At this writing the arguing continues in Washington on how much to cut our taxes. The President wants to cut $750B, the Senate $350B.
One of those taxes is the so-called estate tax, which is also referred to as the inheritance tax and to we cynics as the death tax.
This tax is gradually being reduced and will expire in 2010. Mr. Bush wants it to happen now. Me too!
Who in the world could be so cruel and cold hearted as to promote the idea of taxing dead people? Obviously a majority in Congress at different times have had this malady, because it isn’t a new thing.
The first estate tax was enacted July 6, 1797.
Our leaders came up with this tax to help pay for naval rearmament against a feared war with France. (Here we go with the ‘bad? French again.) It was written for five years, but was repealed in four.
A direct tax on inheritances was imposed again in 1862, in the midst of the Civil War. The rate was raised in 1864, and the tax was abolished in 1870.
My information comes from the Internet (why is that word capitalized?), Bruce Bartlett of the National Center for Policy Analysis, written July 19, 2000.
The third time the estate tax was imposed was again for defense purposes in 1898 to help pay for the Spanish-American War. It was repealed in 1902.
Bartlett’s purpose in writing the history of the estate tax was to show that it was always imposed during times of national emergencies.
America’s fourth estate tax was enacted in 1916. The bill sponsor partially justified it as a means of equalizing wealth. It started at 10 percent for estates over $5 million, but the next year it was raised to 25 percent, but only to estates over $10 million.
Unlike the other estate taxes, this was not repealed after the war, though the rate was dropped to 20 percent in 1926. Bartlett says, ‘Today’s estate tax, therefore, is a direct descendant of the 1916 estate tax.?
President Franklin Roosevelt raised the top rate to 60 percent in 1934 and raised it to 70 percent in 1935 in a conscious effort to ‘soak the rich.? This last move caused Southern democrats to break away from the mainstream of the Democratic Party.
Working with Republicans they got the estate tax reduced in 1938.
Today our estate tax goes to 60 percent, second highest in the world after Japan, and it exists only to redistribute income, since its revenue yield is negligible.
Bartlett concludes the estate tax ‘has no purpose in today’s tax system.?
The current estate tax expires in 2010, however, unless Congress restates this intent the estate tax will be reenacted in 2011.
Of course there are ways to avoid death taxes. Using an Irrevocable trust is one method. Foundations/charitable gifting is another. Endowments for scholarships, land conservance and others can be established.
But, if a person just dies without providing legal means of distributing their savings, Congress gets your money to buy feed for catfish farms, experiments of various kinds and building roads to nowhere in Virginia.
So, a tax that was thought of to help pay for wars is continuing to distribute wealth through pork barreling.
Or, we could have another national emergency.