It is good to see a debate on this.

I might want to discuss further the idea that rich kids take more risks than kids who are not rich. This might be true - I am not sure. Are there studies on behavior of kids from wealthy families?

It should be noted that lots of risk-taking innovation and invention are sparked by necessity as much as by riches. People that inherit lots do not need, so they may be less likely to invent or take risk. People with tons of money become afraid of new things because it might be socially embarassing or risky (they become risk-averse). Risk-takers may have had no choice but to take risk. Companies like "Yahoo" and "Google" were started on the west coast. I am not for certain on the background of the founders, but I do not think they were necessarily rich. I can imagine there has to be at least one wealthy person in the city of Chicago (inherited or earned) that would chuckle if you would have told them 10 years ago there would be billion dollar Internet companies called "Yahoo" and "Google".

People with moderate or limited means may be more likely to go through economically difficult situations and tough times unknown to people with inherited wealth. These difficult situations may prepare them for breakthroughs.

"An ideal tax from an economic standpoint is one that generates substantial revenue without distorting the allocation of resources."

This is only the ideal if you first assume that the initial allocation of resources is fair and correct and therefore does not require a redistribution to stop people from dying on the streets of typhoid whilst the judges and politicians and tycoons party at Harvard.

"But on the other hand the creation of centers of private power acts as an offset to growing governmental power and so may actually serve to preserve liberty."

Ok, honestly Posner, that is the most wacky thing I have ever heard you say. I know the 1890s were a long time ago, but it has NEVER been the experience of history that centers of private, hereditary power have operated to "preserve liberty" for anyone except for members of the dynasty.

The government is getting too powerful so lets give power instead to UNELECTED, unassailable wealthy elites?!? There goes accountability to the People, oops... and the rule of law NOT MEN... I guess it could be said that it is easier to kill the rich than overthrow the government, but you've just hypothetically ceeded police power to the rich, so presumably they become the government. Hail Bush Ceasar!

Of course the dynasty trust should be opposed! It is just the latest loophole in the idea that dead-hand control is inferior to living judgment and that genetics do not convey either moral or intellectual authority to govern.

Do you, after all these years of trying cases, reading history, hearing news... do you actually now believe in the benevolence of the rich? We may differ on the economic utility of wealth accumulation, but can't we agree that much of the industrial activity of the rich pollutes, oppresses, and ultimately works the poor to death? Even if you believe that government power leads to tyranny, what possible justification is there for trusting the wealthy with the power to check that tyranny. Private power also leads to tyranny.

Ideally, Paul Allen has one vote, Posner has one vote, and I have one vote. I can stop either Posner or Paul from oppressing anyone simply by siding against the oppressor. Paul Allen has Billions, Posner (I assume) millions, and I have hundreds. Economically, Paul can oppress either of us, and either Paul or Posner can oppress me, and there is not a single non-revolutionary thing I can do about it.

"But if they don’t work as hard, they will lose jobs to the poor."

That is also unlikely, no one born rich has ever worked hard in the sense that the poor do. What a decline in social mobility MEANS is that despite the sloth of the born-rich, favorable legal status has been granted to their fortunes, and they are immunized from losing their jobs to the poor even if their approval rating is at a record low.

It amazes me that the Wall Street Journal would be publishing on the decline in social mobility as if it was a suprise. The top tax rate has been lowered from 70% in 1967 to 31% now, and income inequality has risen to the highest level since the 1880s and 1920s. In fact it may be higher by now, as expresed in share of wealth controled by the top 1% of people. As wealth becomes more concentrated, mobility decreases... duh... what do they teach in business school anyway?

I apologise for the acrid tone, but come on, just once lets hear about something like homelessness or public school funding or labor relations.

Corey, as usual, is wrong in almost every particular. I won't bother to comment on his self-refuting nonsense. Rather, let's look at the facts. The successful in America almost all got there by working harder and having more ingenuity than their competitors--this hard work and ingenuity helps create more opportunity for others, but let's ignore that. Throughout their lives, this group is generally taxed at a higher rate than anyone else, and pay, as a whole, easily more than half of all income taxes. But that's not enough for some. They wish to ghoulishly hound these people for their money after they die--half again everything they've made throughout their heavily-taxed life.

It's hard enough to justify a graduated tax. Those who think because their one vote equals Paul Allen's one vote that it's a great thing to vote other peoples' money for themselves have gone beyond the bounds of decency.

Let's not forget a major reason people try to do well is to provide for their family. If you take away that incentive, or force them to spend their later years figuring how to avoid being taxed, you greatly cut into efficiency.

Dumb dynasties will dissolve soon enough. Who cares. Rich people shouldn't fill anyone with greed or envy in a land of opportunity. After all, what's happening here is the fulfillment of the wishes of the original moneymaker, who worked hard and helped society in doing so--his wishes should be respected, not the government's greed.

If you want a perfectly efficient way of breaking up dynasties of wealth and power, randomly shuffle newborns in hospitals. Otherwise, all the time and energy spent in this useless hatred actually makes our society less wealthy.

Interesting post; I'm sure this will start an avid discussion.

In my opinion, to objectively discuss the estate tax, we should largely divorce the question of the estate tax from the larger question of wealth distribution in society. The estate tax will not dramatically alter the distribution of wealth from the rich to the poor, because most rich parents will pass on the bulk of their wealth during life (as Judge Posner notes). But it might have a small redistributing affect, which can only be good, if the threshhold for the estate tax is high enough.

Still, that is not the true issue here. The true issue is whether the estate tax is an efficient way for the government to raise money. If it provides 1% of our revenues and is as easy (or easier) to collect as other taxes, then why not have it? In fact, in a "libertarian" sense, it is better to tax the dead than to tax the living. And no matter how entitled they may feel, the children of the rich have no "right" to their parents' money.

If the estate tax is not an efficient means of collecting money, a progressive income tax, or perhaps a "wealth" tax, might be superior and might have a more profound redistributive effect. The bottom line is that the government needs to pay its bills, and the money needs to come from somewhere. Taxes cause the least pain to the fewest people if the government collects the bulk of the money from those who have plenty to spare, with the caveat that taxes should not be so high that they discourage innovation or productivity. The fact is, if we want to balance the budget, we have to tax the rich. It's just a question of how.

"Rather, let's look at the facts. The successful in America almost all got there by working harder and having more ingenuity than their competitors"

Oh, that's a fact now is it? Well gee. That's right, and VHS was a better technology than Beta, and MSDOS was the best most bug-free software available to IBM at the time... and the railroad tycoons didn't benefit at all from massive land grants from the government. It was all the time spent pounding spikes into the ground that made JP Morgan rich. Those college kids that started yahoo were the only college kids in the world with the insight to play with this thing called the internet! Oh what were the rest of us thinking! They didn't win because Yahoo! is more fun to say than Lycos or Excite... no, they were more hardworking and ingenious!

