Director Randall Wallace’s Secretariat is a well-acted, exciting, and beautifully shot 1970s period piece about the Babe Ruth of thoroughbreds. It also dramatizes the immorality of the death tax.
During a contentious scene in a generally upbeat movie, Penny Chenery Tweedy (the outstanding Diane Lane), her husband Jack (Dylan Walsh), and her brother Hollis (Dylan Baker) convene soon after the family patriarch loses his lengthy fight against Alzheimer’s. Even before they can organize his funeral, the three loved ones replace grief with acrimony as they contemplate an impending $6 million federal death-tax liability (equal to $29.5 million today). They must dry their tears to debate angrily whether to liquidate the family’s 2,798-acre horse farm, sell Secretariat, or take other steps to satisfy the tax authorities.
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“We don’t want to end up foolish or broke,” warns Hollis Chenery. The death tax is at 0 percent today. But if the threatened Obama-Pelosi-Reid tax hikes kick in on January 1, that levy will rocket to 55 percent on estates above a $1 million threshold. This would trigger far more Chenery-style family squabbles.
Talk abounds regarding a compromise of a 35 percent rate and a $3.5 million threshold. But Republicans in the midterm winner’s circle should ask humane Democrats to join them in resisting this deal and keeping the death tax as dead as its victims.
Just because someone has expired, why should Uncle Sam collect even one thin dime of the departed’s money?
Some argue that America needs the death tax in order to prevent the serious cash of wealthy dead people from converting their heirs into aristocratic layabouts. If that’s the goal, why not simply confiscate everything above $1 million? That’s a horrible idea. But if people like Bill Gates Sr. (who already got his, thank you) really want to avoid “the Paris Hilton problem,” they should have the courage of their convictions and demand a 100 percent death tax. After all, if they want Paris Hilton — at long last — to join the productive sector, do they think the prospect of only 45 percent of the Hilton fortune would really make her update her résumé?
Americans spend about as much hiding from the death tax as it generates ($28.8 billion in 2008, according to the latest revenue data). “The compliance, or more appropriately, the avoidance costs of the transfer tax system may well approach the revenue yield,” observed Alicia Munnell, a member of President Clinton’s Council of Economic Advisers. The Congressional Joint Economic Committee estimated in 2006 that “for every dollar of tax revenue raised by the estate tax, another dollar is wasted simply to comply with or avoid the tax.”
Economists call this a “dead-weight loss.” This money should be devoted to productive investments rather than pre-paid, posthumous tax-avoidance schemes.
Death-tax opponents have no need to drag public opinion toward repeal. The American people already want to drive a stake into the death tax’s heart. An April 2009 Tax Foundation/Harris Interactive survey found that among 2,002 adults polled, 67 percent want the death tax interred. Respondents also rated it the least-fair federal levy, with an unfairness ranking of 3.9 on a scale of 1 to 5, higher than the gas tax (3.6) and even federal income and corporate taxes (3.4).
Americans understand the death tax’s intolerable cruelty. They believe that people of all income levels should be free to bury their loved ones in peace without enduring family quarrels and worse, refereed by CPAs and financial advisers. Bereavement is excruciating enough without having to inspect spreadsheets and tax schedules. Sweden abolished its death tax in 2005. As publisher Steve Forbes puts it, Stockholm’s policy is “No taxation without respiration.” As anyone with some horse sense would ask: If life without a death tax is good enough for the cradle of Scandinavian socialism, what is America’s excuse for keeping it alive?
— Deroy Murdock is a nationally syndicated columnist with the Scripps Howard News Service and a media fellow with the Hoover Institution on War, Revolution and Peace at Stanford University.
Even if government spending were cut to acceptable levels we would still need to levy some form of taxation. Among the types of taxes available, estate taxes are the least likely to deincentivise. For this reason they are infinitely preferable to income taxes, sales taxes, or capital gains taxes.
What? Taxing already taxed property, at any rate, is preferable, tflavin? Scuttle profitable business ventures to double pay the never-do-with-less government to pay their ransom? Murdock is right on this subject as he is on most, in my view. Well said, Mr. Murdoch!
Flat tax and every one pays from their own check book, not through withholding. That is incentive and involvement.
"Americans spend about as much hiding from the death tax as it generates ..."
Excellent article, and timely. But the paragraph that began thusly especially gets me revved. It points up the fact that the death tax is really just one of the more odious manifestations of a larger problem. I'm not a professional economist and I don't have an answer to this but the question I frequently ponder -- especially in the annual run-up to April 15 is how much of an encumbrance the costs of tax compliance place on the GNP.
I mean this not just in the actual dollars-and-cents of hiring accountants, time spent filling out forms, funding the legions of IRS agents, etc. -- the so-called "dead weight loss."
I mean this in the larger sense of the tax code being the intrusive monstrosity that it is; look at how much we allow -- nay are forced -- to let our financial decisions be based, not on prudent business economics but on perceived or actual tax implications. This happens at every level, from the household to the giant corporation -- basic common sense ("horse" sense?) is consistently and flagrantly usurped by the tax code, just one example being the all-too-frequent imperative of placing portfolio assets in less optimum -- but tax "safe" -- instruments instead of those highly optimized for growth.
Just in terms of economic opportunity costs the lost growth opportunities have got to be staggering.
Currently handling an estate, and not a huge one, I assume there must be a large attorney/CPA lobby to keep the death tax as onerous as possible. Eleven months and literally thousands of dollars in fees and we're not done yet. That money could have gone into farm improvements to increase yields, or paying off education loans. What a waste.
I think its insane that the biggest inheritor of wealth in this country is the government. Why does the government deserve 55% of anybodies wealth? Destroys thousands of small businesses that get sold only because the owner dies and the family can't afford to lose 55% of it.
