Yglesias Goes Kos on Small Business
Speaking of which, f— the small businessman. This is exactly the problem posed by obsessive focus on Paris Hilton. I might be an earnest, hardworking dude who works in the store. And somebody might die and give the store to me. The store may be worth millions and millions of dollars. If so, I ought to pay tax on it. Why? Because I’ve just inherited millions and millions of dollars, that’s why. That I’m earnest and hardworking, and that my riches came in the form of a valuable store rather than a heaping plate of gold matters not a whit. What about those sad folks forced to sell the family business? Don’t cry for them. Here you are, you inherit a store worth $X. You owe $Y in taxes, with Y being less than X. So you are “forced” to sell the store, and accept “only” $X-Y as your inheritance. Note that X is a figure in the millions, and Y a small proportion of X. This is a very good problem to have, abstracting away from the fact that someone you love has probably died and this is probably a bigger concern of yours that the tax bill. This is, in other words, a non-problem. The government ought, perhaps, to facilitate some kind of lending arrangement so that people who prefer to keep the store and pay the tax down over time out of operating revenues can do so.
The problems with this argument are manifold. Most obviously, a farm or other small business that’s operating at a small profit would, presumably, not be profitable if it maintained the same revenue stream and expenses plus having to essentially buy back half the business from the government. That would mean, presumably, having to sell the business anyway. Most likely, for less than it’s really worth because of the time pressures involved.
The reason that the “small business” argument is used by death tax opponents and the “Paris Hilton” counter is used by proponents is that the two have a different psychological impact. The idea that something will “only” effect the “rich” is an easy sell, especially if we’re talking about the idle rich. It’s much more difficult to argue that a Paris Hilton ought to get money that was earned generations ago by her relatives. On the other hand, most people are sympathetic to the son ‘s right to take over the business that his dad built up from scratch.
Our society values the family relationship more than the communal one. Most of us believe that spouses and children have more of a claim on a person’s property than does “society.” People work to build up a business at least partly because of the expectation of being able to pass it on to their children. If they’re not able to do that, their incentives are greatly reduced. Why a successful businessman would go on working if his wealth would simply be confiscated upon his death is unclear.
Further, if the argument is that it’s unfair for the sons and daughters of the rich to have it better than the sons and daughters of the poor, then why wait until the death of the parents to do something about it? It’s not immediately clear to me why it’s fine for Paris Hilton to get to live off her daddy’s millions while he’s alive but not after he’s gone. I mean, f— Paris Hilton. (I believe that’s already been done–I’ve seen the video. -ed.)
From now on, people who have a lot of money can only spend it on themselves. If the kids want to eat, beyond a federally mandated “normal diet,” then they have to get jobs. If they want to go to a school other than the governmentally approved “normal school,” then they should have to work for it. Ditto with their clothes, cars, and so forth. Everyone should get exactly the same thing unless they’ve personally earned the money.
Family? F— family.