The Stupid Tax

Well, fine if Blue Skirt (Red Skirt here) thinks we should all be St. Francis of Assisi, give up all our worldly goods and live simply among the gentle creatures of the earth. Her supposition is that the estate tax will solve poverty, homelessness and perhaps afford us eternal youth---it's a moral imperative. You'd think it was the Holy Grail.

But liberals aren't really looking for more morality they're looking for more money. Other people's money. If they really cared so much about those less fortunate they would give directly to charity on their own. They don't, as documented. Even poor conservatives give a greater proportion of their income to charity than the average liberal. But liberals are happy for the government to take other people's money through taxes, so they can feel compassionate without expending any of their own. The estate tax gives liberals special satisfaction because they think it's the scourge of the rich at their death. Ashes to ashes, dust to dust. Do liberals think without the estate tax the rich will set up a penthouse in the sky? It's the politics of envy even to the grave.

Of course the estate tax taxes the heirs.

But like so many liberal arguments dressed up as compassion when you look at the facts they are threadbare.

Why do liberals always legislate grandiose schemes for the greater good that in reality beggar individuals and families? How does this make any sense at all for the betterment of society?

Is the estate tax really the scourge of the rich?

Should we base public policy on Envy? (It is one of the Seven Deadly Sins, after all.)

Does the tax at the coffin reap a huge return to government coffers, enough to cure all social ills?

First of all, the estate tax is a double tax. These Americans are taxed on their income and again at their death. This is unfair on its face. Sounds un-American to me. Why should the government get to double dip?

Secondly, it discourages wealth creation. Savings and economic growth suffer. Blue Skirt seems to think neither theory nor evidence supports this, but this is simple human nature. The easiest way to avoid paying the death tax is to spend it or give it away before you die. This is fine for a very few hugely wealthy people like Bill Gates or Warren Buffett, but the consequence to the rest of society is to massively discourage savings. And of course, savings generate the capital needed for economic growth in a healthy society. Many small businesses are taxed as individuals, then their estates are taxed at death. Their fixed assets---manufacturing machinery or farm equipment and the worth of their land and buildings may push them into a high tax bracket subject to the estate tax. These businesses don't throw off enough cash to pay the death tax so the children who inherit a family business built up over a lifetime may be forced to sell to pay this onerous tax. Jobs will be destroyed.

Small businesses create roughly 80% of the jobs in this country, and last I checked, women accounted for over half of them. Some of them are doubtless single women providing for their families, working hard to give their children a good start in life. Why should they be punished? And I would add, the best solution to poverty is a job.

Then there is the cost of compliance. It runs to the billions, because no one wants to be unlucky enough to die when they've just gotten a windfall, and they have to keep updating their estate plan to anticipate that Congress might be slow to account for inflation and revise the level upward before it kicks in. (think the AMT) (First they came for the "wealthy", then they came for you.) People care about their surviving spouses and children and so are forced to subsidize accountants and lawyers to navigate the maze of the gift tax and estate tax. Hmm, a helpful survivors guide from the IRS which goes on in mind-numbing detail. Then 31 pages of instructions to understand the 41 page form 706 (U.S. Estate Tax Return), not to mention the mere 12 pages of instructions to understand the 4 page form to give a gift (Form 709 U.S. Gift Tax Return). Apparently it is better to give to the government. And this is just the beginning.

But if you insist, liberals, who do you really think should pay this tax? Unaccountable rich persons? Bill Gates and Warren Buffett? But do they pay it? No. Are they accountable? No. They endow foundations, so instead of taxing the Rockefellers, you tax the Rockefeller Foundation. Foundations are notoriously unaccountable, even to their founders. The estate tax merely transforms the wealth in this case.

And the amount taken in by the Feds is miniscule, about 1% of estimated total tax receipts in a year.

To sum up, the estate tax is levied on those who are rich, unlucky (die at the wrong time) and stupid (think they can afford not to hire those lawyers and accountants).

The best argument for the estate tax is someone like Paris Hilton. But we've had this tax for some years and it hasn't prevented her from enjoying unearned income. Why is that? Generations of planning by the Hilton family.

As U. of Chicago Economics professor Gary S. Becker goes on to say:

The energy and political capital spent on supporting high estate taxes is better spent on trying to raise opportunities to children from poor families by improving their education, training, and health.

So forget about Paris and give to your local St. Francis or Mother Teresa. Or start a small business. And let's get rid of the Stupid Tax.