Historians/History

Death, Taxes, and the American Founders

by Andrew M. Schocket

Andrew M. Schocket is associate professor of history and American culture studies at Bowling Green State University. He is writing a book on the American Revolution in contemporary life. Attribution to the History News Service and the author is required for reprinting and redistribution of this article.

The proposed tax deal between President Obama and Congressional Republican leaders includes a revision of the federal estate (inheritance) tax. At stake are issues as old as the nation: individual property rights versus the democratic ethos, and the need for savings versus the need for resources for the common good. For many of today's issues—such as Internet neutrality or nuclear disarmament—appealing to the founders seems clearly inappropriate. But in the case of the estate tax, the founders struggled with the same issues that we struggle with today. And many of them—though not all—believed that taxing and reducing large estates was a good idea, for it benefited society as a whole.

Today Republicans would like to repeal the estate tax completely, while Democrats want to retain it. The proposed tax package would exempt the first $5 million of estates and levy a 35 percent tax on anything above that. Should the deal not go through, the inheritance tax is scheduled on Jan. 1 to revert to 2001 levels, exempting the first $1 million with a rate of 55 percent on the value exceeding that amount.

For years, Republicans have loudly proclaimed their desire to abolish the"death tax," their name for the inheritance tax. And they and their Tea Party allies have called for a general reduction in taxes in accord with their view of the American Revolution as an anti-tax revolt. Furthermore, because the first modern estate tax was enacted in 1916, they have argued that it is merely a Progressive-era idea, foreign to the founders, who wanted to defend property at all costs. But the actual history is more complex and more instructive.

Just as we do today, the American Revolutionary generation wrestled with the question of how much property the dead should be allowed to pass on to their children. For us, it is partly a fiscal concern: requiring the wealthy to pay taxes on estates is a way to lower federal deficits with minimal social cost. The idea of using an inheritance tax to raise revenue occurred to the nation's first politicians, too. In 1797, the Congress voted and President John Adams signed into law an estate tax to fund the building of a federal navy.

Today's debate echoes that of the nation's founders in another, more profound way. Does allowing a small number of families to accumulate great wealth -- increasing from generation to generation -- harm democracy? The United States Constitution's ban on inherited titles met with unanimous approval because of the perceived threat posed by lords and earls to a democratic republic. Similarly, Americans have always understood that establishing a small group of families with seemingly unlimited wealth, social privilege, and political power undermines a fundamental American principle: that all citizens are legally and politically equal.

Some founders wanted to eliminate inheritance entirely. In a letter to James Madison, Thomas Jefferson suggested that all property be redistributed every fifty years, because"the earth belongs in usufruct to the living." Madison gently pointed out the plan's impracticality. Benjamin Franklin unsuccessfully pushed for the first Pennsylvania constitution to declare concentrated wealth"a danger to the happiness of mankind."

At the other end of the spectrum, the Constitutional Convention decided to forbid the English practice of allowing the government to seize the entire estate of a person convicted of treason. They reasoned that the property even of citizens who had committed the highest crimes against the nation should not be wholly confiscated.

But, again like today, most people held views in between. By the 1770s, because of the practices of primogeniture (requiring all property to go to the deceased's first son) and entail (allowing families to will property that could never be divided or sold), along with rich families' penchant for land speculation, about three-quarters of Virginia's good land was owned by only a few hundred families, out of a population of around 400,000. Pressed by the small farmers and landless men on whom it depended for military service, Virginia banned primogeniture and entail in 1777. Virginia reached a compromise: Rich families didn't lose their land, but large estates got broken up over time, thereby loosening the richest families' grip over Virginia's economy and politics.

So, as with other political issues—even independence itself—Revolutionary-era Americans held a range of views on how much property people should be allowed to pass on to their children. But one thing is certain: They hoped to prevent the emergence of a small group of people with perpetual wealth and thus perpetual privilege. Keeping a robust estate tax today would further that goal, and it would be consistent with a long-standing tradition of American democracy.

This piece was distributed for non-exclusive use by the History News Service, an informal syndicate of professional historians who seek to improve the public's understanding of current events by setting these events in their historical contexts. The article may be republished as long as both the author and the History News Service are clearly credited.