Of the several objectionable provisions included in the tax compromise that congressional Republicans extorted from the Obama administration, none is more noxious than the one that all but guts the estate tax.
Even the needless and unfair continuation of tax reductions for families making more than a quarter of a million dollars a year merely extends a benefit already enjoyed by affluent households. Estate tax cuts, by contrast, create a whole new windfall for those who already enjoy privileges and security undreamed of by the vast majority of Americans.
The provision is the work of Arizona’s John Kyl, the Senate’s second-ranking Republican and a longtime advocate of abolishing the estate tax. To most eyes, the former estate levy didn’t look like much of a burden; it allowed couples to leave their heirs?$7 million tax free and taxed any additional inheritance at 45%. Kyl’s plan, which he has crowed is as good as abolition, increases the exemption to $10 million for couples and reduces the tax rate on the rest to just 35%. The average windfall for the approximately 6,600 wealthy taxpayers annually affected by the estate duty will top? $1.5 million.
Abolishing the estate tax has been a goal of some conservative Republicans since the 1940s, so it’s easy to forget that its modern champion was a president the GOP used to regard as among the greatest the party has produced — Theodore Roosevelt. Like many thoughtful Americans of his era, he believed the disproportionate accumulation of wealth in the hands of a few would make a mockery of our meritocracy and, ultimately, of our democracy. In 1910, he summed up those feelings. “We grudge no man a fortune in civil life if it is honorably obtained and well used,” Roosevelt said. “It is not even enough that it should have been gained without doing damage to the community. We should permit it to be gained only so long as the gaining represents benefit to the community.... The really big fortune, the swollen fortune, by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means. Therefore, I believe in a graduated income tax on big fortunes, and … a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.”
In 1916, eight years after Roosevelt left office, Congress finally recognized the justice of his case and incorporated a levy on estates into the tax code.
In fact, American governments have taxed estates, at least on a temporary basis, since the founding. The first estate duty was imposed by the Federalists to finance the undeclared war with France; Abraham Lincoln imposed a temporary inheritance tax during the Civil War. It clearly is a pillar of any rationally progressive tax system, and it is no accident that it’s under assault in what amounts to a new Gilded Age in which wealth is accumulating with ever-greater rapidity in a smaller and smaller number of hands. The hereditary advantage such unchecked concentration confers undermines our notions of equal opportunity and turns the American dream into little more than a genetic lottery.
Arguments that the existing estate tax frustrates initiative simply are nonsense. Has anybody noticed a shortage of rich people lately?
It’s also no mystery how such advantages are obtained. Again, Roosevelt’s appraisal of the first Gilded Age is sadly resonant. “The man of great wealth owes a particular obligation to the state,” he said, “because he derives special advantages from the mere existence of government.”
It is particularly grotesque that, in this instance, those who derive their special advantage from the government by reason of the wealth they’ve amassed have secured this benefit by holding hostage the meager assistance Washington affords the one in 10 Americans who currently are jobless. In California, 12.4% of the workers are unemployed; in L.A. County, where bankruptcies have risen by 30% over the last year, nearly 13% are jobless. Of the 15 million Americans who are without work, 42% have been looking for a job for more than five months. An additional 9 million have been forced to accept part-time work, though they’d like full-time employment.
Those are the people the Republicans held hostage, so that the children of the rich might grow fatter still.