Bury the Estate Tax for Good

Friday, 12 Nov 2010 02:31 PM

By Deroy Murdock

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Director Randall Wallace's "Secretariat" is a well-acted, exciting, and beautifully shot 1970s period piece about the Babe Ruth of thoroughbreds. It also dramatizes the immorality of the death tax.

This paragraph barely reveals the plot: During a contentious scene in a generally upbeat movie, Penny Chenery Tweedy (the outstanding Diane Lane), her husband Jack (Dylan Walsh) and brother Hollis (Dylan Baker) convene soon after the family patriarch has lost his lengthy fight against Alzheimer's.

Even before they can organize his funeral, the three loved ones replace grief with acrimony as they contemplate an impending $6 million federal death tax liability (equal to $29.5 million today).

They must dry their tears long enough to debate angrily whether to liquidate the family's 2,798-acre horse farm, sell Secretariat, or take other steps to satisfy the tax authorities. "We don't want to end up foolish or broke," warns Hollis Chenery.

The death tax is at zero percent today. But if the 2001 and 2003 tax cuts lapse on Jan. 1, that levy rockets back to 55 percent on estates above a $1 million threshold.

This would trigger far more Chenery-style family squabbles.

Talk abounds regarding a compromise 35 percent rate and a $3.5 million threshold. Republicans in the mid-term winner's circle should ask humane Democrats to join them in resisting this deal and insisting that the death tax remain as dead as its deceased victims.

Just because someone has expired, why should Uncle Sam collect even one thin dime of the departed's money?

Some argue that America needs the death tax to prevent the serious cash of wealthy dead people from converting their heirs into aristocratic layabouts. If that's the goal, why not simply confiscate everything above $1 million?

That's a horrible idea. But if people like Bill Gates Sr. really want to avoid "the Paris Hilton problem," they should have the courage of their convictions and demand a 100 percent death tax. After all, if they want to force Paris Hilton to join the productive sector, would the prospect of eventually acquiring a mere 45 percent of the Hilton fortune really make her update her resume?

Among many other reasons to kill the tax, Americans spend about as much to hide from it as it generates, according to the latest revenue data: $28.8 billion in 2008.

"The compliance, or more appropriately, the avoidance costs of the transfer tax system may well approach the revenue yield," observed Alicia Munnell, a member of President Bill Clinton's Council of Economic Advisers.

The Congressional Joint Economic Committee estimated in 2006 that "for every dollar of tax revenue raised by the estate tax, another dollar is wasted simply to comply with or avoid the tax."

Economists call this a "dead-weight loss." This money should be devoted to productive investment rather than prepaid, posthumous tax-avoidance schemes.

Death tax opponents need not drag public opinion toward repeal. The American people already want to jackhammer a stake into the death tax's heart.

An April 2009 Tax Foundation/Harris Interactive survey found that among 2,002 adults polled, 67 percent want the death tax interred.

Respondents also rated it the least-fair federal levy, with an unfairness ranking of 3.9 on a 1-to-5 scale, outpacing the gas tax (3.6) and even federal income and corporate taxes (3.4).

Americans understand the death tax's intolerable cruelty. They believe that people of all income levels should be free to bury their loved ones in peace without enduring family quarrels refereed by CPAs and financial advisers. Bereavement is excruciating enough without having to inspect spreadsheets and tax schedules.

Sweden abolished its death tax in 2005. As publisher Steve Forbes puts it, Stockholm's policy is "No taxation without respiration."

As anyone with some horse sense would ask, If life without a death tax is good enough for the cradle of Scandinavian socialism, what is America's excuse for keeping it alive?

Deroy Murdock is a columnist with Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University. E-mail him at Deroy.Murdock@gmail.com

© Scripps Howard News Service

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