Director of the National Economic Council Gary Cohn, along with Treasury Secretary Steve Mnuchin, released a plan for tax reform in late April. There is still not much by way of detail, but if it is based off of the tax reform plan that President Trump campaigned on, it will be a drastic improvement over the current system and should catalyze even greater economic growth. One aspect of the plan stands out as particularly important from both an economic and moral perspective: the the repeal of the Federal Estate Tax, more commonly known as the death tax.
While the argument for the estate tax seems to be purely moral — “the rich need to pay their fare share” — the argument against the estate tax can be made in both analytic and moral terms.
In 2014, the most recent year with published data, the overall federal budget was just over $3 trillion. The estate tax accounted for less than one percent of that revenue — 0.6 percent, to be specific, or $19.3 billion. It is entirely irrelevant in the scheme of the massive, bloated federal budget. A paper published by the National Bureau of Economic Research makes an even stronger claim: “available evidence suggests that, historically, true revenues associated with estate taxation may well have been near zero, or even negative… Far from ‘backing up’ the income tax as some have claimed, the estate tax may actually generate a rise in income tax avoidance activities sufficient to offset revenue collected through estate levies.” The estate tax only applies to estates valued at $5.3 million or above. Those with estates that large usually have access to high-powered tax attorneys and accountants that ensure the absolute minimum is paid in taxes. Therefore, they not only get away with paying the minimum in income taxes, but can usually ensure that the estate tax is minimized as well. This entirely nullifies the purpose of the tax, which is to raise revenue.
Furthermore, the estate tax is a slap in the face to those who are grieving a loss, and is frankly nothing but a bald-faced theft of resources from someone who cannot even defend themselves. An individual’s estate is the valuation of their entire life’s work–it belongs to that individual, and should be theirs to do with as they please, not taxed at rates that can climb to 40 percent in the highest bracket. Leftists like the progressive think tank Americans for Tax Fairness correctly point out that an estate must be worth more than $5.3 million in 2012 dollars ($5.49 million in today’s dollars) in order to qualify for the estate tax, but then reach the entirely wrong conclusion. They claim that the estate tax is necessary because its repeal would cost the government $225 billion in revenue, and that it ensures the rich pay “their fair share,” but who decides what is fair? Just because the estate tax only affects the wealthy does not make it any less wrong. Their reasoning smacks of the “from each according to their ability, to each according to their need” philosophy that seems to form the backbone of many recent progressive economic policies. However, it is that exact philosophy that has driven the investments of the wealthy away from our shores. If we expect to regain the business of the wealthy to drive economic growth and employment, taxes must be cut, and the most insulting of all taxes must be repealed. America must be a haven for business and investment, not punish successful businessmen and women.
In the dystopian world of Ayn Rand’s masterpiece Atlas Shrugged, the collectivist U.S. Government steals so much in the form of burdensome taxes and regulations that the titans of industry who built the economy disappear, one by one, to a community where their genius is recognized, appreciated, and valued. Even if the estate tax made up a more significant portion of government revenue, its immorality alone would necessitate its repeal. As it is, the revenue generated from the tax is less than one percent of total revenue. The punishment of the “men of the mind” must stop.
Written By: Matthew Vitale
Executive Editor, The New American Right
External Vice President, College Republicans at UCR