the death tax

Who was King George III? If you made it through the government schools before civics was relegated to seven minutes at the end of senior year, you probably have this image of a tyrannical fancy-boy with fumes of hot rage seeping out from beneath his powdered wig. If not, you haven’t the foggiest clue who George III was, anyway.

The truest picture is quite to the contrary. He was pious, devoutly religious and temperate. King George was known as faithful to his wife and adoring of his fifteen children. At home in England, he was beloved throughout his celebrated fifty-nine year rein.

While the Declaration of Independence can be purely defined as a list of grievances with the Christian King, in truth, independence came as a final remedy for those grievances. Eighteenth century England was a perfectly lovely nation to be a free citizen of. In the New World, the colonial system was coupled with low taxation, open markets and free trade. This created what Historians believe was the most prosperous place with the highest standard of living in the world. What’s more, England was a nation of law and justice. Not tyranny and despotism.

Yet, ten years before the Declaration, Parliament levied the Stamp Act on the colonies, a direct tax requiring that each printed document carry a revenue stamp. To be sure, the revenues were intended to pay for the debts accrued from the costly, but highly successful Seven Year’s (or French and Indian) War: a war which ultimately benefitted the colonies far more than it did the motherland. Still, it was the principle of this tax that infuriated the colonists and ignited a decade of resistance. The colonies had no Parliamentary representation, yet Parliament had complete taxation authority over the colonies.

If that seems unjust, imagine an electorate with universal suffrage (above age 18) and representation, but which comingles taxpayers with persons who pay almost no taxes and with non-tax payers. If a non-taxpaying welfare recipient is voting for her welfare check, er, uh, voting for Linda Sanchez that is, while a taxpayer is voting in the same district for a welfare reforming tax reducer, have we reached the point of taxation without representation? At the very least, we have a gross dilution of the taxpayer’s voting representation.

Liberals like to argue—here, I loosely interchange “argue” where I in fact mean, “spit, stutter and scream”—so what if the top X% are paying taxes, the average person (the little guy) isn’t affected. By their logic, a tax could justly confiscate 99% of one extremely wealthy person’s fortune. Indeed, I suppose if I had ten children and only boiled one of them alive, the other nine should really have nothing to complain about.

Take the so-called “Death Tax,” officially titled the “Estate Tax.” In 1916, Congress decided that when a person dies, the value of his estate shall be taxed above a certain exempted amount. Talk about taxation without representation. Who is there to represent deceased persons whose estates don’t come in under the exemption? I’m not certain, but I don’t believe Heaven has Congressional representation (though I see that Hell has quite a number of districts now).

Liberals will “argue” that this tax only affects the “rich.” Even if this were true, I fail to see the underlying “argument.” One, accruing wealth is not (yet) a crime in America. Two, even if it were, a criminal penalty cannot be made into the form of a tax. Three, putting one and two aside, what do we suppose forms the genesis of jobs, investment and economic growth? Let’s just hope it’s all generated at the Internal Revenue Service, because it’s hording mass amounts of capital.

In 2001, Congress repealed the Death Tax. Ever since, Congress has slowly phased it out by reducing the rate by 55% per year, while increasing the exemption from $1 million to $3.5 million. In 2000, 52,000 estates paid the tax. Because of the increased exemption, only 17,000 paid it in 2008, generating about $24 billion (or, a paltry 1% of Federal tax revenue. Thus, to suggest that this tax serves the noble purpose of deficit reduction is like suggesting a handful of iodine tablets will revitalize the Gulf Coast.).

Since it was part of a budget reconciliation bill, Congressional rules placed a ten-year expiration on it. This Congress is now refusing to repeal it permanently, guaranteeing that the heirs of anyone who dies with an estate larger than at least $3.5 million will be hit by up to 45% taxation.

Liberals will hail this as a tax on the richest of the rich, and a means of forestalling the onset of oligopoly in America: to keep wealth from being centralized in a small number of hands. Truly, better all the wealth to be placed in one set of hands.

But this isn’t the whole story. For one, the economy doesn’t work like it did in fourteenth century Venice. The modern economy is fueled by innovation, and there is ample opportunity in the global marketplace for individuals to pursue high-paying work, start businesses and market their ideas.

Second, this is a tax on capital, not income. That includes stocks and investments, as well as machinery, equipment and any resource that generates incomes. That means, if you own a small business and a home totaling $3.5 million, your heirs shall be hit with a tax. So, in addition to the estate of Bill Gates, farmers, restaurateurs, donut-chain owners, auto-repair shop owners and anyone who spent fifty years building a small fortune will leave behind a hefty tax burden. Often times, the only way  for the heirs to pay this tax is to liquidate that capital (i.e., sell it off at fair market value). Unless one can conceive of maintaining an auto shop without a lift or a donut shop without a commercial deep fryer, this often means selling the whole business to cover the tax.

This leaves business owners with one rational option: life insurance. Yes, the party who supposedly “has your back” when it comes to fighting off those conniving insurance lobbyists (all the while having their campaign war chests stocked by insurance companies) would rather have you sink thousands into insurance companies, rather than simply relinquish its postmortem claim on your estate.

Third, if Liberals are so hungry for a tax on capital being transferred to heirs, why has the inheritance tax not satiated them? Already, if a person dies leaving a capital asset to his heir, the heir carries over the basis of that capital, and is taxed should he ever sell that asset. Thus, if Grandma buys a diamond ring in 1925 for $200, leaving it to you in her will, and you sell that ring for $10,000 in 2010, you will be taxed on $9,800 of that sale.

But it’s never enough. This tax isn’t about placing a check on the centralization of wealth, nor even is it about redistributing wealth. Maximal taxation, no matter the reason or outcome is the name of this game. This is about control, servitude and dependence.

By forcing persons with estates exceeding the exempted amount to (a) invest in life insurance (b) invest in estate planning attorneys (c) avoid growth of its business to avoid the inevitable tax burden, this tax is an irrational obstacle placed in the way of job creation. The Heritage Foundation has cited studies indicating that no fewer than 130,000 and as many as 1.5 million jobs would be created by repealing this tax.

Although Heritage is an undeniably Conservative institution, can there be any doubt that lifting this burden would lead to job creation? At its core, this tax suggests that it is better to waste economic resources immediately, rather than reinvest in one’s business enterprises, and thereby invest in the growth of our nation. That it is better for an heir to sell his parents’ business or sell off assets to pay a tax, rather than to hire a new employee and expand the business. Instead, let the federal government extend his unemployment benefits and all are taken care of!

Revolutions have been waged over far less than the unjust and unfounded Death Tax. If he were here, King George himself might survey the current political landscape and find strange bedfellows throughout this very nation, now in its 234th year of belligerence. As matter of fact, George III would practically be Ron Paul in 2010.