Archive for June 9th, 2010
Dan Duncan died in late March. Duncan had a net worth of more than $9 billion – that’s “billion” with a “B” – and according to Forbes Magazine was the 74th richest man in the world. But here’s the reason WC brings up the late Mr. Duncan: every dime of his estate will pass to his wife and four kids. For the first time since 1916, no federal estate tax will be assessed against Duncan’s estate or, for that matter, against anyone else’s. If you’re filthy rich, it’s a great year to die.
The reason for this aberration is instructive and appalling. Back in 2001, the Bush administration and the then-Republican Congress “repealed” the federal estate tax. More correctly, they phased the estate tax out over a period of nine years. Under Congressional rules in effect back in 2001, a revenue bill could not have legal effect for more than ten years without a 60% vote in both branches of Congress. The Republicans didn’t have the votes, so they passed the phase-out, with the estate tax repealed for one year, in 2010. Various commentators heaped scorn on the bill at the time. WC is sure that those fine folks who represent us had every intention of getting back to it sometime in the next decade. But they didn’t.
Sure, they tried. In fact. WC has taken Senator Kyl to task for obstructing Senate efforts to prevent this very problem. Senator Kyl, WC’s readers will recall, supported a block on an extension of unemployment benefits to protect the richest of the rich from paying estate tax. He helped kill a compromise bill that would have levied the estate tax only on estates over $7 million – about one quarter of one percent of Americans. Kyl’s tactics make no sense and may ultimately be counterproductive: if Congress does nothing on January 1, 2011, the estate tax rates revert to at least 41% on estate’s in excess of $1 million. Hello?
None of the reasons advanced for repealing the estate tax make any sense, especially in the context of a ballooning federal deficit. The first excuse WC has heard is that it is unfair to pay estate tax on monies that have already been subjected to the income tax. Piffle. Zillionaires in Duncan’s tax bracket don’t pay income tax. They can afford the very best tax planning advice. Only working stiffs like WC and his readers pay any income tax. Nor is there anything shocking about paying a tax with previously-taxed money. We do it all the time. If you buy a gallon of gasoline, for example, you are using previously taxed money to pay federal fuel tax, state fuel tax and sales tax.
A second excuse for repealing the estate tax is that it hurts family farmers. Their farms, the argument goes, have greatly appreciated in value, and sometimes the family farm has to be sold to pay the taxes. Of course, any first year law student with a pencil could solve that one: write an exemption for family farmers. Oh, wait, there already is one. If it’s not generous enough, increase it. It’s no reason to repeal the entire tax.
John D. Rockefeller, the original oil czar, paid estate tax at a seventy percent rate, far higher than the tax has been in recent times. Why should today’s zillionaires get a break? The answer, of course, is that they have more friends in Congress. Until someone sensible takes charge – if there is someone sensible around – elderly billionaires should probably be careful crossing streets.