Repealing the Estate Tax Is Anti-American
Most Americans are untouched by the estate tax. In fact, only one in 5,000 people are affected by this 40 percent tax on inheritances over $5.49 million. But to hear U.S. Rep. Ted Yoho tell it, it is ruining America.
In 2015, after voting to repeal the estate tax — which he labels the “death tax” — Yoho issued the following statement: “We are blessed to be living in a Constitutional Republic, where through hard work, the entrepreneurial spirit is rewarded. It is this system that has made America great. If you have worked hard to build a business or a personal estate, you should not be penalized by the federal government when you die.”
This argument flies in the face of what the Founding Fathers were fighting against. They and other Enlightenment thinkers were very suspicious of landed aristocracy. They knew the transmission of wealth over the course of multiple generations led to power concentrated in the hands of the few.
In “The Wealth of Nations,” Adam Smith dismissed birth-based multi-generational inheritance as “manifestly absurd.” He wrote: “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.”
Thomas Jefferson passed laws in Virginia ending the practices of entail (the idea that only heirs could inherit a property owner’s land) and primogeniture (which required that the owner’s eldest son inherit his father’s land in the absence of a will). Other states followed suit.
The estate tax gets to the heart of many people’s conception of what a “constitutional republic” should and should not do about economic inequality and the distribution of power. But this discussion has been twisted by conservatives like Yoho, who invoke the family farm or small businesses every time they bring the subject up, and never mention that the main items taxed are unrealized capital gains like investments in stocks and bonds.
If the welfare of the family farm is such a concern for these politicians, why not simply expand the protections that are already in place? The government currently allows family farms 15 years to pay off the taxes. If that isn’t enough time, then extend it. Family farms are also allowed an extra $1 million exemption — on top of the $5.49 million given to non-farm estates. If that isn’t enough, expand it.
In fact, if family farms are the issue, why not simply make them exempt? The estate tax affects less than 100 nationwide anyway. But no, conservatives claim the only fix is to repeal the tax altogether, which is what the 2018 budget in its current state calls for.
As Americans, we believe that a meritocracy is superior to being ruled by a landed aristocracy. For most of our history, we have passed laws and taxes to encourage the former and discourage the latter.
The top marginal tax rate was slashed to 50 percent in 1980 and hasn’t crept past 40 percent in 30 years. And in that same period, income for the top quintile has doubled while the bottom 60 percent of Americans has seen its income stagnate. Inequality is as high as it has been since the Great Depression.
That the rich have an outsized role in our government is obvious. But what is the solution that conservatives offer? More tax cuts for the wealthy at the expense of programs that help everyone else.
Both sides of the aisle can debate to what extent the government should intervene. But to pretend that handing more money to the rich will do anything but worsen inequality (not to mention the debt) is to ignore the reality of the past four decades in America.
There is a (probably apocryphal) story of a lady who approached Benjamin Franklin as the Constitutional Convention was wrapping up. She asked him, “Well, doctor, what have we got — a republic or a monarchy?” To which he famously replied, “A republic, if you can keep it.”
Can we? If so, we are going to have to be honest about the effects of the taxes we pass — as well as the ones we repeal.
Here is Yoho’s contact information if you would like to let him know what you think.
This piece was was written as a collaborative effort between Sandy Parker, Dan Neal and other volunteers at Indivisible Gainesville.