Death and Taxes

As we glide through a week marked by historical anniversaries, including those of Lincoln's assassination and the Titanic's unfortunate engagement with that iceberg, thoughts are turning back away from baseball to somewhat more substantive matters. This Friday is Income Tax Day, or rather the deadline for those unfortunate enough to owe taxes. This includes a smattering of souls who have to pay a large chunk of money inherited from deceased relatives who were clever enough in their lives to amass what Tevye in "Fiddler oin the Roof" called "a small fortune."

The issue of the estate tax--or what the Republican hacks darkly and wisely renamed the "Death Tax" for ultimate emotional impact--is one where I tend to fall on the Right side of the ledger. I am not one to think our population is overtaxed. Compared to most Western nations we have a rather low tax rates, which accounts for our crumbling infrastructure and appalling educational decline, among other national embarrassments. The Republican ideological mantra of "No New Taxes" is hopelessly rigid and will be self-defeating unless we can find a way to float above the ocean of federal deficits. However, the justification for taxing private estates completely eludes me.

In the interest of full disclosure I must admit that I stand to inherit some money within the decade, and would prefer not to share it with Uncle Sam. The amount I'd have to relinquish would not be significant. But this is not about me; this is about fairness.

A very liberal friend of mine--one who, incidentally has been doling out her hefty share of some inherited wealth to the tax man--tried to explain the rationale of the estate tax. "The children never earned this money," she says. "Why should they keep all of it?" Why? Because that was the will of the decedent, that's why. Because that is money saved after it has been initially taxed once, sometimes twice if it's from dividends or interest. The remainder--the net income--should remain as the safety net for the family, if that is the will of the individual. The responsible parent always has the welfare of the child in mind. This is one more form of social security, and should be preserved. If the decedent wants to leave a portion of his estate to the government, nothing stops him (though I've never heard of such a thing). But where, oh where, does the government get a right to snatch the family jewels?

This is not a pragmatic view. Advocates of the estate tax claim that its gradual dissolution could cost the Feds thirty billion dollars a year. This might be overstating the case, because much of the interest, at least, gained by the heirs through their expanded accounts will see its way onto the tax rolls. But as it stands now, the estate tax is a monster to those small-business owners and small farmers who have to liquidate their businesses to pay the estate tax, which currently is about 49% of the amount over the $1.5 million exemption. For the super-rich this is no crisis; they'd give comparable amounts to charity for tax write-off purposes. But for a significant minority this is patently destructive.

Responsible Democrats, who can sense the direction of the wind, are striving now to reach a compromise with the most strident Republicans, who want to kill the tax entirely. Okay, we do need some boosting of the national coffers, so if Bill Gates or, more immediately, Warren Buffet were to kick it, it would do no one any particular harm to shift some of their savings toward the buttressing of bridges or the needs of internal security. The Democrats suggest raising the exemption limit to at least $3 million, and making it permanent, which would exclude most small business owners and spare them of potential personal economic disaster. The concept of the estate tax will never be completely appropriate to my mind, but that would be a Death Tax I could live with.