On a procedural vote today the United States Senate failed to repeal the federal estate tax. There were 41 voting against repeal, according to Reuters, three votes short of the number needed to head off a filibuster.
The estate tax is intended to be a tax on the rich, but as Wall Street Journal edit page observed today it actually falls more squarely on the owners of farms and private businesses.
The superrich or their kin--such as Bill Gates Sr. and Warren Buffett--are some of the loudest voices opposing repeal. Yet they are able to shelter their own vast wealth by creating foundations or via other crafty estate planning. Edward McCaffery, an estate tax expert at USC Law School, argues that "if breaking up large concentrations of wealth is the intention of the death tax, then it is a miserable failure."
And, of course, the most notable victims are family-owned newspapers that do not generate the revenue to be able to pay Uncle Sam 50 percent of the value of the business every generation.
There is talk of a compromise in the air: to raise the exemption and to lower the rate from 55 percent to 25 percent or even 15 percent.
Here’s my suggestion. Let’s charge 5 percent on all estates over $1 million. It would probably snag a good deal of revenue but it wouldn’t force heirs to liquidate family businesses. And it would be low enough that it wouldn’t be worth doing expensive estate planning.
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