Tax Analysts Blog

The Mostly Dead Tax on "Swollen Fortunes"

Posted on Aug 4, 2010

As debate rages over the estate tax -- mostly dead but not yet all dead, to use Billy Crystal's distinction from the Princess Bride -- it's worth a glance back a century or so. In August 1910, Teddy Roosevelt delivered his famous speech on the New Nationalism, insisting that government had a responsibility to balance property rights against human welfare. "Normally, and in the long run, the ends are the same," he said. "But whenever the alternative must be faced, I am for men and not for property."

Roosevelt's commitment to human welfare -- defined, at least in part, by equality of opportunity -- led him to support heavy estate taxes.

    The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and in another tax which is far more easily collected and far more effective - a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.
Roosevelt understood that checks on accumulated wealth could prove dangerous, both economically and politically. "I know well that the reformers must not bring upon the people economic ruin, or the reforms themselves will go down in the ruin," he said. But leaving great fortunes unmolested was even more dangerous. "We must be ready to face temporary disaster," he declared, "whether or not brought on by those who will war against us to the knife. Those who oppose all reform will do well to remember that ruin in its worst form is inevitable if our national life brings us nothing better than swollen fortunes for the few and the triumph in both politics and business of a sordid and selfish materialism."

Just some grist for the mill ...

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