Fixing the Death Tax Fails Again

Fixing the Estate tax has floundered and died once again. Democrats once again show that there isn't a tax that they don't love and are willing to defend to the death.

Senate Democrats yesterday filibustered yet another attempt to eliminate the so-called "death tax," which Republicans say unfairly taxes already-taxed money and is crippling family farms and small businesses.

"We charge people income tax when they earn income. With what is left, they make investments, and then as those investments pay dividends or pay income, we tax that. Then we say, 'When you die, we want half of that asset,' " Sen. Johnny Isakson, Georgia Republican, said yesterday.

"It is wrong. It is wrong for individuals, it is wrong for family farmers, it is wrong for landowners, and it is wrong for America."

Republicans fell three votes shy yesterday of the 60 needed to break the filibuster.

In the 57-41 vote, two Republicans -- George V. Voinovich of Ohio and Lincoln Chafee of Rhode Island -- joined Democrats in the filibusters. Four Democrats -- Max Baucus of Montana, Blanche Lincoln of Arkansas, Ben Nelson of Nebraska and Bill Nelson of Florida -- joined Republicans in the effort to break the filibuster.

I'm convinced that reform of this tax is dead. And I'll be suffering because of it when it comes to inheriting the family farm. The real estate value is well over $3 million. That means I'll lose it completely or go into extreme debt to pay the taxes.

Current law exempts the first $2 million of an individual's estate and $4 million of a married couple's. Any amount over that is taxed at 46 percent.

If I had to do this today, I'd owe Uncle Sugar about a million dollars for the taxes. But hey, it's just a tax on the rich. Except, it isn't. OpinionJournal had an informative piece yesterday on just why this tax will never get money from the wealthy.

Americans favor repealing the death tax not because they think it will help them directly. They're more principled than that. Two-thirds of the public wants to repeal it because they think taxing a lifetime of thrift due to the accident of death is unfair, and even immoral. They also understand that the really rich won't pay the tax anyway because they hire lawyers to avoid it.

For proof that they're right, they need only watch the current debate. The superrich or their kin--such as Bill Gates Sr. and Warren Buffett--are some of the loudest voices opposing repeal. Yet they are able to shelter their own vast wealth by creating foundations or via other crafty estate planning. Edward McCaffery, an estate tax expert at USC Law School, argues that "if breaking up large concentrations of wealth is the intention of the death tax, then it is a miserable failure."

That's right, you can hide from the estate tax, if you have enough money to pay someone to set it up or have the savy in tax law to know what to do. If you're like me, you don't have the ability in either realm.

Which brings us back to the political paradox that, even with Republicans at a low ebb, voters still support death tax repeal. A majority in both houses of Congress also supports it, so Senate Democrats can stop repeal only with the procedural dodge of a filibuster. Even at that, several Democrats are clamoring for a compromise that would take the issue off the table in November. They recall what happened in 2004 to Tom Daschle in South Dakota.

But Republicans should accept a compromise only if it lowers the death tax rate enough (to 15%) to reduce the incentive for avoidance and eliminate its punitive nature. Voters have been saying clearly and for years that they don't want a tax whose only justification is government greed and envy.

A compromise would have been acceptable. Raise the minimum estate value to where it won't affect small businesses or farms and reduce the rate.

Looks like the only hope I have at this point is avoidance. What the hell, the rich can dodge it and the politicos refuse to fix it (not to mention they have yet to learn fiscal responsibility). I'll pay my fair share, when I'm dead. (Maybe)