WASHINGTON, April 18, 2015 — One of the major differences between a capitalist economy and a communist one is the concept of private property, which leads to the right to bequeath. As such, over the last 239 years Americans have worked hard, earned income and eventually accumulated wealth. However, under the current laws, up to 50 percent of some of that wealth must go to the government to pay federal and state taxes. It’s time to stop that.
On the federal level, the House of Representatives recently voted to repeal the estate tax. The bill will have a tough time getting passed in the Senate, and the president says that he will veto the bill even if the Senate does pass it.
Those who favor maintaining this tax insist that it is fair. Since some of this wealth may have resulted from the increased value of the property after it was purchased, they further argue that this property has never been taxed.
However, when it is passed onto heirs, the property is not sold, but stays in the family or is given to a person of the original owner’s choice. There is no sale, even though there may be a legal transfer of title. As long as that is the case, there should be no tax. Eventually the property may be sold rather than bequeathed, and at that point the increase in value can be taxed.
The president says that, because this tax applies only to estates whose value exceeds $5 million, it affects only the wealthiest 1 percent of Americans. He insists they can afford it and that the revenue collected can be used to pay for his social programs. He argues this benefits the common good.
The problem with that logic is that the top 1 percent of Americans already pay about 35 percent of the income taxes collected by the federal government. How much more do we want the most successful people to pay?
The tax also affects many small business owners whose business may have value, but do not have the liquidity to pay the taxes. Should the heirs sell or mortgage part of the business just to pay the taxes?
There have been numerous situations where heirs were forced to sell large parts of their inheritance just to pay the taxes. This seems to be particularly a problem for those in the agricultural industry, where large family farms in a desirable area carry a high market value. Often because of the inflated value, parcels of the farm must be sold to pay the estate taxes.
Many of the very wealthy end up becoming philanthropists who use the wealth they created to support causes that they deem appropriate, not causes that the federal government may deem to be worthy of an income transfer program.
Most of all, these high achievers want to make sure that a legacy lives on past their days so that they can provide for future generations of their family. Since they earned the income that led to the wealth accumulation, shouldn’t they have the right to determine how their wealth is distributed upon their passing?
And even more problematic is that this tax reduces investment in the economy and at the same time provides funds to grow the already burdensome welfare state that has been vastly expanded in the last six years.
In 2001 the Bush tax cuts were enacted. As part of that package, the estate tax was phased out over a seven- year period. But in 2010, President Obama insisted the estate tax be re-instated. Then he said he would only sign the “fiscal cliff” deal if the 35 percent estate tax was raised to 40 percent.
America has always been the land of opportunity where all citizens had the opportunity to achieve and were able to reap the rewards of their achievements. Americans also had the right to dispose of their property in any manner they chose. Those who earned the property owned the property.
We certainly don’t want a system where the government owns half of a person’s wealth upon his or her death. Don’t you want the fruits of your labor passed on to your children? Doesn’t everyone?