Howard: Estate tax inefficient, unfair

The future of President Barack Obama’s social-democratic policies and the very nature of… The future of President Barack Obama’s social-democratic policies and the very nature of the Republic’s economic system are being decided in the U.S. Senate. But it’s not a bill on corporate bailouts, government seizure of private property or anything to do with the minimum wage.

Instead, a revolt among Senate Democrats is challenging the estate tax — known as the ‘death tax’ by some of its opponents — and its place in the U.S. tax code.

The estate tax is a tax levied on the property of the dead at a rate of 45 percent. It is applied to the estates of individuals worth more than $3.5 million and to couples worth more than $7 million.

Recognizing the tax as a confiscatory penalty applied to successful individuals and small businesses, 10 Democrats joined with all 49 Republicans in the Senate to reduce the tax to 35 percent and increase the eligible estate value to $5 million for individuals and $10 million for couples.

Although this challenge is a step in the right direction, it fails to address the deeper implications that the tax has on our national identity.

First, it’s important to recognize that the estate tax is emblematic of the U.S. tax system: a system that is, at its very core, based on wealth redistribution rather than public works and national defense.

According to 2006 federal income tax data, the top 50 percent wage earners in the United State pay 97 percent of federal income taxes.

This top 50 percentile subsidizes the social welfare of the bottom 50 percent, who themselves barely pay into the system yet reap significant rewards from it.

Think of it this way: Workers pay into both Social Security and Medicare — two programs that will likely never benefit most of us at all. But the federal government, lobbied by legions of elderly voters, insists that we continue to prop up its failing, Depression-era safety nets.

This is what social democracy looks like: Estate taxes to legally confiscate the wealth of the nation’s top earners, a progressive income tax to separate the industrious from their money and nearly defunct Social Security measures supported by the labor of young people who might not enjoy the program’s benefits themselves.

The senatorial assault on the estate tax must function as the starting point to a general assault on the redistributive, confiscatory nature of the U.S. tax code, a system that is not only an immoral transgression against the values of this Republic but harmful to the U.S. economy.

The Wall Street Journal reported in an editorial on Jan. 13, ‘Douglas Holtz-Eakin, the former Congressional Budget Office director, estimates in a new study that the economy would create roughly 1.3 million more small business jobs with no death tax rather than with a 45 percent rate.’

Perhaps then it’s no coincidence that Sen. Blanche Lincoln, D-Ark., who co-sponsored the reduction in the estate tax, is from a state where more than half of all jobs are created by small businesses. Lincoln said, ‘If we reform the estate tax, [small business people] will invest in their businesses and create more jobs.’

A report of the U.S. Congress Joint Economic Committee reported in 1998, ‘The estate tax violates the basic principles of a good tax system: It is complicated, unfair and inefficient.’

But what troubles me more than the fact that the tax is inefficient and harmful to the U.S. economy is that the tax, like Congress recognized, is deeply ‘unfair.’

‘ The tax, like others with the same agenda of wealth redistribution, is a punitive tax directed against the successful and industrious.

The only morally justified tax is one that serves the individual’s interest, which serves the defense of this nation or the maintenance of public works used by all. Any other use of taxes constitutes a theft perpetrated by the government to serve the mob.

It is this mob that clamors at the polls for more and more handouts and calls for the financial lifeblood of the successful.

It is the mob that enforces these taxes with its votes in every election while seeking more and more undeserved benefits.

The confiscation of private wealth to gratify the desires of the unproductive is slowly gnawing away at the roots of this Republic. Before any more damage is done to the fabric and identity of this nation, it is imperative that the estate tax be discontinued, that the top half ceases to support the bottom half and that the young cease to bear the burden of the elderly.

E-mail Giles at gbh4@pitt.edu.