I strongly dissent from the “Commentary” in the April 27 Chronicle by Rabbi Jerome Epstein, executive vice president of the United Synagogue of Conservative Judaism, advocating retention of the federal estate tax.
Large bipartisan majorities in Congress have supported repeal of this unfair and confiscatory levy. The suggestion that Epstein’s contrary views represent those of the American Jewish community is irresponsible.
The premise of Epstein’s argument is fundamentally wrong. Taxation has only one legitimate purpose: to raise revenue to fund the necessary operations of government. Social engineering, income redistribution, encouragement or discouragement of specific behaviors are not legitimate aims of taxation.
The estate tax is an unfair “double tax” on assets derived from wages, interest, dividends, distributions from partnerships and S-corporations and other items that have been taxed during a decedent’s lifetime.
Epstein argues that capital gains are not “double-taxed” because of the “stepped-up basis” feature, permitting capital assets to be valued as of date of death. True, but the tax impact is not changed under any of the repeal legislation, which would abolish the “stepped-up basis” and levy capital gains taxes utilizing an original-purchase-price basis.
Thus, under both current and proposed law, such assets would be taxed once. Repeal would preclude other forms of assets from being taxed twice.
Effect on giving
The contention that repeal of the estate tax would hamper philanthropic giving is speculative. Opinions differ on whether charitable bequests are much affected by estate tax considerations.
Such bequests are most heavily influenced by the donor’s charitable impulses and interests, particularly since such gifts are not in competition with the donor’s living expenses.
Furthermore, the impact of estate tax repeal on charitable giving is not even a pertinent factor in evaluating its desirability, given the legitimate purpose of taxation.
It is dismaying for Epstein to invoke tzedakah in support of his argument. Tzedakah is a mitzvah that must ultimately arise from the donor. It should not be imposed by the federal government under penalty of law.
Epstein’s contentions that estate tax repeal would benefit only “the rich” or that “98 of every 100 people” will face no tax liability anyway are irrelevant and without merit. I believe the future “bite” on taxpayers who will die over the next few decades will be significant and affect many more people.
Current exemptions are woefully inadequate, given the rising value of real estate and financial assets and increased efforts by baby-boomers to save for retirement.
Thus, the estate tax, once the province of “the rich,” will bite more and more deeply into the middle class. This bite is huge, given rates of 37 to 55 percent of the taxable portion of the estate.
This argument also assumes that the federal government has a pre-eminent “right” to take assets that taxpayers have accumulated during their lifetimes. This is contrary to fundamental principles of American democracy, among which is respect for property rights.
Epstein disregards the administrative and economic costs of the estate tax. It forces millions of Americans to undertake expensive, convoluted efforts to minimize the tax “bite” and to assure sufficient liquidity to cover the often enormous tax bill that comes due soon after death.
These efforts include formation of complex trusts, the purchase of life insurance policies on the lives of decedents and the engagement of costly accounting, estate planning and legal assistance. This is a waste of time, effort and money.
The tax is especially devastating to heirs of farm and small-business owners, who must somehow come up with large amounts of cash to pay a tax bill levied on estate assets that are primarily illiquid.
The argument for retention of the estate tax is essentially nothing more than a combination of class envy, support for bloated government and opposition to tax relief for all American taxpayers (including upper and upper-middle income taxpayers, who pay most of the taxes and who deserve relief under any standard of fairness and justice).
It is unpersuasive to invoke the support of William Gates, Sr., George Soros or Warren Buffett for estate tax retention. These billionaires (or their relatives) have plenty of assets that they can (and will) deploy to avoid the impact of the estate tax.
The same cannot be said for American taxpayers whose years of hard work, enterprise, frugality and planning have permitted them to accumulate more modest estates of a few million dollars and who are the primary victims of this cruel tax. This is precisely the time to get rid of it.
Stuart S. Mukamal is a Milwaukee attorney.
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