Nine years ago a gradual reduction in the estate tax was launched, culminating in complete repeal this year. But there was a catch. Congress could not pay for permanent repeal. So next year the estate tax returns to its 2002 levels – with the first $2 million of an estate exempt for married couples ($1 million per person) and a 55 percent tax on the largest estates.
Some are pushing for raising the exemption to $10 million for couples ($5 million per spouse) and dropping the tax rate on the largest estates to 35 percent. Others would repeal the tax entirely on farmland.
Each of these proposals is overly generous to wealthy heirs and puts farmers, ranchers and small business people who must earn their way at a competitive disadvantage. The overwhelming majority of family farms and businesses would be hurt, not helped.
Farming and business are competitive. The heir of a tax-free $10 million estate has a huge advantage in competing for land and business over those who stand to receive modest or no inheritance. The estate tax helps level the playing field between those whose success is based on being born into the right family and those who must earn success through hard work, brains and determination.
Exempting big estates is a move away from the concept at the core of America’s founding – that opportunity should be based on what we do, rather than who we are. America represented a rejection of feudal Europe, where land was tightly held by the wealthy elite through inheritance, and opportunity was scant to those of modest origins.
It becomes even clearer that the attack on the estate tax is misguided when we look at what is happening in America today. Wealth and income are concentrating rapidly. According to The Business Insider, 66 percent of the income growth between 2001 and 2007 went to the top 1 percent. In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. That ratio has exploded to nearly 500 to 1.
Today, 83 percent of all US stocks are in the hands of the top 1 percent, who now hold nearly twice as much of America’s corporate wealth as 15 years ago. The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
A big reduction in the tax on large estates would add fuel to the fire, undermining the idea of a level playing field at the core of America and hurting family-size farms, ranches and businesses.
Agree or disagree? Let Chuck Hassebrook know your thoughts at email@example.com or 402.687.2103 x 1018.
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