The Estate Tax is Good Tax Policy

One of the favorite targets of Republicans is the estate tax, or, as they prefer to spin it, the "death tax". Both Missouri senators support repealing the tax permanently, covering their attack on the middle class by wrapping themselves in the banner of small businesses and family farms.

In fact, the "estate tax" could more properly be called the "spoiled brat" tax than the "death tax". Right now, dead multi-millionaires are able to pass on $4,000,000 - FOUR MILLION DOLLARS!! - without paying any federal estate tax whatsoever. That's not counting setting up trusts or tax shelters or working with life insurance to pass on even more without paying any taxes. Any gazillionaire that doesn't manage to pass on a huge amount more than that while still avoiding paying Uncle Sam a share just isn't paying enough attention to the tax shelters their country-club neighbors are using.

But first, let's talk about the notion of tax. Then, we'll talk about the notion of inheritance. Then, finally, we'll talk about conspiracy.

About Taxation: It's easy to complain about taxes. Nobody, myself included, likes to pay them, and yet they're everywhere. I pay taxes when I buy gasoline, when I pay my phone bill, when I get my paycheck, and on and on. Pretty much whenever you transfer funds from one person to another, there is a tax burden.

The fairness of the status quo depends upon the perspective taken. I could argue that sales tax is unfair, because the poor people spend a higher percentage of their money on goods and services than rich people, who tend to sock it away in a mutual fund and make more money. On the other hand, I could argue that the graduated income tax is unfair, because the uber-wealthy pay almost half of the federal income tax.

Ultimately, though, the government needs money, and somebody has to pay for it. (Even Republicans, who have developed an unquenchable thirst for deficit spending, realize that our children will have to pay for these years of fiscal idiocy. That'w why, on this Father's Day, all children of Republican fathers should kick their fathers in the groin.) The wealthy wind up paying a good deal more than the poor, because most of the tax comes from the income tax, and income disparity in this country is rapidly approaching feudal proportions. (Simple-minded folk think that the flat tax is a good idea, so that if we all paid 17%, that would be fair. But they don't understand that 17% of $10,000 means absolutely nothing to Bill Gates, but it means a huge impact on my lifestyle. Pity the simple-minded - they mean well, but know little of life.)

So, since we need to pay, the goal is to make it hurt as little as possible. We spread sales and fuels taxes out, so they don't hurt as much as they would if we paid a lump sum every year. We lessen the immediate impact of the income tax by using withholding, and people rejoice when they get a refund of their own money back!

No tax hurts as little as the estate tax. From the perspective of the recipient, an inheritance is a windfall, unearned and personally undeserved. When we get up into the $4,000,000 range, we're talking about a huge cash jolt that has nothing to do with hard work, ingenuity, entrepreneurial risk, or helping people. It is money that cannot be planned upon to come in at a certain time, so it winds up being an unscheduled, uncertain, unplannable $4,000,000 hot cash infusion. Four hundred million tax-free pennies from heaven.

This is a pain free tax. All it really does is reduce the size of the windfall received by the children of the uber-wealthy. Reduced pleasure, in the context of taxation, does not equate to increased pain. Making me pay more gas tax so some kid who has never worked a day in his or her life can have MORE than $4 million tax-free just doesn't seem fair to me. Does that sound fair to you?

About Inheritance: The wealthy have many ways of helping their children. Getting them into schools, unpaid internships subsidized by parents, hiring tutors, setting them up in business, hiring them into the family business, giving them the tremendous advantages of a web of daddy and mommy's friends to make certain they have cushy jobs through their careers, and so on and so on. These are just a tiny few of the many, many forms of affirmative action that have developed to protect the offspring of the wealthy from the harshness of the world the rest of us live in.

These are fine and wonderful things - and I have certainly sought to help my children get their starts in life, too. No problem with that whatsoever. Sam and Ali are both tremendously "advantaged" kids, and I sincerely wish that I could leave them an estate over $4,000,000.

But it galls me to hear the children of advantage seek to pass their pain-free tax burdens on to others. They whine like feeble victims at the thought that unearned multi-million dollar inheritances might be taxed.

Worse yet, they wrap themselves in the misleading guise of the small businesses and family farms of America. In fact, only a tiny percentage of family farms pay any estate tax whatsoever, and, even in those cases, a little life insurance and planning can help the millionaire kids inherit their farms and businesses without undue financial burdens.

But, really, I don't care. Why should I have some governmentally-approved pseudo-right to have my family set me up in business? Why should I get to take over the family plumbing business just because my father inherited it from his father? Why is little Jimmy's vision of working a family farm in Georgia any more important to us than little Tyrone's vision of working that same farm, even though he is descended from the slaves that worked on that farm? Why should we care to have our tax policy reward this sick sense of entitlement?

I'm not against the concept of inheritance. I'll be happy to accept one. But I don't think that the joy of inheritance suffers unduly when the amount over $4,000,000 is subjected to a tax burden. My heart does not bleed for the rich kids who get only $4,000,000.

The Conspiracy: Believe it or not, the reason we are talking about the "death tax" instead of the "spoiled rich kid tax" is because a cabal of incredibly wealthy families have decided that we are stupid enough to save their billions. 18 families worth a total of $185.5 billion have financed and coordinated a 10-year effort to repeal the estate tax, a move that would collectively net them a windfall of $71.6 billion. Those families include cess-pools of sick selfishness like the families behind Wal=Mart and Gallo Wines.

Absent from the group of 18, however, is Bill Gates.

“The estate tax should be regarded as just paying back to the country for all the wonderful things it’s made possible for the people who have that wealth,” said Bill Gates Sr. in an audio statement played at the press conference. “I don’t think there’s any great societal goal being served by inherited wealth. And certainly there’s no sensible argument that I can think of for insisting on being able to pass the last penny of $100 million on to your three kids.”

The group of 18 families have spent a few million dollars to convince you to increase your own taxes to save them $71.6 billion. Has it worked?

(Thanks to Waveflux for inspiring me to get down to writing this. If you want to read a more positive article, go read The Estate Tax: Efficient, Fair and Misunderstood.)