More on Estate Tax

If huge numbers of family farmers and small business owners are opposed to the estate tax, perhaps it's because some of them have been worked up by ads like the ones discussed -- and strongly refuted -- here by the independent organization factcheck.org.  The title of the factcheck.org analysis, "Estate Tax Malarkey," gives you an idea of its attitude toward claims that the estate tax hurts lots of farmers and small businesses.  (We can't dismiss Factcheck as a lefty site, because just a month before this paper it had helped refute the claim that abortions had risen during the Bush administration.)

Among the points in the factcheck.org analysis, one seems potentially relevant to Greg's assertion that "[a]pparently at least 15 family farms each year would immediately have to be sold to come up with assets to pay the taxes."  Greg appears to infer that from the passage quoted by Rob that says "at the $2 million threshold, only 15 of the farms would have had insufficient liquid assets to pay."  But the factcheck.org article suggests that for true small farmers and business owners, immediate payment is not necessarily required: 

Worth noting is that family-owned farms and closely held businesses already receive special treatment under current law. Heirs who agree to keep the farm or business assets within the family for 10 years after death can reduce the taxable amount of the estate by 40 percent to 70 percent. And if the farm or business is at least 35 percent of the gross value of the estate, payments can be spread out over 14 years.

Maybe this is another of the reasons why the estimated number of farms that would have to be sold is as low as 15 -- or maybe the number is even lower?  I don't know the answer to that question, but the point is that the tax already makes some provision for the concerns of farms and small businesses. At any rate, 15 farms a year is a very small number in a big nation, when balanced against the long-term costs of repeal worsening an already dangerous budget deficit (and does anyone seriously claim that the estate-tax repeal is any kind of supply-side growth-encouraging measure?).  This seems a small tail wagging a very big dog of repeal.  That's to say nothing of the many proposals that have been made to raise the exemption for farms and small businesses while leaving it unchanged for the heirs of very wealthy families -- a course of action far less regressive than repealing the tax altogether. 

Certainly, the estate tax involves questions of prudence and fact that must be determined in order to apply the principles that CST sets forth.  But surely that doesn't mean ipso facto we throw up our hands and say "well people just disagree"?  A couple of questions and a comment:

1. Of course, one of the "artificial structures or transfers and distributions" that people do to avoid the estate tax is to give to charity.  The CBO estimates that repealing the estate tax would reduce charitable contributions (during life and in bequests) by a net 6 to 12 percent (and I've heard larger estimates).  While of course some charitable causes receiving contributions are morally neutral or even wrong, does CST nevertheless regard charitable contributions as a category as a good thing (and thus presumably be concerned about a measure reducing the incentives to contribute)?  I would think so.

2. Is CST at all concerned about the potential social effects of large inherited wealth (at least beyond what's needed to give people significant incentives to work for their kids' futures) -- effects such as increased inequality in life opportunities and starting points (which differs from inequality in outcomes) and the potential for increased stratification and a less fluid society?  (We might add the negative effects on the heirs themselves, although that is subject to the objection that it is purely paternalistic.)   

3. Greg's post throws up lots of questions about the estate tax without offering data to counter the data Rob cites about the small numbers affected; instead Greg seems to suggest that there's no way we could balance these considerations and reach any kind of judgment about what CST suggests, or which way it points, on this question.  I agree that we have to be careful about making judgments on complex policy questions and have to know all the facts.  But I think there is also a danger on the other side of a kind of "prudentialist relativism," in which, outside of a few issues with categorical rules, we throw up our hands and say it's just so complex we can't reach any judgment.  There needs to be room for intermediate judgments, in which we say that although there is no categorical rule, nevertheless on balance the major principles of CST point in a certain direction on a given question.  (And to answer some of the concerns Rick has raised in the past ... that doesn't the bishops should speak officially on all such things; lay people can take the lead without the implication that therefore the issue in question is up for grabs under CST.)

Tom