March 21, 2001
Congressional Republicans have signaled that they are willing to
compromise the death-tax provision of President Bush's tax-cut
proposal. This offers a splendid opportunity to get it right.
Those who are campaigning for a cut in the death tax are not
impressed with the worries of Bill H. Gates Sr., George Soros and
Warren Buffett that repealing the death tax might discourage wealthy
people from giving money to charitable foundations. In fact, those
foundations are mostly private slush funds that the super rich use to
promote liberal causes and enhance their own political influence.
Bill Gates, for example, put $25 billion into his private
foundation which his father runs. When Bill Gates dies, the $25
billion will be exempt from the estate tax even though his family could
retain control of that extraordinary pile of cash far into future
That same estate plan has been profitably used by many of the
super rich including Buffett, Soros, the Rockefellers, the Fords, David
Packard, and others. Extraordinary amounts of money escaped death
taxes through their foundations that are notorious for promoting
Bill Clinton is also working the foundation racket. His Little
Rock library (which doesn't have any books) raises tax-deductible money
from Marc, Denise and other super Rich in order to enable Bill and
Hillary to continue to live and travel in the royal style to which they
have become accustomed at taxpayers' expense.
While "only" two percent of estates now pay the estate tax, that's
twice as many as when the first George Bush was President. The number
of taxable estates will double again before George W's plan fully takes
effect in 2009, thus wiping out the life savings of millions of
Americans who die before then.
About 90 percent of federal estate tax returns filed are for
estates of $2.5 million or less. These Americans aren't rich enough to
escape the death tax through private foundations, so they usually have
to sell their small business or farm to pay the death tax (at rates up
to 55 percent).
Congress assured us it solved the problem of small businesses and
farms in the Tax Reform Act of 1997, but that "reform" turned out to be
"all hat and no cattle." It is so complex that only about 3 percent of
estates qualify, and even those are in danger of the government re-
visiting the case and collecting the original tax plus interest.
Instead of the present plan to cut the death tax rates for all in
small incremental steps stretched out over many years, President Bush
and Congress should compromise by raising the exemption to $10 million.
This would be really meaningful to the very people who deserve a tax
cut, the people who have labored hard over a lifetime to build up a
family business, family farm, or other family property.
President Bush and the American people should be on guard against
a devious plan by Congress to issue press releases bragging that they
are cutting the tax paid by the person who dies -- while the fine print
in the legislation substitutes a brand new tax on the heirs who inherit
the property from the deceased. The dishonesty of this chicanery is
exceeded only by the secrecy of the effort to keep it out of public
discussion until the tax law is passed.
Ever since the 16th Amendment gave Congress the power to tax
incomes in 1913, no federal tax has ever been levied on the heirs who
receive property from the deceased. The heirs have always received a
fresh start (sometimes called "stepped-up basis") in the appreciated
property their parents left them.
It's bad enough that some in Congress want to sabotage President
Bush's promise to repeal the death tax by substituting taxes on the
children who receive the property (a device called "carryover basis").
But they should not be allowed to get by with pious platitudes claiming
that they repealed the death tax.
Once before, during the Jimmy Carter regime, Congress
surreptitiously wrote carryover basis into the law. When the public
found out how complicated and burdensome it was, they kicked up such an
uproar that it had to be delayed, and delayed, and then repealed in
Public reaction was comparable to what happened when seniors
belatedly discovered they were going to have to pay big premiums to get
the "catastrophic" health care that Congress had bragged about passing.
Senior citizens storming and blocking then Ways and Means Chairman Dan
Rostenkowski's automobile became a memorable news photo in 1988.
The deception in the death tax shenanigans is headed for a similar
donnybrook. Congress should be honest with the American people: just
raise the death tax exemption to $10 million and don't doubledeal us by
imposing a new post-death tax.