Estate Taxes

Commentary by Pete du Pont

Host intro: Taxes aren't supposed to be voluntary. But commentator Pete du Pont of the National Center for Policy Analysis has found one: the estate tax.

It's true. Estate taxes are voluntary.

If you're rich.

One of the perks of being rich is hiring lots of clever accountants who find loopholes. You can give away up to $10,000 per person per year free of gift tax, or deduct gifts to spouses whose estates are taxed separately. There are life insurance trusts, qualified personal residence trusts, charitable remainder trusts, charitable lead trusts, generation-skipping trusts.

It's legal. It's great for the rich. And it's unfair for everybody else.

The estate tax is bad for growth. The effective marginal federal tax rate -- income plus estate taxes -- can hit 73 percent. State taxes push it higher. These disincentives to savings and investment hurt everybody equally, but again, those who aren't wealthy often don't find the loopholes.

A final irony: the estate tax lowers the capital stock and raises the return on the remaining capital. Since the rich already own much of the existing capital, the estate tax may actually make the rich richer.

The estate and gift tax brings in a paltry 1.1 percent of total federal revenues. In the process it wastes resources, and discourages work, saving and investment.

Let's abolish it.

Those are my ideas. And at the NCPA, we know ideas can change the world. I'm Pete du Pont, and I'll see you tomorrow.

Outro: On Tuesday, can the activist judiciary be slowed down? Pete du Pont says the laws are on the books.