My colleague Rob Vischer accepts my challenge to ground the discussion about the elimination of the estate tax on the facts, agreeing that economic analysis is a crucial dimension to an informed debate about the implications of Catholic Social Thought on this issue. Rob points to a study suggesting that under a certain exemption level retroactively applied to a single tax year in the past (2000), very few family farms would have owed the estate tax in that particular year and even fewer farm estates would have lacked liquid assets by which to pay such taxes. Based upon this hypothetical scenario translated from a single past tax year, Rob offers his “impression is that the case for elimination is grounded more in rhetoric than in fact-based concern for the common good.”
I am not nearly so sanguine about the supposed negligible effects of this tax on family-owned businesses in the modern economy. Nor am I ready to dismiss the strongly-stated and widely-held concerns of those who actually face this question as other than an academic exercise or a political campaign issue. If the case for elimination of the estate tax truly is grounded in little more than exaggerated rhetoric, the multitude of associations, federations, and other organizations representing small businesses and family farmers—a surprising consensus among a diverse group of merchants and agricultural enterprises—presumably would not be so committed to that legislative goal. Because these groups are hearing directly from the grass-roots, that is, from family business and family farm owners who have put two-and-two together as they plan for the future and consider the eventual effect of such a tax, they just may know something of what they speak.
To begin with, the question before us apparently is not whether family enterprises would be destroyed, but how many. No firm conclusions could be reached without a longitudinal study of a series of tax years and even that study would be misleading without adjusting for future anticipated trends in real estate prices, etc. But, for the sake of argument, let’s assume that the narrow slice of statistics cited by Rob can be extrapolated over time. Even under that assumption, while the number of family farms that would be destroyed by the estate tax apparently would be few in number, there indeed would be such losses. Apparently at least 15 family farms each year would immediately have to be sold to come up with assets to pay the taxes. And even under those cited statistics, the eventual mortality rate would be higher. Even if a family farm estate had some liquid assets, the diversion of those funds to taxes means that the next generation assumes the business capital assets on a tighter margin and without operating funds. When forced to compete with large corporate entities not subject to the death tax, the competitive atmosphere is darker for the ongoing family enterprise. The advocates of preserving the estate tax have not yet told us how many family farms may acceptably be sacrificed, in keeping with Catholic Social Thought, for the supposed greater good of enhancing accumulation of revenue by the federal government.
Likewise, as borne out by both the statistics cited and confirmed by stories shared with me by some of those responding to my earlier posting, it is clear that some non-agricultural family businesses already have been broken up or sold to larger corporate entities in order to finance the estate tax. Even if these numbers are but a handful in any single year, we again would have to decide what is the cumulative level of fatalities to family enterprises that we deem morally acceptable.
Moreover, the cited study fails to give the full flavor of the collateral effects of the death tax, in terms the requisite tax and estate-planning arrangements (setting up trusts, distributing assets prior to death, creating shares of ownership in children or others, etc.) and legal expenses that are incurred by the owners of family businesses and farms as they struggle to find a way to transfer the family enterprise to the next generation. Given that these costs are not borne by large corporate commercial entities, which of course pay no estate tax, the competitive disadvantage to family-owned businesses, which often are operating on the margins of profitability, remains unaddressed. Nor can the estate tax issue be considered in isolation, for it is just one of the many ways in which tax policies, employment rules, business regulations, etc. fall more heavily upon small businesses than upon the large corporate entities that can more easily adjust and accommodate to government intervention.
Most importantly, looking at hypothetical statistics about what a particular estate tax exemption rate would have meant in a past tax year is peculiarly uninformative when talking about the death tax. By the very nature of the animal, the crucial question facing any family business is what the estate tax will mean in the future when the contingency upon which it is based, the death of the business owner, is realized. Because the future is always uncertain, because trends in real estate prices, retail sales, etc. are hard to predict, the very existence of an estate tax requires the present expenditure of valuable time and money, not to mention some anxiety, by family business owners to be ready for all possible future permutations. Because planning for such future contingencies has to begin immediately, family business owners find themselves having to consider artificial structures or transfers and distributions that otherwise would be premature or unadvisable, all because of the estate tax cloud looming over and potentially threatening the survival of the family enterprise into the next generation.
