History of the Federal Estate Tax and its Relationship to De Tocqueville's Views
Summary:
A history of the U.S. Federal Estate Tax and why, in the view of the author, it should be repealed. The phase out of this type of tax would not have been favored by de Tocqueville. He would have found this tax a useful way to prevent tremendous wealth from being transferred from generation to generation.
Benjamin Franklin, wise man that he was, indicated the only two things we cannot avoid are death and taxes and in some cases when you die is when you are taxed the most. To understand the "Federal Estate Tax" one must understand how it started. The Estate Tax in its earliest form was instituted in 1916 at that time it was called an "Inheritance Tax" and this tax was levied against the beneficiary of the estate. In most cases this tax was levied against people, whom could least afford this type of tax. The "Inheritance Tax" was eventually restructured to be levied against estates and was protected by a deductible so the people who got the most benefit from the government were also the people who bore the greatest burden of the tax thereby the "Federal Estate Tax" was born. This tax was levied only three years after the 16th Amendment "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration" the "Income Tax."
It is also somewhat misleading to indicate that the "Federal Estate Tax" was repealed. It by law is being phased out and in the year 2010 it will be repealed. Each year from 2001-2009 the protected amount will get higher. Then in 2011 it will return to the 2002 parameters. So while it is a reduction there is only one year 2010 where the actual tax is repealed.
What the "Estate Tax" does is attempt to even the playing field it tries to create equality by reducing the fortunes of the truly wealthy and establishing a fund available to the government that happens after the earner of the estate is gone which causes no hardship to the person who acquired the wealth. What in fact it managed to do is employ an entire discipline of accountants and attorneys who make it their life's work finding loopholes. One of the largest loopholes is donations to charities and non-profits, while it isn't really a loophole it is more like spite work. It is more like if you will not let my family have it then I will give it to someone from whom you cannot take it away. The money that is being lost to the government by the phase out of the "Estate Tax" will need to be replaced for the short term. In 2011 it will be back again in full force.
The phase out of the "Estate Tax is a Republican issue a bill similar to this was vetoed by President Clinton only to be passed again and signed by President George W. Bush. De Tocqueville's America was very different from the America of today. While Democracy as a political entity has changed very little politics in America is very different. In De Tocqueville's America we were at the infancy only 44 years after the ratification of the Constitution.
What I believe De Tocqueville meant is that in 1831 a person born in America was free by birth and did not have to start life fighting for that freedom. In 1831 there was no Income Tax or Estate Tax. It does not seem to be contrary to the writing to phase out any particular tax. The birthright in America was and still is freedom from the time of "We hold these truths to be self-evident" of the Declaration of Independence to 2004. There are no requirements that every person have or be given wealth that was then and is now still something every American can achieve.
When De Tocqueville spoke of the "manufacturing aristocracy," he was speaking of the way the rich would use the working person to further their interests and then continue the process repeatedly using what we call the public welfare system to pick up the pieces. De Tocqueville would not be in favor of the phase out of the "Federal Estate Tax" he in this case would find it as a way to further the aristocracy by keeping tremendous wealth going from generation to generation with no way of keeping it under control. This is the rich get richer mentality and the poor just stay poor.
The "Estate Tax" should be repealed. I believe this because as an American I believe I have the right to keep what I or my family earn from our hard work and not risk the loss of up to 55% of that wealth. What the "Estate Tax" does is punish the successful and limit their ability to provide for future generations. Every person born in America has the opportunity to be successful. America is place where you are not limited by your birth as in a country like India. There also have been attempts to keep all people of equal wealth it is called "Socialism" and in the extreme "Communism." It failed in the former Soviet Union and Cuba. In each case, an upper class tended to have significant means and the ordinary people that were poor with no hope of becoming upper class. At least in America a person can come from lesser means or even be poor and become a part of the wealthy or upper class. That I believe is the key to "born equal instead of becoming so."
There is no need to make a prediction as to whether the repeal of the "Estate Tax" will continue. It will not, by law as I indicated earlier this is not a repeal of the "Estate Tax" but simply raises the exclusion amount and in the highest brackets drops the maximum percentage slightly. 2010 is the only year the "Estate Tax" will be "ZERO." In 2011, the "Estate Tax" will return to the levels of 2002.
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