Is there any document (letter, quote) linked to the Founding Fathers that indicates their support for an inheritance tax?

Question

I recently had someone make the claim that several of the Framers of the U.S. Constitution would have likely agreed with an estate or inheritance tax. This theory was backed up by a few quotes from Jefferson, (who was generally very anti-tax) Madison and Washington. This theory contradicts much of what these men wrote on the general subject of taxation.

The following is a quote that Jefferson liked to cite, to justify this theory:

A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural.

^{— Adam Smith}

Adam Smith: Lectures on Justice, Police, Revenue and Arms (1763)

In Jefferson's own words -

I set out on this ground, which I suppose to be self evident, "that the earth belongs in usufruct to the living": that the dead have neither powers nor rights over it. The portion occupied by an individual ceases to be his when himself ceases to be, and reverts to the society.

Jefferson to Madison, Sept 6, 1789

My question is:
What evidence exists that the Founders may have supported or rejected the idea of an inheritance or estate tax? From a Classical Liberal stance based on Natural Rights, would this form of taxation be considered "moral" or "just"?

Answers can include writings, quotes, speeches etc., by the Founders listed above as well as, from others such as Samuel Adams, George Mason, John Jay or others. Any of the signers of the Declaration of Independence or any of the Framers of the Constitution as well as any of the philosophers who influenced them will be considered legitimate sources for making the case.

Answer 1

The following articles1 2 state that founding fathers who supported estate taxes include Thomas Jefferson, Alexis de Tocqueville, Adam Smith, and Thomas Paine (as Aporter points out, de Tocqueville and Smith are not precisely founding fathers. Tocqueville was an early 1800's French Aristocrat (who briefly came to the U.S. to study the new form of government) who was not alive during the signing of the Constitution, and Adam Smith was a Scot whose writings were highly influential for the founding fathers).

And Thomas Jefferson, who described "The Wealth of Nations" as "the best book extant" on political economy, famously wondered at about the same time whether all hereditary privileges should be abolished since "the earth belongs in usufruct to the living." He could have been quoting Smith with those words: It is "the most absurd of all suppositions," said Smith, "that every successive generation of men have not an equal right to the earth."

Similarly, Alexis de Tocqueville identified the breaking-up of estates as one of the cornerstones of the young country’s success. “What is most important for democracy is not that great fortunes should not exist,” he wrote, “but that great fortunes should not remain in the same hands. In that way there are rich men, but they do not form a class.”

Among those who attended Smith's lectures was the historian and jurist John Millar, who supported a change in the inheritance laws such that wills would be enforced only for a limited part of a person's property. Millar saw this as entirely compatible with a respect for property rights. He was joined in this, as in his enthusiasm for Smith, by Tom Paine.

[The following Politifact article][3] adds John Adams and Benjamin Franklin as founding fathers who felt that regulation of estate passing should be the public's concern

Basic property necessary for man to live should be left alone, Franklin wrote. But he continued that "all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition."

We thought one sentence has particular relevant here: "Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it."

In the book "Wealth and Our Commonwealth," William H. Gates Sr. and Chuck Collins write: "The nation’s founders and populace viewed excessive concentrations of wealth as incompatible with the ideals of the new nation. Revolutionary era visitors to Europe, including Thomas Jefferson, Thomas Paine, John Adams, and Ben Franklin, were aghast at the wide disparities of wealth and poverty they observed. They surmised that these great European inequalities were the result of an aristocratic system of land transfers, hereditary political power, and monopoly."

Noah Webster -- founder of Webster's dictionary and an editor of The Federalist Papers, believed that extreme wealth inequality spells the downfall of nations...

The causes which destroyed the ancient republics were numerous; but in Rome, one principal cause was the vast inequality of fortunes.

This PBS article stated or paraphrased the views of James Madison, John Adams, Alexander Hamilton, and George Washington on estate taxes and/or socialized ownership of wealth, land, and stocks.

James Madison warned that inequality in property ownership would subvert liberty, either through opposition to wealth (a war of labor against capital) or “by an oligarchy founded on corruption” through which the wealthy dominate political decision-making (a war of capital against labor). John Adams favored distribution of public lands to the landless to create broad-based ownership of property, then the critical component of business capital in the largely agricultural U.S. Current levels and trends in inequality would almost certainly have terrified the founders, who believed that broad-based property ownership was essential to the sustenance of a republic.

Other be-wigged early presidents of the U.S. and half the crew on Mt. Rushmore — George Washington and Thomas Jefferson — believed that U.S. democracy would work best if citizens had a broad-based ownership stake in the economy. They too feared that extreme property inequality would prevent America from fulfilling its promise.

