The Republican-controlled Senate today voted, in effect, not to repeal the death tax. That means that the onerous levy is still scheduled for resurrection in 2011.
The death tax is bad policy. Many people have written on why it’s bad economic policy.
But the death tax costs the country more than money. As I explained in my booklet “Death and Taxes: How Divorcing the Two Benefits the Family“, it costs virtue as well.
Not only does the death tax squelch the pursuit of dreams, but it also squelches the pursuit of the virtues on which healthy republics depend. A successful business requires vision and planning. It requires the willingness to delay gratification, to save for capital investment, to put in the long hours and make the financial sacrifices necessary to nurture a newborn business, to focus on long-range rewards instead of the frustration of short-term setbacks. It requires the discipline to work hard without giving in to discouragement. It requires the courage to take responsible risks and to rise to challenges. It requires dependability: Meeting payroll, paying bills, and delivering products on time. It requires the exercise of wisdom and discernment to choose among different options in product planning, marketing, hiring, and in investments.
The virtues needed to raise a successful business from the ground up carry natural rewards, including prosperity. They also bring less tangible benefits to the individuals and families who practice them, such as greater freedom from worry, the trust and confidence of others, and self-respect. Like all virtues, these build upon themselves when exercised to productive ends. Industry, discipline, and responsibility become habits when practiced regularly, contributing to healthy families, healthy businesses, and a healthy nation.
The estate tax discourages this very behavior. It clouds vision because it decreases the likelihood that what an entrepreneur builds will survive over the long term. It discourages delayed gratification because it makes immediate consumption relatively cheap. It blunts the exercise of wisdom by forcing people into making decisions due to estate planning considerations that they might not otherwise make. It teaches that courage and responsibility aren’t worth pursuing, because it seizes their rewards.
For these reasons, the estate tax is a tax on virtue, corroding the moral as well as the economic strength of the nation.