2017-04-11 – During the Passover Seder we sing a hymn that recounts the blessings that the Israelites experienced during the exodus from Egypt. At the mention of each blessing we sing dayenu—it would have been enough for us. Each miracle by itself would have been enough and yet we continued to be showered with more and more. Dayenu! Enough!
In every generation, there are people who never consider their blessing to be enough. No matter how much they have, they always want more. We have people like this in our generation. You know who they are.
Today in America, the too-much-is-never-enough crowd is seeking to have the federal estate tax repealed. This is a tax that the rich revile as a tax that leaves heirs destitute, destroying small businesses and farms. And such claims elicit sympathy. But these claims are false. And the too-much-is-never-enough crowd knows it.
Here are the basic facts:
- The federal estate tax on individual estates of $5.49 million or less is $0. A married couple can pass nearly $11 million to their heirs without any estate tax at all. If you think inheriting $11 million tax free is destitution, you must be a member of the too-much-is-never-enough crowd.
- The tax rate above that is (essentially) 40%. That sounds high, but consider what this means for a married couple with a combined estate of $25 million. They are able to pass this money to their heirs with a tax bill of under $6 million (an effective tax rate of under 23%). The heirs get $19 million plus. If you don’t think your heirs would be satisfied with $19 million plus, you can write me into your will. I with thank you and say: Dayenu.
- Let’s take it one more step. Let’s say the $25 million estate consists of an operating business or a farm and it might be hard to liquidate assets to pay the $6 million tax bill. The law actually contains special provisions to make paying the bill easy, stretching it out over years. Furthermore, the tax is not something that surprises anyone. It’s quite common for people with $25 million dollar estates to take out life insurance policies to pay the taxes. While the life insurance is not free, it spreads the cost over many years so there is no disruption to the operation of the business or farm.
The too-much-is-never-enough crowd knows all this. But they tell you fake facts to make you sympathetic with their fake problems.
The federal estate tax does not take in much money because so few people every pay it. You could almost say that the word tax does not even apply. The main function of the federal estate tax is to put the brakes on obscene concentrations of wealth.
At the end of last year the net worth of Warren Buffet was pegged at $75.2 billion. With normal application of the estate tax, Buffets heirs wouldn’t expect to inherit more than $45 billion. In fact, they will inherit much less because the estate tax actually encourages philanthropy and other activities that will break up Buffets estate when he dies. His family will surely be comfortable, but none of them will have net worths that exceed the gross domestic product of most countries. Buffet’s massive concentration of wealth will divided and subdivided.
Thomas Jefferson would have loved this.
History remembers our Declaration of Independence as Jefferson’s greatest achievement. But did you know that he dropped out of sight in Philadelphia in 1776 after the declaration was signed? He had more important work to do than fight for independence from Britain. He went back to Virginia to fight against an odd provision of property law called “primogeniture.”
Primogeniture was not so odd in those days. It was a rule that gave the entirety of a decedent’s estate to the oldest son (daughter, if there was no son). Britain still has a form of primogeniture in the way the crown is inherited. Queen Elizabeth has three sons and a daughter, but the kingdom will not be divided four ways when she dies. It will go to Charles—for better or for worse.
What was it about primogeniture that riled Jefferson so much that he considered its eradication more important than severing the colonial ties with Britain?
Primogeniture concentrates wealth.
And with marriages between the sons and daughters of wealthy families (think Ivanka and Jared Kushner), fewer and fewer families controlled the wealth of Virginia. Jefferson saw young people in the colony dispirited because they didn’t have a chance of owning property. (You don’t think people moved west because of the pretty scenery, do you. They were economic refugees!)
So he launched a campaign in Virginia to eliminate primogeniture—to assure greater economic equality.
The too-much-is-never-enough crowd within the Republican party love to tout Thomas Jefferson as their founder and spiritual ancestor—never thinking that, if they had lived in the 1770s, Jefferson would have been their blood enemy.
(Come to think of it, they would have been Tories, so Jefferson would have been their enemy for more than one reason.)
Now, we’re not talking economic equality here. Jefferson was a rich guy. A pretty rich guy. He wasn’t handing his own estate over to the peasants. His beef with primogeniture was the level of wealth concentration that crowded out economic vitality. That’s what the federal estate tax targets—huge estates and huge estates only.
If you think that’s the way it ought to be, contact your representatives in Congress and tell them to oppose the repeal of the estate tax. Thomas Jefferson would be on your side. (And so would Warren Buffet.)
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