Book Review: Death And Taxes by Hans F Sennholz


(Center for Futures Education, P.O. Box 489, Cedar Falls, Iowa 50613), 1982 • 105 pages • $5.95 paperback

Herbert Hoover put it right on the line: “The American people have from the earliest moments been alive to the evils of inherited economic power. Several million dollars is economic power and too often it falls into the hands of persons of little intention to use that power for public benefit either in expansion of enterprise and employment or for public services. It is the breeding ground of playboys and playgirls of morally obnoxious and degenerating character.”

For once, President Hoover was in touch with the majority of the American people. Most Americans dislike playboys and snobs, and estate taxes are a good way to give them their comeuppance. Estate taxes make good political sense.

But estate taxes make no economic sense. As Hans Sennholz clearly shows, estate taxes produce very little revenue (less than 1 per cent of projected 1983 federal receipts), consume scarce capital, distort the structure of production, lead to costly avoidance schemes, and promote more conspicuous consumption than perhaps any other tax.

Of course, estate taxes do not level factories like a B-29. But when the tax comes due, stocks, bonds, farms, and family businesses must be sold to pay the bill. This consumes productive capital which is needed in other sectors of the economy. The old factory remains standing; the new factory is never built.

Confiscatory taxation leads to avoidance and evasion. The simplest way to avoid estate taxes is to avoid leaving an estate. Sell the business, retire early, and spend it all while you can. Thus, even in the grips of recession, luxury items sell at a brisk pace, while essential industries languish for lack of investment capital.

Jewelry, furs, precious metals, gems, works of art, and bearer bonds are easily transferred, difficult to trace, and thus particularly amenable to tax evasion. When all else fails, there is always the Swiss bank account or Liechtenstein family foundation.

Having taken such a dim view of estate taxation, it is not surprising that Professor Sennholz offers a few avoidance techniques of his own. An expert on inflation, he shows how the inflation that can destroy a family fortune can be used to facilitate the tax-free transfer of wealth between generations. These sections on family annuities, limited partnerships, revocable living trusts, family mortgages, corporations, holding companies and other techniques are required reading for those who want to protect family wealth in an age of inflation and estate taxation.


July 1983

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July/August 2014

The United States' corporate tax burden is the highest in the world, but innovators will always find a way to duck away from Uncle Sam's reach. Doug Bandow explains how those with the means are renouncing their citizenship in increasing numbers, while J. Dayne Girard describes the innovative use of freeports to shield wealth from the myriad taxes and duties imposed on it as it moves around the world. Of course the politicians brand all of these people unpatriotic, hoping you won't think too hard about the difference between the usual crony-capitalist suspects and the global creative elite that have done so much to improve our lives. In a special tech section, Joseph Diedrich, Thomas Bogle, and Matthew McCaffrey look at various ways these innovators add value to our lives--even in ways they probably never expected.
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