Wealth and Our Commonwealth:
Beacon Press 2003
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In June, 2002, George W. Bush signed into law the legislation repealing the estate tax. It provides for annual reductions in the tax until 2010, when no federal estate tax will be imposed. According to this law the previous rate of 55% will resume in 2011. My take on this, when I heard about it, was that competent estate planners will have to get Dr. Kevorkian out of jail in 2010.
The subtitle of this book clearly summarizes its thrust. The following quotes are examples of how the points are made. The attitudes of early American leaders to ownership of property are covered. From a letter of John Adams in 1776 (page 29):
The balance of power in a society, accompanies the balance of property in land. The only possible way, then, of preserving the balance of power on the side of equal liberty and public virtue, is to make the acquisition of land easy to every member of society; to make a division of land into small quantities, so that the multitude may be possessed of landed estates. If the multitude so possessed of the balance of real estate, the multitude will take care of the liberty, virtue, and interest of the multitude, in all acts of government.
And from Thomas Jefferson (page 30):
The descent of property of every kind therefore to all children, or to all the brothers and sisters, or other relations in equal degree, is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.
In 1901, Andrew Carnegie’s wealth was equal to ˝ of the annual gross national product. The authors quote him as he was speaking before Congress about a large inheritance tax (page 38):
Of all forms of taxation this seems the wisest. Men who continue hoarding great sums all their lives, the proper use for which was for public ends [that] would work good to the community from which it chiefly came, should be made to feel that the community, in the form of the State, cannot thus be deprived of its proper share. By taxing estates heavily at death the State marks its condemnation of the selfish millionaire’s unworthy life.
The estate tax was enacted in 1916 long after it was initially promoted by Theodore Roosevelt when he was still a private citizen. From Gates and Collins (page 13):
When the estate tax was established in 1916, our nation was deep in struggle over the values of opportunity versus hereditary privilege. The accumulation of great wealth and the power of the great trusts lead to questions about the direction of our society. One of the expressed intentions of the tax, as articulated by Theodore Roosevelt, was to break up “those fortunes swollen beyond all reasonable limits.”
Here is a telling quote from Cordell Hull, Representative, Senator, and Secretary of State under FDR: “An irrepressible conflict has been raging for a thousand years between the strong and the weak, and the former always trying to heap the chief tax burdens upon the latter. That conflict still continues.” The book goes on to describe the details of opposition to the estate tax as described historically in Cordell Hull’s précis, including unintended consequences such as subtle erosions of state tax revenues from repeal of the federal estate tax and quantitative estimates of reductions in charitable giving as a consequence of repeal.
The authors present an interesting idea in the epilogue: earmark a portion of the estate tax for government activities that enhance equal opportunity, for example, an education program like the GI Bill, but not just for veterans. Such programs would help the payers of the estate tax by knowing that they were passing along a legacy of success to the next generation, and students graduating without burdensome debt would have more career options, indirectly benefiting society. The whole program would indicate to the general public that government can do some things right. This has already happened with the Peace Corps and the GI Bill. No inheritance tax worthy of enactment would fail to generate many times more revenue than such a program would require.
It is gratifying to know that a group of over 1000 billionaires and millionaires have signed a petition opposing repeal of the estate tax in the spirit of Andrew Carnegie. This is an important book written by important authors.
John A. Frantz, M.D.
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