The Morality of the Estate Tax

The Morality of the Estate Tax

By Lee Farris, United for a Fair Economy
December 17, 2007

Whoopi Goldberg has made the Wall Street Journal's conservative editorial page - as an anti-tax hero.

She recently used her position as co-host of ABC's talk show The View to rail against the estate tax - a tax that currently affects less than 0.3% of the estates in the U.S.

She's upset, and the Journal is thrilled to amplify her voice, about the ethics of making super-wealthy people pay an estate tax even though they've already paid other taxes.

The bogus logic goes like this: you paid taxes all your life and then when you die, you have to pay more. The right has even coined the term "double taxation" to make us think that it's as bad as double jeopardy.

What's bogus is that the estates of super-wealthy individuals who have to worry about the estate tax are comprised mostly of unrealized capital gains that have never been taxed. Currently the cut-off is at $2 million or $4 million for a couple, and these estates derive in large part from appreciation of stocks, real estate and other assets. The estate tax is the only means of taxing this income.

In fact, one reason the estate tax was originally created was to serve as a backstop to the income tax, taxing income that was never taxed under the income tax.

But even in the rare case when all of someone's estate has been taxed, so what? We all pay taxes multiple times throughout our lives - often when money changes hands. We pay income tax, social security tax and some capital gains tax - every year that we've had income. And that's just for federal taxes. Depending on what state we live in, we've also paid state income tax, state sales tax, excise every time we've bought a car, and property taxes on our homes.

The reality is that each of us pays many taxes on the same individual income. Having the super-wealthy pay more when they pass their estates to their heirs is only one more in a long string of taxable events that we put in place through a democratic process.

So why pick the estate tax as the one to call double taxation and therefore immoral?

Indeed, it is different from many other taxes: instead of applying to a broad population, only those who have amassed large fortunes have to pay it.

It is also our most progressive tax - a shining example of the widely shared principle that those who have more should pay more.

And it is an opportunity for those who become super-wealthy in our country to repay the country for its role in their success. After all, if Whoopi had grown up in Romania, her talents would probably not have been rewarded quite so richly as they have been here.

And yet, the Journal says, "Ms. Goldberg has her political facts down." And, "Death as a taxable event and double taxation offend the average American's sense of fairness."

Actually, the Journal has it wrong.

Sure, conservative polls show that in the abstract, more people oppose the estate tax. But progressive polls prove that once people hear about the practical implications of getting rid of the estate tax, they overwhelmingly support it.

One significant result of the tax is that it keeps taxes lower for the rest of us who aren't super-wealthy. Without an estate tax, the rest of us will have to make up the trillion-dollar shortfall over the next ten years.

The long and the short of it is, the estate tax is fair, brings needed revenue to our country, touches only a few people who can afford to give back, and helps keep our democracy the meritocracy most of us want it to be. We should stand up for everyone in the nation, not just a super-rich few.

Let's not leave important decisions that affect our democracy in the hands of a celebrity, no matter how talented she is at other things.

United for a Fair Economy is a national non-profit that spotlights the growing wealth divide. Lee Farris is Senior Organizer on Estate Tax Policy.

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