Democracy's Trust Fund

 

Chuck Collins is program director at United for a Fair Economy and co-author, with Bill Gates Sr., of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes (Beacon, 2003).

Within weeks of passing a fiscally reckless $350 billion tax break primarily benefiting millionaires, Congress is at it again. The next stop on the ongoing "tax break offensive": permanent elimination of the estate tax.

The estate tax is a wealth inheritance tax, which exempts more than 98 percent of Americans. Only estates over $1 million for individuals and $2 million for couples are taxed today. The threshold rises incrementally to $3.5 million for individuals and $7 million for couples in 2009 -- exempting all but the most massive one-half of one percent of estates.

On June 18 the House of Representatives voted 264 to 163 to sink the estate tax, with 41 Democrats joining all but four of the Republican majority to sink the estate tax. The vote was virtually the same as a year ago.

The fate of the estate tax hangs on the Senate, where pro-repeal forces have been unable to muster the 60 votes they need to pass permanent repeal. There is more receptiveness to a reform proposal there, as complete repeal efforts will remain stalled for the foreseeable future.

If passed, estate tax repeal would enable the heirs of multi-millionaires and billionaires to keep an extra $161 billion in inherited fortunes by 2013 while adding to the deficit. Between 2014 and 2023, it would cost $820 billion in lost revenue.

Juxtapose the House's vote for another tax cut for multimillionaires with its refusal to address the expansion of the child credit for 12 million low-income working families, and you begin to appreciate the real drive behind these tax cuts.

The radical right's budget agenda is to shrink, shift and shaft. Shrink government to a "watchtower state," with military, police and property-rights protection. Shift the tax burden off wealth and onto wages, off of federal progressive taxation and onto regressive forms of state and local taxation. And shaft people who depend on government safety nets or investment in equality of opportunity.

Estate tax repeal has a hallowed spot in their program. And they keep repeating discredited myths to justify its elimination, such as the canard that the estate tax forces farmers out of business.

At a June 17 press conference, Tom Bius from the National Farmers Union, which represents over 300,000 small farmers, called on Congress to "stop using farmers to front for complete estate tax repeal." The Farmers Union supports reforming the estate tax, but not repeal. The pro-repeal American Farm Bureau has not produced a single example of a farm lost because of the estate tax.

Opponents of the estate tax claim the estate tax is "double taxation." But the bulk of assets in taxable estates -- appreciated stocks and real estate -- is wealth that has never been taxed.

On June 18, the House voted down a Democratic alternative that would have raised the wealth exempted by the estate tax from the current $1 million to $3 million immediately. The all-or-nothing repeal forces, backed by wealthy families, such as Mars candy and the Connells (Hallmark greeting cards), oppose compromise. Their hired hands in Congress have blocked reform efforts knowing they will undercut the "populist" image they have tried to cast. But such reforms will not help the Mars family (net worth $30 billion), who spent a $1 million last year to hire lobbying powerhouse Patton Boggs to lobby on the estate tax.

Our country is facing federal budget deficits of more than $400 billion a year, states are in their worst budget crisis since the 1930s and everything from schools to health care to fire departments are being slashed. Repealing the estate tax would be unconscionable.

Killing the estate tax would increase the deficit, deepen the cutbacks, shift the tax burden onto those less able to pay and jeopardize the Medicare and Social Security on which millions of Americans depend. To make matters worse, repeal would remove a healthy incentive for charitable giving, the lifeblood of our civic institutions.

At the heart of the case for preserving the estate tax is recognition that none of us gets to where we are alone. This is not to minimize individual hard work or creativity. But the United States has remarkably fertile soil for the creation of wealth thanks to public investments made over generations, funded in part by estate taxes. We have an extensive transportation infrastructure. We have a skilled workforce because of substantial investment in public schools and colleges.

Without taxpayer-funded research, there would be no Internet, no human genome mapping and few vaccines and medical wonder drugs. The estate tax is a reasonable repayment of a debt to our society by those who benefited most financially.

The real question is not how much money we are leaving our children and grandchildren, but what kind of country we are leaving them.

Do we want them to grow up in a polarized country with ever-greater extremes of wealth and poverty?

Do we want them to grow up in a country where equal opportunity has become a cruel joke? Where some children expect to inherit billions of dollars tax-free while millions of others suffer preventable illness and attend crumbling schools without libraries, art, music, science labs or even enough teachers?

Do we want to undermine democracy by turbocharging an increasingly powerful hereditary aristocracy? The top 1 percent of households already has almost 40 percent of the nation's wealth, twice the level of the 1970s.

Originally passed in 1916, the estate tax was a response to the wide inequalities of the Gilded Age and a recognition that too much concentrated wealth and power was putting democracy at risk. Societies with great hereditary concentrations of economic and political power are not friendly to strong stepping-stones of opportunity, including public education, small business assistance, and science and technology research. They are more focused on nurturing old wealth and power than creating avenues for new wealth and opportunity.

An estate tax on the very wealthiest Americans is not a threat to prosperity, but a pillar of a dynamic economy and democracy.


Click here to subscribe to our free e-mail dispatch and get the latest on what's new at TomPaine.com before everyone else! You can unsubscribe at any time and we will never distribute your information to any other entity.

Published: Jun 20 2003