Sunday, June 26, 2005

Estate tax sham

Saturday's Washington Post condemned an estate tax proposal by Rep. Jon Kyl (R-Arizona) as a sham but the logic employed by the Post is too flawed to be taken seriously.

America's estate tax is being gradually phased out until its complete repeal in 2010 only to return in full glory in 2011, as if it had never been phased out at all. (How lawmakers can sleep after passing such convoluted legislation remains a mystery). Kyl's proposal would allow an $8 million exclusion for each individual rather than the $1 million currently slated to return in 2011.

From the Post:
No one expects full resurrection to happen, nor should it; the amount of estates shielded from taxation at that time, $1 million, is too low. But complete repeal is unjust, unnecessary and unaffordable; it would cost $745 billion over the first 10 years, $1 trillion if extra interest costs are included. Though the House has voted to make repeal permanent, proponents of that approach don't have the 60 votes necessary to close the deal in the Senate.
Politicians and liberal journalists don't understand the meaning of the word "cost". Cost refers to an expenditure not phantom revenue. Complete repeal won't "cost" a thing. If you hoped that your grandmother would send you $100 for your birthday but she didn't, did that cost you $100? Of course not. You're disappointed, but it didn't "cost" you a cent.

The Post's opposition to Kyl's proposal is based on the idea that the U.S. cannot afford to repeal the tax without consdidering the real issue which is that the estate tax is the most unethical and illogical tax of all.

State and local taxes make sense in that proceeds are used to fund schools, police and fire departments. Taxes on items like gasoline and tires make sense in that the proceeds are used to build and maintain roads and bridges. While our income tax system is far from perfect, it still makes some sense in that the proceeds are used fund a government that maintains an economic system that allows us to earn that income. But a tax on the value of everything accumulated over a lifetime, imposed simply because you died, makes no sense at all.

The Post believes Kyl's proposed exclusion is too high and his proposed tax rate is too low.
You'd think Democrats would not only see through this sham but be eager to pick up the fight. After all, the question is whether, at a time when the gap between rich and poor is widening, extraordinarily wealthy Americans ought to be asked to give back some of what they've been able to amass. But instead of seizing on the estate tax fight as a defining issue, Democrats have scared themselves into thinking that they'll be punished for standing up against repeal.
"Give back"? Wealthy Americans were not "given" their assets by the IRS and shouldn't be required to relinquish them to the federal government just because they had the misfortune of dying. If they choose to give back at death by leaving assets to their favorite charity that should be their choice.

You paid taxes on it when you earned it. You paid taxes on what you earned through intelligent investing. You paid taxes on it when you spent it. And if you bought real property, you have paid taxes on its value every year. So who should get to decide where it goes when you die, you or Congress?


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