by Ray Keating
The Keating Files – September 23, 2021
Years ago, some Washington wag rather aptly renamed the estate tax as the death tax. Sure, it was meant to gain an edge politically, but it also had the added virtue of being more accurate. After all, the “estate tax” name originally was used to score political points as well.
The death tax ranks as one of the strangest levies imposed by government.
The current death tax was imposed in 1916. Previous measures went back to the earliest days of our country – but were temporary. The 1797 Stamp Act, imposed to help pay for undeclared war with France, included taxes on the assets of the deceased, wills and bequests. Death taxes were inflicted during the Civil War, but were gone by 1872. And the Spanish-American War saw a death tax instituted from 1898 to 1902.
But the current death tax emerged from the Progressive movement’s emphasis on envy and class warfare, which always run contrary to sound economics.
As of September 2021, the death tax imposes a top rate of 40 percent with an exemption level of $11.7 million, and there are efforts afoot to increase taxes at death.
So, what’s the problem? There are several.
First, there is a basic issue of fairness. After paying many, many taxes over a lifetime, the death tax means that government shows up at death in order to impose a tax on total assets.
Second, a tax on total assets is not exactly good for investment and job creation. The levy discourages efforts to build up businesses, while also increasing the likelihood that firms will have to be sold or even closed. And consider that family businesses can be particularly vulnerable at the time of an owner’s death.
Third, resources are diverted away from productive efforts, and wasted on accountants and lawyers to find and set up ways to avoid death taxes.
Fourth, many studies have spelled out the broad negative economic effects of death taxes on investment, economic growth and job creation, and in turn also point out that once all of the costs and economic negatives are factored into the equation, the death tax winds up providing no benefit – that is, no net revenue – to the federal government.
Given these ridiculous realities of death taxes, we are left with returning to the idea that these levies are imposed simply out of the unsavoriness of envy and class warfare. Indeed, economics makes clear that death taxes shouldn’t exist at all.
Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur. Keating has three new books out. Vatican Shadows: A Pastor Stephen Grant Novel is the 13ththriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com. Past Lives: A Pastor Stephen Grant Short Story is the 14th book in the series. Get the paperback or Kindle edition at Amazon, or signed book at www.raykeatingonline.com. And order the 15th book in the series What’s Lost? A Pastor Stephen Grant Short Story.
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