Yes, yes, yes, we agree that government spends too much. But, certainly, some government spending is necessary: on the military, the courts and (uh, I forget the rest).
Anyway, we have to raise funds. The question is how to do it best. The current system is a mess, but it’s a starting point. Given the chance to change it, I would, first, lower marginal tax rates on ordinary income across the board; second, lower them again; third, lower them again, etc., etc.
Someday, we might get to a top rate of 20 percent and a bottom rate of zero. We’d get rid of every loophole and preference. That’s the goal. Everything else is a distraction: the proposed $500-per-child tax credit, the capital gains cut, the tuition credit–and your own efforts on behalf of eliminating the estate tax.
All taxation is confiscation. It’s the taking of personal income or wealth (which, as you say, is merely piled-up income). What makes the estate tax more humane than individual income taxes is that it takes from someone who’s no longer alive and thus doesn’t need the money.
Oh, it takes from his heirs, you say?
Well, Bob, that brings me to a simple change that would make taxes at death more fair and palatable. It’s this: Instead of taxing the “estate” of the dead person (which is to say, taxing the pile of wealth he had lying around when he died), we should tax the recipients of the deceased’s largess–tax them the way we would if they received the same amount as income.
In other words, we need an inheritance tax rather than an estate tax. Spouses would be exempt (as they are now), and we’d allow a hefty exemption (say, $200,000 per person). This would inspire people to spread their bequests around, and it would still leave the incentive to make large contributions to charity (an encouragement that would be sharply diminished if all taxes at death were abolished). What do you say to an inheritance tax?
On jobs: I am well aware that studies show that getting rid of the estate tax will create them. It should. Any tax, by definition, withdraws money from the private sector, which is where jobs are created. What I’m saying is that taxes are a necessary evil. The question is whom to tax and how.
On fairness: No, I do not favor income distribution. I don’t think we should take from the rich and give to the poor. I do think that we should take more from the rich than from the poor and use the money for the necessary functions of government. Don’t you?
Again, missing your wise counsel (except in the case of death taxes), as the House-Senate conference on the tax bill begins, I am