Until the George W. Bush administration, the estate tax -- what conservatives often call the "death tax" -- was 55 percent. President Bush changed that to zero. But as with other Bush cuts, the estate tax is set to return in 2011.
Douglas writes:
Given the track record of great industrialists past, it's not certain that the Kochs wouldn't find a way to keep their private company within the family even if the estate tax returns to pre-Bush levels. But there's no doubt the tax would consume a great deal of their fortune. Of course, that is just what the tax intended to do, and there are many good reasons for having it.To understand the impact on the Koch family, consider that some reports place the wealth of the Koch brothers at $36 billion, their company second at times only to Cargill as the largest privately held company in America. To the Koch family, a 55% estate tax means they must contemplate a corporate re-organization, the result of which would conceptually be to go public and sell off 55% of their shares in order to pay the tax or, more likely, that they would donate the majority of shares to a charitable foundation. Either way, the estate tax at 55% would entail a transformation of Koch Industries and a diversification of ownership, with ramifications for the family's long-term control.
Former Treasury Secretary Robert Rubin and hedge fund manager Julian Robertson make the case for bringing back the estate tax in the typically anti-tax editorial pages of The Wall Street Journal.
The tax would provide billions of revenue to a cash-strapped Treasury. "[R]oughly 100% of the funds would be spent, while part of any large inheritance is highly likely to be used for savings or debt repayment," Rubin and Robertson point out. (It's worth pointing out that much of this wealth has never been subjected to income taxes, and there's little truth to conservative protests that the estate tax is a "double tax.")Estate tax is grounded in powerful philosophical underpinnings. Our nation views itself as a meritocracy and a land of opportunity and we have a proud legacy of upward mobility. ... An estate tax helps us promote this legacy, by avoiding the accumulation of inherited economic -- and political -- power that is antithetical to this historical vision of our society and to the vitality and dynamism that has contributed so much to our success.
There's a final argument in favor of restoring the levy, and it's one that should resonate with any self-made mogul. The estate tax, as Winston Churchill once put it, offers "a certain corrective against the development of a race of idle rich."