There’s an old joke, about a man who propositions a woman. He asks, “Would you sleep with me for a million dollars?” She says “Sure.” He replies, “OK, how about for twenty bucks?” Outraged, she responds “How dare you! What kind of woman do you think I am!?” He notes “We’ve already established that, the rest is negotiation.”

People tend to view riches and great wealth through a different prism than they do mundane money and income. This fact was probably at the fore of Hillary Clinton’s mind when she unveiled her new estate tax plan. The details reveal a massive and progressive increase in all aspects of the tax, along with an elimination of the basis step-up. Hang onto that last point for a moment – that’s the real doozy.

The vast majority of Americans never have to contend with the death tax. Today, it only applies to the portion of one’s estate (the sum total of all one’s assets at time of death) in excess of $5.45 million (and spouses inherit without paying any tax). One source reports that fewer than 1 in 700 pay any estate tax. Thus, it’s a tax on a very small minority of the populace, and thus, there are very few with a personal stake and thus inclined to squawk about it. Money-hungry politicians love these sorts of taxes, because they’re an easy sell to the masses. They rely on our apathy and distaste for the scions of the wealthy, who are stereotyped as dilettantes and overcoddled wastrels with few redeeming qualities.

Supporters of the tax typically offer arguments that include “the wealthy must pay their fair share,” “the inheritors have done nothing to deserve the money,” and “society has an interest in preventing dynasties.”

First – the wealthy already do pay their “fair share,” by any non-greedy definition of “fair.” Their income tax burden, in the aggregate, is greater as a percentage of their income and as a percentage of total taxes paid, than all other income brackets. Furthermore, the estate tax hits “wealth,” i.e. money and assets accumulated over a lifetime with income that has already been taxed. It is thus a double tax on income.

Second – the inheritors are typically the children of the deceased. I find the notion that the state feels greater legitimate claim to a parent’s assets than it grants that parent’s children morally abhorrent. Human beings are hard-wired to care for their offspring. Parents want the best for their children. They work harder and save money so their kids can have better lives than they did, and they have done so since the beginning of time.

I must study politics and war that my sons may have liberty to study mathematics and philosophy — John Adams

For a supposedly well-intentioned and enlightened person to claim that those children don’t deserve whatever their parents have accrued is deserving of a string of expletives I shall not share here. This idea is the worst sort of selfish envy, and nothing more. It is merely a cloak of false righteousness meant to cover the fact that some people want to steal from others.

Third – the “dynasty” argument is nothing but a straw man, another cloak of false righteousness meant to mask covetousness. There’s an old proverb:

Shirtsleeves to shirtsleeves in three generations

that has existed for centuries in various forms in many cultures. It reflects a reality: dynastic wealth tends to fade. Whether by a reduced degree of skill and competence, less drive and motivation, carpe diem excess, or simple dilution across an ever-growing number of offspring, wealth lacks multigenerational persistence. Society doesn’t need an estate tax to kill off dynasties, even if there was a morally justifiable reason to do so (there is not).

All the justifications, all the pseudo-moralizing, all the high dudgeon about how evil the super-wealthy (oh, wait – just some of the super-wealthy), is nothing more than cover for politicians stealing more of what people have earned. People have been hammered by this class warfare for so long that many have been convinced they’re good and proper moral citizens when they support the death tax, but there’s no justification for this sort of theft.

Now, lets touch on one pro-death-tax argument that I did not yet cover: unrealized gains. People argue that, without a death tax, assets would cross generational lines without incurring taxation. In response, I say, so what?. What’s the difference, other than as an excuse to take other people’s money? If and when those assets are sold, they’ll be taxed. And, since the shirtsleeve-to-shirtsleeve phenomenon is the norm, that’s going to happen at some point.

Here’s where Clinton’s proposal gets insidious. Consider the current state of the death tax.

Lets say you purchased $10,000 worth of Apple stock in 1994 and still own it. Today, it would be worth about $1.1M. If you die today, your Apple holdings would be assessed at their current value, not at what you paid. That adds to your estate total, and you’ll be taxed at a 40% rate for the amount in excess of the exemption. In exchange for paying the death tax, your Apple holdings receive a “stepped-up basis,” i.e. their baseline value for tax purposes will be $1.1M. If your inheritors sell the stock tomorrow, and the price doesn’t change, they would not have to pay the capital gains tax you’d have incurred if you sold the stock yesterday. That’s a rational compensation for having to pay the death tax, and, in fact, it works to the benefit of people who inherit estates below the exemption threshold.

Clinton’s plan would not only increase the cap gains tax rate on the super-wealthy, it would eliminate the stepped-up basis at death. THIS is where those of you who don’t care about soaking the rich should perk up and start to care. Your inheritors would not receive the stepped up basis on your assets. So, if they sell your house (perhaps because they already have homes of their own), they’ll incur the full capital gain from the price you paid for it.

The stepped-up-basis elimination is the dirtiest part of this proposal. The plan is being headlined as a means to take only from the super-wealthy, so it hides the fact that it’ll bleed just about everybody.

And, since the plan’s thresholds aren’t indexed for inflation, its impact over time would grow. In this, it’s much like the Alternative Minimum Tax, which was originally written to tax only about 150 households in the entire nation, but which now affects millions.

Clinton’s death tax proposal is unabashed grave-robbing. It’s vile, it’s immoral, and it’s reprehensible. It’s also no surprise. Big-government politicians have proven, time and time again, to be vile, immoral and reprehensible.

• About the Author

About Peter Venetoklis

I am twice-retired, a former rocket engineer and a former small business owner. At the very least, it makes for interesting party conversation. I'm also a life-long libertarian, I engage in an expanse of entertainments, and I squabble for sport.

Nowadays, I spend a good bit of my time arguing politics and editing this website.

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