The founding fathers of this country, and many of the leaders that followed, watched the wealth accumulated by the early industrialists such as Getty, Rockefeller and Carnegie. Our country’s leaders did not want any person or family to acquire so much wealth that they became more powerful than the government — or so rich that they could challenge it. For this reason, the founders of our taxation system brought this concept to life with the Estate Tax in 1916. In this way, the estate tax, or “anti-accumulation of wealth tax,” keeps us all safe from excessive growth of a small few.
Should we apply this rule to the over-development of corporate wealth? Are some corporations so wealthy and powerful that they, willingly or unwillingly, have undue influence on government policy?
Originally, the government felt it necessary to take much of the wealth you’ve created in your lifetime. Of course, now it’s just a way to bring in more tax revenue. But in the old days, government took as much as 90% of a decedent’s estate. The numbers are much lower now, and in 2010, there is actually 0% estate tax. Wealth accumulation aside, in these very difficult economic times, the estate tax is considered a great way to bring large numbers of dollars into the federal coffers. With the recent passing of George Steinbrenner and other extremely wealthy magnates, more than a few people are mad that the government has missed out on billions.
But the savings by the Steinbrenner family is not the point of this column.
This article is about the “anti-accumulation of wealth tax.” Imagine if Bill Gates or Warren Buffet passed their fortunes on, and they were allowed to double or triple, time and time again. Their wealth would soon exceed that of some of our states, and potentially allow a challenge to the federal government. And even if they did not overtake the government, could such wealth enable the wealthy to “buy” favors that are not in the interest of the citizens at large?
The 1916 Estate Tax focused on the wealth of individuals, and just 25 years earlier, addressed the power of corporations and their ability to manipulate markets and consumers. The Sherman Anti-Trust Act is somewhat of a parallel in intention to the original estate tax. The goal is for no single corporation to become so powerful and control so much commerce that consumers don’t have choices, which railroads them into undesirable situations because of unfair or diminished competition.
But with the recent economic debacle and with the slogan “too big to fail” maybe we’ve created the situation the estate tax was designed to protect against, and the Sherman Anti-Trust Act was designed to prevent. We have laws in our country that are designed to protect consumers. We place the government in a position of being the referee between parties. And although the government doesn’t always do a great job of being a referee, it’s better than a situation where there is no referee, because we have a tremendous imbalance between the parties that come to the table.
Maybe there should be a limit on the size of any single company. Maybe there should be a limit on how much commerce any single company should be allowed to control. Just like we are concerned that no single family gets too big and too powerful, maybe the same principles should be applied to the corporations who are so prominent in our country.
Maybe the giant banks should be broken up into dozens of stand-alone operating units. Maybe the same logic should apply to other industries. Maybe we need to learn from the experience of “too big to fail.”
Originally, only estates of individuals were considered for a death tax. But corporations weren’t as pervasive as they are now, and giant multi-nationals were not contemplated at that time. Entrepreneurs need a healthy environment to flourish and grow – to create concepts that produce jobs. But the environment has become unfriendly to small companies with exhaustive regulation which favors the growth of large companies.
It’s a long shot, and it would be controversial, but maybe we should consider applying the same logic of a wealth accumulation tax to giant corporations. What do you think?