It's time for the Senate to join the House in repealing, once and for all, the socialistic death tax monster, whose only remaining purpose is to serve as ammunition for class warfare demagogues.
As part of its tax reform measure last year, Congress set in motion a plan to phase out the Estate Tax entirely by 2010, only to reinstate it in full force the very next year.
This means that if individuals subject to the tax die on Dec. 31, 2010, they will escape the tax, but if they survive past midnight, their estate will be taxed -- in many cases -- millions of dollars. Just consider the incentives the government is creating for suicide and even murder. Only Congress could devise a scheme so offensive to the intellect and sound moral judgment.
Last week, the House reversed this odious blueprint by making the tax repeal permanent. Estate tax advocates are now relying on the Senate, where Daschle's Demagogues have so far refused even to consider the bill.
Minority Leader Dick Gephardt, in typical moralistic cant, argued that the lost tax revenues would be sure to compromise the president's new domestic security initiative. "I can't think of a more irresponsible, wrongheaded thing to do on the floor of the House today," said Gephardt.
But domestic security just happened to be a handy issue that day. The opponents' preferred objection is that the tax affects only the wealthy, who, being privileged through life's lottery and the government's magnanimity, should not be afforded any relief. They point out that only 2 percent of estates are subject to the tax -- as if to say that the Constitution provides no protection to the materially blessed.
Democrats are reduced to employing the politics of greed and envy because there is little merit to any of their arguments in favor of retaining the tax, and there are plenty of reasons to end it. Let's take a look:
They profess concern about lost revenues, but as usual, they use a static analysis -- one that doesn't consider the tax's economic consequences or its effect on income tax revenues.
In 1998, Congress's Joint Economic Committee concluded that "the estate tax may actually result in a net revenue loss for the federal government." The Committee cited a study by Stanford economist Douglas Bernheim, who documented the many revenue-reducing methods taxpayers use to avoid the estate tax, mainly through lifetime transfers of resources from parents to their prospective heirs. These result in significant reductions in income tax revenues because the children are in much lower tax brackets. As Bernheim said, "Although it is very difficult to estimate these effects precisely, in recent years, true estate tax revenues may well have been negative."
But the tax's greatest economic sin is its negative impact on economic growth. The tax -- on money that has already been subject to income taxes -- encourages capital owners to shift their resources to less productive uses to avoid taxation. Since it is a tax on capital, it reduces the incentive to save and invest. And get this: Even a former member of Bill Clinton's Council of Economic Advisers conceded that the costs of complying with estate tax laws (and avoiding the tax) are nearly equal to the revenues it raises (approximately $20 to $30 billion a year).
In addition, the tax contributes to the dissolution of thousands of family-run businesses, and it penalizes work, savings and thrift, punishes achievement and promotes consumption (many people spend their money before dying to avoid the tax.) Even the notion that the tax increases charitable giving is largely overblown, according to the Committee's Report.
At the root of liberal arguments in favor of the tax is the supposition that it reduces inequalities of wealth. This premise is factually flawed, since the empirical evidence shows the tax hasn't reduced such "inequalities." But much more importantly, it is legally and morally flawed, because it is based on the erroneous assumption that government has the right to redistribute wealth.
Liberals maintain, essentially, that all property belongs to the government, and whatever we are allowed to keep, we do so at the government's pleasure. They say the government provides the structure that allows us to earn and retain wealth. But this couldn't be more foreign to the American concept that government exists to serve the people, not the other way around. Contrary to liberal dogma, the institution of private property is indispensable to economic and political liberty, as well as prosperity.
Opponents of repealing the death tax have run out of arguments, so we should expect a lot more class warfare hysteria as the elections near. Let's hope that voices of reason prevail.