heard it on npr

in case you don't know, the death tax is when someone dies and leaves some property to whoever and the govt comes in and takes part of the inherited property. the death tax in its current form was passed by congress in 1916 -- current form except it was called the estate tax. the man who envisioned the estate tax was also the man who inspired the creation of the teddy bear -- teddy roosevelt. while mr roosevelt was president, he started the work for the estate tax, but he left office in 1909 before it was passed.


in 1913, the first income tax law passed and here we are three years later with the estate tax. the early 1900s were an era of progressive thinking about taxation. "progressive" meaning that people believed in the power of taxation to redistribute wealth thereby leveling the playing field and equaling opportunity.

in the 1920s andrew mellon (google him) was secretary of the treasury, and he worked to get the estate tax repealed but his effort was not successful. later, in the 40s, the opponents started calling it a "death" tax because "death" is a wee bit more attention-grabbing than "estate". still, it hung on. the death tax just wouldn't die.

a smallish percentage of estates on which folks are required to pay tax consist of family farms or other small businesses. the estate tax can sound the death knell for a small business, but the vast majority of small businesses and family farms are not subject to the tax. in the 90s, opponents tried to stir up support for their position by drawing attention to the families that suffered thusly but they could not muster enough support and the tax stayed in place.


for all its staying power, it's not very effective. it has never produced more than 2% of federal revenues in any individual year since world war dos. here are some more facts i gleaned from an npr interview with michael graetz of columbia law school.

The estate tax was repealed for 2010. But if nothing happens, it will return in 2011 -- individuals who inherit estates valued at $1 million or more would see them taxed at a 55 percent rate; couples who receive estates of $2 million or more would also pay that rate. But under the framework of the deal struck between President Obama and Congressional Republicans, the first $5 million of an estate would be exempt -- the rest would be taxed at 35 percent. Many House Democrats would like to see a 45% tax on individuals' estates worth more than $3.5 million and couples' worth more than $7 million.

interesting stuff, really. lots of machinations over a tax that generates little revenue. so, what's the dealio? why are folks so het up over this relatively ineffective tax? because it's the most progressive tax on the books.


mr roosevelt believed that the estate tax was the way to prevent the accumulation of dynastic wealth and to establish a more level playing field. mr roosevelt believed the accumulation of dynastic wealth was counter to the american dream. but see, some would say accumulation of dynastic wealth is the epitome of the american dream.

there, my fair readers, is the crux of the issue.