Let me close, however, with this significant qualification on everything that I’ve said here and before about the estate tax: the analysis presented above is that of a reasonably well-informed citizen, not of an expert in small business and farm economies or the economic effects of taxation. I'm not even a tax-law expert. In teaching about litigation with the federal government, I carefully avoid tax matters and tax jurisdiction. Which leads me to this final point, that we who think about Catholic Social Teaching and its implications for public policy also must have the humility to recognize our own limitations and to appreciate what is to be gained from the expertise and wisdom found in other disciplines. Prudence requires not only that we appreciate limits on use of law and government as a tool of social justice, as well as the secondary effects of policies, but that we also recognize and appropriately defer to the greater expertise of those who are trained in the disciplines that shed greater light on the question of the moment. (And for that reason, and undoubtedly to the relief of those who dread any discussion of taxes and tax law, I'll not post further on the subject.)
Like Richard, I would like to follow up on Rick’s invitation to respond to Professor Foley’s interesting column on “Stem Cells and Constitutional Duty.” I thought it would be useful to reread or review several relevant texts before offering my response. The texts I re-examined are the following: the majority opinion in Roe v. Wade; the majority in Stenberg v. Carhart; and Michael Scaperlanda’s and John Breen’s important and insightful essay Never Get Out’a the Boat: Stenberg v. Carhart and the Future of American Law.
I begin with one area of agreement with Professor Foley: people do have a right under domestic and international law to beget children, or not. But once they do, regardless of the method used to “beget,” their responsibilities and accountabilities arise. I suspect this is where Professor Foley and I would begin to part company. And so, let me offer some principal points of disagreement with her commentary.
I must respectfully disagree with her contention that the President abused his Executive Power and violated his Article II oath to “preserve, protect and defend the Constitution of the
United States
.” First of all, the President followed Article I, Section 7.2 of the Constitution in registering his disagreement (objections) with the stem cell legislation. Under the Constitution, it was for the Congress to override the veto with a super majority, and this the Congress failed to do in spite of its attempt. I cannot see how the President failed in complying with the duties of his oath as she asserts. It may be that Professor Foley disagrees with the President’s objections (this seems a plausible avenue to consider when one reads the rest of her commentary). But her disagreement with his justification for the veto does not make the case for stating that he abused his power and violating his Constitutional oath.
I think Professor Foley and I have very different understandings of what the majority said and did not say in Roe v. Wade. Let me concentrate on those issues that are raised in her commentary. The majority did not define the meaning of “person” in Roe. Therefore, it did not answer the question posed by the State of
Texas
. As a matter of fact, Justice Blackmun avoids answering “the question” when he concludes the relevant discussion in Section IX of the majority opinion by stating: “This conclusion [regarding the majority’s dicta about the 14th Amendment and the nature of personhood], however, does not of itself fully answer the contentions raised by
Texas
, and we pass on to other considerations.” I believe the inability of the Supreme Court in Roe to define personhood is one of the important points made and ably demonstrated by John and Michael’s essay to which I have previously referred. In candor, the Court avoided the issue and hence passed “on to other considerations.” The Court did not define the vital term “person.”
Of course, while we are at it, we need to consider that the Constitution’s original text did minimize or eliminate the personhood of some human beings. Article I, Section 1.3 states that those human beings bound in permanent servitude only counted for three-fifths of a person; native peoples counted not at all. With the passage of time, these provisions limiting or denying personhood were superseded by the 14th Amendment. Since the Court has not addressed the issue in Roe or any other case regarding the personhood of the embryo or fetus, I shall hold further comment on Professor Foley’s remarkable observation.
Professor Foley also develops an interesting argument when she asserts that “parental liberty trumps any interest government might have in protecting pre-viable human embryos.” While the
United States
never ratified the San Jose Convention (American Convention on Human Rights) of 1969, it did sign the instrument. Normally signature implies that the signatory country, even though not a party by ratification or accession, will not do anything to undermine the objectives of the instrument. In any case, this instrument states one relevant objective in Article 4 that “Every person has the right to have his life respected. This right shall be protected by law and, in general, from the moment of conception…” Another concern I have with Professor Foley’s contention on this topic is who should be considered the “parent” of cloned human embryos? In spite of some set backs, scientists are getting closer to cloning human embryos. Should that occur, will they be considered the “parents” of these embryos; will those who donated cell material used for each clone be viewed as the “parents”? If so, what liberty of theirs is at stake? But then Professor Foley concludes in this part of her discussion that the President’s view on the status of embryos and his interpretation of the Constitution conflict with the undeniable law of the land. I respectfully suggest she is wrong in this assertion.
