Friday, April 03, 2009

Estate Tax: Cutting Off One’s Nose…

President Barack Obama has proposed prolonging the federal estate tax rather than ending it in 2010, as is scheduled under current law. The president's plan would extend this year's $3.5 million exemption level and the 45% top rate. But will this really help America recover from recession and reduce our growing deficits?…Advocates of the estate tax argue that such a tax will reduce the concentrations of wealth in a few families, but there is little evidence to suggest that the estate tax has much, if any, impact on the distribution of wealth…Indeed, from a societal standpoint, inheritance is an unmitigated good. Passing on to successive generations greater health, wealth and wisdom is what society in general, and America specifically, is all about…In its most basic form, it's about as silly an idea as can be imagined that America…can increase the standards of living of future generations by taxing individual Americans for passing on higher standards of living to future generations of Americans of their choice…Study after study finds that the estate tax significantly reduces the size of estates and, as an added consequence, reduces the nation's capital stock and income…documented…in the 2006 U.S. Joint Economic Committee Report on the Costs and Consequences of the Federal Estate Tax. The Joint Economic Committee estimates that the estate tax has reduced the capital stock by approximately $850 billion because it reduces incentives to save and invest…Today in America you can take your after-tax income and go to Las Vegas and carouse, gamble, drink and smoke, and as far as our government is concerned that's just fine. But if you take that same after-tax income and leave it to your children and grandchildren, the government will tax that after-tax income one additional time at rates up to 55%….Spend It in Vegas or Die Paying Taxes, Arthur Laffer, National Review, 4/2/2009

The late actor, notable rake, and fabulously wealthy Erroll Flynn told friends that he planned to leave nothing behind at his death but enough to pay for his funeral. The alternative was to hand it over to the federal government. At the time of his death in the 1950s, the tax rates in the United States were nearly 90% at Flynn’s income level both as a working actor, and in collecting royalties from past work. He did as he said he would; what little was left behind, such as his sailboat, was taken by creditors or the IRS.

That is the model that the President is proposing as a rational alternative to letting people leave their money to whom they choose. That shouldn’t be surprising, though.

The President’s budget is a spend-it-now, for-tomorrow-we-may-die approach to the future. With the presumption that money will be available in coming decades to pay off the debt his administration intends to incur, the federal budget for next year presumes the current generation’s right to steal the earnings of its children. One can imagine the rationale that what has posterity ever done for me?

It’s a rationale that typifies the politics of the Left, of which the President is the leading exponent in office. The future is not our problem. We created the wealth. We get to blow it all, including whatever our children and grandchildren might inherit from us. It is startling in its primitive assumptions, as startling as a hunting band in the 50th century BC might be to us as it consumed every animal it had hunted down in a single night’s feast, having less sense than a squirrel does in burying nuts for the lean winter months. At least the ancient band would have had the excuse that it didn’t have a freezer. Is it a French thing?

Sorry, French shoppers can still get fresh produce from small family farms, wine from small vintners, and so on down the line of French delicacies. French taxes -- this is a socialist country, mind you -- are designed to preserve small businesses providing the heirs to them are willing to continue operations. In America, if you're a farmer, the only break you get on inheritance is that the tax is spread over twenty years. For a small business? No such luck. There's no future planned for a small shop, whether a hardware store or someone who makes small lots of personally designed clothing. The demands of now from Washington and from the several states preclude such thinking. The American shriek for now is fairly recent, in historical terms, but we can't deny the impact.

Now, those who don’t have time for children abort them. Now, those who don’t have time to save from what they earn can take it from someone else, through welfare payments or bailouts. Now, those who can’t bother to learn lessons in class can demand comparable wages with someone who has learned how to do a job. Now, in fact, is the most common complaint in American, and especially American Left, politics. We don’t have it now; we want it now; we won’t take no for an answer now — there's something oddly familiar from an entirely different quarter in this kind of rhetoric, the sound of a prison riot, or the shouting of parasites, liars and thieves.

How long are Americans, in a diminishing majority still the most forward-looking people in the world, going to listen to this? How long are we going to fall for it? How bankrupt do we have to be, how captive to foreign powers, how enslaved by creditors? Now demands are the ticks on a healthy person’s neck. After a while, even the strongest one, bled to fainting, will fall.


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