Thanks for clearing up the facts for us. I had forgotten that in America, the rich are our gods.
I hear that if you are really nice to them, sometimes you can get a small research grant or a bonus so you can buy a used Lexus. Neat!

The rich are heavily taxed because they are heavily rewarded. I'm sorry that they stuck Horatio Alger so far up your... nose. Does it hurt when you think?

I have patents, or rather, companies I used to work for have patents on stuff I helped invent. I was so busy putting in 80 hour weeks that I barely noticed the appropriation. So it is a fact that since I am hard-working and ingenious I am rich right?... Thanks for straightening me out.

"Rich people shouldn't fill anyone with greed or envy in a land of opportunity."

The point is, if social mobility declines, (which it is) then it becomes actually no longer a land of opportunity except in myth and song. I submit that it never was in the sense that people believe it to be.

If you people truly believe in the deservedness and benevolence of the rich then nothing I can say will make sense to you. I am aware that it makes you very angry to have core myths about America called into question.

Corey’s not going to like what I have to say, but I would contend that the rich can in fact sometimes be inefficiently too benevolent. My experience has been that large amounts of wealth tend to create cycles: (1) hard-working person instills in his child a strong work ethic, (2) child works hard and makes a lot of money, and if he is lucky and works hard to use his luck well makes a very large amount of money, (3) grandchildren grow up wealthy and they and/or the ones after them either turn to a life of luxury and spend down their inheritance or become very idealistic and start foundations and endowments to further their idealism. In my experience, that last stage happens more often than not–if not the third generation than the fourth or so. For example, I know a number of Duke grandchildren (of Duke University fame, after the billionaire tobacconist), and a good number of them are very idealistic and work on behalf of the university and the family endowment. Other examples include the Fords and the Carnegies, etc. Ray Kroc’s wife recently gave an enormous amount to NPR, to state another example.

The consequence of the abatement of the Rule Against Perpetuities, see the article Judge Posner linked, is the establishment of this sort of “private nobility” that has lots of wealth preserved in charitable and academic endowments. This private nobility lives off of these endowments, a quasi-nobility which includes academics and graduate student legions (which I used to be). Anyway, I think that NPR will probably become more like this elitist group, now that can engage in unfettered idealism, unhooked from market realities. I think these “private alternatives” to government largesse, which is inefficient and wasteful enough, have their own big problems, whether they be academic, journalistic, or humanitarian ventures.

The greatest liberation of the poor is the free market and the opportunity to create a little nest egg, own a home, and create value that has property rights. A lot of this estate tax debate is mainly over principles, not actual dollars (I agree with Prf. Becker there).

You can cite examples of rich people acting benevolent, in fact you could even say the estate tax is an incentive for benevolence. There are however, plenty of counter examples. The Waltons give away a tiny percentage, the Bushes have concentrated money within the family with remarkable success.

Interesting that Posner mentions the Kennedys and Soros but does not mention the Bush family, certainly our best most recent example of hereditary money elevating people who would not have got there alone. How many businesses did W run into the ground before he switched to politics? (Where _other_ people have to pay for one's mistakes.)

I find it amazing that someone could look at the story of W and find hard work or entitlement. I see the gentleman's C and more failures than anyone should be able to make in such a short time. We should remember here that we are talking about estates, so that we must not only believe that large sums of money are originally earned in a meritorious way, but that this merit somehow passes genetically to offspring. In other words, you have to fuse the "land of opportunity for all" with eugenics.

"The greatest liberation of the poor is the free market and the opportunity to create a little nest egg, own a home, and create value that has property rights."

If only that were true. Those points in history when the economy was least regulated correspond to the times when the poor were the worst off. We had something approaching lassiez-faire in the 1880s and 1920s, followed in each case by a decade of horrendous deprivation.

Poor people are not interested in liberation, they are interested in obtaining power, and that means money in the free market. Liberty is irrelevant without the resources to exploit it. Go tell a homeless person that they have the opportunity to become the next Bill Gates if they would only start saving a nest egg. I am sure they will be encouraged by your message of hope.

Incidentally, I have no quarrel with philanthropy. While I would not have made some of the funding choices that the Bill and Melinda Gates foundation has, I am happy to see 20-some billion dedicated to social causes.

I view the estate tax as a establishing a norm for philanthropy rather than hereditary dynasties. Certainly people who are not generous by nature will attempt to subvert the tax and pass on their divine right of wealth, but they can be only partially successful in the current system.

I would be for lowering the tax on non-family gifts and closing the loopholes on the death tax. This would please all those people who think private charities are more efficient than government run social insurance, and it would respect the right of the rich to decide how to redistribute their good fortune, with only one limit on the (I say socially undesirable) tie of wealth to genetics.

Certainly, I would not tell a homeless or even poor person that they just need to work hard and then be the next Bill Gates. That is a facially absurd insinuation. I would tell that person that, as long as they are not infirm of limb, they can work themselves to an established residence, good food on the table, and the ability to save for the future.

One thing I think is being missed here is that if a bunch of money is in a wealthy person’s hands, that does not mean that this “value,” which is essentially stored rights arising from prior value generation, does nothing. Either two things happen: the wealthy person spends it, which then obviously employs people usually much less wealthy than he, or he invests it, such that less wealthy people can have access to capital for buying a home or investing in their small business or buy a car or something. Both of those things benefit the poor, and probably are more beneficial than charitable handouts in the long run. So, it is plausible to argue that capital, in the long run, is better left in the capital markets and in commerce rather than socked away in a perpetual trust fund or funneled through inefficient government. If, for example, a wealthy person builds a large house, that is (1) architecturally beautiful, (2) a great place to live, and (3) employs a whole lot of people in the process.

"If you want a perfectly efficient way of breaking up dynasties of wealth and power, randomly shuffle newborns in hospitals."

Though that is a good start, it would take more than that.

1. Confiscate several sperm/ova samples from each citizen. Then sterilize him/her.
2. Randomly pair sperm with ova.
3. Give out randomly selected embryos to only those couples approved and licensed by the state as likely to rear good citizens. (They'd have to pass whatever tests/meet whatever criteria, including IQ tests.)
4. Eliminate all inheritance, but provide each baby with a grant of $x (untouchable until the age of 18; part stocks, part government treasury bills, part annuities, part cash).
5. Universally free education from k-Ph.d, including tutoring, and the absence of non-standardized methods of grading, with confidential scorekeeping. (In other words, pure merit, without the ability to blackball someone who took ten times to pass a test instead of once.)
6. Removal of children from private households from age 12-18 for education in a massive state-run school. In other words, k-6 grade would take place in local neighborhood elementary schools, and 6-12 would take place in one well-funded state school/community (with a population in the millions).
7. Limit admission to the teaching profession to doctorates with exceptional math-test scores and abnormally high IQ.
8. Mandatory military service between ages 18-21 prior to admission to college/university.
9. Elimination of non-profit status for all organizations, including churches and charities.
10. Link income taxation to age. The older you are, the higher your taxes.

