Reviving the Estate Tax

Jack Fleming, Opinion Editor

The very mention of the word “taxes” makes many Americans quake in their boots. Indeed, the idea that US citizens and businesses should pay large amounts of money to the government fills many Americans with righteous indignation. One form of taxation in particular, the estate tax, has drawn the ire of wealthy individuals seeking to provide their heirs with sizable inheritances upon their deaths. The blind hatred directed at the estate tax, however, is deeply regrettable. Strengthening and reviving the estate tax, and closing estate tax loopholes, are essential steps in combatting income inequality, increasing government revenue and ensuring that wealthy heirs don’t wield undue influence because of their parents’ financial success.

The debate over the American estate tax is nothing new. There was considerable concern among some of the founding fathers about the emergence of a permanently wealthy set of individuals or families who would consistently wield undue political influence and potentially jeopardize democratic institutions. In a letter to James Madison, Thomas Jefferson described property and inheritance in terms that Republicans  and likely some Democrats  would probably deem radical and abhorrent. Jefferson wrote that property should be widely owned by all Americans and essentially stated that future generations are not entitled to inherited wealth in the form of property.

Illustration by Elie Flanagan

Embracing the ethos of Jefferson’s egalitarian ideas about property is essential. Instead of weakening the estate tax by raising the amount eligible for taxation from $5.6 million to $11.2 million, as Republicans and President Donald Trump have done in their 2017 tax plan, we should lower the monetary amount for estate taxation to somewhere in the neighborhood of $3.5 million and institute a progressive estate tax that increases accordingly with the size of an estate. These actions would better address the hope of some of our founding fathers that concentrated wealth must not be allowed to flow unchecked from one generation to the next.

Closing several estate tax loopholes is also non-negotiable if the tax is to be truly effective. Two loopholes in particular, GRATs and Jackie O. trusts, are blatant (yet legal) ways in which wealthy individuals dodge estate taxes. Both GRATs and Jackie O. trusts are highly complex legal maneuvers that essentially allow incredibly wealthy individuals like casino billionaire Sheldon Adelson and the Walton family, owners of Walmart, to pass untaxed money via trusts to heirs. These loopholes must be closed in order to force the wealthiest Americans to pay their fair share in taxes.

The societal benefits of an improved estate tax are innumerable. For one thing, individuals who receive sizable inheritances are often disincentivized from entering or remaining in the work force and may simply live comfortably off their inheritances. Strengthening the estate tax would also help to reduce the outsized societal influence granted to heirs by their wealthy parents. Additionally, an improved estate tax would serve to increase government revenue by hundreds of billions of dollars, money that potentially could be put towards education, health care and other initiatives that benefit all Americans. But the most important function of the estate tax is the way in which it serves to combat income inequality. As some of our founding fathers presciently observed, the accumulation of unimaginable wealth in the hands of the few clashes discordantly with democratic notions of equality. A strengthened and progressive estate tax ensures that dynastic wealth cannot accumulate untaxed and is thus an utterly essential part of our tax code  it must never be neglected.