Bill Summary: H.R. 1105 would amend the Internal Revenue Code to repeal the federal estate tax and the generation-skipping transfer (GST) tax. It would also lower the top gift tax rate to 35 percent.Background and Analysis: In 1916, the Woodrow Wilson administration pushed through the Revenue Act of 1916, which upped the income tax rates and introduced the modern estate tax.

The estate tax is the epitome of Marxist class warfare and wealth redistribution. It has no place in America.

The congressional debates over the estate tax (and media reports) conveniently failed to mention the influence of Marxist socialist inroads during the last century. Those inroads saddled our nation with several destructive programs and policies that have been sabotaging the American middle class and the American dream.

The Woodrow Wilson administrations (1913–1921) gave us the estate tax (tax on inherited wealth), the graduated income tax, and the inflationary federal reserve. Woodrow Wilson’s chief advisor, Colonel Edward Mandell House, had revealed his political agenda in a boring novel, published in the Fall of 1912, just as Wilson was elected president.

In Philip Dru: Administrator, House mapped out a subversive plan for socialist revolution in America. Through his fictional Philip Dru, House would champion “Socialism as dreamed of by Karl Marx” with a “spiritual leavening.” Because of the novel’s political dynamite, B.W. Huebsch published the book anonymously.

It is well to recall the first three planks of Karl Marx’s Communist Manifesto:

(1) Abolition of property in land and application of all rents of land to public purposes.

(2) A heavy progressive or graduated income tax.

(3) Abolition of all rights of inheritance.

Little known is the background to the Manifesto. Marx was commissioned to write it by the League of the Just, subsequently renamed the Communist League. Contrary to its image, the Manifesto’s program was not the enemy of the super rich.

Indeed, when the progressive income and inheritance taxes went into effect in this country, the truly super rich escaped the taxation by transferring their wealth to tax-exempt foundations (e.g., the Rockefeller and Carnegie foundations).

Instead, those taxes have served to prevent competition from below, making it difficult for newcomers to accumulate wealth.

Bush-era Tax Cuts

In 2001, tax cuts during the George W. Bush administration called for the gradual elimination of the estate tax — accomplished in 2010. But that legislation included a sunset provision, and Congress reinstated a temporary estate tax a year later. On January 1, 2013, Congress made the estate tax permanent at 40 percent for estates in excess of $5 million.

In early 2010, Investor’s Business Daily welcomed the tax’s temporary demise, “A Good Year to Die” (1/4/2010):

“Once dubbed the ‘Paris Hilton’ tax, the levy is supposed to target the inherited wealth of the super-rich who really didn’t earn it or don’t really need so much of it. Or so we’re told. But at some point, even inherited wealth was created and taxed in its creation. The death tax is double taxation, and just because you can’t take it with you doesn’t mean the government should take it from you or your heirs.” [Emphasis added.]
The 2010 IBD article also noted: “The death tax accounts for around 1% of federal receipts on average. But tax avoidance efforts and compliance costs in term of time and money cost the economy much more than that.”

         The day before the House vote on H.R. 1105, Heritage Action echoed the IBD assessment: “The revenue generated by the death tax is dwarfed by its drain on the economy and the amount of effort and preparation that goes into paying (and using high-priced lawyers and accountants to avoid) the tax.”

Democrat Objections

The House proposal to repeal the estate tax was met with Democratic charges that the GOP was in the pocket of the rich. Rep. Jim McDermott (D-WA) managed the Democratic opposition during the floor debate:

“Today’s vote to repeal the estate tax is just the Republicans’ last attempt to tilt the U.S. Tax Code in favor of their ultrawealthy campaign donors….

“Repealing the estate tax will surely sow the seeds of a permanent aristocracy in this country.” [Emphasis added.]

We strongly disagree with Mr. McDermott that repeal of the estate tax merely helps the rich. The July 30, 2001 issue of The New American said it well:

“[T]he truth is that this tax traditionally has put poor people out of work by liquidating family farms and small privately owned businesses that are asset ‘rich’ but cash poor. No other tax contributes more to the trend toward the amalgamation of business into huge corporate empires than the death tax; the only way many small businesses and farms can stay in operation after the death of the owner is either through incorporation or through the sale of the private firm to a large corporation.”

During the floor debate, Mrs. Kristi Noem (R-SD) provided a stirring personal example of the impact of this tax:

“On March 10 of 1994, my dad was killed in an accident on our family farm. I was taking college classes at the time. I was 21 years old, and I ended up coming home with my family and trying to figure out how we were going to get by without him after this tragedy hit our family.

