"No taxation without
respiration"
Rep. Bob Schaffer as quoted in The Wall Street Journal, 7/23/97
| On
Sunday, April 13, 1997, The New York Times published Are Death Taxes
So Inevitable? by David E. Rosenbaum (p. 16). This article, which appeared in the
Week in Review section suggested that the federal estate tax may eventually be repealed.
It was noted that Canada, Australia, and Israel have repealed their estate taxes. Four
reasons were given for possible repeal: more people becoming subject to the tax, the
relatively tiny portion of revenue raised, powerful lobbies opposing the tax, and
arguments by economists that the tax is counterproductive. During the previous week, Newt Gingrich, speaker of the House of Representatives, called for the repeal of capital gains taxes and the federal estate tax. One one hand, this may be seen as posturing for some reductions in rates in the near term. On the other, it may be seen as a statement of long-term goals. On Tuesday, May 27, 1997, The Wall Street Journal ran an article titled Tax the Rich, Nuke the Poor, by Holman W. Jenkins (p. A19). This is a good article that reviews many reasons why the estate tax makes no sense. For example, it makes passing on smaller estates harder than larger ones. Planning for modest estates (example: $2 million) is harder than planning for larger ones (example: $5 million) since the money generated to pay for life insurance or funding gifts is not there. As for the oft-cited fact that the estate tax affects so few, the author wryly notes that it is apparently OK to scapegoat a segment of the population for the unfairness of life when that segment is small enough. He notes that no one has made a systematic case for why policies based on resentment of the rich are productive of social welfare. In fact, there are many economic arguments to the contrary. |
In the
October 1999 issue of the Dow Jones Investment Advisor, an article titled
Dead Reckoning, by Stuart Weiss, discusses the possible elimination of the estate
tax. On Sunday, June 20, 1999, The Los Angeles Times ran an article by James Flanigan, Estate Tax's Disappointing Legacy Invites Repeal. To quote from the article: "So it should be repealed--and probably will be in the next few years." On Thursday, May 1, 1997, The Wall Street Journal ran an article on its editorial page titled Death and Taxes, by Alan Reynolds (p. A18), director of economic research at the Hudson Institute in Washington. The article was a response to Deputy Treasury Secretary Lawrence Summers comments that those who want to repeal or cut the estate tax have "no case other than selfishness...In terms of substantive arguments this estate tax argument is about as bad as it gets." Reynolds pointed out that a decade ago Summers edited the first volume of the National Bureau of Economic Research's Tax Policy and the Economy. That collection included a study by Douglas Bernheim, Does the Estate Tax Raise Revenue? which suggested that the estate tax might actually reduce federal revenues since it encourages actions that reduce income tax collections. Reynolds also referred to Notes on Estate Taxes, The Journal of Political Economy (4/78), by Joseph Stiglitz, where it was suggested that the estate tax may lead to greater inequality due to reduced savings. Reynolds concludes that repealing the estate tax "is not selfish-it is just good economics." |
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