During the week of June 5, 2006, Senate Democrats kept the Death Tax alive by voting against repeal of this tax. Two Republicans voted to oppose repeal: Voinovich of Ohio and Chafee of Rhode Island. Americans favor repealing the death tax and two-thirds of the public want to repeal it because they think that taxing a lifetime of thrift due to death is unfair and even immoral. The insurance industry is the main funder of an anti-repeal organization called the Coalition for American Priorities. President Bush’s 2001 tax-cut included a phase-out of estate taxes. Currently the first $2 million of an individual's estate and $4 million for a married couple is exempt and the rest is taxed at 46%. By 2009, the exemptions rise to $3.5 million for an individual and $7 million for a couple and the rate falls to 45%. Total repeal would go into effect in 2010 but only for that year. In 2011 the tax would be re-imposed on estates valued over $1 million and the top tax rate would revert to 55%.

      I was a financial planner for Dean Witter/Morgan Stanley for over 40 years. The Certified Financial Planner course included a segment on estate planning which I was required to complete. I did in fact write some very large insurance policies on individuals seeking to provide for their heirs in the event of death, which would have required large sums of money to pay for estate taxes. The main beneficiaries of the estate planning process were life insurance companies, accountants and lawyers. All were beneficiaries of fees required to accomplish completion of the estate and subsequent taxes. I witnessed the anguish of many heirs of thrifty families who built business firms and farms and practiced thrift and saving during their lives only to see taxes take a substantial slice of their estates if they had not properly planned ways of reducing taxes by not owning only life insurance policies but also through sophisticated trusts etc. The estate tax raises barely over 1% of the total federal tax revenues. Studies indicate that for every dollar raised from the tax, roughly another dollar is lost because of avoidance, compliance, administrative and enforcement costs. The compliance costs are roughly commensurate with the tax's yield. Very wealthy people can avoid estate taxes by setting up family foundations and by creating generation skipping-trusts. Some of the billionaire class can set up “off shore” accounts which are exempt from U.S. taxation. The USA has the second highest death tax in the industrialized world-higher than in the socialist Nations of Sweden and France.

      The estate tax is unfair because it falls on the wrong people-savers not spenders. In conclusion, polls and practices consistently reveal that people in the U.S. and elsewhere oppose the idea of death taxes: Canada, Australia and Israel have abolished such taxes. The death tax can be thought of as the opposite of a sin tax: it is a virtue tax. It is a tax on thrift.

Gary E. Marsella
(Much of the above information was obtained from the Cato institute, Reuters and the Wall Street Journal).

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