"If, for example, a wealthy person builds a large house, that is (1) architecturally beautiful, (2) a great place to live, and (3) employs a whole lot of people in the process."

Thanks! And here I thought trickle down was discredited.

You forgot to mention the jobs said wealthy person creates in their fields picking cotton.

The fundamental question should not be, "what is the most economically efficient allocation?" Rather, the question is "what minimum guarantee of social well being will we make for everyone in our society?"

By your argument, efficiency might be maximized by a fascist tyrant controlling all macro-decisions about production and distribution. If trickle down works then it would work better under a Franco.

Democracy is inefficient in the sense that it requires deliberation and consent in order to exercise power. This "inefficiency" has tremendous value in preventing arbitrary tyrannies because it is often difficult to get people to agree to oppress. Many people here, in your technocratic quest for efficiency, risk optimizing out good/valuable checks on power along with the bad impediments to progress.

Also, it is wrong to assert that direct charity in inferior to investment targeted to grow the economy. Those two things serve different moral purposes. Direct charity gives autonomy and choice to those who would not have it otherwise because of their circumstances. Investment hopes to benefit all in proportion to what share they already have in the economic system. A preference for trickle-down over direct gifts merely expresses distrust for the poor. Its the same logic that leads people to be willing to give a hamburger to a homeless person but not $5 becausee "he might spend it on booze." This is a paternalistic approach, ill suited to people who profess to be interested in autonomy. I've watched many people walk out of Habitat for Humanity orientation when they learn that people for whom the houses are built are not prevented from selling them. Why shouldn't they sell them? The people walking out could sell their house at any time. Why is charitible intent often conditioned on desire to control the choices of the beneficiary. This is a key issue when talking about the estates.

Trickle-down occurs in a market that is structured and controlled by the haves for the presumed benefit of the have nots. Direct charity (at least when not coupled to religious pre-conditions) is undertaken to equalize participation in the setting of market structure.
I say that for this reason direct charity is STRONGLY prefered.

Commenters here have touched on, without really stating, what I think is the best part of the estate tax: it encourages the wealthy to give to charity. An about-to-die millionare has a choice: (1) anoymously pay the feds gobs of money, or (2) buy fame and gratitude from the unwashed masses. A few opt for (3) pay lawyers to figure out how to swindle We The People. I've seen it suggested that the estate tax is part of why the United States has led the world in charitable giving.

An ideal tax from an economic standpoint is one that generates substantial revenue without distorting the allocation of resources.

Sometimes we want to distort behavior (whether that translates to "allocation of resources" or not), as in the case of heavy taxes on cigarettes (to discourage smoking). I think the estate tax discourages another kind of bad behavior: hoarding. Society as a whole does not benefit from extreme wealth concentration.

Kyle, I don't want to come off as someone who is oblivious to the concern you're stating, but just for the sake of argument, what in fact *is* the wrong that comes from wealth concentration? Take a world in which there are no estate taxes at all. That means some people get major bequests and others do not. That may have some unfairness to it, but honestly, we all know that a market economy will usually end up with more and less wealthy people, given that people differentiate themselves with respect to work ethic at the least.

So what? Unless one postulates some sort of "hate-the-rich" complex, there should be no problem with one person being employed by another person whose parents may have worked extra hard and maybe had a streak of luck that they used wisely. In the end, the poor person has a job that is probably better than the opportunity cost. The alternative is either locking the money up into a perpetual charity trust, which has problems of its own, or government largesse given to that person. Such programs reduce the incentive for the parent to work in order to benefit his children. Those that get the super-bequest will either (1) save it, which benefits capital markets, (2) spend it down, which then puts the money back into the economy through consumption, or (3) give it away (hopefully not to a perpetuity).

I just don't see a problem with it, absent some ressentiment issue. And in the end, it engenders greater efficiency, which benefits everyone through lower prices and greater access to goods and services.

The question was not directed to me but... The harm is that concentrations of wealth, as they get more extreme, become concentrations of power.

Concentrations of power are undemocratic. Full stop.

To the extent that anyone in this country still believes in democracy, they should be concerned about the extent that concentrations of wealth distort political and economic equalities.

As I said in my lengthier post above, efficiency is not necessarily the best original postulate on which to base a system of control.

One might counter that our system is not a democracy but a representiational republic, and we have always collectively ceeded power to a father figure in the political or economic or celebrity realm.

That is all well and good, but totalitarian states are also representational in the sense that the tyrant claims to represent the will of the entire people. The system needs populism to pull back towards finer granularities of representation.

Wealth Inequality is the result of the tendency of power systems to concentrate into strong central control. Egalitarianism derives its moral authority from countering that trend.

Imagine a town with one Bill Gates and a thousand people below the poverty line. How many can Bill employ before he thinks he's wasting his money? What incentive does he have to share anything with any of them? He has bread on the table and enough money to keep it there for 100 years after he's dead.

The real world is more complex than that, and real rich people don't just sit on a pile of money and refuse to spend any more than necessary, it's true. Nevertheless, the way I see it, a man with more bread than he can possibly eat is a problem especially when there are men with no bread to eat at all. If everyone meets some minimum standard of living, if there are no starving, no untreated sick, then it doesn't matter to me who has the biggest pile of money or how much larger it is than the smallest pile. Until that day, however, there's something wrong, and it's more wrong when there are folks who are very able to do something about it, but don't.

The "rich employ the poor" line is all well and good, but at some point Bill has so much wealth that it's difficult to spend on anything worthwhile. The only way "trickle down" keeps working is if he's giving some pointless makework to everyone in town to justify feeding them.

I know that wealth is created daily, but it's still a zero sum game at any given time. Those bajillions in someone's vault are absent someone else's dinner table. More wealth in fewer hands means more hands with less wealth. That translates directly to people who can't afford to care for themselves as well, live less, suffer more.

As I said, I understand providing an incentive for people to work. Wealthy people spending their money into the economy is good for everyone. I don't think we should force them to do it, but I do think we should correct their behavior when they're done misbehaving.

