One question that was doing the rounds on Twitter over the weekend was: would you rather have a big trust fund or sporting ability that enabled you to earn similar money?
The question makes sense because a trust fund and athletic potential are both things we inherit from our parents. Both are, in Rawls’ words, “arbitrary from a moral point of view.” And both are forms of capital. One is financial capital, the other human capital. Granted, the concept of human capital does a poor job of explaining income inequalities, but it is useful to think of it when we are managing our own finances.
So, which would I prefer?
One big difference between the two is that, in sport, talent is never enough: the fact that Ravel Morrison is struggling to get into the QPR side tells us this. It takes discipline, work and dedication to parlay even the greatest raw talent into actual accomplishment.
One the one hand, this is an argument for preferring the trust fund: it saves you knackering yourself in the freezing rain every day. But on the other, it’s a case for preferring the sporting talent – because the sense of achievement when you do succeed is something the trustafarian will never enjoy. Happiness consists in what you’ve done, more than what you’ve bought.
This sense, however, is a two-edged sword. Even the most successful sporting career will contain many disappointments. In fact, the same drive for perfection that’s necessary for those achievements will guarantee dissatisfaction. Look at this interview with Sir Alex Ferguson, which came after he had won the Scottish Cup. Or look at Alexis Sanchez: he’s having a great season personally, but is reported to be unhappy. Both men embody the fact that ambition is ambiguous for happiness.
Something else, though, speaks against the sporting life. It’s what happens after it finishes. Huge numbers of successful sportsmen suffer divorce, bankruptcy and depression. And that’s not to mention an elevated chance of lifelong physical pain (pdf)*. Who wants to be a broken has-been in his late 30s?
On balance, then, it’s a tricky question of whether I’d prefer to inherit ability than money.
Which brings me to a puzzle. Anybody who’d take the money should – from one perspective** – want to tax inherited wealth more heavily than inherited ability. This is because inherited wealth is something for nothing to a greater extent than is inherited ability. What’s more, whereas the trustafarian – qua trustafarian – contributes nothing to overall welfare, the person of ability (be it sporting, intellectual or musical) gives us all something to value.
Voters, however, don’t see it this way. A recent ComRes poll (pdf) found huge support for higher top rate taxes but opposition to higher inheritance tax. How can we explain this, in light of the question I began with?
One possibility is that most people would prefer the sporting life. Welfare egalitarians would rather tax men who enjoy the deep happiness of genuine success than the man who suffers a sense of futility because of his inherited wealth. Another possibility is that voters think that most top incomes derive not from people making genuine contributions to society but from rent-seeking.
There might be other explanations. But these, I suspect, are the respectable ones.
* Though not all studies find this.
** There are other arguments against taxing inheritances, though I find most unconvincing.