Please tax my estate
May 24, 2001
If anyone should want to repeal the estate tax, it's me.
I'm a successful businessman with two sons I love dearly. Eliminating the estate tax, as the Senate voted to do Wednesday, would let me pass the full fruits of my success to my children.
But I strongly oppose repeal. Rather than end the estate tax, as my fellow millionaire President Bush advocates, I believe we should mend it.
Although portrayed as a death tax, the estate tax is, in fact, a levy on the inheritances of living heirs. Big inheritances give children of the wealthy -- often generations removed from the original fortune -- an enormous advantage in life. If anything deserves taxation, it's these unearned windfalls.
Less than 2 percent of estates are large enough to be subject to the tax today. To make sure we tax only the very largest estates, we could immediately raise the exemption to $1 million for individuals and $2 million for couples, and regularly adjust the exemption to keep up with inflation.
Critics of the estate tax say it hinders small business owners and farmers from passing their operations on to their children. But these small enterprises make up only a tiny fraction of the taxed estates. And if current protections for family enterprises are inadequate, then strengthen them. But don't throw the baby out with the bath water.
The debate over the estate tax goes right to the core of the American experiment. Unlike Europe, America was founded not as a hereditary class system, but as a meritocracy. The playing fields would be level, and the best players would win.
But those favoring to repeal the estate tax want to end the American experiment. They want to give children of the rich a growing lead, generation after generation, while leaving millions of other children further behind.
I was lucky enough to have parents who paid for my education at Harvard, helped me purchase my first home and invested in my first start-up. Now I've established trust funds for my sons to do similar things.
But what about the millions of American children who aren't as fortunate as mine? If capitalism is the only game in town, it seems unfair to give my children millions of dollars in start-up capital and none to other players.
Today, one out of six children lives in poverty. How will we reduce poverty in future generations if these children start out empty handed?
Every child should have a stake in the American Dream. So let's make that the special mission of the estate tax. We should earmark estate-tax revenue for a Universal Children's Trust Fund. That money could then be divided equally among children under age 18. It could be placed into tax-deferred children's savings accounts, similar to IRAs, managed by parents. When children turn 18 they could tap into their modest inheritances for higher education, first home purchase or a business startup.
Just as Social Security was the right thing to do in the 20th century, a Universal Children's Trust is the right thing to do in the 21st century.
Instead of repealing the estate tax, we should make it the guarantor of the American Dream.
Then I would be even happier to pay the estate tax.
Peter Barnes co-founded Working Assets Long Distance and is a member of the national organization, Responsible Wealth. He can be reached at email@example.com.