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OPPOSING VIEW: End the 'death tax'
This loony state of affairs is the result of a tax law passed nearly a decade ago and the inability of today's lawmakers to reach a sensible compromise. That gridlock will cost the government about $15 billion in badly needed revenue this year — and provide a perverse incentive for billionaires to die, or for their heirs to pull the plug on them, before Dec. 31.
The 2001 law took the estate tax rate from 55% when it was passed to 45% last year, down to 0% this year, and then back up to 55% in 2011. If this seems absurd, it is. The reduction to 45% was more modest than opponents of the estate tax wanted. But it was all they could get. They devised the one-year rate of zero as a kind of ploy to get future lawmakers to sign off on further cuts.
But much has changed since 2001, in ways that might benefit the Steinbrenners but are of concern to estate tax opponents. Congress and the White House are now controlled by Democrats, who have called the bluff and allowed the tax to expire this year.
Now, with the snapback to 2001 levels looming, estate tax critics are beginning to get restive. The leverage they thought they would have with no tax this year is gone. Tax supporters now have the upper hand. All they have to do is bide their time and the tax rate will be back at 55% on Jan. 1, 2011.
But rather than accept President Obama's sensible offer to freeze the estate tax where it was in 2009 — at 45%, after a $7 million exemption per couple —estate tax opponents are pushing for a lower rate.
This could be the latest example of how a minority's intransigence can be counterproductive to its cause. In the health care reform debate, for example, Republicans' refusal to play a constructive role forced the legislation to the left as Democrats had to lean heavily on their own constituencies, such as Big Labor, to get enough votes. The result was a law disappointingly weak on cost controls.
In this case, the refusal to compromise increases the chances of a higher tax rate. If Republicans couldn't get the rate below 45% in 2001, what makes them think they can do so now?
The foes' tactics also raise the question of whether they actually want the tax to go down, or whether they would rather be champions of a perpetual cause that can help them raise vast campaign contributions from wealthy donors.
A 45% rate with a $7 million exemption is a reasonable level that would hit only a tiny sliver of the nation's estates. While opponents rail against the "death tax," the levy is, in reality, an inheritance tax. That's because heirs are the ones still alive to feel its effects.
It makes sense to tax inherited wealth, derived simply by having the right parents, at a higher rate than money acquired through hard work or investment. Advocates of repeal rarely say where else they'd get the money to make up the lost revenue, because the inevitable answer is it would come from taxpayers of lesser means.
If Congress does not retroactively impose a tax for 2010, heirs of Steinbrenner and other ultrawealthy people who die this year will have hit the jackpot. Lucky for them. But the rich and everyone else are entitled to a rational, predictable tax system — not one that makes it smarter to die sooner rather than later.
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