More Estate Tax

WALL STREET JOURNAL EDITORIAL:

Americans favor repealing the death tax not because they think it will help them directly. They're more principled than that. Two-thirds of the public wants to repeal it because they think taxing a lifetime of thrift due to the accident of death is unfair, and even immoral. They also understand that the really rich won't pay the tax anyway because they hire lawyers to avoid it.

[. . .]

Edward McCaffery, an estate tax expert at USC Law School, argues that "if breaking up large concentrations of wealth is the intention of the death tax, then it is a miserable failure."

Certainly I am one who thinks our tax system should reward thrift as well as savings and investment, and it should not tax or penalize these sorts of choices. Probably one reason I have for not wanting to tax saving and investment is that I'm an economist, and that means I understand how saving and investment leads to economic prosperity. I've wondered whether my faith might lead me to a different conclusion, and I don't really see any reason to think that it should.

Consider the suggestion that the reason for the estate tax is thought, by at least some people, to be breaking up large concentrations of wealth. Setting aside the observation that the estate tax has not accomplished such a goal, I wonder why large amounts of wealth would be seen as a bad thing? An individual earns an income by being productive, and being productive means being part of the economy that produces and supplies goods and services people want. By being productive a person earns a living, and this is done by helping those who want the goods and services that result. Wealth is created when a person saves out of income instead of consuming all the income that is earned. Wealth results then from the productivity of people, and from their choices to save and invest rather than consume all that is earned. So, I can't really understand anything wrong with wealth, nor with so-called "large concentrations of wealth." It seems to me that the economic choices of people to create wealth for themselves involve choices that benefit others (being productive), and also choices that involve less interest in goods, services and materialist consumption in the present which seem to me choices that all also good choices. I don't see any clear reasons from my study of Jesus and the New Testament that would suggest I have the wrong idea about the creation of wealth.

So, if 2/3 of the American public, as asserted by the WSJ, want the estate tax repealed, I wonder who is supporting the continuation of the estate tax? This is often a useful and informative question to ask when considering proposed public policies: who wants the proposed public policy? Here is the answer the WSJ offers with respect to the estate tax:

By far the largest supporter of preserving the death tax is the life insurance lobby, which could lose billions of dollars from policies written to avoid the tax. The Los Angeles Times reported this week that the insurance industry is the main funder of an anti-repeal outfit known as the Coalition for America's Priorities. . . .

Noting the special interest supporting continuing the estate tax is pretty informative, but consider something else about this support. The reason the life insurance industry wants to keep the tax is really because the life insurance industry makes a profit on figuring out how people can avoid paying the tax. In other words, without government's prior bad policy (i.e. taxing wealth at death), there wouldn't be a special interest in opposition to end government's bad policy today.

I posted earlier on the estate tax noting that this was a public policy that encouraged envy, and the WSJ seems to think so as well:

Voters have been saying clearly and for years that they don't want a tax whose only justification is government greed and envy.