Kyle, your answer misses a fundamental and unavoidable point in both of my previous posts--that saving money, whether in a bank or in a riskier investment, loans that capital out and attempts to find the most efficient uses of others' labor to maximize returns. Those 1000 poor people are going to borrow from Gates, who will be happy to loan them money, and they will then produce goods and services for each other through trade. It's almost as if you think that humans were helpless before charity and government. Even if Gates lent them zero money, they'd find an alternative currency out there and start trading and doing productive things to make a living with. This much is basic economics, as I see it.

That also shows why this zero sum proposition is completely baseless. Even if Gates has every last penny in your scenario, that does not mean that the other 1000 people are doomed to starvation.

I would also challenge Corey to give me a reason why wealth inequality is inherently undemocratic. Everyone has one vote, rich and poor alike. The rich have more money, but the poor have more votes. It's a balancing act that has existed since classical Greek times. It's worth discussing, but calling capitalism inherently undemocratic will require a good deal of quality analysis that I haven't yet seen.

Somewhere along the line I messed up and posted on the wrong blog. Oh well, as other for the other comment - ignore it. ... here goes again:
Has Thorstein Veblen become relevant again (The Theory of the Leisure Class)? I thought his works had been burned at Linnea's statue years ago. There appears to be only one true road to wealth conservation/accumulation, holding on to what one's got and not letting it slip away. Hence the constant political battles, not to mention the creation of loop-holes in legislation. Tax cuts; income, estate or otherwise; Hmmm, who what and where is the lobby and who truly benefits?

I've lost track, what's the budget deficit running at now; local, state and federal? And I won't even mention the trade deficit. Greenspan must be sweating bullets.

Even if Gates lent them zero money, they'd find an alternative currency out there and start trading and doing productive things to make a living with.

My hypothetical "wealth" is meant to emcompass all currencies, so what you're saying sounds to me like, "when Gates has all the bread, they'll just eat dirt."

Even if Gates has every last penny in your scenario, that does not mean that the other 1000 people are doomed to starvation.

In my scenario, it does. If you pretend, on the other hand, that there's untapped wealth (like farm land) somewhere that Gates doesn't have, then, sure, the poor can haul themselves up by their bootstraps (unless, of course, they're paying heavy taxes for a government that mostly benefits Gates).

Those 1000 poor people are going to borrow from Gates, who will be happy to loan them money, and they will then produce goods and services for each other through trade.

This is the same as "Gates pays for work" except with a middleman. Gates needs nothing. The poor have nothing. Why risk?

I like the "it just gets invested anyway" idea, but I don't believe it. To me, when Gates buys stock in a company, that's not much different from buying gold coins. His wealth hasn't gone anywhere; it's just transmuted. Only through buying perishables (food) or services (gardening) does wealth really change hands because wealth is only really created through work, not trade. Loaning money only "creates" wealth in that it induces the guy in debt to do more work than the lender did to get the money lent. It's accounting mumbo jumbo that hides the real work.

And frankly, all this talk about economics seems off-topic to me, believe it or not. The fact remains that an estate tax encourages charitable giving, and that's good.

I would also challenge Corey to give me a reason why wealth inequality is inherently undemocratic. Everyone has one vote, rich and poor alike.

Campaigns cost money.

The original topic was the estate tax, yet now we are discussing campaign finance reform? They are analogous, but not how Corey thinks.

THE ESTATE TAX

The estate tax is favored by cynical politicians who know that heirs of multimillion dollar estates are outnumbered by non-heirs. Thus, more voters benefit from the estate tax than lose out.

These cynical politicians are usually populists, and so are on the Left. Their campaign and fundraising rhetoric slurs heirs as greedy and undeserving. After all, heirs didn't earn their inheritance.

CAMPAIGN FINANCE REFORM

The campaign finance reform upheld by the Supreme Court was primarily funded by non-union tax-exempt liberal activist groups that wanted corporate money out of elections. (It is true that some conservatives supported campaign finance reform, but that is because they sought to restrict unions.) Campaign finance reform was promoted with the same populist rhetoric: the little guy loses out if the greedy rich are able to spend their dollars how they choose.

CYNICISM: BRINGING DEMOCRATS TOGETHER

In both cases, the Left benefits politically by restricting the use of capital by rich private persons, natural or state-created. First, corporations and rich individuals have less money to spend on elections and lobbying for free market policies. Second, the extremist rhetoric keeps Leftist politicians well-financed and in office, because extremist rhetoric energizes the far Left, which maximizes the number of small "hard money" donations incoming to tax-exempt liberal groups and the coffers of liberal loudmouths like Chuck Schumer.

The problem with these cynical pro-Democrat policies is that Democrats are corporate too. One of the Leftist critiques of Kerry was that he was beholden to corporate interests. For example, his brother brokered deals with the telecommunications industry, which has to be the most oligopolistic industry there is. If you don't like the cost of your cell phone bill, and can't find a competitor with a substantially different contract, or you remember when cable didn't have commericials, you know what I mean.

As I think someone on here already tried to point out, what assists poor people is -- lo and behold -- cash. Cold hard cash. An infusion of capital. Restricting capital and restricting credit in place of capital does not help poor people. Making it harder for poor people to invest in the stock market does not help poor people. Making it harder for poor people to purchase bonds or secure mortgages with low interest rates does not help poor people. Raising prices at the market does not help poor people. Raising the taxes of poor people does not help poor people. Can you guess from this paragraph what the effect of restricting capital, increasing government regulation and maximizing federal litigation against corporations is? Now can you guess what the agenda of the Left is?

HOW TO HELP THE POOR, WITHOUT HYPOCRISY

The way to improve the lot of poor people is to grow the economy. Don't take my word for it, take the word of Professor Bhagwati of Columbia University, who used that very strategy while an economist on the Indian Planning Commission to raise the minimum income of India's poor (defined as the bottom 30% of India's wage-earners). He is quite explicit in "In Defense of Globalization" that:

"[G]rowth was not a passive, trickle-down strategy for helping the poor. It was an active, pull-up strategy instead." p.54
...
"[G]rowth had to the principal (but, as I argue below, not the only) strategy for raising the incomes, and hence consumption and living standards of, the poor." p.54
...
"A suitable growth policy can always nip the immiserating growth paradox in the bud, ensuring that growth does amount to an increase in the size of the pie." p.55
...
"We must also improve the poor's access to investment by making sure that bureaucrats are replaced by markets wherever possible. As I remarked earlier, the anti-market protesters do not adequately appreciate that, as has been documented by numerous development economists who have studied both the working of controls and the rise of corruption in developing countries, far too many bureaucrats impose senseless restrictions just to collect bribes or exercise power. Letting markets function is therefore often an egalitarian allocation mechanism." p.58

I ask you this, my friends. Do campaign finance reform and the estate tax "let the market function"? If not, why is Corey opposed to an egalitarian allocation mechanism? Isn't he supposed to be an egalitarian? Or is he just an elitist in populist clothing?

