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The Estate Tax: Bring it Back Now

Post on September 1, 2010 by 4 Comments »

Of all the ways taxes can be levied, the estate tax might just be the most sensible and fair.

It’s a tax on wealth, not on income, and it can provide funding for vital public investments while having almost no supply-side problems. Besides that, the rates for the tax have traditionally been quite low, much lower than income taxes.

Unfortunately, the estate tax was allowed to expire at the end of last year.

We’ve been making the case for why we should bring it back for a while now. Today’s Wall Street Journal has a very compelling editorial about why Congress should restore the tax in August — for either deficit reduction or public investment, either of which would be medicine for our ailing economy.

An estate tax can provide revenue—with little, if any, adverse supply-side economic impact—to fund deficit reduction, additional public investment or added assistance to those affected by the economic crisis. Used for public investment that has a rapid spend out, or applied to assistance for economically displaced citizens, the net effect will be to increase demand. That’s because roughly 100% of the funds would be spent, while part of any large inheritance is highly likely to be used for savings or debt repayment. And either deficit reduction or public investment will better position our country for future economic success…

“Failure to restore a permanent and strong estate tax for this year has already cost billions of dollars in federal revenue. But there is still time for Congress to take action for the current year. By acting immediately, Congress can, at a minimum, solve the revenue problem the lapse has created for the remainder of the year. It could also consider going further by making the change apply from the beginning of this year.”

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Comments (Closed):3

  1. DPD
    September 1, 2010 at 4:42 pm

    It is also very interesting that 99.9% of the comments on this quack op-ed piece were fervently anti-estate tax.

    The audacity of Rubin and Robertson, given their own record of dodging numerous taxes, is utter hypocrisy.

    The notion that the governemnt has lost revenue due to the expiration of the estate tax should offend and scare every American. The government has no rightful claim to these assets under current law. Any attempt to to turn back the clock to seize these individual’s property can only be described as theft.

  2. Jeff Shaw
    September 1, 2010 at 4:51 pm

    It’s of course a completely false and ludicrous claim that the government has “no rightful claim … under current law.” We’ve had an estate tax for almost 100 years.

    Republicans were vocal backers of it: check out Teddy Roosevelt backing the idea of a progressive estate tax in 1906: http://beluthahatchie.blogspot.com/2006/12/teddy-roosevelt-on-estate-tax.html

    They’re not talking about retroactively taxing people here: just putting the tax back a few months sooner than planned so we can keep vital public investments around.

  3. DPD
    September 1, 2010 at 6:22 pm

    Whatever law was in place in previous year has no bearing on estates created thus far in 2010, none what so ever. If you send a form 706 to the IRS today, they will promptly return it to you becuase there is no federal estate tax in 2010.

    The second to last paragraph of the op-ed says, “Ordinarily in tax matters, the effective date would not precede the date of enactment, or at least the date that a measure was introduced, because Congress knows that taxpayers make their plans based on the existing code. But in the case of the estate tax, presumably nobody’s demise was affected in timing by the structuring of our tax laws. And importantly there has been notice—through the president’s budget and statements by public officials—that a tax would be enacted earlier this year that would apply to the whole of this year.”

    If you read this carefully, you can see that they are attempting to turn back the clock and change the rules. I am an heir to an estate this year and under 2009 rules I would owe the government a form 706 in October. As the year has progressed, Senators such as Max Baucus, arguably the most powerful voice on the estate tax, have backed away from retroactivity and openly discussed the idea of giving estates the option of complying with existing law, at the very least.

    From my stand point, this argument comes out of left field and quite frankly smacks like an attack on assets I inherited nearly eight months ago. I have made commitments and I would like to put this issue to rest. It has made a difficult experience into a nightmare.