Anna Nicole Smith
I bet you didnâ€™t expect to see this title on Relentlessly Progressive Economics, and itâ€™s not just an attempt to get more Google hits. This story highlights some important questions about inheritance.
Not surprisingly, men have lined up for DNA tests to stake a claim on her late husbandâ€™s fortune via her baby. While some individuals have been criticized for coming forward, no one seems to be questioning the justness of this process.
The generally accepted premise is that Anna Nicole slept with a bunch of men and that whichever one happened to have impregnated her should get the billions of dollars. I do not see much rationale for this approach, but I cannot see a significantly fairer alternative.
The real problem is not the handling of this particular situation, but the whole concept of inheritance. The Anna Nicole DNA lottery underscores the ridiculousness of allocating vast fortunes based on heredity.
Even relying on the neoclassical principles of linking rewards to productivity and “equality of opportunity,” one can make quite a compelling case for abolishing inheritance. Some argue that inheritance is a necessary incentive for savings. However, if any of Marxâ€™s analysis has garnered widespread acceptance, it is his point that accumulation has become an end unto itself in capitalist systems. In any case, the wealthy could create legacies through means other than inheritance such as philanthropy or building big monuments. Bill Gates and Warren Buffett seem to be following this path voluntarily.
While prohibiting inheritance may be impractical, taxing it would be eminently sensible. In addition to raising revenue and curbing the inequity of inheritance, suchÂ taxes canÂ induce rich people to devote relatively more of their estates to untaxed charitable purposes (or to building big monuments).
Currently, Canada and Australia are perhaps the only western, industrialized countries without inheritance taxes or other taxes on accumulated wealth (other than property). Both countries used to have estate taxes at the provincial/state level, but interprovincial/interstate competition drove these taxes out of existence. Incidentally, this type of tax competition is the true cause of Canadaâ€™s current “fiscal imbalance.”
The US federal Estate Tax is being temporarily phased out, but will automatically be reinstated in 2011. There is a vigorous American lobby to maintain this tax. We should push for the introduction of a comparable tax at the federal level here in Canada.