Lop Off thoe Big Inheritances

April 11, 1991|By DAVID MORRIS

ST. PAUL, MINNESOTA — St. Paul, Minnesota.--"Nothing in this world is certain except death and taxes,'' Benjamin Franklin observed in 1789. As tens of millions of Americans get ready for April 15, we would do well to ponder the weakened connection between these two inevitabilities.

Baby boomers are turning 40, which means their parents have reached the age at which inheritance becomes an issue. Never in history has one generation had such vast wealth -- more than $8 trillion -- to pass on to the next.

Not only is the potential for inheritance unprecedented; the ability to transfer this without giving a dime to the greater community is also unprecedented in this century. The Reagan revolution made sure of that. As Paul Glastris noted in a recent Washington Monthly magazine, in 1981 a parent could transfer $175,000 to the children tax-free. Today a couple can shield $1.2 million from the tax collector.

This virtually untaxed transfer is occurring just as the majority of hard-working Americans see their living standards decline and desperate local and state governments hike regressive property and sales taxes to pay for essential services.

Why do we put up with this inequity? Because we confuse wealth with virtue. We think that wealth proves initiative and that each of us has an equal chance to become rich. We believe in the unlimited possibilities of upward mobility.

What we believe is a myth, notwithstanding instances of presidents born in log cabins and corporate chiefs rising from the slums.

As Michigan State University economist Paul Menchik, one of the few who looked into the question, says, ''If your father was 10 times richer than my father, you can expect to be 7.5 times richer than I.'' If I am born with a silver spoon in my mouth, I will not grow up to be the butler.

Mr. Menchik estimates the odds of a child whose father does unskilled, low-wage manual work becoming a non-manual, white-collar worker at about 4 to 1. Odds against the child rising to the upper class are astronomical. But the odds are better than 50 to 1 that the son of a father with a professional or managerial occupation will not descend the ladder to become an unskilled or semi-skilled manual worker.

Ten percent of the nation owns two-thirds of everything while one in four Americans owns nothing. Conservatives insist both groups have merely reaped what they have sown and deserve their harvests.

But do their children? The child of a wealthy family will always have a head start in the race for jobs and income by virtue of increased self-confidence, better education, contacts and access to a world closed to children of poorer families. There is no reason to add to this the tremendous advantage of a large pot of unearned capital.

A similar argument was made a century ago by no less worthy a commentator than Andrew Carnegie, the father of the public library. In a North American Review article titled ''Wealth,'' Carnegie, worth more than $20 million at the time, argued that wealth was created more by accident and luck than diligence and intelligence. He maintained that ''surplus'' wealth should be returned to society.

''The man who dies thus rich, dies disgraced,'' he said. Such ''is the true gospel concerning wealth.''

Carnegie meant to create a new ethic among the rich. He knew his millionaire colleagues might need more than persuasive articles to do what was right. Thus he supported a 50-percent inheritance tax. Carnegie's counsel is as fresh and relevant today as it was in 1889.

A 50-percent inheritance tax could generate more than $100 billion over the next decade, enabling governments to provide basic services without unduly taxing those with few resources. Spending these taxes on educational and health services for all children would invest the proceeds of the past to build a future where the rhetoric of equal opportunity more nearly matches the reality of life in America.

David Morris is an author, lecturer and consultant.

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