Use estate taxes to fund inheritance for all: Column

There is no greater love than parent for child. This is perhaps why affluent people have no love for the estate tax. After building and maintaining a household and paying taxes while doing so, as their last wish before passing they’d like to see all their wealth to go to their families without further IRS meddling.

But because of such love, parents are biased and tend to spoil their children. Consider the other side of the transaction, what it’s like to get an inheritance. Through the blind luck of birth, the child receives a massive, undeserved boost compared with his peers. It can mean the difference between secure affluence and disaster.

I am one of the lucky. Before my maternal grandmother died in 1998, she and my mother agreed that she'd split her estate — itself spring-boarded by my great-grandfather’s business acumen and maintained through sound investing — into thirds for me, my sister and my mother. Because my mother was already well-off, my nana wanted to make sure her grandchildren were secure, too. So at 28 years old, I received several hundred thousand dollars (after taxes). And if my parents, who are in their late 70s, die before me, I will receive another inheritance.

Inherited wealth has made a huge difference in my life. Because of it, I didn’t accrue debt in graduate school. When my daughter was born, we had to pay $14,000 out of pocket for the procedure, due to complications and limited health insurance — but I didn’t have to borrow to cover the bill. Three years ago, we even bought a house in the expensive San Francisco Bay Area.

I feel guilty about these advantages. In the U.S., family wealth is a racial marker. In 2013, the median wealth of white households was $141,900; for black households it was $11,000; Hispanic households, $13,700. If cars are not counted, the median worth of black households shrinks to $1,700, with 40% of families having zero or negative net worth.

Because of decades of housing discrimination and predatory lending, black and Hispanic households have been left out of the wealth-generating benefits of home ownership.

And even people who own homes are stretched thin: 63% of Americans don’t have enough cash savings to cover a $500 emergency, let alone a $14,000 hospital bill.

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Presumed Republican presidential nominee Donald Trump apparently does not feel guilty. His platform calls for a repeal of the estate tax, which today exempts estates under $5.45 million. (This is over and above his other proposed tax cuts for the rich.) Trump holds that the estate tax is a “disaster” involving unfair “double,” even “triple” taxation. The billionaire Trump had the fortune of inheriting his father’s real estate business, followed by a part of his estate, and there is good reason to believe he'd be just as wealthy if not more so if he had taken that inheritance and parked it in the S&P 500, rather than investing in casinos and high-rises.

He became this wealthy despite paying an estate tax. If he became president and succeeded in repealing the tax, he would bequeath his multibillion dollar estate to his already wealthy family tax free. Yes, this would be obscene, but we know how parents love to spoil their children.

This September marks the centenary of the U.S. estate tax. This November, depending on the election results, could portend its demise. Congressional Republicans have already managed to repeal it once for the 2010 fiscal year, and would have succeeded further if not for the veto power of Presidents Clinton and Obama. If it is to survive this century, the estate tax needs to become something more than a "death tax."

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British economist Sir Anthony Atkinson has an excellent idea: Use the estate tax to fund inheritance for all. He proposes that each citizen be endowed a minimum inheritance upon reaching adulthood, with the program being funded by a restored estate tax. By his calculations, if implemented in the United Kingdom, the program could promise a capital endowment of slightly more than £5,000 (nearly $7,300) per young adult from estate tax revenue alone.

The United States need not follow this plan. Another idea, inspired by Britain's now defunct Child Trust Fund program, would give each newborn a savings account that could be safely invested over time and be accessed at adulthood. Such an idea has received bipartisan support from Sen. Charles Schumer, former senators Rick Santorum and Jon Corzine and former House speaker Newt Gingrich, although none of them thought to fund it through the estate tax.

This is a mistake. Inheritance — the gift of financial security and opportunity — is something to which no child is entitled but which every child deserves. There’s an easy way to provide this gift to all: Stop wealthy parents from spoiling their children too much.

David V. Johnsonis a writer and editor based in Berkeley, Calif. Follow him on Twitter @contrarianp.

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