When I consider my generation’s legacy, I would like us to leave our children a healthy society with ample economic opportunity and not burdened by crushing levels of public debt. I believe a robust estate tax to help pay the bills is an essential tool to achieving this vision – and I’m ready to contribute my fair share.
This lame duck Congress is actively debating the future of the Bush-era tax cuts that are scheduled to expire at the end of 2010. Most attention has focused on the fate of income tax cuts, particularly for those households with incomes over $200,000.
Equally vital, however, is the future of the federal estate tax, our nation’s only levy on inherited wealth. At the beginning of 2010, the federal estate tax was temporarily repealed. If Congress fails to act, the estate tax will return to its 2001 levels.
I support retaining the estate tax – and believe we have an opportunity to proactively shape it to be an intergenerational pact.
In the October issue of The Atlantic, Michael Kinsley argues in an article, “The Least We Can Do,” that my generation, the so-called baby boomers, has one last chance to leave the next generation a positive economic future by eliminating the massive level of public debt we have accumulated over the last 30 years and to demonstrate that we have not squandered the legacy of economic prosperity we inherited from the Greatest Generation.
Kinsley argues for a broad estate tax to skim a portion of the estimated $41 trillion intergenerational wealth transfer that will occur in the next 40 years.
Previous generations created a remarkable fertile ground for wealth creation and broad based prosperity. By taxing themselves and investing in educational institutions, scientific research, public infrastructure, and other social investments like health care and the G.I. Bill – our parents’ generation left us the preconditions for prosperity.
But over the last three decades, we’ve underinvested in this infrastructure, run up huge structural deficits, and tolerated the emergence of extreme levels of income and wealth inequality. Will this be our legacy?
The growing and long-term structural deficits cannot be addressed by spending cuts alone, especially those that undercut productively going forward. We need to identify sustainable sources of revenue that do not disproportionately burden lower and middle-income households.
At the same time, we should reverse of a generation of tax cuts for the wealthy and collect more from those who have benefited from our society and who can afford to pay more. We should discourage the build-up of wealth dynasties that undermine our American value of meritocracy.
As much as possible, we should tax activity that doesn’t serve a productive purpose in the economy – and minimize taxation on activity that is associated with economic growth.
Retaining a robust estate tax meets these tests and should be a pillar of our revenue system. An estate tax is levied at the intergenerational transfer of wealth, not at the time of its creation. It raises substantial revenue from those with the greatest capacity to pay.
Families should be able to pass on a modest amount of wealth to children and other heirs before an estate tax is applied. But as an estate exceeds $2 million in value, a gently graduated estate tax should apply at low rates – for instance at 10 percent. By the time fortunes exceed the $20 million level, substantially higher rates such as those historically associated with the estate tax should apply.
If such a broadly applicable tax were instituted over the next thirty years, as baby boomers exit the stage, this revenue would hugely help eliminate deficits and generate resources for the types of investments that previous generations made for us.
I’ve worked in a variety of fields during my career, as an attorney in private practice, government prosecutor and presently as an entrepreneur in the life science industry. I’ve seen what it means for Massachusetts to be a Commonwealth in the value of a strong judicial system, regulatory agency to thwart market excesses, a set of public and private educational institutions, and thriving companies that foster medical innovation and advances in healthcare quality. None of these valuable institutions emerge without significant public investment.
Congress should reinstate the estate tax at the end of this year. It could be the most important gift we make to future generations.
Howard Brick is the COO and a director of Medpanel LLC.