Keep Downton Abbey on TV
One thing that makes America great is that we don't have a hereditary aristocracy of wealth and power, like that depicted in Downton Abbey -- the popular British TV show. We fought a revolution to reject that system. But that victory is in jeopardy today, as a vote to repeal the estate tax is planned in Congress.
Some American billionaires started legendary businesses. Jeff Bezos of Amazon, Mark Zuckerberg of Facebook, Larry Page and Sergey Brin of Google, to name a few, have created whole industries that have enabled untold numbers of people to live the American dream, raise their children comfortably, and retire securely.
This is a good thing. This is the America where hard work, intellect, and a bit of luck can lead to success. That is what enabled me to grow up in a little farming community upstate, go to college with government loans and a few decades later retire at 55 as a managing director with the largest financial management firm in the world. As a result, my children are starting off in their careers unburdened by financial obligations, and they will someday inherit a substantial estate.
Other American billionaires are people like John, Jacqueline and Forrest Mars who are each worth tens of billions of dollars thanks to a candy business that their grandfather, Frank Mars, started in 1911. Or Christy, Jim, Alice and Rob Walton, who each own tens of billion of dollars worth of stock in Walmart, started by Sam Walton in 1962. But the Mars and Walton heirs are involved neither in day-to-day management nor in active "job creation."
It is these inherited billionaires and their children who will benefit most from the proposed repeal of the federal estate tax, a levy on the transfer of immense wealth from generation to generation.
Some have complained that the estate tax is a form of "double taxation."
But the bulk of the wealth subject to the estate tax has never been subject to any taxation. It works like this: Say I bought Apple stock for $10 million years ago that is worth $200 million when I die. That $190 million profit will never face any capital gains or income tax.
Unlike a typical investor who sells his investments to fund his retirement (and pays a capital gains tax at that time) no tax will ever be paid on the increased value of stock that I still hold when I die.
Americans, acting through our elected representatives, make policies that enable the creation of wealth. Over a century of public investments in scientific research, education, infrastructure, and property rights' protections have created a remarkably fertile ground for enterprise creation.
Countless successful companies were created at taxpayer-subsidized universities and research institutes by students who learned in public schools and traveled on public roads. The Internet used to be called the "Defense Advanced Research Projects Agency Network" because it was created with taxpayers' money.
Leland Stanford would be proud of the high-tech industry that Stanford University, which he helped start, has created in Silicon Valley. But he would be ashamed at what the Republican Party that he help start is doing now -- protecting the estates of billionaires from a modest tax on their fortunes.
The Republican-controlled House of Representatives is expected to vote to repeal the estate tax this week. This would provide a windfall to the investment portfolios of the estates of the wealthiest 0.2 percent of Americans. But it would do nothing for 99.8 percent of Americans whose spending drives our economy.
While we can legitimately debate how much the government can help aspiring young entrepreneurs, we should not change the tax code to help the already rich accumulate further wealth. Part of our American DNA is a rejection of the concept that those who are born to the rich and powerful should grow up to be rich and powerful themselves.
As Franklin D. Roosevelt observed, "Such inherited economic power is inconsistent with the ideals of this generation as inherited political power is inconsistent with the ideals of the generation which established our government."
The proposal to abolish federal estate taxes, and make the permanent accumulation of wealth the new paradigm for America, is a return to an aristocratic elite that was rejected by the American Revolution. We should reject it again today.
Morris Pearl is chairman of the Patriotic Millionaires, a group of wealthy business people and investors dedicated to reversing destabilizing levels of economic inequality. He is a former managing director at Blackrock, the world's largest investment management firm.