POSNER: "Were the estate tax abolished, the revenue it generates would have to be made up by some other tax, which is as likely to be as distortionary as the estate tax and would invite avoidance efforts by tax lawyers."

Not if we cut spending and reduce the size of government to let the private markets fill in the void.

POSNER: "There is a traditional concern with dynastic fortunes—that is, with accumulations of wealth that are so great that they confer disproportionate political power on a family."

How is a dynasty different from a church, a corporation, a political party, a non-profit, an NGO, a union, a public interest litigation firm, or a movie studio? They are all immortal, can amass great wealth, avoid taxation, and influence public policy by targeted expenditure of that wealth. Collective power is collective power, isn't it?

KYLE: "If everyone meets some minimum standard of living, if there are no starving, no untreated sick, then it doesn't matter to me who has the biggest pile of money or how much larger it is than the smallest pile."

Doesn't it depend? What if you're starving because you gambled away all your hard-earned cash? What if you're sick because you refused to purchase health insurance you could have afforded? What if you're sick because you ate lots of lobster and steak and refused to exercise and now you have heart trouble? What if you're starving because you spend all your cash on expensive sneakers and cars? Can someone really claim to be starving and sick when he has cable and over a hundred compact discs at twenty bucks a pop? It seems that everyone in the United States lives at a minimum standard of living that is much better than that of most people in the world. Is your minimum relative to? Or is it objective? Does the line keep changing as the economy keeps growing? Why aren't basic public utilities like electricity and sewage and indoor plumbing considered a "minimum standard"? I can tell that you have never worked for Peace Corps!

COREY:"Concentrations of power are undemocratic. Full stop."

Then our Congress must be undemocratic, because it has all the legislative power, according to Article 1.

There's a simple reason that the wealth of young families in America has been steadily declining since the '70s, and estate taxes have nothing to do with it.

It is because of the racket known as urban planning. Local government and its planning agencies are, by and large, owned and operated by local residents who already own nice houses. Naturally, they want the prices of those houses to continue to skyrocket. So they use the planning agencies to insist that almost no housing be built, and that that little be the condos and apartments prescribed by the pseudo philosophy of "Smart Growth".

While they're at it they also insist that most of our gas-tax funds be wasted on transit that nobody will ride, instead of the new and widened freeways that we desperately need to relieve congestion. After all, in the cartel's view, if you don't already live in [insert city name here], you don't deserve a say in its policies, and you certainly don't need to move here. Never mind the fact that job growth, plus the deliberate housing shortage, will force millions of people to commute into the city, it's "theirs" and they don't have to let it grow.

We need the federal anti-trust enforcement people to go after the urban planning industry, and the groups whose secret agenda is to keep the cartel all-powerful, such as the Sierra Club. As long as the "I've got mine, you can live somewhere else" people control local politics, it will continue to be impossible for most working families to afford to purchase a house -- despite huge amounts of land which are now going to waste.

What if you're starving because you gambled away all your hard-earned cash?

Gambling is considered by experts to be an addiction, like alcoholism. I support treatment.

What if you're sick because you refused to purchase health insurance you could have afforded?

Ideally, opting out of health care would not be an option (sort of like opting out of retirement planning isn't an option with Social Security).

What if you're sick because you ate lots of lobster and steak and refused to exercise and now you have heart trouble?

You seem to be implying that those who knowingly don't care for themselves do not deserve the care of others. Is this behavior OK if the patient is ignorant of the consequences? What do you do with people who became addicted to cigarettes before learning of their effects? How do you prove what they knew or didn't know? While I have a little less sympathy for the self-destructive, I don't regard that as proof of irresponsibility, and I wouldn't be surprised to learn that it's cheaper just to treat them all the same than to spend the money sorting the willful from the ignorant.

What if you're starving because you spend all your cash on expensive sneakers and cars?

This is the same as "what if you didn't buy insurance?"

Can someone really claim to be starving and sick when he has cable and over a hundred compact discs at twenty bucks a pop?

No. Who are you talking about?

It seems that everyone in the United States lives at a minimum standard of living that is much better than that of most people in the world. Is your minimum relative to?

It's true Americans are much better off than the rest of the world. I can't parse your question.

Or is it objective? Does the line keep changing as the economy keeps growing?

This is a good question for the people as a whole.

Why aren't basic public utilities like electricity and sewage and indoor plumbing considered a "minimum standard"?

They are.

I can tell that you have never worked for Peace Corps!

How do you think that would change my opinion?

"I would also challenge Corey to give me a reason why wealth inequality is inherently undemocratic."

I'll give you an anecdote. A former congressman who was on the 9-11 commission recently spoke at my law school, he relayed many stories about how congress works. Offhand, he mentioned a policy discussion he had with Rockefeller when he stopped by for his regular visit. This congressman modified his opinion based on that meeting.

Rockefeller can get a private audience with any congressman he wants at any time. You can not. You can write a letter or yell something at a town hall.

Rockefeller can contribute money that you do not have. Hence, inequalities in wealth lead to inequalities in political power. This is 5th grade civics and I am talking to college graduates here. Come on guys. You can deny that equality is more valuable than whatever you believe in but do we really have to debate that money = power?

Winfield, if I were an elitist, then at least the elitists would like me.

You can quote apologists for lassiez-faire in India all you want, doesn't change the reality that millions of people there are in the grips of horrible poverty that would make most Americans sick to see. I remember once before someone here quoted with joy the fact that third world minimum wages had risen 100%!... From $1 a day to $2. ooooooh.

I did not say that growing the economy would not benefit the poor. I said that growing the economy benefits people in proportion to their original share of the economy.

The free market does not magically become egalitarian simply because regulatory schemes are subject to corruption in undeveloped countries. This corruption is an argument for improving democratic political structures and the rule of law, not for sideswiping the same by turning over control to multinationals and unaccountable elites.

The fact is in developing countries often the wealthy elites and the corrupt governments are the same. If you sincerely want to fix them, then I suggest conditioning participation in the world market on establishing human rights and stable democracies. And I am not talking about the World Bank or IMF plan. I am talking about Arco and Unocal pulling out of places like Burma and Uzbeckistan until the government stops shooting protestors.

I understand that this has gone way off topic, so I don't need a reminder posting.

You can deny that equality is more valuable than whatever you believe in but do we really have to debate that money = power?

