April 27, 2005
Relatively unequal
On Marginal Revolution and in the Wall Street Journal, Tyler Cohen does battle with the estate tax. The economist in me mostly agrees with him, especially on revenue—not much doubt that higher estate taxes = more tax avoidance. Yet I find myself uneasy about one key aspect of his argument:
The estate tax does not do much for equality. In fact it increases consumption inequality -- presumably the relevant measure -- by encouraging the rich to spend more money before they die.
Hmm. The distribution of wealth has never been strong on any measure of equality, and things aren’t getting any better. According to Media Matters (taking issue with a factually challenged Wall Street Journal editorial):
In 1979, the top 0.1 percent of taxpayers earned 2.01 percent of total U.S. income; in 1999, they earned 6.63 percent. This group's share of total income more than tripled, while its share of federal taxes paid only increased by a little more than double. Similarly, in 1979, the richest 5 percent of taxpayers earned 20.83 percent of all income; in 1999, they earned 30.91 percent. This group's share of total earnings increased by about 50 percent, while its share of federal taxes rose only about 21 percent.
So you could argue that we need a little less equality. (It’s also worth noting that where inheritances are concerned, consumption equality is a zero-sum game—any changes in the spending patterns of the rich will be offset by those of their heirs.)
The uber-libertarian in me might also argue that any inheritance big enough to be hit by the estate tax is just affirmative action for the children of the wealthy.
Maybe I shouldn’t go there.
Posted by Stephen at 1:41 AM in Economics | Permalink | TrackBack (0)
Trackback Pings
TrackBack URL for this entry:
http://www.disinterestedparty.com/cgi-bin/mt/mt-t.cgi/65
