May promises to be the month that Senate Majority Leader Frist will attempt to marshall his minions to pass legislation eliminating the estate tax. If this were to come to pass, our nation’s wealthiest families would be the primary beneficiaries of the new law which would free them of billions of dollars of tax liabilities. Senator Frist’s own estate would save many millions of estate tax dollars (as, by the way, would Secretary of Defense Donald Rumsfeld’s estate).
With so much riding on the line, it should be no surprise that powerful and well-financed lobbying efforts have been mounted to speak for America’s richest. An article in The Hill by Elana Schor discusses this topic in some depth and will provide you with a bit of insight into what has been going on behind the scenes and who is behind the push to eliminate the tax.
Currently, the federal estate tax does not apply to estates of less than two million dollars for persons dying this year (four million for a married couple providing basic estate-planning measures are put into effect) . New York State provides that its estate tax structure will match that of the federal government so the heirs of New Yorkers dying this year with less than two million dollars in their estates will not have to pay a state estate tax.
Even though there is an organized clamor (as reported by Ms. Schor) to end the estate tax (which those opposing the tax have conveniently demonized by dubbing it the “death tax”), your faithful blogger feels constrained to make three observations here.
First is that the taxes that are garnered by our estate tax laws will obviously take the place of revenues which would otherwise have to be collected through income taxes. Second is that the much higher exemptions from estate tax which we enjoy today basically relieve all but the wealthiest portion of our citizens from having to pay estate tax. Before a decedent’s heirs pay a penny of taxes, they have pocketed at least two million (and possibly four million) dollars in assets which hardly puts them in a “fire sale” posture. Finally, one might consider that the requirement that substantial estates pay substantial taxes is an important protection which society retains against the concentration of great wealth in the hands of a few. Those of you who have studied world history will know that such a situation has been the germ-seed of many a bloody revolution in Europe and we might be well-counseled to avoid allowing our tax laws to foster the development of a gross imbalance of wealth here.
Many years ago, I was speaking with an IRS agent who had been somewhat of an overeager beaver when it came to tax collections. He told me that he had complained to his group chief that so many of the cases he looked into involved businessmen who were cheating on their taxes but little, if anything, could be done to stop them. “Don’t worry,” he was told , “we’ll collect those unpaid taxes when they die.” In short, the total elimination of estate taxes means that the businessperson who has been able to squirrel away large sums of cash -out of the watchful eye of the tax collector— will never be called upon to account and to pay the bill. While many may see this as appealing (we always root for the “little guy” against the big bad government), the end result is that you and I will be called to make up for this shortfall on April 15th. Add that to what we have been paying at the pump and you may feel that it gets to be a bit much.
In any event, thanks for having the patience to get to the end of my little rant. Should you harbor strong feelings on this subject (be they pro or anti) I would suggest that your senators and representatives need to hear from you before they vote.