This statement indicates to me that you have almost no respect for the viewpoint of the other side, which I would contend is a fundamental problem for you. In my prior post, I clearly stated that there is a tension in democracy--the wealthy have more power per person, but the nonwealthy have a whole lot more votes, and in a democracy, the most votes wins. Which one is dominant? Who knows. A union boss can also walk into a congressman's office, esp. a Democrat, because the union boss may hold hundreds of thousands of votes in his hands. It's not a simple question, and it hasn't been simple since Plato's Republic. The above statement suggests otherwise, and I contend that would be in error. Interestingly, the party that has been most hurt by banning unlimited soft money contributions has been the Democrats, not the Republicans, for precisely the reason I argued in my first post--successive generations of wealth tends to engender a great deal of idealism, maybe an inefficiently high degree of such. That may be why a lot of old money folks are attracted to liberal idealism.

---

Answering Kyle, your original scenario did not postulate that there was no other conceivable form of currency, but if you now add that to your hypothetical, I would contend that's exactly why your hypothetical is not realistic. Nothing prevents nonrich people from being productive and trading amongst themselves with some form of currency or another. If you need a primer on the economic analysis of what a currency product is, email me and I'd be happy to give you some online articles to read or something.

I think a major hidden issue with the estate tax, as we've discussed supra, is the charitable alternative for that money. My point is not that charity is inherently bad but that there are a lot more inefficient and wasteful charities than people realize (I've worked in some), and perpetual endowments present particularly big problems, problems that can be even worse than government, because at least government is accountable to the people eventually and can be changed. A perpetual endowment is under the sole control of trustees. I would contend that it is very arguable that leaving capital in markets rather than locked up in a perpetuity may be better for overall welfare.

By the way, for those whose appetite for this topic has yet to be satiated, Paul Caron's TaxProfBlog has links related to this estate tax mini-debate around the blogosphere that Becker and Posner have contributed to, including a few other bloggers' comments about their posts here.

http://taxprof.typepad.com/taxprof_blog/

It's the first post on Tues., May 17.

Also, http://taxprof.typepad.com/taxprof_blog/2005/05/estate_tax_musi.html

"the wealthy have more power per person, but the nonwealthy have a whole lot more votes, and in a democracy, the most votes wins. Which one is dominant? Who knows."

I know, or rather I can guess. It seems that the one with the least collective action / transaction costs will win.

Wealth can also be used to influence votes. For instance, by commissioning books and academic studies and funding politicians that disparage the teachers union. Or just by flat out buying votes. The union representative ideally represents a consensus achieved through hard work and discourse. The wealthy elite at best represents a purchased "consensus." (At worst a special interest view.) I think that buying support is inherently less democratic than talking it through.

Although I often do, I am not required to respect the viewpoint of the other side. I am required to respect the other side's right to a viewpoint.

"Do campaign finance reform and the estate tax "let the market function"?"

Not sure about campaign finance reform, but with regard to the estate tax, I think we need to ask the question of whether there is really a market at work at all -- whether the market forces that we generally want to promote are actually promoted by post mortem control of wealth.

The best arguments for market economies usually involve information and incentives. A free market is the best way for people to transmit information about what is valuable, what isn't. It inspires people to create, work like dogs, etc., all of which is, in the end, good for all. Fine. This is a simple picture -- Corey (and I) would like to poke holes in it -- but these are the basic benefits of markets. There are market failures all around, but generally we like markets because they inspire people to work and create, and they transmit information.

What in particular does control wealth, post-mortem, add to this picture? Are you less likley to work during your life because you know that, when you die, you can't control your wealth? In a very real sense, when you die, you already can't control your wealth. There isn't really much lost here, as far as incentives. People will argue that providing for one's offspring is an incentive. I think that incentive works only up to a certain point. I don't have data on this, and people will disagree, but I think most individuals would suffer no loss in work-ethic from the knowledge that estate taxes negated any chance of creating some sort of dynasty. Provided that they knew they could pass enough wealth on to their kids such that they would not be destitute, I don't think you would see a substantial reduction in productivity.

In as much as some people actually are inspired to work primarily from the desire to set up a family dynasty, I am not sure that is an incentive we want to promote.

The second benefit of markets that I mentioned was information transfer.

I will be brief here: I can think of no cognizable argument that allowing people to transmit wealth over generations, and consolidate it, aids in information transfer. I am open to any arguments anyone wishes to make.

Most people would agree that the United States has a better form of government than the monarchies of the middle ages. In the middle ages, people believed in things like "divine right of kings" and "what's good for the king is good for the country". If a king decided that it was in his personal best interest to chop off someone's head then it was assumed that it was also in the country's best interest.

The key idea that lead to the improved United States form of government was the idea that (political) power should be limited: that there should be upper limits on power (no more "Off with his head!") and that there should be lower limits on power (the bill of rights).

What the founders of the United States neglected was the need for limits on economic power. As it is, someone can acculate money with no limits on the rate or the total amount and they can spend it (or not) in whatever manner benefits them personally.

What is needed is a system puts an upper limit (through 100% taxation) of one million dollars per year on income and a limit of ten million dollars on total assets owned by any one person. Furthermore, the system would also need to place lower limits on (economic) power such everyone was guaranteed a minimum income (enough to eat, limited health care, education, etc.) and minimum assets (a place to live, clothes, etc.).

Just as limiting political power is more broad than can be strictly justified (there are examples where allowing a king to order "Off with his head!" would be either advantageous to a country, or the king's "moral" right, or both), limiting economic power is also more broad than can be strictly justified. On the other hand, it prevents the kind of abuses that destroy an economy: concentrating economic power in the hands of a few individuals whether those hands are the corrupt politicians of a communist centrally planned economy or they are the corrupt directors of large corporations in a capitalist economy.

So, estate tax is unnecessary but upper and lower limits on income and wealth are necessary.

It should also be noted that rich people don't really earn their money, as such.

Suppose a "normal" person working on an assembly line assembles widgets at a rate of one widget every 50 seconds and is paid fifty thousand dollars per year. Now, suppose someone like Bill Gates works on the same assembly line and assembles the same widgets at a rate of one widget every 1/20th of a second (1000 times faster than "normal") and earns fifty million dollars per year.

In this case one could legitimately say that someone like Bill Gates deserves to earn 1000 times more than "normal". The reality, however, is that someone like Bill Gates would be at most a factor of 2 or 3 times faster (if at all).

The way rich people "earn" their money is either by using their power as directors of large corporations to give themselves multi-million dollar stock option bonuses, by leveraging a monopoly - granted initially by some government - on a natural resource such as real estate, oil or even so-called "intellectual property", or by owning a large fraction of a corporation that experiences large growth.

