OK, just kidding about the landed part, but the rest is true. Today's Washington Post carries an article I've been expecting ever since the election. Despite its budget busting consequences, the House is expected to vote today to
permanently repeal the estate tax, thereby ensuring that the heirs to the Mars, Gallo, and Campbell's soup fortunes will inherit billions free of tax. (I don't include Bill Gates because he isn't leaving his fortune to his kids - he understands the effects of unlimited money on the next generation's morals). Thinking this wonky tax policy area is boring? You won't when you consider what the social and fiscal fallout will be from this. Read on.
Remember that when our Republic was founded, the people decided not to have a European-style aristocracy? The men who wrote our Constitution were well acquainted with the deadening economic effects, poor morals, and societal inequities that flowed from aristocracy. When people inherit wealth and live off their dividends, they tend to become lazy, drunken, amoral leeches.
Worse, they buy and enforce one set of laws for themselves, and another for everyone else. So in England, a drunken lord could get away with murder, while starving people were shipped off to Australia for stealing loaves of bread.
Just as bad, people who inherit wealth don't create it - they have no understanding of hard work and they don't use their inheritances to build anything, they just hire investment advisors to manage the money for them in the way that will best support them in the lifestyles they follow and create the largest pot of money to leave to their kids.
So what does this have to do with the estate tax (recharacterized by Luntz as the "death tax")? The estate tax was first voted in to finance the Spanish-American War back in the early 1900's. It has been with us ever since, and along with the Anti-Trust Act, it was a marker for the end of the era of the robber barons in America. An unlimited marital deduction was added (so anything you leave your spouse is tax free), and up until the early 1990's, everyone could leave up to $600,000 free of estate tax ($1.2 million per couple). A later change was to increase that amount gradually to $1,000,000 per person ($2m per couple). The tax hit very few people, but the people it did hit, it hit hard (the initial rate on the lowest bracket is 37% and the top bracket used to be 55%, assessed on everything you owned over the $1 mill except for what you were leaving to your spouse). The very rich have entire industries of estate planners and financial managers who spend their lives figuring out ways to avoid the estate tax. I once heard one presenter talk about "massaging the numbers" get an extra $40 mill over a 30 year projection by fiddling with the numbers on a charitable trust. The average Joe wouldn't have believed the numbers, not to mention the sheer greed of it.
Congress had made it beneficial to donate monies to charities by letting the rich put their money into esoteric things like Charitable Remainder Trusts and Foundations and Charitable Lead Trusts. The bargain was that in exchange for getting extra money out to their heirs, some public good was also accomplished. Now, the philathropy of the rich tends to go to . . . their colleges (Harvard, Yale), and their favorite entertainments (opera, the finer arts), none of which I'm quibbling with (and I have to give kudos here to Bill Gates and Ted Turner for bucking that trend by actually doing something for poor people). Nevertheless, there was at least some public benefit in return for the private advantage.
Now there will be a permanent repeal of the estate tax. Consequence No. 1: philanthropy will dry up. There will be far fewer Jack Kent Cooke Foundations, far fewer Pew Charitable Trusts. Consequence No. 2: The rich will get richer - much richer. And the richer they get, the more laws they will buy. Think Bush (they both buy and sell), think DeLay. The effects on our democracy would be devestating. We already talk about people buying Senate seats. Just imagine a Congress with nothing but Kennedys and Rockefellers, except their names will more likely be Mars, and Mellon Scaife, and Coors, and the far right wingnut theocratic heirs to the Dominos pizza fortune. Consequence No. 3: the economy will suffer - I firmly believe that when capital is tied up in trusts (which cannot take major risks) and when wealth is being spent on yachts in Europe, while the middle class is shrinking and the poor are driven into extreme poverty, the result is not a robust economy. Consequence No. 4 (and this is the least of them but having known some of these people I tend to actually feel sorry for how lost and weak they often are): entire generations of leeches will be born.
So the next time you hear about the "unfairness" of the "death tax," remind people that America wasn't supposed to be an aristocracy.