Adam Smith, Founding Fathers, and the Inheritance Tax

By Douglas V. Gibbs

In an article I wrote a couple years ago, Liberal Democrats Keep Calling America a Democracy. . . But John Adams Disagrees, I explained the dangers of pure democracy, and how the United States is not a democracy, but a republic.  We use certain democratic processes to elect our representatives, but we are a republic, no less.

A commenter, today, left a strange response to the article, setting aside the point of the article, to launch an attack against John Adams, himself.  He explained in his comment that "John Adams in the Wealth of Nations also said that we are capitalistic society. And the advocate of pure capitalism said the end to taxes. Yeah! Then he said the system will only work if inheritance tax was 100%. This is where we lose the trust fund kids."

There was no call to end all taxes.  In Article I, Section 8, Congress is granted the authority to impose "indirect" taxes.  Direct taxation, however, such as we see with the current income tax system, as perceived to be allowed by the 16th Amendment, is in direct conflict with what the framers intended.  The comment by the visitor to my article eludes to what the liberal left tends to believe, that we have a revenue problem, rather than a spending problem.  Where I was most offended, however, was not the statement that says pure capitalism calls for no taxation whatsoever, but that the commenter misrepresented John Adams, The Wealth of Nations, and his claim regarding the attitude of the founders regarding inheritance taxes.

I responded in the comment section as follows:

Douglas V. Gibbs said...

Mr. Robert, you are in error. John Adams is not the author of Wealth of Nations. Adam Smith was.

Douglas V. Gibbs said...

Your quip about Inheritance tax is inaccurate, but I will address that at the end of this response. In Wealth of Nations Adam Smith did not write that "we" are a capitalistic society. His writings were studied by the founders, as they were a study into successful economic systems. Smith was a Scottish economist, and moral philosopher, who published his Wealth of Nations coincidentally in 1776. The writing of the work, or course, began long before the American call for independence, a combination of 17 years of notes. Five editions were published: 1776, 1778, 1784, 1786, and 1789. Original publication was in March of 1776, prior to the date on the Declaration of Independence. In America, as the new country sought to define its identity, statists like Alexander Hamilton argued against many of Smith's principles, while those that championed liberty found Smith's writings about the free market to mirror what was emerging in the United States, and saw the policies of capitalism ones that would be beneficial to the growth of the country - consistent with the principles that already made up the quiltwork of American Exceptionalism, such as self-reliance, personal responsibility, hard-work, and the ability to keep what one produced. As for your quip about inheritance tax, in Wealth of Nations Smith did not write that inheritance tax should be 100%. In fact, he wrote that estates should be able to cascade down through the generations. Heavy taxation on inheritance encourages the wealthy to remove their money from the economy to avoid the tax, spreading it around in other countries, rather than giving it to posterity who will likely invest that money back into the domestic economy.

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