- The Washington Times - Wednesday, June 14, 2006

The old maxim says that there are only two things in life that we can’t avoid, death and taxes, but why pile on by combining the two?

Edward C. Prescott, 2004 Nobel laureate in economics.

This is what it comes down to in the end: We want their money when they die, or at least a lot of it. After all the fanciful rationalizations in favor of the estate tax, a k a death tax, have been held up to the light and found wanting, it’s hard to think of any other reason for this kind of confiscatory taxation. Because it’s certainly not a fair tax. The taxes on this money have already been paid once.

Nor is the way the tax is due to go up and down in the coming years rational or even coherent: It’s now scheduled to expire completely in 2010 for only one year; then it returns with a bigger bite. (Forward-looking estate planners will want to schedule their deaths for 2010.) This is just plain screwy. Call it taxation without respiration.

And the death/inheritance/estate tax doesn’t make much economic sense, either. Because it keeps getting changed, it violates one of the cardinal principles for devising a sound tax structure: dependability. There’s no way for family enterprises to plan ahead with any assurance.

This ever-changing tax has spawned a whole industry of lawyers, accountants and consultants whose purpose in life is to protect large estates from posthumous taxation. The practical result is that, instead of the government getting all this moolah, much of it goes to those who devise and run personal and family trusts.

The death tax also spurs people to spend their millions on themselves rather than invest in the economy and build up assets whose full value they couldn’t pass on to their heirs. So the tax winds up depriving the government of the revenue it might otherwise have collected on the profits of those investments.

Whatever it’s called, the estate tax is in essence a tax on capital, and anything that’s taxed has a tendency to grow scarce. So here’s a sure way to drain private capital from the economy and so depress it in general.

But it’s unlikely mere reason will sway anyone who is, yes, dead set on keeping the estate tax on the books. Something there is in the populist make-up that just can’t stand the idea of letting folks pass on to the next world without paying a toll to Uncle Sam. Mainly envy and resentment.

This debate isn’t really about collecting revenue but exacting vengeance for the crime of having made more money than the rest of us. It’s almost an article of faith among some Americans that no fortune can have been acquired honestly. Therefore it is only right that we expropriate what we can of it when the owners are no longer in a position to protest. Or as Mark Twain responded when someone told him a great fortune was tainted, “Yes, twice tainted. T’aint yours, and t’aint mine.”

Yet few taxes seem to have more ardent fans than the death tax, especially on the part of those who can’t stand to see others prosper mightily.

But reason is making inroads. Even in Washington. The House has already voted to repeal the tax and the Senate is chipping away at it.

The senior senator from Arkansas, Blanche Lincoln, long has recognized the folly of a death tax, maybe because she’s aware of the burden it places on farm families and family-owned businesses. In the end, the heirs may find it simpler to sell the farm or business to pay the estate taxes rather than continue the operation.

Have you noticed there don’t seem to be as many locally owned banks or newspapers as there once were? The estate tax may have had something to do with their sale to giant corporations. For with the passing of the older generation, families may decide they can’t afford the expense or bother of dealing with the heavy impact of estate taxes. So they sell out to Engulf and Devour Inc. This kind of concentration of economic power isn’t healthy for a society — economically or socially.

There has to be a better way to collect revenue, or at least a more decent way, than by soaking the dead.

Paul Greenberg is a nationally syndicated columnist.

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