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Sometime before the July 4 congressional recess, Senate Majority Leader Tom Daschle (D-S.D.) will allow a vote on the full and permanent repeal of the Death Tax. Senator Daschle does not support permanent repeal, but due to election year politics he agreed to hold a vote. Senator Daschle has no intention of saying exactly when the vote will take place. He will bring the bill to the floor the very moment he thinks he is most likely to have the votes to kill it.
Senator Daschle, however, has a problem. Many of his Democrat colleagues want to avoid opposing repeal of the Death Tax. A “typical” moderate Democrat up for reelection this year hopes Daschle finds the votes to kill the legislation from someone else. A politician running for re-election – in either party – wants to vote for complete, total, and permanent repeal. It’s not just a tax issue, this is a values issue and this vote speaks volumes about each senator’s vision of the nature of the relationship between the individual and government.
Do we want the government to have the power to tax you and your loved ones because you died? If your senator is locked in a tough re-election battle, you know how he or she wants to answer that question.
Not to add any pressure to the wavering or “undecided” senators, but the Death Tax vote also represents a significant signal to whether or not he or she supports fundamental tax reform. Politicians in both parties love to criticize the IRS and bash the tax code. Now they have a chance to put substance behind their rhetorical flourishes.
No provision of the tax code is more representative of what’s wrong with the current code than the Death Tax. According to Congress’s own Joint Economic Committee, the cost of compliance with the Death Tax exceeds the revenue it generates for the Treasury. How can a senator say, “We need tax reform” and turn around and vote to keep such an inefficient and complicated tax in place?
The current tax code generates anger and frustration because it is confusing and treats people differently. Individuals who do what the government wants get one set of benefits and individuals who make their own choices pay more taxes. Again, no provision of the code is more emblematic of this unfairness than the Death Tax. For starters, the current code treats people differently depending on the year the individual dies. (Apparently, the government has some preference for when you to die.) If you die in 2005, you pay one amount. If you die in 2009 you pay significantly less. If you die in 2010, you pay nothing. If you die in 2011, you pay what you would have paid before 2001. Ask your senator, “Why do you care when I die?” And if he or she gives you the slightest bit of rationale, you might add that any affirmative steps you (or your spouse) take to conform your death to suit the government’s preference is in fact ILLEGAL. The government doesn’t even allow you to do what the government wants you to do!
Often you hear politicians blast the current tax code – correctly - because it discourages savings and investment. The Death Tax actually punishes saving and investment. Take for example, two individuals with the same lifetime income. One spends it on fancy cars and expensive vacations. The other saves in the hopes of creating a nest egg for his children. Who pays higher taxes under the current Death Tax regime? The saver does. The current code encourages individuals to hire lawyers to shelter your assets in Death Tax avoidance schemes. That is not a tax code that encourages investment. If your senator really means it when he or she says we need to encourage more saving and investment, they must vote for permanent repeal of the Death Tax. Otherwise, your senator is just another politician spouting empty election year rhetoric.
Sometime, in the next five weeks, the Senate will take an important vote. The vote is about good economics. It is about fairness. And, it is a litmus test – if the politician is going to talk the talk on tax reform, they need to walk the walk. A vote to keep the current Death tax in place – in any shape or form – is a vote against fundamental tax reform. Our senators need to be reminded of this simple fact.