Another of her points meriting response is her contention that the President relied on his personal moral views in the exercise of his veto power; Professor Foley further contends that this is fundamentally antithetical to the law because it was contrary to the Constitution (the President “pursue[d] an agenda contrary to our declared Constitution”) and thwarted the will of “We the People.” By her professed standard, it would follow that President Clinton acted unconstitutionally in his “thwarting” the will of “We the People” when he vetoed the partial birth abortion legislation duly enacted by Congress.
This brings me to Professor Foley’s general concerns about the difficulty with relating “personal moral views” and public policy and law making. It would seem that she would also be opposed to “personal moral views” that support environmental, safety and health, and education legislation, too. Of course, many who supported the Civil Rights Act of 1964 did so out of their “personal moral views.” We must not exclude the fact that President Lyndon Johnson relied, in part, on morality when he signed this important legislation on July 2, 1964. On the important occasion he stated, “But [discrimination] cannot continue. Our Constitution, the foundation of our Republic, forbids it. The principles of our freedom forbid it. Morality forbids it. And the law I will sign tonight forbids it.” [italics mine] I wonder if Professor Foley would consider the civil rights legislation tainted by the President’s remarks?
It would seem that Professor Foley and others make another invalid assumption about moral (or religious) views that support public acts such as law making. The second error that I believe she makes in this regard is her inability to concede that, at least on some issues, the views of moral and religious persons can coincide with persons who subscribe to purely positivist outlooks. History demonstrates that this coincidence has existed in the past. I am confident it will continue in the future.
A final comment pertains to Professor Foley’s rhetorical flourish when she claims that the President has assumed “near dictatorial power” in exercising his veto. The President did no such thing. He followed the Constitution as I have demonstrated. Now, had he used his Article II power as Commander-in-Chief of the Armed Forces and prohibited the Congressional attempt to override the veto, she would have reason to express this concern. But, this is not what the President did; he simply followed the Constitution.
Another aspect of her flourish is in her concluding sentence that the President’s veto did not preserve, protect or defend OUR Constitution; rather, “he was giving it [the Constitution] the finger.” Which finger, Professor? His index finger used in emphasizing a point? Perhaps it was a thumbs up gesture? Or, maybe it was a thumbs down gesture? Since the President is a Texan, perhaps Professor Foley did not recognize some effort on his part to signify “hook-um horns”. But, I shall leave the interpretation of any hand gestures to those more skilled in construing body language.RJA sj
Just a couple of quick points on the estate tax, the elimination of which I still believe faces opposition from the principles of CST. I agree with Greg that policy judgments require wading into the facts, but my impression is that the case for elimination is grounded more in rhetoric than in fact-based concern for the common good. From a report by the group Public Citizen:
A 2005 report by the Congressional Budget Office found that at the current exemption level of $2 million, very few family farms would owe an estate tax. If the $2 million threshold existed in 2000, as many reform proposals would have allowed, only 123 farms in the entire country would have owed estate taxes that year. The CBO study also found that among the very few that would owe taxes, the vast majority would have sufficient liquid assets (savings, investments and insurance) to pay the taxes without having to sell off any farm assets. For example, at the $2 million threshold, only 15 of the farms would have had insufficient liquid assets to pay.
Like the allegations about family farms, the notion that the estate tax forces family-owned enterprises out of business is equally fallacious. Of the 2.5 million people who died in 2004, only 440 left a taxable estate with farm or business assets equal to at least half the total estate, according to the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, and 210 of these owed less than $100,000.
I'll also note that this is not an inconsequential debate: the same report estimates that a full repeal of the estate tax would cost the government $1 trillion over ten years.
