E. J. Dionne possesses all of the intellectual arrogance on the left that William F. Buckley displays on the right, but with neither the rumpled collar nor the powerful intellect. He addresses the inheritance tax in an editorial syndicated nationwide (http://tinyurl.com/5ujx9) and suggests that repeal of this onerous burden would endanger the future of social security (as if it isn’t already on life support) and reward the nations’s bimbo-in-chief.
Let me start by stating that I’ve got no dog in this hunt. I’ve got neither a qualifying estate nor heirs so I might claim to possess a modicum of objectivity. The likelihood of my longevity reaching the point of total collapse of the Social Security system is minimal.
But, let’s consider what is going on here. We’ve got a federal tax system in this country that is undeniably progressive. The more you make, the more you pay. There are good arguments for such a policy. And, surprisingly, the progressiveness is accepted by most folks as morally correct and economically bearable. It is a responsibility of those with more to help out those less fortunate. Noblesse oblige. The question is not whether or not, but where the line should be drawn.
Since there are so many more folks who fall at the bottom of the income scale, either through lack of motivation, poor life choices, lack of preparation, failure to obtain an education, or simply circumstance, it is easy to make a popular case for getting more from “them”. And, conversely, it is hard to deny that those with more are able to exercise a disproportionate influence on the political (AKA taxing) policy makers. So, there’s a tension in the system and Dionne appeals to the populist rather than the realist in his demands. It’ll play in Peoria.
So, consider this. You work hard and are frugal. You save and invest. In the process you pay income taxes on your working wages. You pay income tax on your investments and dividends. You pay capital gains when you roll your investments over and build your estate. You do it all to provide something for your children when you go. You pay taxes all along the way and in the process you abide by the progressive tax structure, you create jobs and opportunities, you probably forego most of your own Social Security (arguably rightfully so,) and you are part of the commercial engine of success that drives our economy.
Then, when you pass on, as inevitably you must, the government wants half of what your estate is worth. That hardly seems fair despite the fact that it will mean, as Dionne points out, that someone as ignorant, déclassé, and repugnant (except to hormone-charged adolescent boys and World Wrestling fans) as Paris Hilton will be rewarded. And, as E. J. goes on, if the government doesn’t maintain this confiscatory policy, you will lose your Social Security which demands this blood to maintain itself.
Disregard the fact that most of the ultra-rich, like the builders of fortunes such as Hilton’s, have armies of attorneys dedicated to sheltering those fortunes from the inheritance tax. From those estates, the government Robin Hoods will get little to assuage the poverty of the masses. No, most of the impact of the inheritance tax falls upon the hard-working family farm. There you find estates of high value but low liquidity which regularly fall victim to the redistribution policies enacted by the populist “progressive” politicians. They don’t make huge sums of money in the risky business of agriculture, but they do own large tracts of land which have a lot of potential value, assuming they could be developed, sub-divided and a market existed for the homes and commercial construction. Failing to structure those estates to avoid the inheritance tax will result in a very unpleasant surprise for the heirs.
Consider this. I’ve got a good friend who owns a ranch in western Colorado. It’s a beautiful place in a rugged section of the state. Lots of high desert, some craggy canyons, loads of scrub oak and very little water. He manages a small herd of breeder cows, about 350 of them, which each drop a calf every year if the winter isn’t too hard and there’s enough rain to get some grass to sprout. It’s hard work, but it maintains a life he loves. He sub-leases a chunk to a fly-by-night operator who is trying to cull some gold flakes out of a dry lake bed and he has another company which has installed a natural gas well. The cash flow is pretty basic and depending upon the season can be a bit erratic. But, the land covers 28,000 acres and if the inheritance tax were imposed upon his demise, the only way of meeting the obligation would be sell the land at auction and lose what he has spent his life building. There’s no way his kids could come up with the extortion money that the likes of Mr. Dionne would demand. Is this justice?
Dionne writes a column with a lot of appeal, but it doesn’t pass the muster of common sense. He wants a tax on that which has been already taxed. He throws the red herring of Bimbette Hilton in for some emotional support. He stirs in a bit of class envy and suggests that it is simple greed which makes these folks want to keep what they’ve earned. He ignores the fact that little real money is generated by the “death tax”. And, he seems blissfully ignorant of the unintended consequences of the tax which leads to the break up of family farms, ranches and homes which have been built by hard work and initiative.
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