Isn't it odd that so many people who profess a belief in hard work, and who have attained considerable material success that way, want to endow their children with enough money to keep them indolent the rest of their lives?
The estate tax is the last sticking point in the deliberations over the compromise tax bill. Some Democrats are proposing to amend the agreement to restore the 2009 rates, which were 45 percent for that portion of an estate above $7 million for a married couple (half that for an individual). In other words, $7 million could be passed on tax-free, and a good accountant can find ways to expand that.
The Republicans are insisting, and the bill provides that $10 million of a couple's estate ($5 million per individual) would be tax-free and the rest taxed at 35 percent. Many Republicans would like to eliminate the estate tax altogether, so this represents a concession. (They are fond of calling it a death tax, but of course it is no such thing. It is a tax on the windfall reaped by the inheritors.)
The debate has become urgent this year because of a bizarre provision in the 2003 legislation that left 2010 without any inheritance tax. That has led to articles, both serious and humorous, urging people to commit or not commit suicide this year in order to avoid the tax, though murder might be more of a concern. (Representative Cynthia Lummis (R-WY) claims that some of her constituents were discontinuing such life-extending medical treatments as dialysis in order to avoid the tax.)
If nothing is done, rates next year would automatically go to 55 percent on estates above one million ($2 million per couple).
The argument against the estate tax is usually that it will hurt small businesses, but very few small businesses would actually be hurt, in fact, less than 5 percent according to a January 29, 2003 study by the Congressional Budget Office when the rate was 49 percent on estates over one million.
Owners of a farm or small company whose children have worked in the family business and will continue doing so should be able to pass the enterprise along intact. Levying a fair tax in such situations would accomplish that. The small business and farm issue, however, is a smokescreen for the 2 percent of the population that would gain from reducing or eliminating the tax. When the estate is largely financial wealth, a hefty inheritance tax would be good for society as well as the able-bodied heirs.
It would be good for the heirs because it would give them the self-respect that goes with using their own talent and energy to make their way in the world. It would be good for society because parents would either contribute to the general treasury in the form of taxes, or, in order to avoid doing so, would turn their wealth to some public good. The chief example and advocate of this is Andrew Carnegie. In his Gospel of Wealth (1901), he wrote: "The thoughtful man must shortly say, "I would as soon leave to my son a curse as the almighty dollar, and admit to himself that it is not the welfare of the children, but family pride which inspires these legacies.'"
Besides, there is another debt that people of wealth usually owe. Carnegie bequeathed society many wonderful things, most notably hundreds of municipal libraries, but one of his first gifts went to establish a relief and pension fund for the workers in his steel mills. About that he wrote: "I make this first use of surplus wealth...upon retiring from business, as an acknowledgment of the deep debt which I owe to the workmen who have contributed so greatly to my success."
Naturally, we all want to leave something to our loved ones and no one is suggesting they go without some healthy portion of the family estate. Enlarging the amount that can be inherited, and reducing the tax on the remainder, only feeds the growing disparity between the very rich and the rest of us. Either the middle class will soon be asked to make up the lost revenue, or the poor will be told to suffer the consequences through reductions in vital programs.
If the tax only encourages people to contribute to the public good, then we will all benefit. As Gloucester says in King Lear, (IV,1): "So distribution should undo excess,/And each man have enough."