Today’s New York Times (p. B1) quotes an official of the American Bar Association citing a statistic that says much. In 1977, 10.5 per cent of those who died paid some federal taxes on the estates they left, whereas in 2011, under the new law, less than half of 1 per cent will do so. Obama’s new tax law means that the first $10 million left to heirs will have no estate tax to pay to Uncle Sam while being required to pay 35 % on whatever they leave over $10 million. Under the existing law (passed in 2009), the comparable numbers were $7 million and 45 %. Various gift tax maneuvers and other legal means remain available to the richest citizens to evade even these reduced estate taxes.
Estate taxes have been justified and used in countless countries for centuries. Indeed, many of the 50 states in the US continue to impose estate taxes (and/or the slightly different “inheritance taxes”) using the same justification. Basically, the idea is that even the most minimal commitments to democracy and equality of opportunity require that all citizens begin with roughly equal resources and supports. Hard work, talent, and commitment should determine each individual’s successes rather than the wealth that one’s parents did or did not leave behind. So estate taxes were seen as ways to both support the government’s activities and help produce a more level playing field for each generation.
What Obama’s tax bill does is directly contradict all this. It reduces the support for state activities from estate taxes while enhancing the inequality of starting points among our citizens. At a time when the economic crisis and the government’s responses to it already discriminated for the rich and against everyone else, this new tax bill takes that social injustice some steps further.
Rick Wolff is Professor of Economics Emeritus at the University of Massachusetts, Amherst and currently a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York City. He has a PhD in Economics from Yale University as well as degrees from Harvard (BA) and Stanford (MA) Universities. He has authored or co-authored both scholarly and popular books and articles. His recent work analyzes the causes, consequences, and alternative solutions to the global economic crisis (including a documentary film/DVD and book both entitled Capitalism Hits theFan. All his work – including media appearances, lectures, whole classes, podcasts and blogs – can be accessed at www.rdwolff.com.