The estate tax disappears on Friday. Barring congressional action, it will stay gone for one year before returning on January 1, 2011 at far lower exemptions and far higher rates. Democrats’ inability to save the tax from at least temporary death has put the party in an awkward position of raising the tax from the dead, and quite possibly taxing the estate of someone who died when there was no death tax.
I understand why progressives like the estate tax. In theory, it curbs the creation of a class system while also fattening government coffers. But when you read the arguments for it, it’s hard to see how they can convince anyone.
Tim Fernholz of the American Prospect, whom I liked when I briefly met him before we went on MSNBC together, has a pro-estate tax piece at Newsweek that deserves to be picked apart.
Fernholz claims there is only a “handful of very wealthy people affected by the tax.” This is so imprecise it is false. Perhaps only a handful of heirs actually pay the tax, but that’s because most business owners or wealthy folk pour money and time into estate planning, in order to avoid the tax — all of those people are clearly “affected,” and negatively, by the estate tax.
Then Fernholz confuses conservatism with corporatism when he writes that the tax “actually incentiv[iz]es work and investment, something conservatives ought to value.” Sure, many Republicans — including self-styled conservatives — want government policy to set pro-work or pro-investment incentives, but a true free-market position involves the government avoiding the game of incentives and disincentives. Let the market do the incentivizing.
But this confusion — seeing no distinction between allowing the market to work and having the government do that same sort of work — reappears in Fernholz’s piece, when he dings conservatives who oppose the death tax:
They support a hand-out to millionaires, while touching populist notes on the horrors of the bank bailouts or complaining about the budget deficit.
If I’m reading this correctly, not re-instituting a tax on millionaires, in Fernholz’s parlance is giving them a “hand-out,” on the same level of a bank bailout. By the same logic, the thief who takes a pass on some Potomac, Md., mansions is also guilty of handouts to millionaires.
