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Monday, June 8, 2009

Concord Monitor- "Keep the nation's estate tax in place"

The Concord Monitor editorializes in favor of the estate tax this morning, arguing that it's appropriate for the government to break up family fortunes, and that it would only hit the super-rich anyway:

An estate tax is an appropriate and relatively painless way to raise money to support government while discouraging the accumulation of dynastic wealth by people who did nothing to earn it. True, some supremely wealthy people, think Bill Gates or Warren Buffett, did earn their wealth. But as Buffett once told Congress, they did so in part because of the enormous benefits they received from repeated reductions in federal taxes. Both men, by the way, strongly oppose a repeal of the estate tax.

Less than one half of 1 percent of all estates pay the 45 percent inheritance tax. Only estates larger than $3.5 million per person or $7 million per couple are subject to it. At that level, the Brookings Institution estimates only 100 of the nation's family farms and small businesses would have to pay the tax.

A Republican-controlled Congress voted to abolish the estate tax during the early administration of George W. Bush, and it's due to vanish in 2010. But that date was just a gimmick to earn bragging rights. To soften the revenue lost by the repeal, the law calls for re-instituting the tax in 2011 at its 2001 level, which had a $1 million individual exemption level and a 55 percent rate on the biggest estates.

The Monitor has the budget process wrong here. The reason the estate tax comes back at full strength in 2011 is that supporters used the reconciliation process to repeal it. Under that rule, they could overcome a Democratic filibuster, but could not make any changes in federal finances that lasted longer than ten years. Any changes outside of that ten year window simply go away.

As to the crux of their argument, they are correct that a Death Tax with a high threshold would only confiscates the wealth of a few families each year. That's not an argument in favor or against it. If we could balance the budget simply by taking all of Bill Gates and Warren Buffet's money, it wouldn't make it right.

The question is whether the state has any right to take away half of a person life's work at the occasion of their death. Or do we have a right to build a future for our children and grandchildren, so that what we've built can be passed down to our family without a significant penalty.

The chief objection to the Death Tax is that government hasn't done anything to justify its raid on the estate. Whether it's come from income or investment, the government has already taxed the money sitting in the family's bank or the equity poured back into the family business. What reason does the state have to take half of what's been built after someone dies, besides its greed and the public's envy?

The Rockefellers and Hearsts don't control the American economy these days. Our economy is not dynastic, but dynamic. I'm probably never going to be rich enough to be effected by the return of the Death Tax, but there's always hope.

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