Three Reasons to Reform, Not Repeal, the Estate Tax
Center for Rural Affairs
The U.S. House of Representatives has voted to permanently repeal the estate tax. If the Senate goes along, it will be bad for family farms and ranches, bad for America, and bad for democracy.
First, the estate tax provides some semblance of a “level playing field.”
Talent and ambition are no match for the economic power and advantage of a $20 million inheritance at a land auction. With no estate tax, competition will increasingly be based on station of birth, rather than working hard and smart.
Many family farmers and business people are concerned that estate taxes will make it harder for the next generation to continue the family business. But proposals to exempt $2 million per person ($4 million per family) would exempt the estates of the overwhelming majority of family farms and rural small businesses.
Second, when wealth concentrates American is weakened.
The estate tax is a critical preventative measure. There is a natural tendency for wealth to concentrate. The richest 1 percent of Americans now control over one-third of the nation’s wealth – a 50 percent increase over their share in 1976. These are the very families that pay the lion’s share of estate taxes. Removing the estate tax will only accelerate wealth concentration.
History warns us of the dangers of concentrated wealth.
As wealth concentrates, power concentrates. Average families begin to feel they have no stake, which ultimately leads to collapse. It has happened repeatedly. But it need not happen in America if we take steps to prevent it.
Finally, we should tax the largest estates because it is one of the fairest ways to raise revenue.
The federal government is running record deficits. The Social Security Trust Fund is building insufficient funds to meet its future obligations. The president has proposed deep cuts in rural development programs, farm programs for family-size farms, and conservation programs to balance the budget.
Is this really the time to grant a $70 billion per year tax break to the nation’s wealthiest families?
The alternative proposal to raise the exemption would address the concerns of family-size farms and ranches and most rural small business. But it would save two-thirds of estate tax revenue to pay the nation’s bills and constrain ballooning deficits.
That is a far better solution than giving a windfall to the rich and passing the bill to our children and grandchildren.