Wes Vernon
Death to the 'Death Tax'
Private vs. public transportation; Arlen Specter & Jack Kemp
By Wes Vernon
May 4, 2009

If you hope to leave your small business or your farm to your heirs, you'd better get all your papers in order and plan on dying in 2010. That is the year the Death Tax goes down to zero.

Earlier in this decade, then-President George W. Bush wanted to kill it dead — for good. But led by the likes of Illinois Senator Richard Durbin — who has lived off the taxpayers all his adult life and thus would not understand all the hard work, sacrifice, and perseverance that goes into creating and maintaining a viable family business — Congressional Democrats held the Bush administration to a graduated formula to phase out the tax ever so gradually over a period of years — finally expiring in 2010 — but then returning like Dracula in 2011.

Kneeling at the altar of the tax-grabbing bureaucracy, the Dems are at it again. President Obama and Capitol Hill Democrats are at odds only on whether to impose the death tax at 35% or 45%, and at what income level to allow this most unfair of all the unfair taxes to kick in.

Death Tax — nothing but bad news

A new study by Douglas Holtz-Eakin, economist and former director of the non-partisan Congressional Budget Office, estimates that by eliminating the Death Tax, America could create 1.5 million jobs.

You could even go beyond that and show that the Death Tax is a net minus for the federal government. Think compliance costs and impact on capital accumulation, argued the Joint Congressional Joint Economic Committee in a 2006 study.

Dick Patten's American Family Business Institute (AFBI) weighs in with a study just this year estimating that doing away with the tax altogether would net the federal government about an extra $26 billion in additional revenue.

So what good is it?

A writer for the super-partisan New York Times frets that without the Death Tax, President Obama won't be able to pay for his highest priorities of energy, health care, and education. Even forgetting for the moment that Obama's recipes in all these areas are ineffective, expensive, counter-productive, and arguably dangerous to the republic, the above studies put the lie to the claim that eliminating the Death Tax somehow starves the treasury. More investment creates more jobs. That creates more tax revenue for the feds — with more individuals and companies paying taxes.

The AFBI report says permanently repealing the Death Tax would —

  • Increase small business capital by over $1.6 trillion.

  • Increase the probability of hiring by 8.6%.

  • Increase payrolls by 2.6%.

  • Expand investment by 3%.

  • (As noted above) create well over a million new small business jobs.

  • Slash the current jobless rate by .9%.

So if the Death Tax does no good for the U.S. Treasury, fails to create new jobs, raises the unemployment rate, forces families to sell the family farm/business at fire sale rates to pay the taxman, and imposes an unfair double taxation on assets for which small business people had already been taxed over a lifetime — where is the justification for it?

It comes down to the class hatred of Marxism. That business person makes more money than I do. So take it away from him. That's what we're talking about here — and the Dick Durbins, the Harry Reids, and the Nancy Pelosis — and America's first fully socialist president — are playing to that peanut gallery.

The Death Tax is a spite tax.

Ah, but there's even more to the story

Might have known someone besides ideological Marxists has a dog in this fight. Comes now Brett Joshpe of the American Civics Exchange, who tells us "the insurance lobby" has as one of its priorities the preservation of the Death Tax.

Writing in National Review Online, Joshpe says insurance companies, through "second to die" life insurance policies, help survivors pay estate taxes and generate about $18 billion in premiums each year.

So this is the way the merry-go-round works: The insurance lobby has been "showering Democrats with campaign contributions." The Dems play to their Marxist class-envy radical base and rake in campaign cash in the process.

This sweet little racket works out for nearly everyone — the liberal politicians, their kook base, and of course, the insurance industry. Only the small business owners and their survivors get jerked around — paying the taxman, the insurance companies, or both. Cute? And you wonder why Grassroots America holds Tea Parties to vent its outrage?

Welcome to Federal Motors

The whole business of who pays for what in transportation is taking an interesting turn these days.

Instead of letting General Motors go through the normal bankruptcy process, which would recommend a no-nonsense business model to bring it back to health, the socialist mindset at the White House — never "letting a crisis go to waste," as White House hitman Rahm Emanuel put it — pounced on the automaker's crisis as an excuse for nationalization.

The federal takeover of General Motors and — by a different route — of Chrysler as well, will be a burden on present and future taxpayers. Worse, it will contribute to a debt that our children and grandchildren will have to bear.

We can argue until the cows come home over such alleged contributing factors as corporate mismanagement or government edicts on the companies to make pill-sized autos that nobody wants to buy, along with tougher and tougher gas mileage standards — or allegations that UAW demands in wages, work rules, and benefits put our homegrown auto companies at a competitive disadvantage with foreign manufacturers — or any combination of the above. Those are issues for another day when we have the space.

Here is the irony

General Motors, in particular, has been accused of engaging in a conspiracy in the twenties to buy up the streetcar lines all over America only to dismantle them and replace the trolleys with buses. That led to demands for more and bigger roads/highways that accommodated more and more automobiles and trucks. That had a deleterious effect on the intercity railroads — passenger and freight. The new highways were subsidized by the government, with the result that the unsubsidized railroads either went to bankruptcy court, or ended up in huge mergers, or survived by dumping their passenger service.

At that point, Amtrak took over the passenger trains in a government-backed operation, while the freight railroads consolidated and today are likely the only major transportation mode in the world that is responsible for both its operations and its infrastructure in the private sector. While they survive and serve the public well, the freight rail carriers do not earn a return on investment comparable to most major industries.

