Let the question be settled: Americans are as fed up as ever with our bewildering, unfair tax policy, which destroys jobs, family businesses, and the drive to succeed that has put the United States first among nations.
They are especially upset about taxes that could prevent their children from realizing the American dream. A prime example is the estate tax, or “death tax,” as it is grimly and properly known to those who have felt its bitter sting. The death tax represents all that is wrong with the U.S. tax code. No wonder more Americans oppose this tax — 67 percent, according to the Tax Foundation’s latest survey data — than any other tax on the books, including both the income tax and gasoline taxes.
Last month’s “Tea Parties” illuminated this simmering angst, as hundreds of thousands of taxpayers protested policies that will shackle future generations with outrageous debt and confiscatory taxes. These were not simply protests against “big government” and high taxes but protests against policy trends that threaten the virtuous practices of entrepreneurship and diligent saving.
The reason the death tax is especially unpopular is simple: The death tax is unfair, discriminatory, and directly impinges upon core American notions of virtue and the good life.
This one tax discourages hard work, thrift and long-term investment in a family business. This one tax confiscates the earnings and savings of a lifetime — assets that already have been taxed many times over — and prevents parents from passing their legacy on to their children. This one tax, more than most others, punishes success.
The death tax, in short, does everything government shouldn’t do.
Small wonder the hated tax is emerging as the number one tax issue in the 111th Congress.
Three months ago, the conventional wisdom was that the death tax would be set permanently at the current 45 percent level, as President Obama proposed. This was seen as inevitable.
Now it seems far less certain. Indeed, as the New York Times recently acknowledged, a likely fight over the death tax could threaten the president’s entire agenda.
What’s happening is that Americans are discovering the threat of “soft despotism,” and they don’t like it.
French political observer Alexis de Tocqueville coined the term “soft despotism” to explain how tyranny could arise in America. Tocqueville argued that the threat to American freedom would come not from a sudden, dictatorial power grab, but from a gradual “soft” increase in government control.
Tocqueville explained in his book Democracy in America that soft despotism is closely akin to an overly indulgent, coddling parent. Government “willingly works for their [the public’s] happiness; but it wants to be the unique agent and sole arbiter of that; it provides for their security, foresees and secures their needs, facilitates their pleasures, conducts their principal affairs, directs their industry, regulates their estates, divides their inheritances; can it not even take away from them entirely the trouble of thinking and the pain of living?”
Such government policies render citizens incapable of, and disinterested in acting independently. A modern day soft-despotism might arise through subsidies, TARP payments, mortgage guarantees, universal healthcare, and other programs that “little by little steals the very use of free will from each citizen.”
The death tax is a natural byproduct of soft-despotism. A state that coddles most of its citizens must suppress those who act independently. Entrepreneurs, family business owners, and diligent savers are precisely the kinds of people most likely to reject the siren call of soft-despotism. These people consider taking care of themselves, their families, and their communities a virtue and are none too enticed by promises of government largesse.
They also are the people who do the most to provide independence and upward mobility for others by creating jobs and economic growth. As Tocqueville warned, “Estate law itself would take charge of destroying fortunes in each generation, and no one would create new ones. The poor man, deprived of enlightenment and freedom, would not even conceive the idea of raising himself toward wealth, and the wealthy man wouldn’t let himself be carried along toward poverty without knowing how to defend himself.”
Soft-despotism cannot take root so long as citizens have the drive to flourish. The death tax, however, by confiscating 45 percent of one’s life-earnings at the time of death, is an easy way to chop down the tall poppies and eviscerate the civic virtues of self-reliance and independence.
The death tax is more than just a money grab. It is the ultimate expression of contempt toward entrepreneurs, family business owners, and those who work hard and save so they can help their children and grandchildren live a better life — without the “help” of government.
Americans may yet yield to the siren call of soft despotism but not before America’s entrepreneurs and family business owners put up a last stand.
The tax battles are just beginning. There can be no better battleground than the death tax.