Evan Bayh is suggesting that we end the estate tax when the deficit shrinks.
I support eliminating the estate tax, especially for small businesses and family farmers,†Bayh said in a statement released by his office. “During times of surplus, I’ve voted to eliminate the estate tax. Unfortunately, today we face mounting deficits and would be forced to borrow more money from China and ask our children to pay it back with interest. That is not a responsible course.â€
Sen. Richard Lugar, R-Ind., has been a long-time advocate of lifting the tax on inheritances, and that has not changed, his spokesman said.
Here is when the estate tax should be eliminated: When the deficit is gone, the national debt is gone, and the income tax is gone. That the estate tax is a priority at all in this country is mindboggling. It effects very, very few Americans. You can already leave $2 million to your heirs tax free. Couples can leave $4 million. So, unless you have a couple million dollars squirreled away, this does not affect you.
The campaign to end the estate tax has been waged primarily by 18 of America’s wealthiest families. If you’re reading this blog, that’s probably not you. The families have a combined net worth of about $185.5 billion and the repeal of the estate tax would yield their heirs a windfall of $71.6 billion. Worth playing for?
As for the much imperiled family farmers you always hear about, don’t worry about them. A New York Times investigation was unable to find an example of a family being forced to sell its farm because of estate tax liability. So, for folks concerned about the family farmers, perhaps an amendment simply exempting family farms from the estate tax would be in order.
I’ll just re-post thoughts I’ve posted before and will likely post again:
Nobody likes paying taxes, and every tax contains elements that are unfair or particularly undesirable. But, I have never had anyone adequately provide a justification for eliminating the estate tax before eliminating the income tax. Whatever moral claim an heir has on the state of his father at the end of his life, it pales in comparison to the claim a worker has to his paycheck at the end of the week. So, whatever problems the estate tax has, there is little or no reason to address them while we still tax the paychecks of working people. Furthermore, extreme concentrations of wealth have pernicious effects on our democracy. I don’t have any serious problems with allowing individuals to amass ridiculous amounts of wealth based on their own luck and skill. But I don’t see any particular public good served by extreme levels of wealth in the hands of the children and grandchildren of those people. How many generations since John D. Rockefeller made his first billion? And we still have his progeny directly affecting our lives through their various prominent roles in our government.
I’m still unhappy with Senator Bayh for voting for the elimination of the estate tax back in 2001, and, while I’m pleased that he’s at least giving a nod toward fiscal sanity by linking the estate tax to the deficit, I’m not a great deal happier with the level of support he is giving to the idea of getting rid of this tax in advance of taxes that affect average citizens, such as the income tax; or getting rid of taxes on rich people while a massive National Debt remains for our children to pay.
Update The estate tax repeal bill fell 3 votes shy of what was needed to advance the provision. According to the linked article, in 2002, only 1.17% of people who died left a taxable estate.
Two Republicans, Sen. Lincoln Chafee of Rhode Island and Sen. George Voinovich of Ohio, broke with their party.
“Repealing the estate tax during this time of fiscal crisis would be incredibly irresponsible and intellectually dishonest,” Voinovich said.
So, for folks concerned about the family farmers, perhaps an amendment simply exempting family farms from the estate tax would be in order
Has no one proposed this? It seems those that oppose repealing the estate tax would do better with the public if they didn’t just say “No!” and look like they don’t care about the farmer family.
The Reps may be greedy, but if the Dems don’t offer something like this AND get it into the press, they’re not playing smart.
If we are concerned about helping small businesses, which is always the argument (although as you point out, Doug, it is quite specious), the stronger position is to INCREASE the inheritance tax – especially if capital gains taxes stay low. Too many 2nd, 3rd and 4th generation people just sit around on the wealth of their forebears and have no motivation whatsoever to actually PRODUCE anything. They are the overly conservative economic drivers in this state’s economy, IMHO. They are the ones who take the wealth of early and mid-20th century entrepreneurs to Florida and leave it there. They are not helping anyone. Giving them a walk from taxes just doesn’t make any sense – if, as I said at the beginning of this post, our goal is to increase economic innovation. But our goal is not really to do this – it is to maximize the wealth of a few people and lie to the rest of us.
As I recall, an amendment specifically targeted at the family farm (and perhaps small business) was offered and rejected back in 2001. Those are the poster children for the campaign to eliminate the tax, but they aren’t the intended beneficiaries.
The wealthiest 1% of Americans control something like 1/3 of the country’s wealth, with the bulk of that figure actually controlled by the wealthiest 0.1% of Americans. They are the intended beneficiaries — as I’ve heard at least one person put it: the people on Barbara Bush’s Christmas Card list.
The estate tax is a triple tax. When you earn money you pay taxes on it in the form of both income taxes and then consumption taxes. You then pay taxes on all future income generated by this wealth. Then, after you die, your estate pays a tax. From a moral standpoint there is a lot wrong with the estate tax.
That being said, I think Bayh makes an interesting AND intelligent comment that I am impressed with. Bayh sits on the fence WAY TOO OFTEN and it is good to see him actually tell us his opinion on something controversial.
Here is what I think we should do with the estate tax.
1. Immediately double the minimum thresh-hold to qualify for the estate tax. Immediately index the thresh-hold with inflation. In other words we should allow a larger exemption to the estate tax. This would make it so that fewer small business owners and farmers are effected by the estate tax.
2. Simplify the estate tax. It is needlessly complicated and BILLIONS of dollars are currently spent by people trying to avoid this tax and for the government to collect this tax.
3. I actually currently agree that until The Federal Budget deficit is gone and until The Federal Debt is gone that the estate tax should be kept as long as the thresh-hold is doubled, it is simplified, and it is indexed with inflation…
I highly dislike the estate tax; but, we have to fix our spending first.
The current total government liability is between 53 and 70 TRILLION dollars depending on whose figures you beleive. We have got to cut government, and cut it now.
Mike Sylvester
I don’t agree with the triple tax assessment. Any money I acquire gets taxed in a lot of different ways before it reaches me, but that’s not really a concern. (E.g. Customer paid sales tax when buying widget; Widgetmaker Inc. pays income tax on proceeds from widget sale; Widgetmaker Employee pays income tax on wages from manufacturing widget; Widgetmaker Employee pays sales tax on items purchased with wages. That’s not a quadruple tax.)
Similarly, I do not think it’s relevant to consider how the money was taxed as it made its way to the decedent and while it was in the possession of the decedent. Money is passing from decedent to heir. Taxation on the transaction before heir receives this new money seems more just than taxation on a wage earner before he receives the fruits of his labor.
I recall an amendment to exempt the first $75 million didn’t pass.