The View From 1776

Inheritance Tax Redux - Part II

The intent of the inheritance tax is to confiscate the capital from capitalism.  Lenin did it a gun point; his American liberal-socialist co-religionists do it via the inheritance tax.

Socialists (American liberals) are fighting to keep the inheritance tax, because it is a symbol for their ideal of egalitarian wealth distribution.  The religious tenets of socialism ascribe all of humanity’s ills to the existence of private property, which throughout history has been unequally distributed because of variations in humans’ interests and capabilities.  Get rid of private property, in socialist theory, and human nature will change; we all will magically have the same interests and capabilities, and aggression, crime, and war will disappear.

Confiscating private property via the inheritance tax is the quickest route, short of armed revolution, to this egalitarian bliss.

In the religion of socialism there is no distinction between capital (savings) and the income from invested capital.  Not content to take the milk, liberal-socialists also want to take your cow.

Because of socialism’s theory that only manual labor can create value, no value is ascribed to the innovator or the entrepreneur who, at great financial risk, develops a new product or starts a new business.  That’s why liberal-socialists call Bill Gates’s income from share-holdings in Microsoft “unearned” income.

From this it follows that individuals or families who have saved over the years and accumulated sufficient capital to invest for the creation of new companies or expansion of existing companies are social parasites whose wealth really belongs to the political state, the surrogate for the workers.

In socialist theory, the planners of the collectivized political state, having no profit motive, will maximize efficiency and benefits, at the lowest cost, to the workers.  The socialist state in which business is regulated or supervised by social engineers will be more productive than a capitalist economy, and everyone will live happily ever after.

But, in the cold light of the real-world dawn, handing over private capital to the political state is the equivalent of taking all your money out of the bank and burning it in your fireplace to produce a brief period of warmth. When the capital is gone, the political state can’t replace it, because the political state knows only how to spend your money. 

Our New-Deal socialist state’s emphasis on consumption as the creator of jobs flows directly from this failure to distinguish between capital and income.  What liberal Republicans and Democrats advocate, when we remove the camouflage from their rhetoric about “investing” in the future, is the impossible proposition that giving people money to spend via Federal grants will, of itself, create jobs and wealth.  In fact, all it does is increase the money supply and feed inflation.

The reality, however distressing to liberal-socialists, is that jobs and useful goods and services are created only when businesses increase production.  Businessmen may ramp up production in anticipation of a new Federal spending program, but there are unpleasant collateral effects. 

Taxes will have to rise, or the Treasury will have to market more debt.  Either will increase business costs and reduce profits, and selling more Treasury debt adds to the money supply and increases inflation.  All of these lessen the incentive to increase production or to start a new business.  Worse, they start the cyclical process that proceeds to an economic recession.

The soundest way to create new jobs and to raise everyone’s standard of living is to support personal savings and accumulation of private wealth.  That means repeal the inheritance tax permanently.  When private investors, and the financial intermediaries investing in their behalf, face risk of loss from poor investments, in real life they make better risk/reward calculations than the social engineers of the socialistic political state, who face no consequences from squandering public funds on PC and pork-barrel projects.

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