Estate Tax

This week, Congress is debating a bill that combines two policies. One is an increase in the minimum wage. The other is a reduction in the estate tax.

I have specified my views on the minimum wage in earlier posts. It is a simplistic plan that will ultimately do more harm than good. Minimum wage laws are to liberals what abstinence-only sex education is to conservatives; a simplistic idea that looks good until you look at the results in detail, whose proponents tend to rave about a very small number of studies that support their position and ignore the large body of evidence and theory that does not.

I have not written about the estate tax, but my position can be easily derived from some of the arguments that I have given elsewhere.

Returning readers may recall a story that I sometimes use to argue the case for redistribution of wealth. Imagine that an airplane has crashed in the desert. They are far from any sign of civilization except the remote estate of an eccentric billionaire who had built himself a mansion in the desert as far away from everybody else as possible. The estate has several large swimming pools, fountains, and gardens all fed from the water that the owner has piped in. However, there is no way to contact the outside world until the next water shipment comes, in about a month.

The eccentric billionaire wants to sit on his roof and drink his lemonade while he watches the crash survivors die of thirst. He claims that the water is his and it would be an act of aggression (that is to say, wrong) for anybody to try to take the water from him by force and to distribute the water-wealth to the crash survivors.

The question is: Are the crash survivors morally prohibited from redistributing the water wealth from the eccentric billionaire to the crash survivors?

I would argue that they are permitted to do so. They should provide the eccentric billionaire for some compensation of the water -- a fair market price and then some to recognize the value of the water to those who used it. However, they have no obligation to lay down in the sand and die of thirst while a sadistic eccentric billionaire horded a huge excess of water wealth.

In using this example in the past I have not made the effort of tying it into any aspect of moral theory. So, allow me to explain the moral theory behind this conclusion.

Every statement about 'ought' or 'should' is a statement about reasons for action. There is no sense that something 'ought' to be done except in the sense that there are one or more 'reasons for action' for doing that thing. If there is no 'reasons for action' for doing something, why should I do it?

Desires are brain states that provide reasons for action. A "desire that 'P'" is a reason for action for bringing about a state of affairs in which 'P' is true.

Desires are the only reasons for action that actually exist. Anybody who makes an appeal to a reason for action who is not talking about desires is making a false claim.

"Pleasing God" is not a reason for action because there is no God to please, and no way that an action can please God. Similarly, 'intrinsic merit' is not a reason for action because intrinsic merit does not exist.

One way we can try to answer the question of what to do is to ask whether the act of redistributing the water wealth would fulfill more desires. This is the act-utilitarian option; do that act that has the best consequences. However, humans always act so as to fulfill their (current) desires given their beliefs. Given this, the only way a person can consistently do that act that has the best consequences is if he desires nothing but doing the act that has the best consequences. This is not a real-world option. We must live with the real-world fact that humans have multiple desires and ask which desires they should have. The answer to the question of what should be done becomes the answer to the question, “What would a person with good desires do?”

So, now, we have ruled out of our set of reasons for action: (1) pleasing God, because pleasing God is not a real-world reason for action, (2) realizing intrinsic value, because intrinsic values are another type of reasons for action that simply do not exist, and (3) performing the act-utilitarian best action because the type of creature that can consistently perform the act-utilitarian does not exist.

These types of reasons for or against any policy are to be thrown out; they refer to fiction, so the claims that are derived from them are fiction and have no place guiding real-world decisions.

Desires are the only reasons for action that actually do exist. Any statement about what the reasons for action that exist recommends in this situation must be a statement about what would fulfill the more and the stronger of the relevant desires.

Desires themselves can be good or bad.

Of course, no desire has intrinsic merit (because intrinsic merit does not exist). We cannot evaluate desires on this standard.

However, desires have effects. As such, desires are capable of fulfilling or thwarting other desires. Because of this, “reasons for action” for promoting or inhibiting certain desires do exist. Not only do we have the motive for promoting or demoting certain desires, but we have the means. Social conditioning through praise, condemnation, reward, and punishment are the tools for molding desires within a community. Clearly, we have opportunity to mold the desires of others using these tools.

Of course, our “reasons for action” tell us to use these tools to promote desires that tend to fulfill other desires, and to demote desires that tend to thwart other desires. Our “reasons that exist for action” are reasons to call ‘good’ desires that fulfill other desires and to praise and reward actions indicative of these desires. Our “reasons that exist for action” are reasons to call “evil” desires that tend to thwart other desires and to condemn and punish actions indicative of these desires.

More importantly, our “reasons that exist for action” are reasons to endorse institutions that redistribute the water wealth from the billionaire recluse to the crash survivors – from those who have great surplus to those who would otherwise get sick and die.

The argument is that much stronger when we ask what our “reasons that exist for action” recommend be done with the estate of somebody whose death renders him incapable of using his wealth any more. There are some “reasons that exist for action” that will be satisfied by the wealthy building empires that they can leave to their heirs like modern day Dukes and Earls. However, the bulk of the “reasons that exist for action” argue for institutions that motivate those who accumulate great wealth to set up foundations and other non-profit institutions that will fulfill a set of more and stronger desires.

Warren Buffett, who recently made the first installment of a $30 to $60 billion donation to the Bill and Melinda Gates Foundation, reported that he does not trust the government to spend his money wisely. Yet, he also expressed opposition to repealing the estate tax.

The way he reconciles these views is by asserting that the estate tax is a valuable incentive for causing people to contribute their great wealth to institutions who will spend them wisely (more wisely than the government).

So it is the case here. The value of the estate tax is not that it adds money to the government coffers. Personally, I would be pleased if the government never saw a dime of this money – it is more likely to be spent in ways that profit the politicians than to benefit those who are poor and sick. The value of the estate tax is that (properly designed) it gives those who have accumulated great wealth to leave it to nonprofit institutions of their choice. They get to decide which institutions will benefit from their success, not the government. Yet, the benefit is more widely distributed.