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Congress Sneaks Past Another Tax Increase

Despite all the rhetoric from Congress about wanting to cut taxes and give working families a break, they have done it again. Both houses of Congress have passed another stealth tax increase that will adversely affect nearly all Americans. They are smart enough not to call it a tax increase, but it will cause everyoneís taxes to climb more with each passing year.

Iím confident that you donít mind having to pay more taxes, as long as taxes are being raised for a good cause -- right? What better reason is there for most Americans to tighten their belt and do without than to allow 10, 50 even 100 BILLION dollar estates to pass untaxed from one generation to another? Yes, Iím talking about the Guardians Of the Privileged and their latest effort to repeal the estate tax law.

Now hold on. Hasnít it been proven that estate taxes donít make the government money because of offsetting revenue losses? How can I put this? NO! There have been studies showing how under a very narrow set of circumstances the government can lose more than it gains on selected estates. Letís examine these circumstances. If a small business owner died and the heirs had to fire everyone and sell the assets to pay the estate taxes, the loss in revenue from the taxes of the jobless employees could cancel out the governmentís revenue gains. This canít happen where there is a surviving spouse who automatically inherits the estate without tax liability. This canít happen with estates valued at less than the $675,000 that are currently exempt. This canít happen where the assets of multi-million dollar, much less multi-billion dollar estates are held as stock in publicly traded companies, since the stock can change hands without effecting the companyís assets. In fact, there are only a small number of business estates in which the heirs could be forced to fire their employees and liquidate upon the death of the owners. How small a percentage are we talking about? Less than three percent of estates fall into the category where small businesses and/or farms face liquidation. Put another way, more than 97% of the money that the government collects through estate taxes is a positive revenue source.

How much money are we talking about? Well, letís look at 1995. That year over 2,312,000 people died. As you can see from Table 21, which was taken from my recent book, A Broken Covenant -- the Rape of the American Middle Class, only 78,023 (about 3% of those who died) had estates valued at more than the $600,000 filing threshold. Together these 78,023 estates were valued at more than $136 BILLION dollars. Because of current exemptions such as estates passing untaxed to spouses, the government only collected a little over $14 billion in estate taxes that year. This amounted to about 2% of the 731 billion dollars of revenue collected. The income taxes of working Americans were nearly 2Ĺ% less because of the $14 billion gained from estate taxes.

The portion of the nationís tax bill paid by estate tax collections is rising, because the number and size of mega-estates is rising. The government estimates that the number of estate tax filings will increase about twice the inflation rate or about 5Ĺ% per year based upon its historical models. Such government calculations donít seem to adequately take into account the cumulative effect of years of tax cuts that have been overly generous to the wealthiest among us. As you can see from Table 21, during the years 1995-1997, the number of estate filings has increased more than 12Ĺ% per year, which is better than twice the governmentís projection. More significantly, the amount of money in taxable estate returns has increased by over 15% per year. The amount of money in taxable estates valued at 20 million dollars or more increased over 36% per year.

If these trends continue, the amount of estate taxes collected annually by 2009 will probably exceed 100 billion dollars. This alone is enough revenue to decrease everyoneís income taxes by over 5%. So about the time that estate tax collections from the burgeoning estates of the mega-rich will significantly reduce our income tax burden, the Guardians Of the Privileged will have eliminated estate taxes completely.

During the past two decades the richest one percent have more than doubled their share of the nationís personal wealth. The lionís share of the 40 plus percent of wealth now owned by the top one percent is owned by the richest one-third of one percent of the population. This accelerated migration of wealth into their hands is squeezing the majority of Americans.

President Clinton has vetoed the bill to repeal estate taxes two years in a row, but he wonít be able to stop them a third time. It is time for us to take a stand. We must not allow Congress to keep trying to repeal the estate tax law. Such a repeal would both increase the amount of income taxes paid by working Americans, and magnify the unfair wealth advantage currently being enjoyed by the mega-rich.

Copyright © 2000 by Stephen Rodnesky

     

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