A recent
propaganda piece by the well paid lobbyist for the American Business Defense
Council tries to persuade us to pressure our Congressional Delegation to vote
to end the estate tax (Grand Forks Herald, December 16, 2015).
But it
makes its case only by deceptively appealing to our emotional support for
“family farms” and “small businesses.”
Nobody wants to see a parent’s lifetime of hard work wiped out by the
estate tax. But before we let our
emotions run away with us, we ought to know, factually, how the estate tax
really works.
Here
according to the Center on Budget and Policy Priorities, is what the state tax
means to us:
·
Nationwide,
only 2 out of every 1000 estates are subject to the estate tax. That’s right, 99.8% of estates owe no estate
tax at all. That astounding figure is
because of the tax’s high exemption amount, which has jumped from $650,000 in
2001 to $5.4 million in 2015.
·
No
estate valued below $5.4 million pays any estate tax. Of the few estates which pay the tax, the
effective tax rate (the rate actually paid) is far below the statutory rate of 40%. On average, estates valued at less than $5
million pay nothing; between $5 and $10 million pay under 8%; and those valued
between $10 and $20 million pay under 16% -- still leaving a generous head
start for the next generation.
·
Loopholes
have been written into law which allows wealthy estates to pass on large
portions of their assets while avoiding estate taxes. These loopholes should be closed.
·
In
2011, only 18 North Dakotans were required to file estate tax forms. Their gross value was $444 million. Of the 18 filing, only 11 ended up paying
estate tax. Their estates paid $7.7
million and kept the remaining $436.3 million.
(If I had to pick a parent, I guess I wouldn’t mind being born into one
of those families.)
Far from
being a “death tax,” the estate tax is a life tax. It promotes social mobility and opportunity,
it rewards hard work and talent, and it prevents capital from being
concentrated into too few hands – thus reducing the evils of an aristocracy of
the wealthy and propertied class the founders of the American nation warned
against. In a 1789 letter to his friend
James Madison, Thomas Jefferson gave perhaps the shortest explanation of why we
need an estate tax: “The Earth belongs
in usufruct to the living.”
Ben
Franklin, himself a wealthy man, gives a more radical justification for the
taxing inheritance. He argues that,
beyond minimal subsistence, most wealth is a creature of public laws and
convention. Franklin concludes: “Hence the public has the right of regulating
descents, and all other conveyances of property and even of limiting the
quantity and the uses of it.”
Democracy
and inherited wealth are incompatible.
Those who argue for an elimination of the estate tax are servants of an
aristocracy of wealth and property. The
number obliged to pay the estate tax is relatively few and the amount paid by
the estate is relatively small. The
estate tax is just.
Rather
than being eliminated, the estate tax should in fact be increased.