The first two cases obviously raises some serious ethical concerns and the third case raises more subtle ethical concerns. "Owning" a large corporation is like a king "owning" a country of serfs in feudal times or even like a cotton farmer "owning" slaves: when dealing with "ownership" of people or entities that encompass people there need to be much greater limits on the powers afforded to the "owner" over the owned object than when the owned object is something like a loaf of bread.

At any rate, these forms of earning money are clearly not beneficial to society as a whole and, as such, are not the kinds of things that society should be rewarded by allowing such people to "earn" more than everyone else.

Corey:

I agree that you need not accept all viewpoints, but I would contend that you should respect a well-articulated viewpoint enough to try to understand it fully before dismissing it. Others on this blog have repeatedly suggested to you that you fall short of that mark. As for mine, you neglected to read even the plain meaning of it, much less digest any implied meanings of it, before dismissing it. Perhaps a little more listening and reading and a little less writing would help the quality of discourse.

Wes:

You raise two main objections to very high incomes that I see. First, you contend that they could not possibly reflect actual productivity, as who could possibly be 1000 times more productive than a line worker, for ex. Second, you contend that owning a large corporation is akin to dictatorial power that we should rebel against just like we rebelled against the English king.

As to the first point, I would respond that (1) Gates really is a heck of a lot more productive than an uneducated line worker, including the extraordinary increases in productivity that would have come from his years of education, learning, experimenting, and obviously uniquely inquisitive and inventive mind. But, I agree that does not bring one from the modest blue collar income to unimaginable wealth, just maybe to extraordinary wealth (and his products really have had that great an effect on productivity to be worth quite a lot). To reach that second step, one must factor in his entrepreneurship and the great risks that he took. There were probably tens of thousands of people and companies like Gates in the 70s and 80s and 90s who would experiment and take risks in the area of computer and software design, in the hopes of coming upon a fabulous design that everyone would want and which would be greatly productive. They did so knowing that they would probably fail, but in the small chance they succeeded, they would make out like gangbusters. Most, of course, failed or only partially succeeded, and that is fine. It’s the American way to take a few risks. But you have to add in the hours and entrepreneurship of all of those people together in order to calculate the amount of brainpower and risk-taking that created our modern software marvels.

As to the second point, there are a few critical differences between a corporation and a monarchy. First and foremost, a monarchy has virtually complete monopoly power over a whole civilization. One could not move outside the English jurisdiction without having to go to a completely new culture and language. In contrast, if you don’t like working for Lame Corp., there’s no monopoly. You may quit and find another job instead of whine. Furthermore, a rational worker investigates the prospective employer for its reputation for employee care before signing on. So, workplace quality and employee care is subject to market forces. The king is not. Second, the king has police powers that no employer even remotely has, so that is another major difference. I'm sure there are others, but those are two big ones in my analysis.

"You may quit and find another job instead of whine. Furthermore, a rational worker investigates the prospective employer for its reputation for employee care before signing on."

You can't always just quit when you have a family, a mortgage, and credit card debt that will start charging you 35% interest if you are a day late.

You can't always find an employer that takes care of its workers. In good times, most employers look good because they are competing for talent. In times like now, all employers are cutting benefits because the unemployment situation favors them.

In practice, a corporation can feel like it is more in control of your life than the government.

There is no question that Gates and the other 20 people who put their careers on the line to start Microsoft deserve some kind of reward for their success. But given that theirs was simply one product out of hundreds that just happened to be selected (its an interesting story)... does he deserve as much as he got? (virtual monopoly on PC software for 25+ years) Right now Microsoft employs tens of thousands of people, and Bill is still being compensated as if current product is being produced by him or as a result of his risk.

In other words, its not an all or nothing proposition. We have to desice if we allow wealth accumulation to reward innovation or to encourage innovation by others. Then we have to find a mechanism to limit this reward to what is necessary to accomplish that goal (high top tax rate, estate tax, etc...) Otherwise, 25 years later, we may still be overcompensating someone at the expense fo other good ideas. (Re: Linux)

Answering Kyle, your original scenario did not postulate that there was no other conceivable form of currency, but if you now add that to your hypothetical, I would contend that's exactly why your hypothetical is not realistic.

Indeed. I wrote that it was not realistic at the time that I introduced it.

Let me try again, starting from my premises (which I don't see contested).

Poverty results in suffering (and is therefore to be avoided). From "starving to death" to "can't afford a new kidney", lack of money kills. One could get "lucky" and live in poverty but never experience a serious illness, never suffer the effects of higher crime, etc., but that looks unrealistic to me.

There's finite wealth in the world. What Gates has, others do not have. Wealth in the world increases over time as people create things of value, but on the day Gates dies, the money he has in the bank is, in a sense, deprivation for others who could have benefited from it.

Therefore, concentration of wealth is bad. The estate tax discourages hoarding, and that's why I think it's a good thing.

As I said before, if everyone could afford everything they need to live securely, I don't care about concentration of wealth. Until then, it's a problem that the estate tax addresses.

Kyle:

As I have stated twice, I would dispute your second premise. The stock of value in the world ("wealth") is not static. I have a lot of knowledge capital in my brain now. Well, maybe not a lot, but some. If I die tomorrow, that knowledge capital goes away. If you choose to take a day of work off tomorrow, the amount of value created tomorrow goes down by your work product. The stock of money is simply not the final yardstick for how much wealth is in society. If half of the buildings in America fell down overnight tonight, there would still be the same number of dollars in circulation, but much less wealth. Likewise, if all of a sudden cheap cold fusion were perfected, we'd all pretty quickly get a lot wealthier, even though neither the stock nor distribution of currency would change only because of that invention.

RWS,

I don't think anything you said contradicts what I'm saying. The ammount of wealth in the world changes over time, but it's always finite, and where it is matters. Property destruction decreases total wealth. Creation increases total wealth. The fact that weath is created and destroyed doesn't change the fact that what we have is only so much.

The stock of money is simply not the final yardstick for how much wealth is in society.

I agree, and it's what I meant when I said, My hypothetical "wealth" is meant to emcompass all currencies.

So what are we arguing about?

RWS -- the fact that wealth is fluid, and capable of overall expansion, does not change the fact that it is finite.

G-mail accounts allow for an ever growing amount of storage space. Nevertheless, at any given moment, the amount of storage space is finite, not infinite.

Granted, Kyle and text. I think what I am objecting to is more the underlying premise of the second point, which is that "on the day Gates dies, the money he has in the bank is, in a sense, deprivation for others who could have benefited from it." I object to this zero-sum analysis. Whether Gates has $50 billion or $150 billion in the bank does not deprive me of my own ability to produce value and wealth from my own hands. If one buys that the labor market at least roughly clears, I am going to make what I earn, period.

