The estate tax hoax

The “American” way of life hangs in the balance. The threat: Terrorism? Hurricanes? Disease? Drought? No. The repeal of what helped make the U.S. the “land of the free to pursue your place”: the estate tax.

A bit of history. The U.S. as a country and culture emerged from a desire to escape religious persecution. But many, if not most, came to these shores in search of an escape from economic exclusion. The inequality created by the transfer of inherited wealth and debtors’ prisons, so common in the Europe of the founders’ ancestors, had created and perpetuated a clear class division that existed for centuries. Without a clear understanding of history, many people today do not realize the crushing economic class system that pushed the early settlers to choose the difficult life of a “new world” settler just for the opportunity to escape their lot in life as second-class citizens.

Another bit of history. In 1906 President Theodore Roosevelt proposed a federal inheritance tax and said, “The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government.” The first estate tax became law as part of the Emergency Revenue Act of 1916 in preparation for World War I.

When did profit overtake looking out for fellow citizens? As the only industrialized country in the world whose citizens live without universal access to health care, the U.S. has begun the slow slide back to having a “royalty” class with perks only the privileged few can afford.

Do we look out for our own and protect the most vulnerable among us? Not if it’s health care insurance for all children. Here in Illinois 374,000 children live uninsured. These are children of the working poor. One simple solution: continue the federal estate tax and distribute the revenue to each state based on its respective population.

Can we expect that? No. Thanks to the right-wing spinmeisters, the estate tax has morphed into the “death tax.” And claims of how the tax severely hurts family farmers and small business have become “conventional wisdom.” Too bad. It’s simply not true.

In 2001 The New York Times reported the pro-repeal American Farm Bureau Foundation could not cite a single case of a family farm lost due to the estate tax. The nonpartisan Congressional Budget Office says under the current level of exemptions (the current estate tax doesn’t kick in until $1.5 million for a single inheritor and $3 million for a couple), only 300 family farms would qualify to pay the tax. And with the proposed increase in these amounts (by 2009 the level of inheritance free from taxation will increase to $3.5 million for an individual and $7 million for couples), only 65 farms will owe the tax.

Small business? According to a study by the Federal Reserve, the average small business is worth just over $700,000, far below the current tax exemption.

And both small business and farmers enjoy other targeted tax breaks. With careful planning a small business in 2004 could pass on $5 million and a farm $8 million. In 2001, when the Bush administration began the push for repeal, only the top 0.14 percent of all estates paid the tax.

Sens. Jon Kyl (R-Ariz.) and Bill Nelson (D-Fla.) have sponsored and spearheaded an effort to permanently repeal the estate tax. So far an outcry from some wealthy individuals — such as Warren Buffet and Bill Gates’ dad — has prevented the Senate from passing a permanent repeal.

How much does the estate tax bring to the Treasury? The CBO says in 2003 about $20 billion. Think of how many schools can be upgraded, roads repaired, bridges built and all the other public works projects that $20 billion can provide. Or do we want the top 0.14 percent of Americans to have another expensive luxury vacation home?

The Senate was poised to vote on a permanent repeal as its first order of business upon returning from the summer recess. The horrible carnage of Hurricane Katrina and the federal government’s inept response prodded Senate Majority Leader Bill Frist (R-Tenn.) to bow to political reality and cancel the vote for now. Who really thinks at a time when thousands of Americans remain homeless, the billionaires should get another massive tax break? Note: the ‘families’ spearheading the repeal effort include such small farmers as the Gallo family (wine) and small family businesses as the Campbell’s (soup) family, the Mars (candy) family, the Johnson (wax, Band-Aids, etc.) family and the Levi Strauss (clothing) family (who no longer have any plants in the U.S. producing their famous jeans.).

Do the senators really want to protect family farms? In the 2000 vote to repeal the estate tax, 49 of the 51 senators who voted for repeal had also voted for the 1996 “Freedom to Farm” act which has concentrated agriculture in the hands of a few massive corporate farms. Look around and ask yourself, since that bill became law how many small farmers still raise hogs or cattle?

During the Great Depression President Franklin D. Roosevelt said, “Great accumulation of wealth cannot be justified on the basis of personal and family security … Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government.”

What can you do? Contact your senators and others and let them know where you stand.





Chris Stevens is a staff writer for The Labor Paper in Peoria, Ill. This article is reprinted from that publication with permission, slightly abridged.