On New Year’s Day the estate tax, an essential part of the U.S. tax system for nearly 100 years, disappeared because Congress failed to act in December. Congressional leaders now are pledging to act in early 2010 to reinstate the federal estate tax retroactive to Jan. 1. In the meantime, rhetoric over the estate tax will heat up.
This crazy situation is the result of the Bush tax cuts for the super-rich, tax cuts that were supposed to lead to “trickle-down” prosperity for the rest of us. What we have seen instead is stagnation of wages for most Americans, while those at the very top have become extraordinarily rich. Disparities of wealth and income are now at the highest level since the Gilded Age just before the stock market crash of 1929.
With so much wealth in so few hands, our economy has begun to operate more like a casino, with high-risk speculation fueling boom-and-bust cycles that have wrecked communities across our country.
Instead of pandering to the whims of the super-rich and their heirs, we need Congress to strengthen the Main Street economy, beginning with a vibrant middle class and a respect for honest, hard work. A huge tax giveaway to the heirs of America’s wealthiest families is entirely the wrong approach.
Under the weakened 2009 law, before full repeal in 2010, the first $7 million for a couple ($3.5 million for an individual) was exempt from the estate tax. That means two children of a wealthy couple can each inherit more, tax free, than the average American earns in two lifetimes, or more than 240 minimum-wage workers earn in a whole year. But unlike the lucky heirs who won the genetic lottery, these real, Main Street workers will be paying taxes on earnings. These kinds of misplaced priorities fly in the face of an economy that supposedly rewards those who work hard.
Not all high-wealth individuals want this tax-giveaway. In fact, more than 2,000 likely estate-tax payers have signed a petition in support of its preservation. At a recent press event, Bill Gates Sr., Vanguard Group founder John Bogle and Richard Rockefeller called on Congress to pass a robust estate tax.
In the end, the estate tax is fundamentally about recycling opportunity. Like the farmer who tills under leftover crops at the end of the season, the estate tax helps promote fertile fields of opportunity for the next generation to build upon. It’s about giving each generation a fresh start and a chance at achieving the American dream through their own merit.
It’s time to stop showering wasteful tax breaks upon the super-rich. We instead must call upon Congress to strengthen the federal estate tax and support proposals that find a middle ground between the weakened 2009 estate tax and the pre-Bush level of 2001.
Brian Miller is executive director of United for a Fair Economy (UFE), a national organization that works to promote a more broad-based prosperity and to eliminate extreme inequalities of wealth and income. His article was distributed by the American Forum. Max Brantley’s column will return next week.