Tuesday, September 13, 2005

The Death Tax Returns…

This week was supposed to be the week that Congress voted on the permanent repeal of the Estate Tax (also know as the Inheritance Tax or "Death Tax"). When Congress first enacted the Estate Tax in 1916 they asserted that it would help reduce concentrations of power and wealth in the hands of the few and promote equality of economic opportunity. In essence it would "break up the swollen fortunes of the rich."

This sentiment is not an attractive one to Americans. We as a people are in principle against any kind of transfer of wealth and especially when it is the greedy hands of our government reaching in to transfer wealth from hard working rich people to lazy poor people. That’s how the argument goes, isn’t it?

According to the Center for Tax Justice the Estate Tax raises revenue from wealthiest 1.4% of Americans. In fact as much as two-thirds of it comes from the top 0.2% of Americans. Is there any credence to the assertion that we are punishing hard work and rewarding laziness? In fact, there is not. I agree, people who work hard and amass a fortune through toil and tribulation are what makes America special. I do not think that kids who inherit their parent’s fortunes are in any way, shape, or form special. Think Paris Hilton or Nicole Richie! In fact, it is not only poor liberals who feel this way. Over a century ago, steel tycoon Andrew Carnegie said: "The parent who leaves his son enormous wealth generally deadens the talents and energies of the son, and leads him to lead a less useful and less worthy life than he otherwise would."

Conservatives and Libertarians alike line up and chant the mantra that the Estate Tax punishes non-farm family business owners and family farmers and makes it difficult for family owned businesses to be passed on to the next generation. This should be seen for what it is; all smoke and mirrors. I would refer you back to the 1.4% and 0.2% data I listed above. But if that hasn’t got you convinced, consider this; only 1 out of every 20 family farmers leaves a taxable estate. Even those farmers that do inherit taxable estates only pay an average of $5000 in taxes on it. Of the total revenue raised by the Estate Tax, only 0.5% of is attributable to farm assets. Today AG Weekly, a news source for farmers, published an editorial saying that a permanent repeal of the Estate Tax would be bad for rural America.

Non-farm family businesses are also only a small part of the Estate Tax. They amount to less than 3% of total assets for estates worth less than $2.5 million. The fact is that the Estate Tax code offers many incentives to heirs that want to keep family businesses going, but they don't help wealthy heirs that want to sell the family business. And why should they? If anything, the Estate Tax actually encourages heirs to keep businesses in the family rather than selling.

Opponents of the Death Tax will push forward with their attempts to ensure that large estates are not “double taxed”. In the end the perceptions will remain. Those in favor of the tax believe in the original rational as explained by Congress in 1916. They will continue to point out that the amassing of a majority of the wealth in this country into the hands of the few is bad for society. Those who oppose the Death Tax will assert that they should not have to subsidize society through the redistribution of resources from the mega-wealthy to the mega-poor. In fact, the resources aren’t even going to the poor; they are going to pay for a war in Iraq that will benefit the rich. The poor are already paying for the war with the blood of their children. It is time the rich paid their fair share too.

2 comments:

Humour and last laugh said...

interesting!

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