News from the Secretary By Larry Gabriel Who is right?
"In this world nothing is certain but death and taxes," Benjamin Franklin said.
The federal estate tax has been hotly debated in Congress and main street cafes since Congress first imposed it in 1916. Now we are debating permanent repeal of the "death tax". (Continuing debate might be a third "certainty" we can count on.)
Congress created this tax mostly to raise money for the central government, which previously relied largely upon federal excise taxes and the 1913 income tax (paid by less than one percent of the population).
The new income taxes were supported by rural parts of the country where people feared federal excise taxes (which were becoming a burden on trade) would be supplemented by a federal tax on real property.
The 1916 tax law put new taxes (doubled the income tax rates and created the estate tax) on both the cities and rural people. The rich were hit with taxes on both income and inherited property.
The taxes targeted the rich, but the very next year Congress lowered the bar. In 1916 the 15 percent tax bracket applied only to people with more than $1.5 million in annual income. One year later, that threshold was lowered to the guy making $40,000 a year.
The numbers and the devices change, but the government's goals change little. They still need more money and they still use taxes to break up large "conglomerates" by redistributing wealth, but one thing has changed.
"Conglomerates" in 1916 were rich and famous eastern industrialist families. (You know the names.) Today, a large farm or ranch is viewed by some as a "conglomerate" or "corporate farm" or "factory farm" or some other phrase that means little more than "large".
When agriculture was largely a labor intensive business requiring small capital, estate taxes were not being used to break up "conglomerate" farms or force the owners to avoid the tax by making charitable donations (which by the way is a really "big" business consisting of 850,000 "charities" who collect about $241 billion a year in this country).
It would be only logical for every charity and all who want "small" farms and ranches to oppose the permanent repeal of estate taxes.
The charities need this tax for an incentive to donate. Those who oppose (for social engineering purposes) "large" businesses want to see heirs
forced to sell a portion of the estate to pay taxes in hope of creating more "small" holdings.
Those who are subject to the tax argue that they paid tax on the income, they paid for the land and they paid property taxes every year for the right to keep it, and they should not be hammered again by an estate tax.
So who is right? Ben, of course, whose complete quote is, "Our Constitution is in actual operation; everything appears to promise that it will last, but in this world nothing is certain but death and taxes."