Minutes after posting my piece about the estate tax, I was accused of “just ranting” by an advocate of repeal. He challenges, and I respond:
Do you know how many estates qualified for the tax last year? Do you know what income bracket the majority of the families fell in to? Do you know that family-owned farms and businesses are the hardest hit by the estate tax?
According to FairEconomy.com: Less than one percent of estates are taxed. Less than 3 in 10,000 family farms are subject to the estate tax.
According to the Tax Policy Center: There were only 53,819 taxable estates out of 2,336,840 adult deaths in 1999—2.3 percent, but this was at the peak of the Internet bubble when there was a lot of paper wealth. In 2003, of 63,024 returns that qualified for the estate tax, only 30,627 were actually taxed after adjustments. Fewer than half the estates of between $1 million and $5 million were affected by the estate tax.
Finally, how many dang times do you want to tax the same dollar?? You tax it when I earn it. You tax it at a higher percentage if I follow the American work ethic and work a little harder to get a bonus. You tax it when I save it in the bank. You tax it when I invest it. You tax it when I take it out of my 401k. If I choose to give a gift of more than 10k to a relative you tax it. Then you tax whatever is left when I die.
This is the big myth. We’re not taxing the same dollar, we’re taxing new wealth for the recipient created from the same dollars. If you follow this “same dollar” line of argument, theoretically all the money in the economy is merely the inflated product of the original amount of money in the system, therefore nothing should be taxed, but it isn’t so. There is lots of new wealth being created all the time and that is what is taxed. The progressive tax system treats higher incomes as greater recipients of society’s investments, so, yes, the rich pay a bit more. We don’t tax investments, we tax profits from investments and give deductions for losses.
We don’t tax “whatever is left” of a person’s wealth, we tax less than one percent of the estates passed on to the next generation. Before modern times, when America led the way toward greater equality, these estates were the basis of hereditary nobility. If you want dukes and duchesses, by all means support the repeal of the estate tax. But it is not a “rant” to point out that it is unAmerican to want hereditary wealth to define our society.
Maybe if we spent less time (and money) trying to equalize the income distribution in this country and more time coming up with ways to allow us to reinvest wealth you might find this is an even better place to live.
We aren’t spending any time or money on equalizing income distribution. Income disparity has increased by 50 percent in the last 16 years and by much more since 1980. Twenty-six years of trying to make the United States a “better place to live” by making it more like a third-world economy with drastic income disparity, hasn’t worked.
Income equality is not what I advocate or what anyone concerned about the estate tax is advocating. Instead, the tax system in the United States has focused on increasing opportunity across all segments of society. We each still make of the resources we have and are given what we will.
These facts are widely known. The question is what is right for the United States. If you believe rising deficits and increased income disparity are good for you and your family, urge your Senator to vote to repeal the estate tax. If you want the estate tax to continue, and more generally that we restore fiscal sanity in the United States, I urge you to demand your Senator to vote to block the repeal of the estate tax.