I don't think that Professor Foley's view that President Bush violated his oath of office is remotely plausible, though it is surprising how frequently these arguments are made. The same sort of argument was made against the Unborn Victims of Violence Act. I had a chance to testify on this legislation and the exact same argument came up in the hearings. In response to the argument that it was inappropriate for Congress to fail to demonstate the intellectual submission of intellect and will to the Court's opinions in Roe and Casey, even when operating outside the context of abortion, I quoted Lincoln's statement in his First Inaugural Address: "At the same time, the candid citizen must confess that if the policy of the Government upon vital questions affecting the whole people is to be irrevocably fixed by decisions of the Supreme Court, the instant they are made in ordinary litigation bewteen parties in personal actions, the people will have ceased to be their own rulers, having to that extent practically resigned their Government into the hands of that eminent tribunal." This seems to be just as persuasive today.
Here is a link to a new paper of mine, "The Freedom of the Church", which is forthcoming in the "Journal of Mirror of Justice" . . . I mean, the "Journal of Catholic Social Thought." Here's the abstract:
This Article focuses on what the American theologian and Jesuit John Courtney Murray called a Great Idea, whose entrance into history marked the beginning of a new civilizational era. That idea was libertas ecclesiae, or the freedom of the Church. It served, according to Harold Berman, as the catalyst for the first major turning point in European history and as the foundation for nearly a millennium of political theory. And, this Article suggests, it remains a crucial component of any plausible and attractive account of religious freedom under and through constitutionally limited government.
It is tempting to assume or expect that such a great idea must be deeply rooted and comfortably well established in our Constitution's text, history, structure, and doctrine. However, this Article suggests that there might not be, in American constitutional law, a commitment to - or even room for - the libertas ecclesiae principle, richly understood. Instead, it could be that we are living off the capital of this idea - that is, we enjoy, embrace, and depend upon its freedom-enabling effects - without a real appreciation for or even a memory of what it is, implies, and presumes. In our religious-freedom doctrines and conversations, it is more likely that the independence and autonomy of churches, or of religious institutions and associations generally, are framed as deriving from, or existing in the service of, the free-exercise or conscience rights of individual persons than as providing the basis or foundation for those rights. Accordingly, this Article considers Murray's warning that the individual conscience is not equal to the burden of being the keystone of the modern experiment in freedom.
I'd welcome any reactions.
On a related note: At a recent conference, "Can You Tell Me What a Parish Is?", held at Loyola in Chicago, I commented on an (excellent) paper by Mark Chopko. During the break, Fr. Michael Sweeney, O.P., the President of the Dominican School of Philosophy and Theology, made an important and perceptive point about the Freedom of the Church, namely, that -- properly understood -- is not only the narrow concern of the Church, but a benefit to all of us who value living under constitutionally limited government, and who think that such government makes more likely authentic human freedom.
I am interested in people's reactions to this piece, from Jurist, by Professor Elizabeth Price Foley. She contends that, because "[t]he Constitution, as interpreted by the U.S. Supreme Court for the last thirty-three years, does not recognize pre-viable embryos as 'human life'"; and because, given Casey and Roe, "under the Constitution of the United States, parental liberty trumps any interest government might have in protecting pre-viable human embryos"; it is therefore the case that "when President Bush justified the use of his veto power to prevent 'the taking of human life,' he was using Executive power to effectuate a personal moral view that is fundamentally antithetical to the law as declared by the Constitution and interpreted by the U.S. Supreme Court. He was defeating a legislative act – thwarting the will of 'We the People' – to pursue an agenda contrary to our declared Constitution."
Is this argument -- I hope I have stated it fairly -- persuasive, or even plausible? Put aside, for now, doubts about whether the Roe line of cases in fact stands for a constitutional-law rule that pre-viable embryos are not "human life" (as opposed to a rule that, because such embryos are not "persons" protected by the Fourteenth Amendment, before viability, a woman's privacy and liberty interests outweigh whatever interests the state might have in protecting them). Is it likely that the President's duty to “preserve, protect and defend the Constitution of the United States" precludes him from vetoing a bill for moral reasons that are in tension with the premises and implications of a particular line of Supreme Court decisions? I would not have thought that even the strongest judicial-supremacy positions entailed such a result.
