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Copyright 2000 The San Diego Union-Tribune  
The San Diego Union-Tribune

July 24, 2000, Monday

SECTION: OPINION;Pg. B-7

LENGTH: 883 words

HEADLINE: 'Tis the season to bribe the voters

BYLINE: James O. Goldsborough; THE SAN DIEGO UNION-TRIBUNE

BODY:
There is no member of the human species so abject as a politician in election heat. As November comes, they get positively giddy. What must I do to be re-elected, they ask, with no thought to good government.

The one thing we can always expect is tax cuts. It matters not if the federal budget is in surplus or deficit, if the economy is boom or bust, if we have wars to fund or a peace dividend. Tax cuts are bribes for votes. It is particularly bad this year, with both parties desperate to win control of the House of Representatives.

One of the worst examples of election-year pandering was Newt Gingrich's "Contract With America," which thankfully did not outlast Gingrich himself. Gingrich elevated pander to an art form, hiring PR firms and packaging promises in a pretty program with a patriotic name. Sure fire.

Four years ago, Bob Dole, a prudent man while in the Senate, thought he could win the presidency by making Jack Kemp, the crown prince of tax cutters (Steve Forbes is the king), his running mate. It was a gamble, for the country had not balanced a budget in two decades, and it failed. Voters have always been able to see through Forbes, (who would tax only labor, not capital), and Kemp did not help Dole.

Politicians never tire of trying to hoodwink us for they think they are smarter than we are. H.L. Mencken, no friend either of politicians or the common man, once described the awful relationship:

"Truth, to the overwhelming majority of mankind, is indistinguishable from a headache. After trying a few shots of it on his customers, the larval statesman concludes sadly that it must hurt them, and after that he taps a more humane keg, and in a little while the whole audience is singing "Glory, glory hallelujah," and when the returns come in the candidate is on his way to the White House."

Let us consider one of the current tax games under way (there are, of course, several). We have had in this nation since Revolutionary times a form of estate tax, paid by decedents on property passed on to heirs. It is a progressive tax and has been, from time to time, challenged before the Supreme Court, and always upheld.

In a 1898 estate tax case (Knowlton vs. Moore), the very nature of progressive taxation was attacked as "so repugnant to principles of equality and justice that the law should be held to be void." The court disagreed.

Indeed, the principle of progressive taxation would soon be be written into the Constitution with the 16th Amendment, which became law in 1913 upon ratification by Wyoming, the 36th state. That amendment established that income taxes, like estate taxes, were indirect taxes and therefore could be progressive.

"Taxes," Justice Holmes wrote about this time, "are what we pay for a civilized society."

But not in an election year.

In its present form, the estate tax has existed since 1916. If progressivity is the basis of any just tax code, this is a good tax. It affects only the richest 2 percent of Americans who die, those leaving estates worth more than $675,000 (rising to $1 million by 2006). That exemption is doubled for family businesses and farms.

In 1997, the last year on which full statistics are available, the tax was levied on 47,596 estates. But more than half the $20 billion in estate taxes collected that year came from 2,400 estates valued at more than $5 million.

The average tax paid on estates valued at between $600,000 and $1 million was $45,810. And remember, that these estates often are in the form of stocks and real estate on which capital gains taxes have not been paid and are not paid when passed to an heir.

Nations that have recently repealed estate taxes, like Australia and Canada, have replaced them with capital gains taxes paid on the value of appreciated but unrealized wealth, so that bequeathed income does not go entirely untaxed.

Don't look for our politicians to propose that change anytime soon. On the contrary, the Republican Congress not only has repealed the estate tax (though the president will veto the bill) but wants to repeal the capital gains tax, too. Let's not forget that the richest Americans are also the biggest campaign contributors, but it would be cynical of me to suggest a connection.

America's Gini index, which measures a nation's income distribution, is the highest of any wealthy nation, meaning that the gap between our richest and poorest people is the greatest of any wealthy nation.

This gap is also reflected in World Bank statistics showing that America has the highest child poverty index of any wealthy nation. Given this problem, the last thing politicians should be doing is repealing the estate tax, paid by our wealthiest decedents.

Which party deserves more blame for the quadrennial panderama? I think Republicans deserve more respect. At least they really believe that money is virtue and poverty is sin.

Those poor Democrats -- nine in the Senate and 65 in the House -- who voted for estate tax repeal don't even have principle to stand on. They're afraid voters will be seduced by the Republicans, who believe, as Mencken said, that "hooey pleases the boobs a great deal more than sense."

Goldsborough can be reached via e-mail at jim.goldsborough@uniontrib.com.



LOAD-DATE: July 26, 2000




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