Saturday, November 25, 2017

Carnegie and the "Death Tax"

Andrew Carnegie, the industrial giant and philanthropist, was born on this day (Nov. 25) in 1835. His life and legacy is somewhat of a conundrum: he was both a hard task-master and cruel industrialist as well a warm-hearted, benevolent man who greatly wanted world peace—and who favored an inheritance tax.
The Coming (?) Change is the “Death Tax”
As of this writing, the both highly touted and highly criticized tax reform bill currently being considered by the U.S. Congress is still in flux. But the present estate tax provision will most likely be unchanged in the final version of the bill, which possibly will be signed into law. DJT is promising this will be done before Christmas.
The opponents of the current estate tax provision, which seem to include most Republican legislators, are wont to call it a “death tax.” Further, they emphasize how unfair it is to the families of hard-working people who wish to pass their accumulated wealth on to their descendants.
So, changing this provision is one of many changes in the tax reform bill, which has already passed by the House. The Senate version, yet to be voted on, currently has the same projected estate tax change as the House bill.
Misleading Claims about the “Death Tax”
Sam Graves is the U.S. Representative from the district where I live. In his Nov. 15 email newsletter to people in his district, Rep. Graves decried the estate tax, writing that “a tax that kicks in when you die is absurd.” His main point: “Farmers are hit especially hard by the death tax.”
What Rep. Graves failed to mention is that currently $5,490,000 is exempted from the tax that he thinks is so despicable. (I wonder how many farmers in north Missouri have an estate worth more than that.)
According to the Center on the Budget and Policy Priorities (see here), in 2017 only two out of every 1,000 estates will owe federal estate tax—5,500 out of the nation’s 2,700,000 estates (about 0.02%); only 80 of those (0.003%) are small farms and businesses.
The tax bill already passed by the House doubles that exemption immediately and eliminates it completely after six years—and this in the name of tax reform for the benefit of the working middle class.   
But guess who benefits from this change in the estate tax? The wealthiest people in the land, of course—including the Trump children who will potentially gain as much as $1.4 billion if the tax reform bill is signed into law by the President.
Carnegie’s Surprising Support of Estate Tax
Many of you perhaps read my article about the questionable philanthropy of Andrew Carnegie and two other wealthy people. (You can read/review that article here.) In reading about Carnegie before writing that article, I was surprised at what he said about the need for an estate tax.
In a June 1889 article titled “Wealth,” Carnegie wrote,
Of all forms of taxation, this [the estate tax] seems the wisest. Men who continue hoarding great sums all their lives, the proper use of which for public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share. By taxing estates heavily at death the state marks its condemnation of the selfish millionaire's unworthy life.
Near the end of that article, Carnegie asserted that the person who dies rich “dies disgraced."
When Carnegie died in 1919, he had already given away over $350,000,000 (over $5 trillion in 2017 dollars) of his wealth. After his death, his last $30,000,000 was given to foundations, charities, and to pensioners. 
Kudos to Carnegie!


  1. The first comment on this article came in only a few minutes ago. A local Thinking Friend wrote,

    "Praise for Carnegie? I'm trying to remember your earlier conclusion on whether he was a force for good or ill."

    My response:

    "As I acknowledged in my opening statement, I think Carnegie is 'somewhat of a conundrum.' In my previous article, I was mainly critical of him, but there is much to be praised also. So, today's article emphasizes the commendable side of that complex man."

  2. And then another local Thinking Friend sent me an email with these comments:

    "And kudos to you, Leroy, for digging this out. Like most of us, Carnegie’s record was mixed. And I couldn’t agree more with you about the value of an estate tax. I think we should tax large estates much more heavily than we do now and then perhaps we could fund our govt adequately and even give the middle class a real reduction!"

  3. Heavy taxes on the estates of the wealthy would be only a very small portion of the total revenue of the federal government--but it would surely be of some benefit to the general well being of the citizenry.

    But one of the main benefits, I think, is that it would mitigate against plutocracy, which seems to be a real and present danger.

    Writing for U.S. News & World Report in Sept. 2016, Chuck Collins emphasized that "the estate tax is a fundamentally American notion, an absolutely democratic intervention against a drift toward plutocracy and extreme wealth imbalances."

  4. Thinking Friend Glenn Hinson in Kentucky sent this brief comment:

    "I’m with Carnegie, but I’m a Democrat. Nothing does more to perpetuate the disparities of wealth in America than the ability to pass on all of one’s wealth when one dies!"