On the question of the elimination of the federal estate tax, as with most issues of economic and government welfare policy, the implications of Catholic Social Thought depend on how one sees and judges the underlying practical realities. Once pat-answers and bumper-sticker slogans are left behind, the exploration of such matters necessarily—and quite appropriately—turns on how things look on the ground, where the rubber meets the road. Catholic teaching helps us formulate the questions and rules some motivations in and out of bounds. But we are not spared the hard work of grappling with complex sociological factors, understanding statistics, evaluating economic models, trying to anticipate secondary effects, in other words, all the messiness of real life. As a consequence, prudence often leaves us in a position where reasonable people with full fidelity to the precepts of Catholic Social Thought come to different conclusions.
For many people, proposals for elimination of the federal estate tax evoke images of fabulously wealthy trust fund babies living the playboy life off the income generated from inherited assets of a prior generation. If this is all that were at stake in the estate tax issue, then the only question for Catholic thinkers would be whether a proposal to tax this transfer of wealth were motivated by a legitimate sense of equity and securing revenues to advance the common good or instead by envy and, as Rick Garnett puts it, a “soak the rich” attitude.
Instead, it is significant that the most vocal supporters of the proposal to eliminate the estate tax are the various associations and federations of small business people and family farmers. When the owner of a small business or farm dies, the estate tax requires that the entity be valued according to its going value were it to be sold, that is, were the business to be transferred by sale to a new owner and were the farm-land to be sold. If an estate tax is then pressed against that value, the effect then could be to force the sale of the business or farm land to pay the tax, thus preventing transfer of the family business or family farm to the next generation.
When thinking about the estate tax and the implications for Catholic Social Thought, consider these words of the David McClure, president of Montana Farm Bureau Association:
“When the average person sees the figure of $2 million as the current exemption, or even $3.2 million, which is the exemption in 2009, it sounds like a lot of money. However, when you look at how land prices in Montana are currently skyrocketing, it doesn’t take a whole lot of land to exceed that value. Farm operations are capital-intensive businesses whose assets are not easily converted to cash. Add your farm equipment—a combine can be worth well into six figures—barns and sheds, and you’re usually well over that amount.”
As bad as would be the loss of the family farm itself, the implications for Catholic Social Thought do not end there. As Mr. McClure notes, if the family farm is subject to forcible sale to cover the estate tax, there could be a cascade effect on the rest of the rural community, with respect to agriculturally-related small business that support the family farm, social structures behind family farms, etc. In addition, urban sprawl and loss of agricultural land is advanced by the state tax. To again quote Mr. McClure: “The irony is that many who are opposed to death taxes elimination are the ones who are vocal about expanding high-density subdivision development, urban sprawl and loss of aesthetically attractive ag land open space; yet the underlying driver of these very problems is often an estate tax bill that the heirs can’t pay."
Consider further the case of family-owned businesses, including those that began small but have grown beyond the size of the classic Main Street merchant. A family that has built a business over time and now have a number of stores or locations could easily have built something now valued at several million dollars, although that value is mostly sunk into the capital assets of the business. The imposition of the estate tax upon such a family businesses could well force the enterprise to be put up for sale or converted into a publicly-held corporation. The estate tax thus contributes to the decline of family-owned businesses, with the loss of the social benefits that we all obtain from having our local retailers and service-providers owned and operated by individuals who are personally invested to the community.
It is striking that those who bewail the rise of Walmart and other mega-corporate retailers are also likely to support a robust imposition of estate taxes that undermine the family-owned businesses that compete against the Walmarts of the world. Moreover, the estate tax essentially discriminates against the family-owned businesses and in favor of the Walmarts and other publicly-held corporations. While the large corporate entities pay taxes on profits only once, the family-owned business may be taxed on the same profits twice, once when initially earned and then again, upon the death of the original family owner, when the estate tax is imposed against the business assets which were acquired by investing those profits back into the family business.
Might an alternative estate tax regime be created that avoided these effects, that is, allowed for a transfer of family businesses and family farms, thus being imposed only in the context of the stereotypical extremely wealth trust fund babies? Perhaps. But it would be a different system than is presently in place and if calibrated to avoid destroying family-owned businesses that have a paper value of fairly large size would generate a very small revenue for the federal government. Nor would secondary economic impacts thereby be avoided, as we still would experience the effect of removing those investments from the private economy; effectively encouraging resort to various means by which to avoid estate tax implications, whether those are economically productive and socially desirable or not; and the continued expenses of tax-planning paid to lawyers, especially by those family-owned businesses and farms that we want to exempt if they are able to structure arrangements appropriately. Is it really worth the candle? And, by this point, is really a matter with deep implications for Catholic Social Thought and worthy of attention among the other pressing issues in this society?