Even Alexander Hamilton, favorite of the moneyed interests, argued that few people wanted to be wage laborers only, and he believed, like Henry Ford centuries later, that a strong middle class was needed to become energetic customers of businesses in the entire economy.

Although quotes from founding fathers directly addressing an estate tax are scarce, it is commonly argued in related articles that they did not want a privileged aristocracy; and that they believed individuals should achieve wealth through merit and hard work, not inheritance. The founding fathers were rebelling against empires that had large concentrations of power, generational wealth, and class status that was earned through birth rather than labor.

Answer 2

While not precisely responsive to the question, it is worth understanding that even if the Founders would have supported inheritance taxes, it does not follow that they would have supported inheritance taxes imposed by the federal government (knowing what they did at the time about the federal government that they contemplated).

The Founders envisioned a very small and limited federal government, and until the U.S. Civil War, in 1861, more than seventy years after the current U.S. Constitution was adopted, the federal government was very small and was funded predominantly with customs duties on imported goods. Indeed, apart from the temporary surge in the scale of the federal government during and in the immediate aftermath of the U.S. Civil War, the federal government remained very small relative to the size of the economy until the authorization of a federal income tax, shortly before World War I.

(Via a September 25, 2006 report of the Congressional Research Service).

Even as late as 1915, shortly after the predecessor to the modern federal income tax was adopted, customs duties were still one of the leading sources of federal tax revenue:

(Via this intermediate source).

Meanwhile, starting well before the U.S. Civil War, and prior to the 2002-2004 time period when the state death tax credit was repealed, the vast majority of U.S. states had some form of estate tax or inheritance taxes, and some U.S. states continue to do so.

This made sense from an administrative perspective, because then, as now, probate proceedings were handled exclusively in the state court system, and not the federal court system.

In practice, state inheritance and estate taxes were usually administered in connection with the administration of probate cases by state courts with probate jurisdiction. Indeed, the laws of inheritance and probate administration, more generally, are purely a question of state law in the United States (even though the federal estate tax now heavily influences how estate plans are structured in large dollar estates).

Since the federal government didn't have a bureaucracy in place to collect state inheritance and estate taxes, until much, much later (with the rise of the IRS as a powerful bureaucracy over the course of the 20th century), it made sense for inheritance and estate taxes to be a source of state revenue, rather than a source of federal revenue.

As a result, the Founders failure to provide in the U.S. Constitution for the imposition of a federal estate tax does not reflect an aversion of the Founders to inheritance or estate taxes more generally. Instead, this only reflects the fact that this was not an initially contemplated revenue stream for the very small federal government which they originally contemplated.

Answer 3

They revoked primogeniture and most of the English class distinctions about wealth. But always remember that saying of theirs: The Power to tax is the power to destroy. That doesn't answer it but I feel they would give that power to the States. We have to remember their practical methods of solving what wasn't known from experience, the laboratory of the states

What does "states as laboratories of democracy" mean? Many programs start in the states as experiments, if they are successful they are sometimes adopted nationwide. Examples: Amber Alert, Social Security, C02 emissions, etc.

JOHN DICKINSON “Experience must be our only guide. Reason may mislead us.” – 1787

Answer 4

History suggests that no founder of a nation considered or solved every conceivable problem that future generations would encounter, and that effort towards finding solutions may have been ongoing. It might be difficult from our written record to make a clear case above other hypotheses that, given sufficient time and experience, the Founding Fathers would not ultimately have favored a different strategy of taxation than the de facto strategy, George Washington himself regarding the matter as an apparently necessary inconvenience. This should not prevent discovery of a correct stance given the fundamental principles they advanced.

My theory is that they may have allowed the wealth tax to exist simply as a standing expedient for the lack of apparent alternatives, or because they did not feel the people were accepting enough to advance a superior alternative during their lifetimes.

However, a wealth tax is fundamentally opposed to the tenets of classical liberalism, for the following reasons:

1. It disrupts individual economic freedom (in a way, without limit), while giving power to the state without any return of benefits to those affected. Classical liberalism proponents intended to maximize individual economic autonomy, by limiting the power of the government. Forcing Uncle Sam to be on the list of one's heirs or allowing perpetual taxes against one's reserves seems to contradict economic autonomy, while aggrandizing the government purse and therefore powers without any corresponding benefit to those so taxed. If an individual desires, in his Last Will and Testament, to bequeath all or a portion of his earthly goods to some government treasury, that is his privilege--however, presupposing that some portion of the means he has intended to consecrate for the benefit of his heirs actually belongs to the government seems like folly. To whom will the members of government be made accountable, if the fortune they are taking is from the deceased? That speaks to inheritance taxes specifically, and now to address wealth taxes generally: they are sore fetters to freedom. A wealth tax such as a property tax generally is levied recurrently at set intervals on the basis of how much wealth or value is owned. The recurrent nature of the taxation implies mathematically that one's holdings and assets shrink exponentially towards zero over time. This is a tax against private property and ownership, and this inevitably decreases economic freedom because it discourages the edification and accumulation of worth, with the very same assets being taxed repeatedly until they have run out. In short, wealth and property taxes directly contradict the principle of private ownership of property, and nullifies such deed clauses as were common at the time, granting ownership of a property to a person, and "to his/her heirs and assigns, in perpetuity".

