Death, taxes and aristocracy
“In this world nothing is certain but death and taxes.” Benjamin Franklin
Tax season is over. Recently, Republicans have written several columns in the LVN criticizing our current tax system as unfair. As usual, their basic idea is that the rich pay too much in taxes and the poor pay too little.
One of the taxes Republicans really hate is the estate tax, which they call the death tax. Republicans seem to pine for the good old pre-Revolutionary days when the aristocratic upper class controlled most of the wealth and everyone else did the work.
When the American Revolution took place, one founding principle was the elimination of this hereditary class of aristocrats. The founders knew the damage the ruling hereditary classes had done to the countries of Europe, and they wanted nothing like that in the new United States.
“As riches increase and accumulate in few hands … the tendency of things will be to depart from the republican standard.” Alexander Hamilton
“When economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny.” John Adams
“Progressive taxes are required to prevent a permanent rich aristocracy that then buys government and ends democracy as happened in England.” Thomas Jefferson
By working to abolish the inheritance tax, Republicans are trying to reestablish the concept of a hereditary ruling class. They also display, again, their ignorance of actual American history, unaware that this tax is nearly as old as our republic.
Starting in 1777, every Revolutionary state government abolished the laws that had allowed the concentration of inherited property as practiced in Europe and Britain. Thomas Jefferson’s reasoning on this followed what Adam Smith, the father of modern capitalism, had said, “A power to dispose of estates for ever is manifestly absurd. The earth and the fullness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural …. There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death.”
In 1784, North Carolina passed a statute abolishing the old forms of inheritance in order “to promote that equality of property which is of the spirit and principle of a genuine republic.”
On July 6, 1797, the first federal estate tax was passed; it required the purchase of federal stamps for wills and estates. After four years, the tax was ended.
In 1862, an estate tax ranging from 0.75 to five percent was passed. The top rate was raised to six percent in 1864; the tax was ended on July 14, 1870.
In 1892, a tax on estates valued at over $1 million was passed, with a top rate of 15 percent; it was repealed in 1902. The modern estate tax was re-established in 1916.
From 2002 to 2009, the exclusion (meaning no tax is owed for estates below that amount) rose from $1 million to $3.5 million (double for a couple). For 2015, the exclusion is $5.43 million per individual and double that for married couples. That means if I leave an estate of $5.43 million, my heirs won’t pay a penny of inheritance tax. In 2013, out of 2.6 million deaths, just 4,700 estates owed taxes. That’s one-fifth of the top one percent. Not exactly a burden on the average American family.
Critics of the estate tax like to claim the tax is destroying family farms and businesses. In 2013, only 120 small businesses and farms (100 of them large farms) were hit by the estate tax.
Last Thursday, the U.S. House of Representatives, led by Republicans, voted on H.R. 1105, the “Death Tax Repeal Act of 2015.” If this bill became law, it would add $270 billion to the national debt over the next ten years, harming the vast majority of Americans to protect the already wealthy.
Nevada’s controller, Republican Ron Knecht, has written columns bemoaning income inequality while championing lower tax rates for the wealthy. Maybe he needs to listen to Republican president Teddy Roosevelt, who said in 1910, “I believe in a graduated income tax on big fortunes, and … a graduated inheritance tax on big fortunes, properly safeguarded against evasion, and increasing rapidly in amount with the size of the estate.” Today’s Republicans should pay attention to Roosevelt and do what’s best for our country. We don’t need another aristocracy.
Jeanette Strong, whose column appears every other week, is a Nevada Press Association award-winning columnist. She may be reached at email@example.com.