Coping with Big Wealth

The issue of big government still comes up but no longer so often as when Rush Limbaugh had an enthusiastic following. The idea, promoted by a former president as well as that former pundit, was that government is the one and only problem; it cannot be a solution.

Resisting the temptation to be sidetracked on the many ways that government might be too big, it surely is safe to say that not everyone shares the same view; some have even learned about the New Deal. Is a government big only when it taxes to fund projects for the general population or might it also be too big if it taxes to maintain a military and engage in foreign wars? Might it even be too big if it merely intrudes into our lives without good reason?

Enough said on that, but it seems that politically, the contention that government is too big tends to be linked closely to taxes. There surely are other concerns about government than just being too big but to Reagan and to Limbaugh that possibility seemed doubtful. But to this day, the hyper-concern with taxes remains a political reality.

Still, there is a rising consciousness that big corporations and great wealth are much more important concerns than big government. And there is growing awareness that wealth disparity is an important and growing threat to democracy. In the past, proposals for addressing this problem have generally focused on taxing away the wealth but as noted before, that presents a political problem. Too many voters, long proselytized to fear of big government with its ability to inflict big taxes, will oppose any proposal that suggests any tax increases. Even taxes that apply exclusively on the extremely wealthy will be opposed, often by many with little or no wealth.

Inherent in human (and even some animal) behavior seems to display a strong concern for fairness, and to many it simply seems unfair for anyone, even government, to step in and confiscate something that belongs to someone else. Despite this, most people do understand that operating a government does take money. But in the realm of avoiding the corruption to democracy of wealth and power, the argument is not made that the government particularly needs the money (despite complaints about the growing government debt level).

Fueled by the big government ideology, there is a concern that any taxes beyond the very minimum of what is judged essential are simply illegitimate. In particular, many feel that the government simply does not deserve the money from estate or wealth taxes. It is an objection that has surprisingly widespread appeal, resulting in a widespread opinion that someone with wealth should be allowed to decide what is done with their money. It seems best to avoid solutions to problems that require raising taxes whenever possible.

Estate taxes were originally intended to mitigate the corruption of wealth as it accumulates in a family over generations. But recent changes have been made estate taxes especially ineffective, helping to perpetuate an hereditary status for an elite few that resembles what European royalty once enjoyed. Might there be a politically more acceptable alternative to this problem? Might there be some way other than taxes that would prevent such wealth from growing, generation after generation.

Instead of taxing the great estates, we might focus more attention on who is receiving an inheritance. A limit, perhaps of a few million dollars, could be placed on what any single individual could receive as an inheritance. That way, many different parties would receive a relatively small portions of any gigantic estate. Of course there there are issues such as large gifts given to heirs before a death. And some limitation on donations to each of a large nuclear family might be needed. Such implementation details deserve attention of course and they surely can be managed at least to some extent.

There surely would be a debate about on how much wealth can be inherited by a single heir, but the principle is that there needs to be a cap on that amount. This simple limitation would change the way wills are drawn but any cap will cause large estates to be fragmented. With a sufficiently large cap, the concern about forcing small businesses to be liquidated could be avoided; heirs could still be made wealthy by any normal standards, but not so wealthy as to be a menace to democracy.

Worthy, perhaps along with not-so-worthy, charities would probably become enriched as estates pursue a sufficient number of heirs, but still, each such charity would receive only a limited amount of money. Preparing wills could become more difficult.

So perhaps a larger cap should be made to accommodate estates that choose to make large donations to government agencies. In particular, sovereign wealth funds could be established to receive large grants, justified as a way to simplify estate planning in a just manner that spreads the wealth among the general population as a minimum income.