Connecting the Dots: Estate Tax Celebrates 100 Years

We’ve just celebrated the Centennial of a major event in American history. It was back in 1907 that a Republican president introduced legislation for the Estate Tax.

Ah, the Death Tax, as the ultra-right likes to call it. The Dynasty Tax, as its defenders more accurately call it.

Are you surprised that it was the Republicans who gave us the Estate Tax? And the Republicans were right!

The president was Theodore Roosevelt. In his State of The Union address that winter he said an Estate Tax “would help preserve a measurable equality of opportunity for the people of the generations growing to manhood… There should be equality in conditions under which each man obtains the chance to show the stuff that is in him when compared to his fellows.”

In other words, the Estate Tax wasn’t an issue of raising money. It was about what kind of society America wants.

Why the concern? America, while in the thick of its own rapid industrial expansion, saw the dangers emerging both here and in Europe of a new aristocracy. It wouldn’t be based on the old landed titles of earls and barons, but in control over banking, manufacturing and railroads.
What was the danger in that? Europe’s class society was built on inherited wealth. Those at the top believed they were naturally superior and were entitled to all the power that money affords. This arrogance carried over to their belief that the lower classes were destined to be their servants. And, above all else, in their eyes the purpose of the government and the economy was to maintain their families’ positions.
Put simply then, the Republicans saw the country at a crossroads: Would we have a society built on inherited position or an open society built on ability. The Republicans opted for ability.

By 1912 under another Republican president, William Howard Taft, the Estate Tax became law.
Indeed, throughout most of the Twentieth Century it was the Republican mantra that each generation should prove itself, that there should be no free rides. It was the conservative position.

Now the ultra-right wing of the Republican Party is out to destroy the Estate Tax.

An individual who has built a fortune and paid taxes during his or her life, they say, shouldn’t be taxed again on the same money at death. This is grossly misleading on two levels. For one thing, the appreciation of capital retained had not been taxes.

Second, an individual at death can’t be taxed— for the simple reason that at the moment of death he no longer has any money. At that moment he is worth not a penny more than the poorest person who ever lived. Indeed, if you want to say that there is a Death Tax, it is God who collects it. Nor does the current law hurt surviving spouses to whom the estate passes tax free. It is on the other heirs, who did not earn the money. Oh, they still gain. After paying the tax they still receive a financial benefit.

It was the Republican Party which gave us this pillar which contributed to America’s greatest achievements of the Twentieth Century—the creation of a fluid economy with economic opportunity. Now the same party that is trying to take it away. It would be better if they would listen to the voice of a great president one hundred years ago.

Paul M. Troop is a retired political and business reporter and editor now living in Johns Creek. In addition to working for such newspapers as the Atlanta Journal-Constitution, his articles have been distributed worldwide by such news agencies as Reuters and the NANA syndicate.