The title alone is enough to ignore Sebastian Mallaby’s latest editorial, but a quick dissection of the text may go further at undermining the crazy assumption that taxes are good because they bring in much-needed revenue, no matter how unfair (or harmful) the tax may be. Consider:
It doesn’t matter if you are liberal or conservative, Democrat or Republican. There is no possible excuse for doing what Congress is poised to do this week: Abolish the estate tax.
The federal government faces a future of expanding deficits. Thanks to the baby bust and medical inflation, spending is projected to rise by nearly 3 percent of gross domestic product by 2030, a growth equivalent to the doubling of today’s Medicare program. What is the dumbest possible response to this? Take a source of revenue and abolish it outright.
What’s the dumbest possible assumption? Accept that spending, and the inevitable increases, are untouchable. Here’s an idea: spending is out-of-control? Stop spending so much. I can’t afford the BMW 645 I want, so I haven’t bought it. The concept isn’t difficult.
And since history is filled with examples of trust fund kids blowing their fortune and permanent elite status, here’s a little bonus fun:
The nation faces the prospect that inequality will damage meritocracy. When the distance between top and bottom widens, it becomes harder to traverse the gap; people of low birth are stuck at the bottom, and human talent is wasted. What is the dumbest possible response to this? Take the tax that limits what the super-rich pass on to their children and get rid of it. Send a message to hereditary elites: Go ahead, entrench yourselves!
Life isn’t fair. Get used to it.
I can’t help myself, so one more:
If the abolitionists succeed, some other tax will eventually be raised to make up for the lost revenue[ed. note: reduce spending?]. So which tax does Congress favor? The income tax, which discourages work? A consumption tax, which hits the poor hardest? The payroll tax, which is both anti-work and anti-poor? Really, which other tax out there is better?
The abolitionists don’t respond to this question because there is no convincing answer. Paul Volcker, the former Federal Reserve chairman, has written that “we would be hard-pressed to find evidence that, compared with the alternatives, a reasonable estate tax significantly discourages work or innovation or savings.” In other words, killing the estate tax and raising some other tax instead would damage the economy. [ed. note: he’s cheating.] And that’s before you take into account the positive distortions introduced by the estate tax, such as more social mobility and higher charitable giving. Charitable bequests will fall by at least a fifth if the estate tax is repealed permanently.
Positive distortions. Offered with no further comment.