didn’t work for and you haven’t paid any taxes on  it is considered income to you. Another part of the “Walters Plan”  is where we establish a more equitable income tax structure. Don’t tax the billionaires at a lower rate than the people who empty their trash. Let’s set a level of tax free income so that a person can get the basic necessities and then tax everything else at a certain rate and with no tax deductions. These big tax loop holes that congress seems to endlessly write for the rich, and for many others for that matter,  are one of the reasons we are in the deficit hole we are in.

But what do I know.