A legacy beyond their means
How the government uses “tax on death”.
The desire of the administration of Donald trump to eliminate the inheritance tax gave new life to the debate about the benefits and justice of such taxation. This debate in various forms has been ongoing for two thousand years.
Where the wind blows
Donald trump being a presidential candidate, said that “no family should have to pay death taxes because it’s double taxation”. As a result, the current presidential administration is planning to abolish all forms of inheritance tax by the year 2025.
The subject of inheritance tax is very old and equally interesting. Supporters of such a tax was, for example, classical liberal economists. As pointed out by Adam Smith, “the right to have money and property forever patently absurd”. Political philosophers referred to in this notion of justice. The simple fact of birth, they said, does not imply the acquisition of wealth. Jeremy Bentham rejected the argument that people have a natural right to inherit the property of their relatives. “Who is this Queen of nature, which gives it the force of law?” he asked.
John Stuart mill emphasized that he wants the promotion of equality of opportunity, not promote the creation of elite that will rule for generations.
And also believed that taxation of the rich, who live on inherited money and land, will reduce taxes for the poor.
In the early twentieth century US President Theodore Roosevelt stated that “the transfer of a Grand state to the next generations is truly a great harm to society as a whole”, because it deprives the society of incentives to independent making money. In 1916, the United States was introduced inheritance tax with a strong progressive scale, by 1940, its rate had reached 77%. In France until 1956 heavy inheritance tax levied on even a relatively small state.
However, in the 1970s, public sentiments had changed. Real estate prices went up because of population growth in industrial countries. The number of homeowners increased, so that the inheritance tax began to be seen as the excess burden of a significant share of the population. In addition, the abolition of currency restrictions and the free movement of capital have encouraged rich people to decide to move to some country where inheritance tax is not so high. What made the government to think about and to question the feasibility of this method of filling the budget.
In the 1990-ies in the world actually launched a campaign against inheritance tax.
Its ideology pointed out (ahead of trump) that this tax in any form — a classic example of double taxation because the inherited money and property are the result of earnings from which taxes have already been paid.
They gladly used in his speeches that the most meaningful phrase — “tax on death”.
Now the supporters of this point of view and then refer to the country, inheritance tax abolished, such as Sweden, Norway and Russia.
However, proponents of high taxes on inheritance, the same as the classical economists or Theodore Roosevelt would be disappointed to learn that the annual growth of the amount of bequests as a percentage of GDP in France, say, has tripled. And that half of the billionaires in Europe, the state inherited and the number of billionaires is growing.
The Roman experience
The inheritance tax was invented in the course of the tax reforms undertaken by the Roman Emperor Augustus, who preferred to call herself first citizen. By the time the control over the tax revenues have moved from the Senate to the generals and to the Emperor personally, so any tax was in some degree a military nature.
Not accidentally, the official purpose of the inheritance tax was the creation of a pension Fund for veterans.
Tax felt very productive, as for the rich Romans had in order to leave their land holdings and other assets to friends and foster children. Therefore, it applies only to the inheritance passed by will. Close relatives (parents, children and grandchildren) from this tax were released. Such attention to the identity of the heirs allows you to speak about it as about the inheritance tax, although levied at a flat rate of 5%. Note that this was one of the main sources of budget revenues in Rome.
Here it is worth mentioning that U.S. President William Taft in his inaugural address in 1909 he devoted a passage to the inheritance tax as an important element of internal policy, emphasizing that this tax is very fair and it is very easy to assemble.
During August, the inheritance tax was inseparable from the sales tax, in the sense that it was also introduced by this Emperor, and its proceeds also went to the “veterans Fund”. Sales tax was levied at the rate of 1% from each product sold or plot of land and at the rate of 4% from each sold a slave. When the Romans began to complain about new taxes and inheritance and sales, August was just saying that they can cancel and revert to the old Republican war taxes like charging owners of jewelry and luxury items, such as richly decorated chariots, their value tenfold. After the death of August the rate of sales tax was reduced by half. In 40 ad the Emperor Caligula sales tax was abolished altogether, which caused General rejoicing. Inheritance tax, however, was not canceled.