- The Washington Times - Friday, February 23, 2001

Just because someone is really, really wealthy, doesn't mean that he is well-endowed with common sense. Earlier this week a handful of the richest people on the planet, including George Soros, Warren Buffett and Paul Newman urged Congress not to eliminate the death tax. More than 100 other rich people took out an ad this weekend in the New York Times, essentially saying "Please tax us." Estate tax advocates in Washington are exulting that even the nation's yacht-owners don't want this tax repealed.

The truth is that these fabulously wealth Americans aren't being nearly as selfless as it may seem. Most billionaire families have long ago engaged in careful estate tax planning-by, for example, depositing their fortunes into family foundations or by creating generation skipping trusts to avoid ever having the long arm of the Internal Revenue Service reach into their graves for even a dime.

Let's take the example of Mr. Soros. According to research by Brett Fromson of TheStreet.com, there are very few Americans who have been so successful at gaming our tax system as the billionaire financier. Many of Soros investments are "offshore" hedge funds that are often exempt from U.S. taxation. "Soros can afford to support high inheritance taxes," writes Mr. Fromson, "given the enormous personal income tax advantage he enjoys." Now I personally have no objection to Americans engaging in legal tax avoidance. It's smart personal finance. But Mr. Soros shouldn't then turn around and hypocritically urge other people to pay more taxes, when he finds so many clever ways to avoid U.S. taxes himself.

The dirty little secret of the death tax is that the people who are clobbered by this tax are not billionaires. They are typically ordinary Americans with medium sized estates the millionaire next door.

I am talking about ranchers, farmers, and self-starter businessmen and women. They are the risk-takers in our society who have spent a lifetime pouring sweat equity into their family-owned firms.

They become anguished and enraged when they discover that their reward for a life of virtue is a confiscatory death tax that will rob their grave. Every year there are thousands of heirs who are forced to literally sell the family farm or business just to pay the estate taxes. It's particularly unjust given that this tax is imposed on dollars that were already taxed when the income was earned during the deceased's lifetime.

Now Mr. Buffett worries that without a death tax America will become a society of pampered third and fourth-generation inheritors hoarding their family fortunes without ever working an honest day's wages or contributing to society their whole lives. (The image of Ted Kennedy may jump to mind here.) But as Professor Edward McCaffery of USC Law School argues, "If breaking up large concentrations of wealth is the intention of the death tax, then it is a miserable failure." The Kennedys and Rockefellers who still have massive family fortunes despite the estate tax.

The death tax rewards the very life of lavish and unproductive consumption it is intended to discourage. This tax says to the elderly: Live high on the hog; wrap yourself in every material comfort; eat, drink, be merry. You can't take it with you, and you can't leave most of it to your kids. Your goal is to die broke the ultimate form of tax avoidance. Meanwhile the frugal man or woman who scrimps and saves and selflessly builds up a legacy to leave to his and her children, is clobbered by a death tax that allows the IRS to snatch more than half. Through the death tax, we reward vice and punish virtue. Where is the tax fairness in that, Mr. Soros? Mr. Buffet? Rep. Richard Gephardt?

One last argument that is used by the billionaires is that if we were to get rid of the death tax, it would destroy private charities. But there are volumes of evidence that charitable giving is influenced by economic growth much more than by the value of charitable tax deductions. In the 1980s, the value of charitable deductions fell almost half, but charitable giving soared. It's insulting to say Americans give to their churches or the Red Cross or the Salvation Army because they want a tax break. Granted, it is true that without the death tax, there would be fewer Ford and Rockefeller Foundations, but given how these Foundations have misspent money in recent decades, that wouldn't be such a bad thing at all.

George W. Bush is right to demand the end to the death tax. We consider ourselves to be the freest nation on Earth, but we currently have the second-highest death tax in the industrialized world. Many nations that seem much more socialistic than our own, like France and Sweden, impose much less onerous estate taxes than we do. This confiscatory tax collects a meager 1.5 percent of total revenues.

Some studies have predicted we would get more tax money, not less if we abolished the tax. George Mason University economist Richard Wagner, an expert on federal tax policy, has come to precisely this conclusion. He says that because the death tax channels billions of dollars of capital into economically unproductive and complicated tax shelter schemes, the tax reduces economic growth and thus costs the economy jobs and tax revenues. The death tax, of course, is not bad news for every industry: There are thousands of tax lawyers and crafty accountants whose livelihoods depend on preserving this tax.

I find myself in the unusual situation of siding with Hillary Clinton, not George Soros in this debate. Last fall while campaigning for the Senate in New York, Mrs. Clinton said: "You ought to be able to leave your land and the bulk of your fortunes to your children and not the government." Fortunately, 3 out of 4 Americans agree with her.

Stephen Moore is the president of the Club for Growth.

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