Now that Congress has returned from its Independence Day recess, Republican senators will try again to declare America permanently independent of the death tax. A June 8 bid to scrap this levy fell three votes short, when Democrats (and Republican renegades Lincoln Chafee of Rhode Island and Ohio’s George Voinovich) filibustered. If abolitionists can secure three more votes than the 57 they mustered (opposite 41 opponents), a majority of senators would kill this odious tax for good.
While Democratic death-tax defenders are unlikely to accept pro-repeal arguments from, say, the Free Enterprise Fund or the Heritage Foundation, they might heed advocates closer to their philosophical perspective.
When the House of Representatives voted 272-162 to kill the death tax on April 13, 2005, 42 Democrats concurred, including 8 members of the super-liberal Congressional Black Caucus.
“All across this land are Americans who have paid their taxes all their lives, only to face a final taxing event at death,” CBC member Sanford Bishop (D., Ga.) said in that day’s debate. “They paid their taxes during their lifetimes and should not be charged again when they die.”
Bishop, who co-sponsored “The Death Tax Repeal Permanency Act of 2005,” added:
The death tax represents all that is unfair and unjust about the tax structure in America because it undermines the life work and the life savings of Americans who want only to pass on to their children and grandchildren the fruits of their labor and the realization of their American Dream …
Employees of family businesses, many of whom are minorities, are at risk of losing their jobs because their employers are forced to pay the unfair and exorbitant death taxes levied on them. Funeral homes, weekly newspaper publishers, radio station owners, and local dry cleaners, all are affected all across the demographic spectrum …
[A]lthough reasonable minds may differ on this issue; I believe that the death tax is politically misguided, morally unjustifiable, and downright un-American.
Supply-side economics guru Arthur Laffer could have written the floor speech of CBC member Rep. William Jefferson (D., La.):
The federal estate tax results in … slower economic growth, reduced social mobility, and wasted productive activity. Moreover, the costs imposed by the estate tax far outweigh any benefits that the tax might produce. It is unclear whether the estate tax raises any revenue at all, since most if not all of its receipts are offset by losses under the income tax.
In 2003, Congress’ Joint Economic Committee reported that the death tax brought in $22 billion in annual revenue, but cost the private sector another $22 billion in compliance costs. Therefore, the total impact on the economy was a staggering $44 billion. And, when one calculates the amount of money spent on complying with the tax, the number of lost jobs resulting from businesses being sold, or the resources directed away from business expansion and into estate planning, it is clear why this punitive tax must be eliminated.
Jefferson’s effectiveness as a pro-repeal spokesman unfortunately plummeted after his ejection from the House Ways and Means Committee amid an ongoing federal corruption probe.
“Much of rural America’s strength is derived from the principles and values learned through hard work and passed down from one generation to the next,” said Rep. Marion Berry (D., Ark.), not to be confused with Washington, D.C.’s crack-smoking ex-mayor, Marion Barry. “Now families can make long-term, financial plans and know that the businesses they worked so hard to build won’t have to be sold to pay an undue tax.”
This bill’s chief Democratic co-sponsor, Alabama Rep. Bud Cramer, warned that “If Congress does not enact this legislation, the death tax will be resurrected in 2011 and those that are fortunate to live past this date must face the old oppressive tax code.” Indeed, the death tax will fall to 0 percent in 2010. But without permanent repeal, it will boomerang to 55 percent. As Cato Institute tax analyst Chris Edwards ominously observes, “If you are in poor health in 2010 and you own substantial personal or business assets, your heirs might favor your prompt departure.”
High-level Clintonites also have criticized the death tax.
“Prohibitively high inheritance tax rates generate no revenue,” Joseph Stiglitz, chairman of President Clinton’s Council of Economic Advisors, said in the June 6 Investor’s Business Daily. “They simply force the individual to consume his income during his lifetime.”
As a May 1 Congressional Joint Economic Committee study recalls, Alicia Munnell, a Clinton CEA member, has written, “resources spent on avoiding wealth transfer taxes are of the same general magnitude as the [revenue] yield.” She also has concluded that, “the compliance, or more appropriately, the avoidance costs of the transfer tax system may well approach the revenue yield.”
Liberals love to discuss social capital — in essence the idea that the silver spoons of “old-moneyed” whites repress minorities. The obvious answer is to help minorities acquire their own silver spoons, in part by letting successful non-whites bequeath their wealth to their heirs. The death tax frustrates this objective.
A 1997 Kennesaw State College study discovered that 90 percent of black business owners surveyed believe the death tax hindered their long-term growth prospects. The equivalent figure for companies overall was 61 percent.
Writing in the June 14 edition of Alabama’s Anniston Star, Sen. Jeff Sessions (R., Ala.) recalls his day-earlier discussion with Robert Johnson, the wealthy founder and chairman of Black Entertainment Television. Johnson, Sessions wrote, “explained how devastating the death tax was” to black entrepreneurs. “He explained how his company was strong and vigorous, but it was small compared to CBS, ABC, NBC and Fox. If something happened to Mr. Johnson, the death tax owed by his estate would be huge and his heirs would have to sell, most likely to ‘some big conglomerate,’” rather than another black owner.
As Rep. Jefferson observed on the House floor, “Those few minority-owned businesses that have been able to take steps to reduce their estate-tax liability complain that it has detracted from their ability to meet business objectives by channeling time, energy, and resources away from productive endeavors.”
He cited the case of Leonard L. Harris, owner of Chicago’s Chatham Food Center. “My focus has been putting my earnings back into growing the business,” Harris explained, according to Jefferson’s speech. “For this reason, cash resources to pay federal estate taxes, based on the way valuation is made, would force my family to sell the store in order to pay the IRS within nine months of my death. Our yearly earnings would not cover the payment of such a high tax. I should know. I started my career as a CPA.”
For some black-owned companies, this challenge has proved fatal.
“The Chicago Daily Defender — the oldest black-owned daily newspaper in the United States — was forced into bankruptcy due to financial burdens imposed by the estate tax,” Harry C. Alford, Jr., president & CEO of the National Black Chamber of Commerce, wrote in an April 5 editorial for the American Family Business Institute. “We all remember what happened when the great Sammy Davis Jr. died. His wife was in bankruptcy within six months due to the vicious ‘death tax.’”
“It is all right for black folks to begin building wealth in this country,” Alford adds. “It is not against the law, and it certainly is more enjoyable than poverty.”
Senate Democrats also might be intrigued to learn that such bastions of fairness and compassion as Canada, New Zealand, and Sweden somehow advance social solidarity without death taxes. If they can live without it, why can’t we?
Deep down, some Democrats understand that the death tax damages the economy in general, and family farms, rural habitat, and prosperous blacks in particular. This election year, Senate Democrats can demonstrate that they really care about such things and people by joining Republicans in killing the death tax, once and for all.
– New York commentator Deroy Murdock is a columnist with the Scripps Howard News Service and a senior fellow with the Atlas Economic Research Foundation in Arlington, Virginia. (AtlasUSA.org)