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Teddy Roosevelt on the Estate Tax, 100 Years Ago

(AP Photo)

We speak Wednesday about the estate tax debate in Congress. That tussle comes 100 years after then ex-President Teddy Roosevelt gave his famous “New Nationalism” speech, in which he discussed how America should deal with fortunes and inheritance.

TEDDY ROOSEVELT ON THE ESTATE TAX, 1910:

We grudge no man a fortune in civil life if it is honorably obtained and well used. It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community … The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and … a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.

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  • Heidi L. Forman

    Tom:
    What I want to say is that this tax creates an incredible amount of gaming the system. There are ways to decrease “value” of an estate such as the use of family limited partnerships and other estate freeze techniques. But only the truly wealthy have the means to take advantage of these methods. Those with a small (but taxable) estate end up taking the worst hit because they do not utilize these methods. So the very wealthy do OK with the use of lawyers, estate planners, trusts, etc. and the just wealthy get hit hard. This lacks the equity that a tax should have and also means that the tax may not be breaking up dynastic wealth, etc. Perhaps changes should be made to the income tax instead – for example get rid of the FMV basis that inherited property gets upon death and instead tax that gain.
    Heidi
    Youngstown, NY

  • Allen Banbury Marshfield, Vermont

    The wealth that an individual is able to amass through his/her efforts, and the wealth of a nations infrastructure is a, rightly, resource for their enjoyment. That that wealth should be passed on to their heirs and heirs of heirs through trusts with out recognizing and endowing the civil structure that made it possible is unacceptable. Where the split should be, civil vs heirs, is a matter for the legislature to deal with but I personally find the process of endowing heirs and heirs of heirs with possibility of a life time of non contribution to our national society except as it preserves their wealth, a repugnant concept. I believe the inheritance tax is justifiable mechanism for reimbursing society for its part in establishing and furthering an environment in which the wealth could be accumulated,

  • Paul Randall

    There is a lie that is repeated over and over again, that money in estates has already been taxed. This is simply not true. Capitol gains on property and equities held by estates have never been taxed and under current law they never are. This is the bulk of money in large estates. Also because most large estates have used tax shelters to reduce the tax liability only a fraction of the their total value even comes under estate tax law.

  • Hampton

    T. Roosevelt’s statement says it all. In a democracy wealth is created when society creates a friendly capitalistic environment. Teddy said:

    “the process of endowing heirs and heirs of heirs with possibility of a life time of non contribution to our national society except as it preserves their wealth, a repugnant concept. “

  • TomK

    Yes, TR says it all and provides some perspective on how the USA has moved to the extreme right over time. In 1900 a conservative aristocrat republican was saying things that would get him ostracized as a “RINO” today. Actually I can’t even see many Dems taking the progressive attitude of TR today. We are careening toward oligarchy and don’t have much time to save our middle class society which was once the wonder of the world.

  • wch

    This has absolutely no relevance to today, and here’s why.

    Teddy Roosevelt was not in favor of a 50% tax rate (remember that states take a cut too); the estate tax in 1910 was never higher than 15%. Let’s also remember that 100 years ago the average person lived to about age 65 at best, and no one was offering a five year life extension for some $50,000 surgery, as can occur now.

    Now, if you plan to retire or consult the younger folk in their careers you’ll need at least $1MM (liquid, not real estate) just to cover a “living wage” (those that oppose the estate tax usually have a penchant for that metric.) With the market swoons I’ve seen over the last few years you’d be cutting it really close at $1MM, especially if you look at the putrid bond returns and the expected inflation predicted for the near future. Oh, and can you be sure $1MM covers you when your life expectancy may reach 90, and you need 25 years of being consistently right on your investments? The current administration’s love of quantitative easing doesn’t exactly signal to the older folk that wealth accumulation is a bad idea, either. $3.5MM may not even cover what $1MM does today when (not if) hyperinflation kicks in.

    I’m sure in TR’s day few worried about their non-working years when 90% of the population died while working, or became sick and no amount of money could reverse it. It’s a whole new world when your career has to cover the present and the future. Wealth accumulation isn’t hoarding – it’s a virtue. TR may have resonated with the public then, but not now.

  • wch

    above should have said “those that oppose the estate tax repeal usually have a penchant for that metric.”

    Apologies.

  • EC

    I’m sorry, but I think there is a big difference between somebody inheriting $20 billion from Bill Gates and somebody inheriting a farm worth $3M. The farmer needs the land to make a livelihood. He WORKS it. He has to or he will have nothing. Although the physical property may be worth $3M, his annual income is alot less. Bill Gates’ heirs will never have to work to survive. Besides, why does somebody need millions and billions of dollars? I make about $30,000/year pre-tax and tend to have everything I need. Granted, there isn’t enough for any type of retirement account, or much savings, but I seem to get along ok. Working to survive is a necessity. Not working is a privilege.

  • PoorHouse

    Hey wch, you say one needs $1MM to provide a ‘living wage’ in retirement. How are most of us in the bottom 98% of income supposed to amass that kind of retirement? Conservatives are continuing their attacks on Social Security so we won’t even have that to help. I don’t understand how individuals in the upper income brackets think those in the lower income brackets are supposed to save enough for retirement without the help of social programs. Republicans are the Marie Antoinette political party, they and their ultra rich backers want to have the entire economic cake and the rest of us are supposed to be satisfied with the crumbs that ‘trickle down’.

  • timelesstraveller

    I suggest a ‘Reinvestment in America,’ taxation benefit. That would say that anyone that took the expected tax amount payable and invested in one or more of a list of investment beneficial for the stablization and growth of the country would get a credit of some kind equal to what they would get by investing outside this list. In this modern world of global economy, supply and demand has changed. Modern advertising that sometimes hides and can suppress a health balance of consumption sometimes dictates where the mega/multi industries will invest. We wave the flag and they wave the dollar. Following the maximum growth of profit is not loyal or does not salute any nation’s identity.

  • Sybil

    What’s more appalling is that anyone outside the estate holder and his/her heirs feel entitled to that estate. What?! Why wait til folks are dead? Just take their stuff now. Oh wait…we already do.

  • wch

    “I don’t understand how individuals in the upper income brackets think those in the lower income brackets are supposed to save enough for retirement without the help of social programs.”

    It’s simple to say but hard to remember every day- you make up your mind to do everything from age 20 to age 65 that is necessary to amass retirement wealth: educate oneself without school, change jobs when you’re not advancing in your career, take risks that can be rewarded, find a hobby that earns you more than costs you, and don’t overspend, ever. Lastly, make most parenting decisions correctly, and your children will be there for you in every way you need. Not much has changed in the last 100 years to answer your question, Poorhouse. The only thing that’s changed is the illusion of social programs being there and helping more than they hurt.

  • unemoployed accountant

    Just wanted to agree with another comment that most of the estate tax is on wealth that has accumulated through capital gain and as it is passed on with a stepped-up basis to heirs (not at original basis but at fair market value at the time of inheritance) this is wealth that has never been taxed. I don’t think most people realize this, and for some reason no one points this out in the discussions I have heard. Perhaps a good solution would be to put all reciepts the government gets from estate taxes in a special fund that would go towards higher education scholarships, which according to one of your panelists is the real reason for the unequal wealth distribution in this country (lower income people cannot afford higher education so get trapped in lower wage jobs)

  • http://www.beccar.wordpress.com Eugenia Renskoff, Brooklyn

    Tom, No estate tax unless you are very, but very rich. Eugenia Renskoff

  • Pingback: Inherited wealth. Any justification? - Page 18 - US Message Board - Political Discussion Forum

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