The British model of taxation

Prompted by the 2017 Nobel Prize for Literature, I've been reading "Remains of the Day." It is a Very British novel written by Kazuo Ishiguro. The narrator is an aging butler in a palatial English country house. If you saw any of "Downton Abby," you get the picture. The book was made into a movie starring Anthony Hopkins as the butler/narrator. I saw the movie on TV but had not read the book until now.

British tax laws for generations into the 20th century made possible these huge land holdings populated by a moneyed aristocracy addressed as "My Lord" and "My Lady." America's founding fathers did not want an aristocracy and forbade inherited titles. The Constitution calls for a president, not a king or a duke or a prince. America was to be a land of opportunity and upward mobility.

When the modern U.S. income tax was initiated early in the last century, it was designed to be "progressive," meaning the wealthy paid a higher rate of taxation than the poor and middle classes. With the Republican tax overhaul now before Congress, more than a century of progressive taxation is in jeopardy, and so is the principle that America should have no aristocracy, no landed gentry nor ruling class.

Not only does the tax proposal cut taxes on the wealthiest Americans while reducing funds available for "safety net" programs, it also eliminates the inheritance tax. It is the inheritance tax (deceptively referred to by Republicans as the "death tax" — it is not death that is being taxed but the inherited wealth of the top less-than-one-percent of U.S. taxpayers.

Britain's tax structure once protected the baronial estates and inherited wealth of its aristocracy, but that system resulted in a stagnant, anti-innovation, closed-upward-mobility, anti-working-class economic system as British wealth and power declined. Tax laws were changed to no longer protect the great estates and to encourage entrepreneurs and innovators. 

In the 21st century, members of Congress are trying to resurrect the failed British system of protecting great wealth at the expense of innovation, creativity, and simple fairness. The inheritance tax repeal is especially egregious. The current tax, applied only to estates topping $5 million, affects less than 1 percent of Americans — those who own their own private jets, multiple homes and and enough "bling" to eclipse the sun. Advocates of repealing the tax say it's a tax on assets already taxed as income. But these same advocates want to disallow the deduction of state and local property taxes, sales taxes and other already-taxed assets of the middle class. It is not unusual for assets to be taxed more than once. Each time you purchase something subject to the sales tax, you are paying a second tax using money that has already been taxed. Surely, if the poor and middle class can pay taxes twice, so can the super-wealthy.

Otherwise, the American economy could end up as stagnant as Britain's was 100 years ago.