“All I could hear during that point in time were the words that my dad had said to me for many years. It wasn’t very long after he was killed that we got a bill in the mail from the IRS that said we owed them money because we had a tragedy happen to our family.

“One of the things my dad had always said to me is, ‘Kristi, don’t ever sell land, because God isn’t making any more land.’

“But that was really our only option. We could either sell land that had been in our family for generations, or we could take out a loan. So I chose to take out a loan, but it took us 10 years to pay off that loan to pay the Federal Government those death taxes….

“A lot of the conversation today has been about that the rich need to pay more. Well, the rich will avoid this tax. They have the resources to do that. But it hits families like mine harder than ever. The rich certainly are not going to pay the burden of this tax.”

So one is right to question the uncharacteristically generous arguments of the super rich for maintaining the estate tax. When the issue came before Congress in 2001, one of the organizations defending the estate tax was “Responsible Wealth” — “a network of business leaders, investors, and inheritors in the richest 5% of wealth and/or income in the U.S. who believe that growing inequality is not in their best interest, nor in the best interest of society.”

Among those who have appeared on the roster of Responsible Wealth have been billionaire George Soros, David Rockefeller Jr., Steven C. Rockefeller, left-wing economist John Kenneth Galbraith, and television producer-leftist activist Norman Lear. At one time, information on the Responsible Wealth website claimed: “repealing the estate tax would undermine meritocracy and promote an aristocracy of wealth.” [Emphasis added.]

Unexpected GOP Opposition

Surprisingly, three GOP representatives voted against the repeal. At least 2 of the three have previously called for repeal of the estate tax. So why did they oppose it this time?

Rep. Walter Jones, who has supported past repeal efforts, said he opposed the measure this time, because the repeal was not tied to any offsetting reduction in spending and he wasn’t willing to support a measure that would add to America’s huge deficit problem.

While we generally find Walter Jones on the right side of most issues, we disagree with his reasoning on this one (we don’t score the GOP on this roll call anyway — see below).

Given the perverse nature of this double tax, designed to hold down the middle class, we think any congressman is remiss in not seizing an opportunity to support repeal.

Although both unconstitutional spending and current tax rates should be cut, it is not always practical to insist that they be tied together [in fact, the House should use its power over the purse independently to curtail spending]. A good question to ask: If there were no estate tax, should a conservative constitutionalist vote to create one in order to reduce the deficit? The “no” answer should be clear.

Moreover, the claim that repealing the “death tax” will add $269 Billion to the deficit over 10 years is likely erroneous.  Unleashing America’s entrepreneurial spirit and reducing the federal disincentive for private investment will positively impact the economy and federal revenues.

A September 23, 2014 study by the Heritage Foundation, “The Economic and Fiscal Effects of Eliminating the Federal Death Tax” confirmed that assessment:

“While the death tax applies to relatively few Americans and raises only tiny amounts of revenue for the federal government, it imposes substantial costs on the American economy in terms of lost jobs and reduced growth rates. It has been devastating to family businesses and the communities in which they operate. The Heritage Foundation estimates that eliminating the federal estate tax (and related gift taxes) would boost U.S. economic growth by more than $46 billion over the next 10 years and generate an average of 18,000 private-sector jobs annually. Eliminating the federal death tax would create economic opportunities for American families and free up financial assets for private-sector investment and income growth.”

In an editorial for USA Today (“‘Death Tax’ Punishes Success,” 4-16-15): House sponsor Kevin Brady (R-TX) argued:

“Since its creation as a temporary tax in 1916 to help fund World War I, the death tax has robbed $1.1 trillion in capital from the U.S. economy. The Tax Foundation estimates that eliminating the death tax will create 139,000 new jobs and increase paychecks by 0.7%. The death tax generates so little in taxes — a mere two days of federal spending each year. Because it encourages tax shelters rather than investment and saving, many say more federal revenue would be generated by killing it than keeping it.”

Republican Posturing

Unfortunately, this House vote was not a real opportunity for repeal, as supporters are unlikely to overcome the 60 vote hurdle in the Senate required to overcome a filibuster to proceed. And, even if it did pass the Senate, the measure faces a certain, promised veto by the President.

The House vote on estate tax repeal was clearly timed to coincide with the April income tax filing deadline so as to capitalize on voter frustration over taxes. Unfortunately, many of the votes in both chambers are designed purely to impress voters with no prospect of affecting policy.

So we don’t score the Republicans for their posturing vote. Nevertheless, we do give credit to those seven Democrats who broke with their party leadership to oppose this destructive and unjust tax.