Repeal Of The Estate Tax Essay Research
Repeal Of The Estate Tax Essay, Research Paper
Estate Tax Repeal
On June 9, 2000, 279 members of the House of Representatives wholeheartedly supported the repeal of the federal estate taxes. 136 members voted against the repeal, most of them being Democrats who where in support of reform, not abolition. Estate taxes yield roughly $30 billion dollars a year for the United States Government, also Federal estate taxes affect only about 2 percent of estates, which represents at most the top 5th percentile of families in this country (NYT-Krugman-6/14/00). Therefore, why would anyone in Congress want to do away with something that brings in so much revenue? One would think that it is the power that these families wield. Although they represent a small portion of a Representative’s constituency, this small group by far has the biggest voice. So then why would Congress want to throw away $30 billion dollars a year? Because, it is in their best interests and their biggest supporters best interests.
Estate taxes are not imposed on inheritances under $675,000, but anything over and above that amount the federal government takes 39% of the total value of the estate. What this translates into is that a wealthy individual can only pass 61% of his total assets to his children or family. The wealthy pay almost all of these taxes. As I stated above, this consists of only the top 5th percent of families in this country so why should it be changed? Because, although they represent only a small minority, this minority has the biggest voice. Elected officials need to raise money for campaigns. Where does this money come from, aside from PAC’s and corporation’s this money comes from private individuals. How much money is needed? Clawson, Neustadtl, and Weller in their book Dollars and Votes give us a rough idea of what it takes. They write, “How much money would the average candidate need to raise each and every week in the years prior to an election?they will need to raise $7,000 per week for the House; $15,000 per week for the senate”(Clawson-3). Imagine contributing that much from your family, it does not buy a vote, but it does provide you with access and influence. In 1996 individuals contributed over $71.6 million dollars in soft money to political parties (Clawson-127). This represents a lot of power and influence. Why wouldn’t Congress repeal the estate tax? If I were rich, I would argue that they repeal it as a thank you gesture for all the money I’ve contributed over the years. Also, with this much money coming into current, and potential Congressmen’s pocket’s, why would they not want to protect their best interests?
This is a tax that is focused on a very small group of the population. The said purpose of eliminating the estate taxes was to help farmers and small-business people be able to maintain their family businesses. In the case of farmers family land possessions and not have to sell them just to pay federal taxes. Although this repeal will help them, the number of farmers and business owners it will help is not comparable to the number of wealthy people it will help. A plan offered by the Democrats seemed to present a more reasonable alternative. According to the NY Times “Their plan would cut the estate tax rates by 20 percent, a gesture to the political pressures, and raise the exclusion for couples owning family farms and businesses to $4 million to better help the supposed targets of this legislation”(NYT-6/11/00). Through this article we clearly see that there is political pressure on this issue. Although I do believe that intentions were good and that members of Congress do want to help “the little people” who are affected by these taxes, it seems to me that wealthy individuals caught wind of this legislation, saw what it could do for them and put pressure on Congress to push this legislation through. I don’t even think it took that much pressure but the pressure was there. The fact that this legislation was passed by the House shows the type of power and influence that the rich have in this country, in the private sector and in the government itself.
As far as timing is concerned, the timing could not be better for legislation like this. We are in a period of American history in which we have never seen so many people with personal and business assets totaling over $1 million dollars. Will the legislation help them? Yes, but with careful estate planning the average citizen can avoid paying estate taxes. The obscenely rich cannot avoid such taxes, their estates are just too large. According to Cornelius M. Kerwin in his book Rulemaking, effects of rules/legislation are very closely monitored. He says, “These effects are determined by the balance of benefits and costs”(Kerwin-116-7). When discussing this legislation it is obvious what the costs and benefits are. The cost goes to the American people, how? There is now a shortage in the revenue stream of, when fully phased in of about $50 billion dollars, Congress will have to make up the difference somewhere, most likely with new taxes. The benefit goes to that small majority of farmers and small-business owners the repeal was intended to help and to the thousands of ridiculously wealthy individuals and the politicians who no longer have to worry about Uncle Sam taking their money when they die.
My personal opinion is that the repeal of the federal estate taxes is not a positive move. It robs our government of much needed revenue and helps the rich get richer. As it is pointed out in one of the New York Times articles more and more wealthy families will be inclined to leave greater amounts of money to their families and less to museums and charities. So we can see that not just the government will hurt but other parts of our system may be affected as well. Paul Krugman sums up my feeling very well in this line, “The truth is that the vote to repeal the inheritance tax was just an unusually blatant demonstration of a much simpler power law – the one that says that money talks”(NYT-Krugman-6/14/00).