Abolish Inherited Wealth

Allowing wealth to accumulate from one generation to another is a recipe for unacceptable inequalities. We should abolish inherited wealth.

Inherited wealth has a massive effect in fueling economic inequality. (Aron Fjell / Unsplash)

In Charles Bukowski’s novel Hollywood, the protagonist Hank Chinaski reflects on the importance of home ownership to his father. “Look,” Henry Chinaski Sr once told him, “I’ll pay for one house and when I die you’ll get that house and then in your lifetime you’ll pay for a house when you die you’ll leave those houses to your son. That’ll make two houses. Then your son will…”

Hank thinks this is ridiculous. What if after accumulating ten houses in ten generations, the eleventh Chinaski gambles them all away? Better to live for the moment.

Anyone who cares about creating a society without landlords should have the opposite concern. What if the Chinaski family’s holdings do accumulate as planned?

In ways much more serious than petty real estate fortunes, inherited wealth has a massive effect in fueling economic inequality — and the problem is getting worse. As of the most recent data I could find, the amount of inherited wealth going from one generation to another each year is up 119 percent from 1989, even when inflation is taken into account. According to United Income founder Matt Fellowes, a “historically unprecedented” amount of money is going to be flowing from one generation to the next in the next few decades.

The right wing has done a good job of demonizing even modest efforts to tax these transfers, branding the tax on large estates as a ghoulish “death tax.” That’s obviously ridiculous. But how would a better society handle the inheritance issue?

Socialists want to take the means of production, distribution, and exchange away from their current owners and bring them under social ownership. Some blueprints for what such a society might look like involve state ownership of nearly everything, or even eliminate money as a medium of exchange.

I’ve argued that a more realistic vision of the kind of socialism we could bring about, without waiting for massive technological progress to solve the logistical problems raised by trying to plan an entire economy, would involve nationalizing the “commanding heights,” taking many important public goods out of the market entirely and bringing the remaining private sector under worker ownership.

These individual elements have all been successfully beta-tested in the real world. But the combination would mean the first society since the agricultural revolution that wouldn’t be divided into a powerful ruling class and a subservient labor force.

If Henry Chinaski Sr had been born into such a society, whatever income he built up couldn’t have been derived from exploitation. That doesn’t mean every penny of it would be his to do with as he liked, since he would still have to pay a significant portion of it in taxes to fund the massive public sector. But he would have a reasonable claim to spend whatever remained however he chose.

Such a society could democratically decide to outlaw individual home ownership, but I have a hard time imagining that. Most working-class people today would be horrified by that suggestion. Nor is this just an eccentricity of American culture: think about Palestinian refugee families who lovingly pass down the deeds to houses that were stolen during the Nakba from parent to child to grandchild, in the hopes that one day the family will be able to return home.

It’s just barely possible that under socialism, when the state (or tenant cooperatives, or a combination of the two) has universally replaced private landlords, global cultural attitudes would shift so dramatically that the majority of the population would be on board with banning home ownership. But what if that doesn’t happen?

Letting real estate accumulate in individuals’ hands is a good way to reintroduce landlordism. Letting very small businesses owned by one person with no full-time employees be passed on from one generation to another could easily reintroduce full-blown capitalism. And existing capitalist democracies have shown us that a sufficiently unequal distribution of wealth will always find some way of translating itself into an unequal distribution of political power.

Banning all inheritance would be too draconian. If your mom dies and she wants to leave you her lovingly preserved packing crate of vinyl Kenny Loggins records, nobody should stop you. And in any case, it’s difficult to imagine a proposed law to do that getting very far in a democratic society. Nor should Clint Eastwood’s character in Gran Torino have been prevented from leaving his beloved car to Bee Vang’s character. It’s even reasonable that Henry Chinaski Sr should have been allowed to pass on a single house so that his ungrateful son could actually live there.

But a just society would have to take a hard line against wealth snowballing from one generation to another.

An Estate Tax of 100 Percent

The way to abolish inherited wealth without abolishing inherited Kenny Loggins records, cars, or personal dwellings is simple: introduce a strict upper limit on the value of assets that can be passed down from one generation to the next. The estate tax on assets beyond that limit would be 100 percent.

In most contexts, a 100 percent tax would be counterproductive. If all or even part of the point of any given tax is to raise revenue, people need an incentive to produce the income being taxed. Existing empirical evidence seems to show that this incentive is preserved even at very high marginal tax rates. But someone who gets literally nothing for producing some extra bit of income has no reason to produce it.

But the point of a 100 percent estate tax wouldn’t be to generate revenue. It would be to create a society not distorted by the effects of intergenerational wealth accumulation. We don’t want anyone’s incentive structure to include the hope of indirectly enhancing their children or grandchildren’s income.

Some centrist and right-wing critics would argue that this is counterproductive in itself. Doesn’t a dynamic economy need the hope of intergenerational wealth accumulation as a motive for productivity?

The first thing to say about this is that the people who end up having huge estates to pass on to their children are the ones who arrange what’s produced and how, but they aren’t doing most of the actual work, whether we’re talking about menial labor or research and development. And even under capitalism, many voluntarily childless people are strongly motivated to excel at their chosen careers and produce wealth. So the point shouldn’t be exaggerated.

That said, it’s certainly true that people with children usually care a great deal about what kind of lives their children will lead. Realistically, empowered workers in socialized businesses would be intensely interested in how their decisions in the present impacted the lives lived by their children in the future.

But this isn’t a reason to preserve inherited wealth. It’s a reason to abolish it. We want to live in a society where people know that, beyond passing on personal possessions, the only way to provide economic comfort and security to their children today is by lavishly funding public goods that will also guarantee the economic comfort and security of everyone else’s children tomorrow.

Abolishing inherited wealth, in other words, is a good way to safeguard the collective inheritance of every new generation.