Taxing Upward Mobility

A recent article in the Christian Scientist Monitor called “‘Upward mobility’ in real decline, studies charge”reminded me how many Americans equate “democracy” and “capitalism.” These are probably the same Americans who are sure we live in a democracy, whereas, strictly speaking, we live in a Republic, not a democracy.

Personally, I suspect that unfettered capitalism is more likely to lead to an oligarchy than to a democracy. In fact, if recent statistics are to be believed, America is moving away from a mobile society where people rise or fall based on merit to a society where people’s fate is largely determined by their birth status, not merit. One has to ask whether democracy is truly possible in such a society. Certainly, equal opportunity would have to take on a new meaning in such a society.

Some argue that taxes attempt to promote the kind of society that America wants. For instance, taxpayers are allowed to deduct the interest and taxes on their home because lawmakers felt that owning a home was an essential part of the American dream. Recent tax breaks for educational expenses and more recent breaks on savings all attempt to promote positive behavior.

If the purpose of taxes is to promote positive behavior, one has to wonder what kind of behavior the government is trying to promote by getting rid of the inheritance tax.

As far as I can see, repealing the inheritance tax because it is an unjust “death” tax will tend to buttress, not bridge, the divide between the “haves” and “have nots” discussed in the Monitor article.

The inheritance tax was originally seen as a way of insuring that America was not burdened with a permanent aristocracy the way Europe was. Yes, the richest families have found ways to get around most such laws, but at least the laws tried to level the playing field.

Today’s aristocracy is based on inherited wealth rather than on inherited titles, but the end result is not too different. If such wealth is allowed to build without any legal restraints, the divide will continue to widen and true democracy will become less and less viable.