Ramaswamy Death Tax Idea Should Be Dead On Arrival 

Presidential politics are in full swing. The early days of the campaign are always entertaining, as many candidates introduce themselves to the American public with some unique ideas for their would-be presidencies. However, some of these proposals are not entirely new ideas, with some also being quite destructive in nature. Such is the nature of one idea floated by Vivek Ramaswamy.

In a conversation with radio host Michael Smerconish, Ramaswamy somewhat stood behind the idea that America should implement a 59 percent estate tax – otherwise known as a “death tax” – at minimum. His only qualm with the idea was seemingly that it was “unimplementable in the current system” and that there would be “consequences” politically. As too many American small business owners and farmers know, however, the consequences of the death tax are more than just political.

The question originated because of a quote in Ramaswamy’s 2022 book, Nation of Victims. In the book, Ramaswamy writes about the estate tax thusly:

“Piketty and Saez are proposing a dry, yet elegant answer to the question, one that both tells us who the worst off are and helps us prevent Wilt Chamberlain’s talentless grandchildren from ruling the world… Piketty and Saez’s equations spit out the answer that the optimal inheritance tax in the United States is 59 percent… I’d take the figure Piketty and Saez arrive at as a minimum. We shouldn’t allow people to become billionaires just by having rich parents.”

There’s a lot to unpack with this section of the book. First, “Piketty and Saez” refer to Thomas Piketty and Emmanuel Saez, two progressive economists. They are widely known for their economic model that suggests the most effective method of curing income inequality is high taxation and indicts free market capitalism as the cause.

The seemingly random sideswipe at basketball legend Wilt Chamberlain is actually a nod to libertarian philosopher, Robert Nozick. Nozick argues in his 1974 book Anarchy, State, and Utopia that all transactions in a truly voluntary free market are just. He uses Wilt Chamberlain to illustrate this point. If thousands are willing to freely give their money to watch Wilt Chamberlain play basketball, then Chamberlain’s comparably outsized wealth is in no way unjust, because he hadn’t forced anyone to do anything. Fans freely parted with their money and – in exchange – got to see him play.

So, Ramaswamy’s proposal reflects an endorsement of the progressive view that taxation can cure what ails society and indicts free market capitalism. However, what it also – in this more narrow context of inheritance taxes – misunderstands fundamentally what wealth actually is.

Many politicians speak about wealth and net worth as if it were liquid cash. When politicians like Ramaswamy see someone with a net worth of $5 billion, they imagine someone with a Scrooge McDuck-style swimming pool filled with five billion dollar bills. However, that’s not how wealth works at all.

Net worth reflects all of a person’s assets. That could include the value of any businesses they own, land they have, property, vehicles, equipment, or anything else they own that has a monetary value, also known as capital. A 59 percent tax on inheritance takes this misunderstanding of economics and turns it into a dangerous political weapon. It is especially unfortunate as Ramaswamy should understand this better than any candidate. His $950 million net worth comes largely from his ownership stake in his biotech firm Roivant Sciences.

No one can pay off 59 percent of land or a business. When someone inherits a family farm worth about 10 million dollars in real estate. Under Ramaswamy’s proposal, that inheritors, likely seeking to continue to operate the business, would be on the hook for $5,900,000 to the federal government. However, they didn’t inherit cash. They just inherited land that might be worth a lot if it were sold. In this case, the would-be farmer has to sell their land to avoid the heartache, go into debt, or sell much of what they own to pay off what’s owed through no fault of their own.

This same example would apply to small manufacturing and retail businesses as well, many of which employ dozens if not hundreds of people. Businesses facing the estate tax are taxed on equipment and other property that provide employment and therefore the policy eliminates otherwise stable jobs.

As if the estate tax weren’t destructive enough, there are myriad ripple effects from when a small business is liquidated purely because the owner suffered a tragedy. The death tax forces companies to either fold or be acquired. Both reduce alternatives for consumers in the economy and blunt competition among firms in markets, aiding companies with different ownership structures such as publicly-traded corporations.

This is already the sad reality for many Americans with a current estate tax rate between 18 and 40 percent. Raising it to a 59 percent minimum would only exacerbate and intensify that pain. That pain should be the true reason why a politician should disown such a proposal, not because their previous endorsement of it is no longer politically convenient.

Republican politicians of all stripes have done excellent work to pare down the existing estate tax, trying to ensure Americans dealing with the losses of loved ones don’t have to also deal with the federal government reaching for their cut and destroying what they’ve worked so hard to build. It would be a shame for one misguided proposal to build momentum for this backwards policy and undo that work.