We live in a world with property and inheritance taxes. To most of us, it doesn’t seem strange to pay taxes on the value of our property. But for much of history, that was completely unheard of. Taxes were on imports and exports only (since they were so much easier to measure). While we don’t think of it very often, that has enormous effects on the ways that we spend our money.

Today we went to see Burghley House near Stamford. It’s one of the best old manor houses left in the U.K. today, with fantastic furniture and artwork, and very impressive architecture. It has over 200 rooms. Originally built by William Cecil, an advisor to Elizabeth I, it was passed down in the family for hundreds of years, and only recently turned into a trust.

So, of course, like everyone else seeing all this grandeur, I’m thinking “this must be some kind of wealthy family to hang on to this all these years.” But the tour guide belied my assumptions. The family had suffered many ups and downs over the years, she claimed. For long periods, large sections of the house were simply closed off and never used by the family. Undoubtedly, some damage was done, which restorations have had to deal with. But the question remains, how does one hang on to such wealth for so long?

Well, really, it’s rather easy when you have no taxes to pay. It’s even easier when you have no heating, water, or electricity bills. As long as you can feed yourself, you’re set, and the size of your house or the value of its contents are no object. Then, when times get better, you’re free to spend all your surplus income accumulating again. As long as you’ve got the big house to start with, it’s easy to see how it can keep getting filled with all sorts of valuables over the years. Not even the Rockefellers have it that easy.

From an economics standpoint, the biggest issue with this system is one of inequality. Regardless of any income inequality, the ability to leverage one’s wealth as necessary presents an inherent inequality. Property taxes, but especially inheritance taxes, represent a way toward a more equal society. Just as importantly, they also encourage people to save and invest rather than spending all their money on consumption goods (like commissioned artwork).

Is this ultimately a problem? It depends on what kind of value you get out of having enormous countryside estates to suck up tourist dollars. Maybe the world’s a better place because of all that artwork than it would be if the average peasant had a little more money to feed his family. When you see magnificent things like this, it really does make you question your assumptions.

Posted on July 14th, 2004 by Lee
Filed under: Uncategorized