Some Brief Words About the Estate Tax

I’ve had so many political opinions lately that I’ve had trouble isolating one that I can take some time to put into words, but here’s a short one that’s been bugging me. Maybe some of my more conservative readers can help me figure out the explanation for this, but to be honest, I don’t know what’s up with right-wing opposition to the estate tax. It often seems to be one of the most-criticized policy proposals in Washington, and yet to me, it seems like it should actually be one of most palatable tax ideas out there.

After all, the estate tax doesn’t have many of the de-stimulative effects which conservative economists often fear from tax plans. There’s no particular reason to think it should strongly impact job creation, it doesn’t hurt small businesses, and it doesn’t do anything to disadvantage private industry against public competition. There’s no particular mechanism by which most people think it can reduce productivity, and it only effects earnings that had been stashed away instead of being allowed to “trickle down.” It may be mildly progressive in nature, in that most proposals affect only estates in excess of $3.5 million (twice that for couples), but since it’s triggered by a threshold (a very very high threshold!) and not governed by a sliding scale, it’s certainly immune to the criticisms generally leveled agains the progressive nature of the income tax. And basically, it’s principle economic effect is to increase the incentives that the children of wealthy people have to start businesses on their own–i.e., it helps ensure that they continue engaging in wealth-creating enterprises and supporting the expansion of capitalism instead of freeloading off their parents in anticipation of future unearned wealth.

So the estate tax doesn’t at any point reduce someone’s personal ability to spend their hard-earned money at any point during their lifetimes. It doesn’t disincentivize productivity or economic participation — in fact in some sense it does just the opposite, but encouraging the wealthy to use their acquisitions while they are still alive and encouraging their children to create jobs and businesses of their own. The revenue raised from it does help reduce the budget deficit, allowing us to continue pouring hundreds of billions of dollars into the military budget and helping to stabilize or financial standing in the world. In some ways, it seems to me that if there was ever going to be a tax that appealed to conservatives’ fiscal ideals, this would be it. So what explain the impassioned opposition? If I were a more cynical, judging person, I would say of course that it is simply a matter of Republicans sticking up for their rich friends who fund their campaigns. But I’m young enough I can still believe that most fiscal conservatives are guided by deeply-held beliefs about the importance of a tax system which doesn’t interfere with basic capitalism. So I am left utterly bewildered by why the estate tax is so anathema to them.

Of course, there are a couple of non-ideological arguments usually used against the estate tax, the first being that it can have an unintentional impact on family businesses which depend on the passage of property from one generation to the next (like a family farm). But this is a simple enough fix, and indeed many of the more recent forms the estate tax has taken have included exemptions for such businesses (never mind the fact that the line between “family farm” and “massive corporate agriculture project is getting increasingly blurred). The second argument one hears a lot is that it amounts to “double-taxation,” since it applies to wealth and goods which have often already been taxed when they were acquired. But this has never really held water for me, because of course, we double-tax things all the time elsewhere. If I buy an item at a store I pay sales tax on it, but the materials which went into making it were likely taxed when they were purchased by the manufacturer. If I earn money from my employer it is taxed, but if I want to make a sizeable gift from that money to a private citizen, it’s taxed again, just like it is if I want to turn around and use it to buy some stocks and bonds. We’ve always accepted that wealth can be taxed again when it is turned into some new kind of wealth or transferred in some way, and the estate tax to me seems no different.

Most importantly, perhaps, these arguments are small, pragmatic arguments and not sweeping ideological ones. They depend on nitpicking the details of how the estate tax is put into place, rather than following from some set of fundamental beliefs about the role of taxation and government in capitalism. So one would expect them to be shared by Democrats and Republicans alike. But they aren’t, of course; which makes them seem like scapegoats for some deeper objections that the conservatives must have and just aren’t telling us about.

So if you’re one of my more conservative readers, I’d put two questions to you: first of course, why do you and your political brethren object to the estate tax so much more viciously than you do to say, a gift tax, which is basically an estate tax applied to people still alive? And secondly (and more broadly),  just what are the principles by which you decide if a tax is “acceptable” or not? Because if you concede (like all but the most righty of right-wingers seem to) that at least some taxation is necessary so that we can fund things like our six-times-more-expensive-than-the-Chinese’-and-Russians’-combined military*, then there must be some principle by which you decide which taxes are necessary evils and which ones are so odious that you are willing drag out the filibuster and prevent 9-11 emergency responders from getting adequate healthcare in order to prevent them from going into effect. So I’m serious, how do you tell the difference between the kinds of taxes no one ever makes a fuss about, and the ones that make your senators effectively shut down the government for weeks at a time?

