America’s founders disagreed about many things, but were united by one desire: they wished to leave behind the aristocratic form of government they’d experienced as a colony of Great Britain. They wasted no time in doing so. Thomas Jefferson, writing to John Adams, recounted that:
“At the first session of our legislature after the Declaration of Independance, we passed a law abolishing entails. And this was followed by one abolishing the privilege of Primogeniture, and dividing the lands of intestates equally among all their children, or other representatives. These laws, drawn by myself, laid the axe to the root of Pseudoaristocracy.”
The abolition of inheritance laws were among the earliest acts of the Continental Congress. Likewise, our first estate tax, the Stamp Tax, was among the first federal property taxes levied in U.S. history. On the books from 1797 to 1802, it was proposed during George Washington’s presidency and enacted just 5 months into John Adam’s first term. It was enacted and ended twice more before becoming a more permanent feature of our tax code in 1916.
The estate tax remains one of the most important anti-aristocratic safeguards we have. It is also reason #3 to oppose extension of the Bush Tax Cuts.
The federal estate tax is a tax on the transfer of assets at death, i.e. inheritance. Currently, it is paid at a 35% rate for the first dollar of an estate’s value over $5.12 million. In other words, if your rich uncle dies and leaves you his estate valued at $5,120,001, you will owe 35 cents worth of estate tax.
Only those of us who have done very, very well ever pay the estate tax. In 2011, for example, 97.6% of federal estate taxes were paid by the richest 5% of Americans. If the estate tax provisions of the Bush Tax Cuts expire, estates over $1 million would be taxed at the rate of 55%, the rate it was set during the Reagan administration.
Over the last 40 years American’s family income mobility has shrunk. This means that those born poor (or rich) are increasingly likely to stay at their inherited family income level over their lifetimes. It is a trend that runs counter to our sense of what it means to be American. Fear and loathing of an entrenched aristocracy is simply part of our national DNA.
Why then do so many Members of Congress defend the estate tax? Answer: because we let them.
During the next week, Minnesota’s Members of Congress are likely to vote on extending the Bush Tax Cuts for the richest 2%. They should vote ‘no’. The Bush Tax Cuts were fiscally irresponsible in 2001 and 2003. In 2012, they are fiscally disastrous. As a country, we can no longer afford to use our tax code to subsidize the rich.
Last week, the Democratic leadership of the Senate backed away from ending the estate tax break. This is not a deal we should accept.
TakeAction Minnesota is part of Americans for Tax Fairness, a campaign to end the Bush Tax Cuts for the richest 2%. People across the country are calling their Senators and Representatives to urge them to oppose any extension of tax cuts (like the estate tax) for the richest 2%. You can join by calling 888-744-9958. When you do, you will be asked to give your zip code and select your Senator or Representative. Please call today.
The Bush Tax Cuts divides our tax code into two-tiers: one for the ultra-rich and one for everybody else. Temporary tax giveaways on the income tax, the capital gains tax, and the estate tax have turned our tax code into a smorgasbord for the rich. It is arrayed with fiscal junk food in the form of high-end tax expenditures. They’ve proven irresistible over the last three decades because they serve politicians so well: they get to talk tough on taxes while still serving the goods to the rich. It’s time to end the free lunch.