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Time to end handouts for heirs

Blaming immigrants is so 2016. Now society’s favourite scapegoats are rich people. More in Common, an NGO that combats polarisation, has polled people in six European countries about the social impact of Covid-19. Which of 17 groups emerged from the pandemic deserving praise? “Medical staff” came first, “wealthy people” last.

Which groups did governments care too much about? “Wealthy people” were first, then “big business owners”. Support for caps on executive pay ranged from 73 per cent in the Netherlands to 90 per cent in Italy. Even higher numbers wanted big business to forgo tax havens.

Taxing the rich may now be the most consensual proposition in politics. It looks like the next political trend. Surveys for Rainer Zitelmann’s recent book The Rich in Public Opinion found much the same: large majorities in the US, UK, France and Germany backed “substantially” higher taxes for millionaires. Even most US Republicans support a wealth tax, if it’s not called that.

In France, Emmanuel Macron’s presidency has never recovered from his early slashing of the same tax. He’s since been known as “president of the rich”.

The right traditionally derides such taxes as Soviet socialism. By page six of his preface, the conservative Zitelmann is on to the Bolshevik extermination of wealthy peasants, the “kulaks”. In fact, though, the rich should welcome higher taxation. It could save their children from opprobrium and Trumpian decadence.

Various trends have created unprecedented wealth: the end of communism; 75 years of accumulation during the west’s “Long Peace”; the surge in inequality after 1980, and greater ease of tax dodging. The wealthy appear recession-proof: since 2007, the Dow Jones has approximately doubled, whereas US median incomes had risen about 9 per cent until the pandemic hit.

To borrow from rhetoric about the poor, let’s distinguish between the “deserving” and “undeserving” rich. The deserving are self-made types such as Jeff Bezos and Bill Gates. They should get large rewards, though $100bn seems unnecessarily high.

The economist Thomas Piketty told me: “People who use this argument, ‘He’s great’ — therefore what? Therefore he should pay zero tax? Therefore we should subsidise him so that he’s even richer?” Piketty proposes taxes that cap individual wealth at $1bn.

Video: Thomas Piketty: why we need a radical new wealth tax

I suspect most rich people would survive that. Famously, many just treat wealth as a way of keeping score. Joris Luyendijk, author of Swimming with Sharks, says the London bankers he observed would accept being paid bonuses in bananas, as long as they got the most bananas.

But the burgeoning category today is the undeserving rich: heirs. Think of the Trumps. Donald Trump himself is widely supposed to be a first-generation heir masquerading as a self-made man. In fact, he’s a second-generation heir.

His grandfather Frederick, proprietor of hotels and brothels, died in the Great Flu of 1918, leaving a canny widow and son who invested his insurance in real estate. Now Frederick’s great‑granddaughter Ivanka goes around lecturing the unemployed.

In the US, inheritances “account for about 40 per cent of household wealth”, says the Center on Budget and Policy Priorities. Fewer than two in 1,000 estates paid the federal estate tax even before Trump cut it in 2018. Trusts and other tax havens abound. Trump’s own Treasury secretary, Steven Mnuchin, has placed assets worth at least $32.9m into his “Dynasty Trust I”.

Taxing wealth is often derided as “the politics of envy”. But I don’t envy the heirs I’ve met. Many seem bored and aimless. While their working peers grow more accomplished and interesting with age, heirs become less so.

Many suffer from both superiority and inferiority complexes: they have private planes yet feel undeserving, as Rachel Sherman recounts in Uneasy Street: The Anxieties of Affluence. They invest vast energy keeping their mitts on their tribe’s money-pot, which often means sucking up to the family patriarch or battling siblings — see Mary Trump’s new book.

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