2. A wealth tax or inheritance tax is inequitable. A death in the family is a misfortune that carries economic and social disadvantages with it. A family that has a greater incidence of deaths will be taxed at a higher rate than others, making the tax a further burden on the grief of the unfortunate. Although death is inevitable together with its corresponding losses, taxing the bereaved on that occasion seems a small and uncompassionate thing to do. For the childless, donating one's estate to charity seems quite reasonable if that is according to his wishes, and if no will exists and no heir even of the remotest kin can be identified, it seems fair to reapportion the property through a dedicated trust within the government--what else is there to do in such a case? However, those families having children, especially young children, will be disadvantaged unfairly by an involuntary inheritance tax. Furthermore, those preparing against future needs are unfairly discriminated against by a wealth tax, because the larger their holdings, the more they are taxed, regardless of whether their holdings are being replenished, or not. This spells out a mistaken premise in the very existence of recurrent wealth taxes: That the Government owns your property, and it is merely on loan to you and will eventually but inevitably be repossessed.

Adam Smith was in favor of the equitableness of taxes as his first maxim of taxation:

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. Adam Smith, Wealth of Nations

To Sum Up:

All of this suggests that if property rights are to be preserved, consistent with the ethic of the Declaration of Independence and the Bill of Rights (Amendments 9 and 10, which distinctly prioritize citizens' rights as broader than governments' rights), there must be a principle of proximity and preference first to those who are nearest of kin to the deceased, then to those more distant of kin, wealth devolving into the hands of the government as a designated trust only in those rare cases when no heirs can be identified following due diligence.

The quotes you used do not seem to justify an immediate taxation of decease to augment the government, rather, it is spelled out unambiguously in Adam Smith's own view:

A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural.

And Thomas Jefferson's quote:

I set out on this ground, which I suppose to be self evident, "that the earth belongs in usufruct to the living": that the dead have neither powers nor rights over it. The portion occupied by an individual ceases to be his when himself ceases to be, and reverts to the society.

Of course we cannot and should not keep the beneficial assets of the dead unused and unoccupied throughout all time; that would seem to be the absurdity spoken of. Who is the society of the deceased? First, his own living kin, and ultimately, his local and national community if no kin or heirs can be identified. Thus, no family should be deprived of what is by right theirs to dispose of as they see fit, so long as such family or their heirs exist. The wording of property deeds hits the nail on the head: "To his or her heirs and assigns, to have and to hold, forever". Property taxes contradict this verbiage and its backing principle.

The Classical Liberal solution:

The dissolution of all recurring property taxes is the only way to limit the power of the government indefinitely and keep economic freedom in the hands of the people. We are not the property of the State; our assets belong to ourselves and to our families. A flat rate (equitable) income tax, as suggested by Adam Smith in the first of his quotes above, seems to be the only sustainable solution that respects both property rights and the apparent necessity of taxation in some form or another. A maximum of half of a tithe (5%) seems reasonable to sustain all the necessary functions of government. Income or increase is taxed only once, and so there is still incentive for growth, but once acquired, property is permanent and perpetual unless dispensed by the sole authority of the owner. "You get to keep (some very high percentage of) what you earn" is a maxim that would unleash unprecedented growth and promote savings, because there would be no holes in the bucket.

Finally, if we are going to be consistent with Washington's pleas for fiscal responsibility and not leaving debts to future generations (see my first reference), does it not make sense instead to endow them with such means as may be necessary to secure their future prosperity--seed crop, as it were--and cut out the burdensome and unnecessary federal agent commissions? Some may argue that leaving fortunes to (potentially ungrateful) children may corrupt them more than help them, but I would avow that there is no one more capably equipped nor more rightful in making that determination than the parents themselves. Regarding the corruption brought on by undue wealth, I for one would trust my own children whom I have reared more than I trust governors who render no account in my mortality to me regarding the dispensing of my estate.

Answer 5

Jefferson most likely didn't. He did have some scattering criticism of the banking system in general:

I believe that banking institutions are more dangerous to our liberties than standing armies... If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around (these banks) will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.

He also probably wouldn't be cool with 3 American billionaires having the same amount of wealth as half the U.S population combined.

You don't have to be a socialist or democrat to understand how messed up and wrong this is.