Estate tax faces year-end deadline

Congress must rewrite the estate tax law before the end of the year or do without the billions it brings in just when the deficit is exploding.
Ray D. Madoff, a professor at Boston College Law School, is the author of the forthcoming “Immortality and the Law: The Rising Power of the American Dead.” He made some cogent suggestions on the subject this week in the New York Times.
The goal, he says, should be to “move our tax system closer to the values on which the country was founded — that hard work should be rewarded and power should not be conferred by birth.”
To accomplish these twin benefits, Madoff would provide “a special rule to facilitate the transfer of family farms and small businesses from one generation to the next. While experts disagree on whether the estate tax has in fact impeded such transfers, the idea that it could is bothersome to Americans. It is important to us that children be able, if they so desire, to carry on the work of their parents. Thus, it is appropriate for the estate tax to have a large exemption for family businesses — perhaps as much as $10 million, and indexed to rise with inflation.”
At the same time, he wants higher taxes on heirs and heiresses who did nothing to earn wealth and have no intention of continuing family businesses.
He points out that current tax law discriminates against those who earn money through working. Those who earn $200,000 at their jobs must contribute $50,000 or more in federal income taxes while a person who inherits that much or even $200 million, pays no income tax at all.
If an inheritor is taxed on wealth received it is through the estate tax, which is due to expire at the end of the year. Madoff suggests that a 55 percent tax on inherited wealth, coupled with an exemption of $1 million to $2 million, would generate much needed revenue for the federal government that would otherwise come from other segments of the population. Those who would pay the tax are, by and large, already wealthy and can afford it.
“For too long, the family farm and business issue has served as a distraction, preventing sensible estate tax reform. Congress should get this issue off the table, so that wealthy heirs can contribute their fair share,” he concludes.
Amen.

Emerson Lynn, jr.