Reward for the Hereditary Elite . . .
It doesn't matter if you are liberal or conservative, Democrat or Republican. There is no possible excuse for doing what Congress is poised to do this week: Abolish the estate tax.
The federal government faces a future of expanding deficits. Thanks to the baby bust and medical inflation, spending is projected to rise by nearly 3 percent of gross domestic product by 2030, a growth equivalent to the doubling of today's Medicare program. What is the dumbest possible response to this? Take a source of revenue and abolish it outright.
The nation faces rising inequality. Since 1980 the gap between the earnings of the top fifth and the bottom fifth has jumped by almost 50 percent. The United States is by some measures the most unequal society in the rich world and the most unequal that it's been since the 1920s. What is the dumbest possible response to this? Identify the most progressive federal tax and repeal it.
Paul Volcker, the former Federal Reserve chairman, has written that "we would be hard-pressed to find evidence that, compared with the alternatives, a reasonable estate tax significantly discourages work or innovation or savings."
But I'm fascinated by the spectacle of elite support for this policy. How can the president and the abolitionists in Congress, who understand the tax and its details, possibly want to kill it? They all say they accept the principle that the tax system should be fair -- Bush officials are constantly claiming that their tax cuts are progressive. They all accept the principle that free trade and competition get the best out of American firms, so what about subjecting rich heirs to competition from ordinary Americans?
Repealing the estate tax is like erecting protectionist barriers around the hereditary elite. It is anti-meritocratic and unfair -- and antithetical to this nation's best traditions.
Considering the finances of many our elected leaders and their campaign contributors the logic of it makes perfect sense to me. Its almost as if our "leaders" are saying," Ask not what you can do for your country, but what your country can do for your portfolio."
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