Thus, the subsidizing of our highways has crippled the economic viability of our unsubsidized railroads, in turn leading to a situation where the operation of today's passenger trains is federally subsidized, while those passenger trains themselves — in most parts of the country — operate on privately-owned infrastructure. That is upside-down from the way the system was supposed to work. But (A) we cannot undo the huge amounts of public money that built the Interstate Highway system, and (B) the proudly independent freight railroads are not about to give up ownership of their infrastructure to the government — even at a price tag that analysts agree would be prohibitive — though that idea was proposed for the Democrat Party's platform at least once (in 1968). We're almost afraid to be writing this — for fear President Obama would pursue it. Forget it. The freight trains are all private, while passenger trains are treated as a public utility. That is not likely to change.

Where socialism begins and ends

The so-called "highway lobby" has argued that the taxpayer subsidies for operating passenger trains should not exist. You can make that case until you realize that the above-mentioned distortion has led us to the point of no return on the issue.

Free enterprise stalwarts Adam Smith and Alexander Hamilton have said infrastructure — along with national defense — is a legitimate responsibility of the central government. Rail infrastructure consists of tracks, bridges, and signaling systems.

Automobiles and trucks — while operationally in the private sector — have been running on publicly-provided infrastructure — i.e., roads and highways. And that was okay by the Hamilton/Smith free enterprise yardstick.

But now — under this nation's first socialist president — that has changed, and big sectors of the auto/trucking industry are now in the public sector for both their operations and their infrastructure...just the mirror opposite of the freight railroads.

For how long?

John Robert Smith — Republican Mayor of Meridian, Mississippi, and former chairman of the Amtrak board — writes that the odds that the federal government "will ever get its hooks out of Chrysler or General Motors are slim to none regardless of what President Obama says." He cites Amtrak as having set the precedent.

If passenger rail under Nixon — whose ideology went with "whatever works" (as he saw it) — gave birth to a federally-operated Amtrak, it is unlikely that Obama — whose core values are to remake America in the mold of European democratic socialism — will provide a workable glidepath for GM and Chrysler and their unions to return those companies to the private sector. (The unions, remember, end up in powerful positions in the new "reorganized" regime).


Here's another difference:

The feds and the UAW end up in the business of manufacturing their primary transportation product at GM and Chrysler. (Ford and the others remain private.)

Rail car manufacturing, by comparison, is mostly in the private sector — for both freight and passenger, though on the passenger side, Alstom and Bombardier are foreign firms (because the post-World War II highway binge drove American firms out of business). The major freight car manufacturers are Trinity, Greenbrier, and American Rail Car. GM has manufactured locomotives in the past for both freight and passenger train operations. To the extent the giant firm continues to do so under its new regime, that will be the one crack in the door to government involvement in the rail car manufacturing business. There are privately-owned competitors.

With that thumbnail sketch of public vs. private involvement in ground transportation, let us hear no more wailing about how the railroads are a burden to the taxpayers while the Simon-pure highway modes are self-sufficient.

And this is just the beginning. Wait until the radical environmentalists pressure the politicians at GM and Chrysler into making only "green" cars that no one wants to buy. That's where — you might say — the "rubber hits the road."

Whither the GOP

Two events this past week refocus attention on Republican Party fortunes. First, we saw the party-switching of Arlen Specter, then the passing of Jack Kemp.

Arlen Specter

Senator Arlen Specter jumped from the GOP to the Democrat side of aisle. He did so because he decided the Republican voters of Pennsylvania were beneath his dignity. They were about to sack him in the primary. He complained the party had lost its "big tent" of the Reagan era.

Kudos to Republican South Carolina Governor Mark Sanford who wrote in the Wall Street Journal that the true "big tent" is one that respects regional differences and settling social disputes at the ballot box.

The governor says he's all for the "big tent," but in order for that tent to stand, it must have a pole. That pole he defined as freedom. The one thing Republicans can agree on, the governor stated, is that the federal government "is too big, takes too much of our money, and makes too many of our decisions."

Governor Sanford adds, "Republicans can welcome debate about legalized abortion or same-sex marriage, but we should be able to agree that social policy should be set through a democratic process, not by unelected judges." Amen.

Jack Kemp

Jack Kemp — former San Diego Chargers quarterback, longtime former congressman, and onetime vice-presidential candidate died Saturday. He was the political father of Ronald Reagan's successful "supply-side economics" and tax policy — which he believed were the keys to the "rising tide that lifts all boats," while also stressing that some help was needed for those "whose boats had sunk," as one obituary writer put it. As George H.W. Bush's Housing Secretary, Kemp fought housing discrimination.

He combined "civil rights" with conservative politics, as in his proposal to create tax-free zones in poor neighborhoods to attract businesses there.

Jack Kemp — the self-described "bleeding-heart conservative" — is perhaps best-remembered by the public as the VP candidate in 1996 who was poorly prepared for his debate with then-Vice President Al Gore. But Kemp was a man of many accomplishments and a deep thinker of the "big picture."

What might have been

This past weekend, I took a guided tour of the Washington sites connected with the assassination of Abraham Lincoln, including the house across the street from Ford's Theatre, where the 16th president was shot.

One can't help wondering how the political map of the remainder of the 19th and much of the 20th Century would have evolved if Lincoln had survived. Would the newly-freed slaves have been given educational opportunities enabling them to participate fully in American society? Would that have led to a bi-racial South in Congress that would have been at least as active as (if not more effective than) the all-white Southern Democrat delegations were in supporting conservative efforts to fight the Cold War? Would that have made Jack Kemp's approach to "civil rights" more the norm, rather than that of the Marxist radical W.E.B. Dubois?

Mind you, I don't have the answers to these questions. Still, I wonder.

© Wes Vernon


The views expressed by RenewAmerica columnists are their own and do not necessarily reflect the position of RenewAmerica or its affiliates.
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