Death Tax Discourages Saving

From the Cato Institute:

"The House approved legislation to permanently repeal the estate tax as Republicans and Democrats in the Senate intensified work on a compromise that could clear that chamber," according to the Wall Street Journal. "Forty-two Democrats joined 230 Republicans in approving the legislation by a wide margin. The estate tax currently is set to disappear in 2010 but return in 2011."

In "Repeal the Grave Robber Tax," Stephen Moore, a Cato senior fellow, writes that the estate tax, or the death tax, is a "dirty little secret" that mostly affects the middle class: "More often they are ordinary Americans with medium sized estates -- the millionaire next door. I am talking about ranchers, farmers and self-starter business owners. They are the risk-takers in our society who have spent a lifetime pouring sweat equity into their family-owned firms. They become anguished and enraged when they discover that their reward for a life of virtue is a confiscatory death tax that will rob their grave. Every year thousands of heirs are forced to sell the family farm or business to pay estate taxes. It's unjust given that this tax is imposed on dollars already taxed when the income was earned during the deceased's lifetime."

He continues: "The death tax rewards the life of lavish and unproductive consumption it is intended to discourage. This tax says to the elderly: Live high on the hog. Wrap yourself in material comfort. Eat, drink, be merry. You can't take it with you, and you can't leave most of it to your kids. Your goal is to die broke -- the ultimate form of tax avoidance. Meanwhile the frugal men and women who scrimp and save and build a legacy to leave to their children are hit by a tax that allows the IRS to snatch more than half. Through the death tax, we reward vice and punish virtue."