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March 2, 2001

Super-wealthy:
Butt out of estate tax debate

By Gene Hall
Publisher

Recently, a group of wealthy Americans—in some cases very wealthy—appeared before Congress to lobby against the repeal of the increasingly unpopular Federal Estate Tax. Some pundits allow that Congress is having second thoughts about doing away with the death tax, a centerpiece of President Bush's $1.6 trillion tax cut.

The group included billionaire investment king Warren Buffet, William Gates, Sr., the father of the wealthiest man in the world and George Soros, another incredibly wealthy financier. Their argument rested on the notion that the heirs of the rich do not necessarily deserve to inherit wealth and that donations to charitable institutions would dry up with the demise of the death tax.

Okay guys, we heard you. Now butt out. The appearance of these folks before Congress is an especially arrogant bit of hypocrisy. The super-wealthy are not hurt by the death tax. If you lose 55 percent of a zillion dollars, you still have a few billion to tide you over. It's small to mid-sized businessmen—America's working class and farmers—who feel the sharpest bite of estate taxes.

I don't believe there is anything in the law that prevents wealthy Americans, or anyone for that matter, from making generous donations to the charities of their choice. If they are worried about spoiling their children, then heck, give it all away.

For the farmer or rancher, however, these choices are much more difficult. In today's hard-pressed agricultural community, the accumulation of large amounts of cash is rare. It is much more likely that a sizable agricultural estate will be composed of land, equipment and livestock. The death tax, however, taxes the value of that estate. What can happen and has happened is that substantial portions of farms and ranches, or even entire family farms, are sold to pay the death tax.

The estate tax contributes to urban sprawl. Often, developers are the first in line to snap up these properties, and within months they are growing crops of subdivisions. Sadly, America's farms and ranches are some of the best open space land and wildlife habitats that we have.

Thrifty wage earners of modest means can run into this trap, too. So can small and mid-sized business owners. Exemptions help, but they are not high enough. Moreover, the whole notion of taxing death is repugnant.

Estates are built with dollars that have already been taxed. Taking another bite at rates of up to 55 percent when the primary owner dies borders on confiscation. Bereaved families sometimes have to deal with the prospect of losing part, or all of their property. It is a bad tax and, at 1.5 percent of the total, a relatively small portion of the federal budget. It is also a grossly inefficient tax, costing the government 65 cents of every dollar collected in administration and enforcement.

The first federal estate tax was enacted in 1797 as a way for our fledgling nation to build a navy to police our shores. The tax was subsequently repealed in 1802. It was brought back during times of national emergency such as the Civil War and the Spanish-American War. Once again, it was repealed when the crisis was over.

The estate tax became a permanent feature of the tax code in 1916. Its basic structure has remained largely unchanged since the 1930's. The events that spurred the creation of the death tax are long over. Instead, it now creates crisis for families. The death of the death tax is an idea whose time has come. The super rich have no shortage of good causes in which to divest their wealth. The rest of America wants to be free of it.

Write Washington on this issue:

The Honorable (Name)
U.S. House of Representatives
Washington, D.C. 20515

The Honorable (Name)
United States Senate
Washington, D.C. 20510