While I'm at it, I would also question that the conclusion follows from the premises Kyle stated. Kyle stated that poverty is bad (I agree) and that there is finite wealth (I agree, except to the extent stated above). It does not therefore follow that wealth concentration is bad. If, for example, some are richer than others but no one is poor, that obviously would be a counterexample, though an unrealistic one. However, if one posits that someone is chronically poor because they do not have a work ethic, then taking money from rich man to give to poor man does not really help much in the long run, and makes things doubly worse by giving rich man a mild disincentive to work and poor man a major disincentive to work. If, on the other hand, rich man employs poor man, or poor man borrows from rich man, the result is a more productive society. That would be a definite counterexample to Kyle's syllogism, EVEN if one accepted the premises as stated and implied.

Sorry to double-post, but to tie my second analysis to the problems I have with Kyle's second premise, the "deprivation" that he would assert does not exist just because the government does not take it from the Gates family to give to the poor family. The poor family could benefit from the use of the currency by borrowing it and using those borrowed assets productively. Or, Gates's heirs could buy stuff from the poor family's business. "Deprived" is simply not the right word for it, and it implies a problematic view of what currency is, fundamentally.

All of this reminds me of a rather humorous situation I once witnessed at a dinner table:

Johnny (in whiney voice): "But I don't want to be a Senator from West Virgina. I want to be a Senator from Massachusetts!"

Creaky old voice from far down at the end of the table: "Now, Now Johnny! you know full well that Massachusetts is for the Kennedys; West Virginia is for the Rockefellers."

It was real hard keeping a straight face through all this. And believe me the porridge was excellent. Kinda makes you sit back and think a bit. Does "Noblese Oblige" still exist?

If, for example, some are richer than others but no one is poor, that obviously would be a counterexample, though an unrealistic one.

I agree, and said so: "if everyone could afford everything they need to live securely, I don't care about concentration of wealth."

However, if one posits that someone is chronically poor because they do not have a work ethic, then taking money from rich man to give to poor man does not really help much in the long run, and makes things doubly worse by giving rich man a mild disincentive to work and poor man a major disincentive to work.

I agree with this also, but I think "the rightfully poor" are the minority of "the poor." Even if they weren't, I might consider it "worth it" to help both groups equally even though one is undeserving.

I object to this zero-sum analysis. Whether Gates has $50 billion or $150 billion in the bank does not deprive me of my own ability to produce value and wealth from my own hands.

It's true that the wealth of Gates does not really deprive others of what they have (or their ability to produce more). That having been said, I see no way around a zero-sum characterization. Wealth is finite. What one has, another does not.

...one must factor in his entrepreneurship and the great risks that he took.

Perhaps it's a bit off-topic but the notion that risk (or even actual suffering) generates a moral right to compensation is an interesting one.

Suppose some guy gets drunk and decides to impress his friends by jumping off the roof and ends up in a wheel chair as a result. The guy will be given a right to park in a better parking places even though jumping off roofs doesn't have much to do with better parking places.

While a compassionate society should try to prevent the less fortunate from suffering too much, often this idea gets transformed into the idea that suffering or taking risks entitles one to be given more than everyone else.

If Bill Gates had taken big risks and ended up dirt poor and living on the street then he could expect a compassionate society to help him get back on his feet. That is very different, however, from expecting society to give him lots of money just because he took big risks.

More broadly, the mechanism by which rich people "earn" their money is that they manage to get control of major economic resources (corporations, real estate, natural resources, intellectual property, etc.) and then they use their control of the economic resource to make themselves rich.

There is no question that major economic resources need to have someone controlling them or that the person controlling them deserves compensation. The question is whether a fair compensation is whatever the person in charge of the resource chooses to give themselves.

It might be, for example, that the current U.S. president George Bush is such a great leader that he deserves to have absolute authority over the United States. It is, however, very difficult to determine the quality of someone's leadership. More specifically, it is very difficult to determine whether they are acting in the best interest of their country or (only) in their own best interest. The solution best solution to this problem at present, is to put limits on their power.

Similarly, because it's so hard to determine whether someone controlling an economic resource is acting in the best interest of themselves or of society, the best solution is to place limits on economic power by have maximum and minimum incomes and assets.

Kyle: It's not zero-sum, because the value of that currency is ONLY its capacity to reflect the actual value in society. In a world of 10 farmers and $10,000, each person has $1000, and they trade around the food they grow. Take the exact same world but no one wants to farm for some reason. They still have $1000, but are far poorer. Likewise, the real world is not zero-sum. You (and your family) earn what you create with your own hands. The world may be zero-sum in terms of the number of dollars, but in no way, shape, or form is it zero-sum in terms of the amount of value creation. Value creation is most enhanced by strong property rights, I would contend, including intergenerational wealth transfers.

Wes: We are now getting to just a generic discussion of the value of welfare programs. This gets a bit far afield, probably, but my general point would be that helping the poor is best done locally, especially with local charities and religious institutions. For ex., my church would never hesitate to help out anyone in the congregation who deserved help, and our doors are always open. This is different from a govt. entitlement in that we would be in a better position to see who is free-riding and to help that person get back on their feet rather than become dependent on the entitlement. It's not as if the govt. is the only or anywhere near the best way to do such things for people who really did fall on hard luck while being diligent with their lives. That, though, gets a bit beyond the present question.

Let me also note that no one has criticized my view of perpetual trusts, which is where a lot of money goes when it is diverted from estate tax liability. I would be interested to hear if someone had a different analysis. From a variety of personal experiences, I have been less than taken by a lot of them--they often end up being entitlements of their own, and quite unaccountable sometimes.

David -

"And no matter how entitled they may feel, the children of the rich have no 'right' to their parents' money."

True, in general, children do not have a "right" to their parents' money. In fact, many parents do not give (or leave) their children much (or any) money (or wealth) at all.

However, it would seem to me that parents, as people living in a free-exchange society, do indeed have a "right" to give (or leave) their money (and/or wealth) to their children.

In effect, you miss the point. This is not a debate about what children are entitled to, but about what types of wealth the government should tax (and what the tax rate should be).

David -

"And no matter how entitled they may feel, the children of the rich have no 'right' to their parents' money."

In general, children do not have a "right" to their parents' wealth. That is obvious: many parents do not give (or leave) their children anything; the parents don't have to.

More to the point: what "rights" do people (including parents) have regarding their wealth, their property? In a free-exchange society, it seems pretty clear that people ought to be able to draw up a contract to control the distribution of their property upon their death.

Acknowledging that a government must raise revenue, the relevant questions are, What types of wealth should the government tax? And what should the tax rates be?

Taxing for purely redistributive purposes suggests that the government (whether elected or not) should have the power to determine how much wealth people "should" have. That's a lot of power.