Just a quick follow-up to Rick's post about yesterday's Senate vote. Teresa Collett (who is from St. Thomas and is probably the leading expert on parental notice laws) and I testified last year on H. R. 748 (the Child Interstate Abortion Notification Act). The full hearing is available here.
Rob asks whether anyone will "dissent" from his view that "the existence of the estate tax -- putting aside questions of rate, when it kicks in, etc. -- is supported by CST, and perhaps more strongly, that its elimination would be condemned by CST[.]"
I would not term my thoughts here a "dissent" but, I have to admit, I am not sure how to "put aside questions of rate, when it kicks in, etc." because, it seems to me, such questions are inseparable from an effort to apply the principles of CST to the issue at hand.
Does CST require a regime under which -- in addition to sales taxes, property taxes, progressive income taxes, capital-gains taxes, gift taxes, etc., all in the service of the common good -- all estates of more than $1 million are subject to an additional tax of (say) 50%? Of course not. Would a movement -- defended in good faith in terms of overall economic benefits to the nation -- from such a regime to one where the tax rate was reduced to 45%, and the tax kicked in at $2 million, clearly be inconsistent with principles of CST? Of course not. Would the elimination of the estate tax altogether, as part of a comprehensive package of tax reforms and increases that, taken as a whole, increased productivity and government revenues, which were then -- we can dream -- conscientiously directed toward the common good, in accord with subsidiarity, the preferential option for the poor, and so on, clearly violate principles of CST? (I am not saying, of course, that I have any idea what such a package would look like). Not necessarily.
Now, Rob asks about this proposal:
Let's assume, for the sake of argument, that the estate tax were to apply only to estates of $100 million or more, and that its rate was 5%. At these numbers, it is difficult to discern significant incentive-based consequences in terms of wealth creation and productive behavior. There would still be calls for its elimination, of course, but they would run along the lines of "It's mine -- hands off!" Such bright-line principles, lacking a functional justification relating to the common good (or the option for the poor, solidarity, etc.) appear to me to be directly opposed by CST.
I suppose I share Rob's instinct about such a proposal. On the other hand, I wouldn't think it fetishizes private-property rights to say that it is not the case -- is it? -- that one's right to lawfully acquired property dissolves whenever the public authority asserts a need that might be served by taking that property. And, it seems to me that it would be reasonable, when assessing Rob's proposal under CST principles, to ask whether the (minimal) funds raised through such a tax actually would be used to promote the common good. What if, for example, the funds were ear-marked for embryonic stem-cell research?
Now, I'm sure that Rob is right and that, in fact, much of the opposition to the estate tax proceeds simply from an excessive enthusiasm for the "hands off! It's mine!" principle. (I'm also sure that much of the support for the estate tax has little to do with the common good, and reflects instead pandering to the "soak the rich!" instinct.) Still, I continue to think that, with respect to most policy questions relating to taxation, regulation, and spending that are likely actually to be presented, CST provides principles that we are bound to employ, but not bright-line answers.
An office-supply company just came out with a survey showing that about 43 % of office workers work on vacation, up from 23% in 1995. 41% of the workers surveyed said it was their laptop computers that helped them do this. On top of all that working on vacation, the survey found that only 61% even use all the vacation time they have coming to them.
This might be too incendiary (or hypocritical) a suggestion to make on a blog, but I can't help but think that this has to be one of the major contributors to the breakdown of the family. I speak as someone who is finding herself having more and more difficulty resisting the siren call of the Internet, both on vacations and even during evenings at home. Sure, now I can be in the same room with my kids while I'm checking my e-mails, with The Wiggles singing and dancing in the background, but I'm not singing and dancing with my kids. (Of course, that might just be the effect of age, or of just being sick to death of the jingles of those four goofy Australians and their irritating furry friends, rather than the fact that I'm working on my laptop.)
I recently met a school psychologist, and asked her what the major problem was that she was seeing in elementary school kids these days. She said it was anger. Could our kids be getting mad because we are all spending less and less time giving them our total, undivided attention, even when we're not at work?
