Repeal of estate tax would harm country, future generations
By Rick Wilson
Charleston Gazette (WV), 8/13/06 
Copyright (c) Rick Wilson 2006

Earlier this summer, billionaire business leader Warren Buffett gave the nation a welcome and all too rare example of old fashioned civic virtue. After arranging to contribute more than $37 billion from his fortune to charity, he urged Congress to retain the estate tax on large sums of inherited wealth.

This tax currently affects the wealthiest Americans. Today, only about one out of every 200 people who die leave estates large enough to be taxed. Surviving spouses are exempt, as are charitable contributions. Currently, the first $2 million of any estate is exempt from the tax (or $4 million for a couple). Estate planning can further reduce tax payments.

In what has got to be one of the best sound bites in the whole estate tax debate, Buffett said, “It’s a very equitable tax. It’s in keeping with the idea of social equality of opportunity in this country, not giving incredible head starts to certain people who were very selective about the womb from which they emerged.”

In other words, he recognized the truth of what the great Republican President Theodore Roosevelt said in 1906: “The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government.”

For example, people are only able to amass and keep large amounts of wealth long enough to bestow them on others due to public investments, such as the legal system; regulations regarding banks, commerce, and the stock exchange; public education; infrastructure; law enforcement; the fire service; legal protection of patents, copyright, and intellectual property; publicly supported scientific and technological research, etc.

Recently, congressional leaders cynically tried to link a long overdue increase in the minimum wage to a drastic reduction in estate taxes. According to the Joint Tax Committee, the proposed cuts would cost $268 billion between 2007 and 2016 —money that could help pay for better schools, emergency preparedness, financial aid, health care, or energy research.

That’s bad enough, but there’s more. The Center on Budget and Policy Priorities estimates that “In the first ten-year period in which the costs of estate-tax repeal would be fully felt (2012-2021), we estimate that repeal would cost $808 billion — or $1.0 trillion when the associated increases in interest payments on the debt are included.”

According to a report released in April by Public Citizen and United for a Fair Economy, “The multimillion-dollar lobbying effort to repeal the federal estate tax has been aggressively led by 18 super-wealthy families ... 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.” Talk about family values.

While opponents of the estate tax have tried hard to label this as a “death tax,” the reality is that repealing the estate tax would impose a “birth tax” on young Americans because it would irresponsibly increase the national debt.

As Diane Lim Rogers of the Brookings Institution wrote in the San Francisco Chronicle, “The ‘birth tax’ is a true cost imposed on all American babies. It cannot be repealed, no matter how upset Americans eventually get about it. Through the harmful effects of deficits on national savings, these future adults will be less likely to have the means to pay off these debts and are in danger of facing a lower standard of living than adult Americans today.”

Meanwhile, the contrast between Congress’s tender solitude for the very wealthy and its scorn for low wage workers is pretty telling. Since the federal minimum wage was last raised in 1997, Congress reduced the estate tax nine times. In terms of real purchasing power, the minimum wage is at its lowest level since 1955. Even if it was increased to $7.25 an hour, real purchasing power would be less than it was in 1968.

The contrast between the numbers of beneficiaries of each measure is likewise startling. The Economic Policy Institute estimates that increasing the minimum wage would benefit 5.6 million workers, the vast majority of whom are not teenagers working for spare change. The average dollar benefit would be around $1,200.

Only 8,200 estates would benefit from current proposals to slash the estate tax, to the tune of $1.3 million each, according to the Urban Institute-Brookings Institution Tax Policy Center. Meanwhile, the whole country and future generations would be saddled with greater debt and thus have fewer options to deal with the challenges of the future.

This kind of short term thinking is dangerous. Even the wealthiest Americans aren’t likely to come out ahead in the long run if this happens. The country deserves better, starting with a clean minimum wage increase and a renewed commitment to fiscal responsibility.

Louis Brandeis, a U.S. Supreme Court justice between 1916 and 1939 once said, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

Given the choice, I’d prefer the former. As a father and a grandfather, the main thing I want future generations to inherit is a working democracy.

Wilson is director of the West Virginia Economic Justice Project and publishes a public affairs blog: www.goatrope.blogspot.com.

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