It is not a “death tax.”
Can we be honest about that?
An estate tax is not a tax on a dead person. It is a tax on inherited great wealth.
It is a tax, that is to say, not on a person who may have worked hard all his life to earn his money – the American way – but on those who did nothing to earn it – the aristocratic way.
As part of an effort to build political support for a graduated income tax in Illinois, state Senate President John Cullerton has proposed repealing the state’s estate tax. His hope is that some Republicans and Downstate and suburban Democrats – who loathe a graduated income tax because it taxes wealthier people at higher rates – might warm to it in return for ending the estate tax, which they also loathe.
We think this is a bad idea.
At a time when our state and nation are threatened by historical levels of inequality, where the richest 1 percent hold 40 percent of the wealth, we can’t see the wisdom in eliminating one of the few direct ways to check this dangerously un-American trend.
There’s an argument for revising Illinois’ estate tax to make it less of a burden on, say, family farmers, by increasing the threshold at which it kicks in and pegging it to the rate of inflation. Since 2013, the graduated tax has been levied on estates valued at $4 million and more. The first $40,000 to $90,000 is taxed at .8 percent, while values above $10.04 million are taxed at the highest rate, 16 percent.
But to abolish the estate tax altogether runs counter to an urgent need to reduce wealth inequality, not aid and abet it. Illinois also would lose about $300 million in revenue. Less wealthy residents – including all of you who so foolishly failed to choose rich parents – might be expected to make up the difference.
Members of the Progressive Caucus of the state House are opposed to repealing the estate tax, warning in a recent statement that this is just the sort of thing that could lead to “a new American aristocracy of unearned fortune.”
If that sounds a little lefty radical, we would remind critics that our nation’s Founding Fathers were a little lefty radical on this point, too. They warned of the danger to the American Experiment of inherited wealth and power and took measures to limit it.
They banned inherited titles of nobility – duke and earl and the like – and prohibited the European inheritance practices of primogeniture and entail, by which massive estates were handed down through generations.
James Madison had this to say about the matter:
“The great object (of political parties) should be to combat (this) evil: ... by withholding unnecessary opportunities from a few, to increase the inequality of property, by an immoderate, and especially an unmerited, accumulation of riches.”
The downside of the estate tax in Illinois, critics say, is that it encourages wealthy people to move away to avoid the tax. We would never dismiss that concern, but we believe a greater good is achieved by insisting on a tax system that rewards merit, not bloodlines. The secret to a stronger Illinois economy is not a give-away to the rich; it is a stronger middle class that has greater buying power.
We favor a progressive income tax for Illinois, as we’ve been saying for decades. And if forced to choose, we’d say that enacting that fairer tax, finally, is more important than retaining the estate tax. A progressive income tax, more so than the estate tax, is central to Illinois working its way out of its financial crisis in the most socially responsible way.
But where is the proof such a trade-off is necessary? Where’s the proof it can work?
On Tuesday, as Rich Miller of Capitol Fax reported, Republican members of the Senate Executive Committee refused to support a measure to repeal the estate tax – a measure they had sought for years – because it would be tied to passage of the graduated income tax. Cullerton’s gambit, at least so far, has gained him no Republican votes.
Revise the estate tax, by all means. Give those family farmers a fairer shake. But don’t abolish it.