Estate tax and the Deficit

Politically Profitable for both Parties
by Shawn Arnold - No Comments
Posted on March 16th, 2010 4:15 pm

 

Often times, Death Tax repeal is said to be a Republican idea.  In a very generalized description, the Republican Party is the party of tax cuts and a smaller government presence and the Democratic Party is the party of higher taxes and a larger government presence.  AFBI is a non-partisan organization, so we take no organizational stance with either of these broad philosophies.  We simply stand for the repeal of the Estate Tax which would assist the goals of both major parties.  Essentially, the goal of Republicans is to limit the size of government and allow the people to be in charge of as much of the economy as possible.  The goal of the Democrats is to provide services to the people that compete with industry standards and make the lives of working Americans easier.  Both parties believe that a government that abides by their respective ideology will lead a country with a higher standard of living than the other.  AFBI does not endorse either party, but it is important to stress the potential for benefit in both parties if the Estate Tax were repealed.

 

Republicans should support repeal because the Death Tax is the easiest tax to eliminate from the budget.  In his research paper entitled Economic Impact of the Estate Tax: Effects of Various Possible Reform Options; Steve Entin explains how the Estate Tax compliance costs exceed the revenue generated by the tax.  Therefore, the tax dollars available to our government would be higher if the tax were eliminated, ceteris paribus.  If the primary goal of the Republican Party is to limit the size of government by relieving the tax burden on Americans, the Death Tax is the place to start.  No one who claims to be a limited government conservative can logically support the Estate tax because Estate tax elimination would pave the way for further tax cuts without eliminating government programs.  Usually, the debate for budget limitation focuses on which programs to eliminate, but Estate Tax repeal is a two-for-one deal.  The Republican Party could decrease taxes and compliance cost spending just by repealing the Estate Tax.

 

Democrats would also benefit from Estate Tax repeal for the same reason.  The goal of the Democrats is to provide more services to the people and be more responsive to needs of the people.  Because Estate Tax compliance costs exceed Estate Tax revenues we are essentially limiting the size of government by having an Estate tax through an economically destructive means.  If the Estate Tax was permanently repealed, the money America saved could help pay for some of the progressive ideas of the Democratic Party.  Most Democrats have rallied behind the idea of funding new environmental research, but their ability to do so is limited by the destructive estate tax.  This same logic would apply to any of the Democrat supported ideas that involve spending money to provide a service.  Because we tax the death of American citizens, the government actually loses its monetary ability to respond to problems in the country.  Democrats who support the tax are supporting the demise of their own ideology.

 

If the two major parties believe their core values, how can we continue to have an Estate Tax?  If a Senator spent 10 tax dollars on gas to drive to someone’s house and demanded 8 dollars for “deficit reduction,” a Democrat would be equally as outraged as a Republican at the two dollar net loss.  Why is eliminating the Death tax to decrease the budget deficit and help American businesses considered to be a Republican idea given this information?  

 

Category: Deficit

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