It may sound like I’m just being rhetorical here to make a point, but I’d genuinely like to know. I don’t want to believe that Republicans in Washington are manufacturing their outrage over some taxes and not on others based mostly on what their rich friends tell them is costing them the most, but the I look at things like the estate tax and I just can’t figure out what the other explanation might be.



*Seriously, think about that next time you’re arguing that the government should focus on cutting spending and not on raising taxes in order to balance the budget. I completely sympathize with people who say that government programs often cost far, far more than they would if they were run by private companies, and I’m all for trying to find such sources of waste and force them to work with a more realistic budget. But when I find out that China and Russia together can run militaries which defend five times as many people and control twice as many nuclear weapons as us for one sixth of the cost, I gotta say the military budget rises towards the top of my list of places where I think we may be letting the government spend a lot of extra money with nothing extra to show for it.


About Colin West
Colin West is a graduate student in quantum information theory, working at the Yang Institute for Theoretical Physics at Stony Brook University. Originally from Colorado (where he attended college), his interests outside of physics include politics, paper-folding, puzzles, playing-cards, and apparently, plosives.

One Response to Some Brief Words About the Estate Tax

  1. Moominmamma says:

    All the arguments from conservatives which I have heard regarding the estate tax rest on the ideological grounds that the “money is being taxed twice” or that “it’s not their money”, referring to the government. “Taxing twice” seems a disingenuous argument as the inheritance is nice fresh new income to the recipient. The idea that the government does not have “the right” to “take my money” seems to me to be either rooted in ignorance or used as a cover for an unwillingness to pay for a civil society . A letter writer to my local newspaper recently opined that if his neighbor John robbed him, that would be stealing, and he saw no difference between that scenario and one in which “John convinces enough people to create a civil government that takes money from his neighbors to pay for things John and others need”. This is an absolutely shocking display of ignorance. If John can convince enough people to create a civil government, and then convince enough people, through their elected representatives, and after much discussion, to ratify a constitution, then we have “a government instituted among men” with “the consent of the governed”. And if that constitution gives government the power to make decisions based on majority rule with strong minority protections in place, and the power to raise revenue in order to “establish justice, insure domestic tranquility”, provide for the common defense,” and “promote the general welfare”, then government has a right to tax you. That would be taxation WITH representation, by the way. I’m guessing our letter writer would call himself a “constitutional conservative” these days, without a hint of irony.

    Though it does appear that our friend above seems ignorant, his objections may also be rooted in his unwillingness to pay the costs of running a society. Note that the author does not seem to include himself as a person who “needs” anything from the civil government that has been created. The attitude that “government has never done anything for me” and that “all my money is being taken from me and given to undeserving people” is common among many. Many people who espouse this position consider themselves perfect examples of the “self-made man”. Take , for example, someone I know who ran a small interstate trucking company and who managed to retire with a few million dollars in spare change. While I acknowledge that he worked hard to build his business, he does not acknowledge that his business largely flourished to the extent that it did because the government (read “taxpayers”) built and maintained him an interstate highway system upon which to ply his trade, that government subsidized his trucks as they caused 99% of the wear on roads while he only paid for 35% of it, that government provided him with the electricity and water to run his office, that government provided for the education of the people he hired to intelligently run his business, that government provided for the police and emergency responders who helped keep his drivers safe, or that government was a fundamental player in the development of the internet, which allowed him to run his business more efficiently. No, government never did anything for him, and it’s just a big bad bully who wants to steal his money and “redistribute” it to other people who need things. And he feels mighty oppressed at having to chip in, because none of it is his fair share.

    Of course, some may try to make an economic argument that cutting taxes raises revenue, but that old canard has been debunked from every which direction by economists of every stripe, and the only ones who cling to it are Republican politicians and pundits shilling for their rich clientele and themselves, and those who have been propagandized into believing it. If you are only willing to hint at it, I am willing to say it flat out, as we now have ample evidence that Republicans are willing to put the enrichment of their sponsors ahead of the responsible governance of the country.

    So I, too, would be interested in hearing whether there are other arguments against the estate tax. I haven’t heard one that convinces me yet, but I’m more than willing to listen.

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