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Archive for Friday, July 21, 2000

Federal estate tax affects very few

July 21, 2000

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So there you have it, folks, the defining achievement of the Trent Lott-Denny Hastert Congress: It voted to repeal a tax most Americans never have to worry about paying.

Both houses finally voted to junk the estate tax by comfortable if not veto-proof margins. The estate tax was first enacted in 1916 and committed the nation to the logical idea that income acquired by the accident of inheritance deserved to be taxed as routinely as a laborer's wages or a corporation president's salary.

As a redistributive device, it has hardly led to the wholesale confiscation of the nation's great fortunes. The estate tax did not get a whack at John D. Rockefeller's stash until he keeled over in 1937. Now, 63 years later, there are fifth and sixth generations of his descendants who will never have to worry about working in their lifetimes.

A recent Gallup poll showed an astonishing 60 percent of Americans favored repeal of this tax, which is principally paid by the richest 2 percent of the population.

We can only ask why the Gallup people did not ask the more pertinent question, which is this: Would those polled favor repeal of the tax if it were explained to them that (a) the chances are they'll never have to pay it; (b) with clever estate planning, even rich people can reduce it; (c) even under existing law, estates as large as $1 million will soon be entirely exempt from it; (d) repeal of the tax will blow a huge hole in the revenue surpluses that could otherwise be used to save Social Security.

The repeal forces wept crocodile tears for farmers. These stalwart folks were portrayed as the principal victims of the estate tax.

Inconvenient fact: Farmers pay only about 1 percent of estate taxes.

Anyway, most of us would be tickled to death if a distant uncle croaked intestate and left us 1,000 acres of prime crop land. We might not enjoy paying taxes on it, but we'd sure enjoy spending what was left when we'd sold it. If preserving family farms is what Congress wants to do, there are more effective ways to do it than to grant blanket tax exemptions to billionaires who wouldn't know a haystack from a manure pile.

It may seem a mystery why Republicans decided to make estate-tax repeal the show-piece of an election-year session so otherwise bereft of accomplishment. Even more mystifying is why a considerable number of Democrats joined them. Or maybe it isn't. If we sweep aside all the disingenuous rubbish about helping farmers and small businessmen, what narrow class of influential oligarchs would benefit most from repeal? Who would best typify the sort of person to whom this tax repeal would be an outright windfall? What would better explain why a number of Democrats voted for it? And why do it in an election year?

The answer I keep seeing is this vision of a typical campaign contributor, someone with surplus wealth and income who has money to pour into campaigns, someone who is being fawned on and milked for cash by both parties in what is going to be the most obscenely expensive election in American history.

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