- The Washington Times - Monday, September 5, 2005

Death and taxes

Once more a Times op-ed piece weighs in urging an end to the death tax (“More tax relief ahead,” Op-Ed, Thursday). Death tax-repeal is, in fact, a major tax increase masquerading as the opposite.

Since I categorically avoid the wholly-owned house organs of the Democrat left, I may have missed contrary essays making this point. But the silence from the right on the topic has been complete.

A major feature of the current law is that the basis of non-monetary assets which are inherited “step up” to their value as of the date of death (or six months later, if the alternate estate valuation date is elected). That means that the increase in the value of these assets over the years they were held by the decedent escapes taxation altogether. With repeal of the death tax, basis in the hands of the heirs would be the same as it was for the deceased. The increase then becomes subject to capital-gains tax when the asset is disposed of. Further, many states treat capital gains as ordinary income so that the gain on inherited assets is subject to the full rate of state income tax.

It has been noted that the current exemption, or any exemption amount that has been proposed, would exclude all but a tiny fraction of estates from payment of death tax. Indeed, estate taxes account for a very small slice of federal revenues.

But the population affected by the loss of basis step-up numbers in the tens of millions. For many families, the biggest asset in the estate is a modest family home. With the inexorable progress of inflation, its market value will be much greater than the amount paid for it years ago. After repeal, when the children sell the home the tax collectors — federal and state — take a seat at the table, and a cut of the proceeds. If the decedent was slightly more prosperous and owned stock, collectibles, or artwork, these assets would also suffer a tax bite when sold. Notice that these estates would escape the current or any proposed death tax because their size is below any recent or proposed exemption amount.

Even the heirs to family businesses would run afoul of this new trap. These “small” enterprises, always mentioned and extravagantly praised, even elevated to the status of hallowed icons by repeal proponents, would carry over the basis of the patriarchal founder/builder. When assets or ownership interests are sold, all gain in value, whether real or the result of inflation, is fully taxable. A predictable result is that heirs become locked into continuing ownership and operation of a business they are unqualified to run and in which they are disinterested. And take note: any really small business would have escaped death tax by coming in under any exemption amount under consideration.

The political appeal of eliminating the death tax is obvious. Beneficiaries of the present law will generally be affected once or twice in a lifetime and perhaps never. It is a tax break which is not widely known and is even less understood by most citizens. An opportunity is presented to “cut taxes,” almost always a good thing, and aggrandizes those most able to contribute significantly to political campaigns, while soaking those many millions who are not aware of the nature of their loss and actually increasing overall revenue to government.

MILT HERRING

Frederick

The tragedy of New Orleans

Surely Osama bin Laden and his band of barbarians are cackling in their caves over the horror inflicted upon the United States through Hurricane Katrina. Nothing in their arsenal short of a nuclear weapon could have wrought the misery, death and destruction brought to our shores by a vengeful Mother Nature.

When the next terrorist attack strikes our nation, as it surely shall, let us hope that the stunningly inadequate government response and lack of coordination exhibited in this hurricane is not a model for how we will deal with a man-made catastrophe.

For years, the horrific ramifications of a Category 4 or 5 hurricane strike on New Orleans have been predicted and trumpeted to all who would listen. The catastrophic impact of the storm could have been avoided or greatly muted had relatively minor investments in shoring up the city been made, a cost which would have been peanuts compared to the tens of billions that will now need to be poured into the area to help it recover, assuming that it can ever return to viability. The dire predictions of what would occur in an underprotected New Orleans struck head-on by a strong hurricane have come to pass: thousands upon thousands of casualties, massive destruction and flooding, power and water failures, toxic brews flowing through the streets, countless individuals stranded on rooftops in need of rescue and refugees with nowhere to go.

Unlike in a terrorist attack, government had in advance a clear picture of precisely where disaster would strike and the magnitude of the approaching event. Governors in the affected areas pleaded with their citizens to leave, even if they had nowhere to go. Many foolishly decided to try to survive the storm at home; others had no transportation which would have enabled them to flee.

While government has conducted some meaningful relief effort and amazing, heart-stopping heroic rescues, the overall response has been glaringly deficient.

Looters, gunmen, rapists, assailants and murderers have roamed the streets and the misery-packedSuperdome unchecked. There appears to have been no plan for thousands of those who have been rescued. Instead, they were being dumped on a portion of washed-out Interstate 10, where those including infants, eldelry people, diabetics, and those with heart conditions are positioned to swelter in stifling heat and die without food or water.

How are individuals expected to survive without food or drink, and in dangerously hot weather?

OREN M. SPIEGLER

Upper Saint Clair, Pa.

Regarding the editorial “Time to crack heads,” (Friday) all I can say is thank you. I have not been a fan of your paper. On the contrary, I have been a vocal critics. The editorial, however, has proven that the dire situation in New Orleans is not a political issue.

Everyone — regardless of political affiliation — must be willing to accept that President Bush and his administration have been woefully inept in its handling of this disaster. For anyone to suggest otherwise is irresponsible and grossly partisan.

There will be enough blame to go around. Mr. Bush had to move heaven and earth to help dying Americans. He barely moved.

GEORGE HENSON

Dallas

The response to Katrina — at all levels of government — borders on the criminal. You would think that with all the money spent after September 11 — including the creation of a new government agency — that the government could do a better job responding to such a calamity. But no, the response to Katrina reveals that our government remains every bit as inept as it was prior to September 11.

This can only embolden our enemies. What’s more, New Orleans descended into anarchy. All the looting and the roving bands of thugs shooting at emergency personnel the city reminded me of the brutal island paradise depicted in “Lord of the Flies.” I’m embarrassed for our country and I’m ashamed to have these images broadcast to the world.

But we can redeem this tragic turn of events by rebuilding New Orleans. We can turn the city into an American Venice with shops, walkways and canals, and let the world once again marvel at American ingenuity and resolve.

THOMAS M. BEATTIE

Mt. Vernon

Katrina damage and destruction has brought out the best in us and, in some cases, the worst in us. In times like this we need a unified positive effort by all Americans. That goes double for Congress and the Senate.

Alas the perennial nit pickers and blowhards have surfaced and are starting the blame game. I’m not going to name names; its the usual suspects with their uncompassionate rhetoric and mean sprinted smear tactics to gain political hay. Some of the people yelling the loudest in the House and the Senate needed compassion and forgiveness in the past. Let’s see a lot of unity to get the people on gulf coast back on their feet.

JIM DAWSON

Clinton

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