  5. As we stand in the shadow of a pending gigantic tax cut for the extremely wealthy, it is worth noting that the estate tax is just one small piece of a huge transfer of wealth from everyone else to the extremely rich. The last time the GOP forced through a large cut in the estate tax, it was criticized as the "Paris Hilton Welfare Act." Just change the name to Ivanka Trump and you have the new picture. So the estate tax makes a good stand-in for the rest of the outrageous tax cut, but the whole thing is more make the poor poorer so that the rich can get richer. The new robber barons are out to take everything they can get. Their so-called economic theories are just flimflam to separate the rest of us from our resources and money. The "administrative state" they want to deconstruct is none other than the state known as the United States of America. We will lose many things from National Monuments to Medicare insurance, but for those earning under $75,000 per year, we will get a tax increase by the end of the ten-year tax period.

    As the Bible put it somewhat more succinctly, "For the love of money is the root of all kinds of evil, and in their eagerness to be rich some have wandered away from the faith and pierced themselves with many pains." (1 Timothy 6:10)

    1. Thanks, Craig, for pointing out the larger picture.

      I think you are certainly right in saying that the estate tax is just "one small piece" in the tax plan which benefits the wealthy far more than anyone else.

      What I can't understand is how with a straight face DJT and the Republican Congress can continually seek to "sell" their tax plan by claiming how much it will benefit the working middle class.

  6. At least someone is trying... With polarized politics, I'm not sure that a majority can be pleased anymore. I certainly trust neither Democrats nor Republicans.

    We had a friend at church who had inherited the family farm (several generations). They had a section of farm land, and rented some more. Due to metropolitan sprawl, his property had increased in value pretty dramatically. They lived an average lifestyle, drove average cars, etc, but with property and equipment they were worth well in excess of $10 million. They enjoyed farming, but knew their days were numbered. Love of money? I don't think so. They gave generously of their income.

    Want to find lovers of money? Look to politics in DC - Democrats and Republicans, and they lobbies they represent. There should be a way to shorten their stay and pay. Let them receive the same pay as the median they represent, and Social Security for retirement - nothing more. They can buy their own insurance like the rest of us.

    (Me - political centrist, independent who voted for people of 5 parties in the last election, including equal numbers of Democrats and Republicans.) I'm sick up and fed of DC and Jeff.

    Carnegie? Thank you for the libraries! I use them all over in my travels.

    1. Anonymous, if your church friends didn't/donb't want the federal government to tax their $10 million farm, why didn't/don't they sell off what is a part of the urban sprawl and since they are not lovers of money they can then give that excess to their church or to charities or wherever so they get to decide what to do with it other rather than the government.

      I still agree with Carnegie on this one: no one needs to be able to give a $10 estate to their descendants completely untaxed for the general welfare.

  7. Bro. Leroy,
    I can offer nothing conclusive to this conversation. I grew up with the mentality that what a man earns he ought to have the right to distribute as he sees fit in life or in death. The other side is of course we all have the responsibility to contribute to the commonweal. I even subscribe to the philosophy of from each according to his ability and to each according to his need. That sounds very Christian to me. Unfortunately that has been corrupted to the point of being impossible to implement except by brute force and that by corrupted leaders (I agree with Anonymous and am also registered independent).

    "The Big Eye" is a sci-fi novel written (1950) by Max Ehrlich and supposes the collision of earth with a planet in 1962 noted for a large eye formation on its surface. Scientists announce the world over people have two years left. The miracle the scientists hope will take place does. The cold war ends. Greed is seen as useless. Peace reigns. What they don't tell the public is the collision will not take place, just a close miss. Will the peace and spirit of generosity that come last? That is their hope. Mankind will get a second chance.

    By the end of the book the characters have the same opinion I have. Politics and laws may make a temporary difference in society, but ultimately general society will return to its selfish, power-focused ways. Real difference will only take place as each one of us takes what we have and shares it with one other person whether that is material possessions, an opportunity for personal advancement, or simply a word of encouragement.

    1. Thanks, Tom, for your comments. I had not heard of the novel "The Big Eye," but it sounds quite interesting.

      I agree that the changes that make the most difference are cultural changes which come about by new ways of thinking by a majority of the people in a given society. And it is true, such changes cannot be legislated.

      However, while morality or generosity or the like cannot be legislated, still just laws can make a difference even if the heart of people don't (immediately) change. For example, legislation changed discriminatory practices against African-Americans in the 1960s and against LGBTQ people in this century. Even though there is still prejudice and lingering mistreatment, things are much better for both groups of people than before the legislative actions.

      With taxes also, having and keeping the estate tax will not change the greedy desire of the wealthy to keep all they have for themselves and their descendants, but it does provide additional funding for the general welfare.