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Let the Death Tax Rest in Peace

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Tuesday, 07 Sep 2010 07:53 AM Current | Bio | Archive

I read Robert Rubin and Julian Robertson’s recent editorial in The Wall Street Journal, which informs us that the United States should bring back the estate tax. It particularly caught my eye as I have been practicing in this area my whole career.

While I have never met Messrs. Rubin or Robertson, and do not want to be disrespectful of the prestigious and respected positions they have earned and hold in the financial community, it is difficult not to personally observe that this is among the dumbest op-ed pieces I have ever read.

Putting aside my opinion, what are the actual facts surrounding the imposition of an estate tax by the federal government?

Does the estate tax make net revenue for the U.S. Treasury?

The answer is "no."

How do I know that? Because a Congressional Joint Economic Committee Study said so.

What that study said was that “the conclusion made from this collection of research is that the estate tax clearly results in losses” of federal income tax revenues…

“Although the exact magnitude of the effect is not know, the research of [Stanford University economist Douglas] Bernheim and CONSAD [Research Corp.] supports the contention that repeal of the estate tax will not result in a revenue loss for the federal government (and may even result in a net revenue gain).”

What is the good of a tax that doesn’t produce any net revenue for the Treasury? Messrs. Rubin and Robertson say that good is achieved because the estate tax is based on “philosophical underpinnings.”

To me, tax is a mechanism to fund the government. There is nothing philosophical about it at all. So what are they philosophizing about?

This is where their op-ed gets good. On the one hand they say the nation is based on meritocracy, a land of opportunity, and a legacy of upward mobility.

But then they say we need to have an estate tax so we can take away people’s money because inherited wealth, and the possibility of political power, is abhorrent (my characterization) to the very things that “contributed so much to our success.”

No, I am not making this up. This is exactly what is known as talking out of both side of your mouth. What Messrs. Rubin and Robertson are really talking about in imposing the estate tax is to reflect the philosophical underpinnings of socialism — and communism. Certainly, not the philosophical underpinnings of the United States which they are also quite clear about.

Then, they go on to express the remarkable proposition that it would be OK to pass legislation now but have it apply retroactively.

And here all this time I thought an ex post facto law was unconstitutional.

What was the purpose of the estate tax?

A look back on U.S. history tells us that the United States has had four estate tax laws. All enacted for the same reason: to pay off war bonds in 1797, 1862, 1898 and 1916. The first three such laws were repealed since the war bonds were paid off. The last was repealed only for 2010 but comes back with a vengeance in 2011.

World War I is long over, there are no more war bonds and the current estate tax serves no purpose. That is the historical fact.

Estate planning is difficult enough just given the fact that it involves human beings. And where money is involved, people can be very dysfunctional indeed.

Now add into the mix an estate tax, generation-skipping transfer tax, gift tax, and the excise tax system, intertwined with the income tax that is the epitome, perhaps the zenith, of being dysfunctional.

What we wind up with is a nasty witch’s brew worthy of Shakespeare. Do we really want this? Is this good for the country? Is this good for you?

I do agree with Messrs. Rubin and Robertson’s position that “a key criterion in choosing taxes is to have the least negative impact on economic activity.”

The fact is that the estate tax is all negative impact, to the Treasury and taxpayers alike. It has no positive economic impact or societal benefit. It is the worst of all taxes.

What I do know as a working lawyer in estate planning for 40 years is that the death tax should stay dead.

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I read Robert Rubin and Julian Robertson s recent editorial in The Wall Street Journal, which informs us that the United States should bring back the estate tax. It particularly caught my eye as I have been practicing in this area my whole career. While I have never met...
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2010-53-07
Tuesday, 07 Sep 2010 07:53 AM
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