Infinitive Splitter

At the often-unintentionally-hilarious Club for Growth blog, Andrew Roth links to this, which he calls "a very interesting theory" about the effect of the estate tax:

Once we lived in an America with a bewildering array of corner lunch counters, interesting bookstores, individualistic neighborhood clothiers, tailors, dressmakers, appliance shops each with its own unique spin on what the owner thought you wanted — lots of small individualistic enterprises that, like family farms, got passed down through the family from one generation to the next.

The estate tax replaced all these with McDonalds, Borders, The Gap, the ubiquitous extended warrantee, and ADM.

So the theory is simple: the basic method of passing business expertise from one generation to the next — the family business enterprise — has been replaced by the franchise operation, all thanks to your friendly neighborhood death tax.

And the next time some smart social reformer demands you watch his heart bleed for all the small local businesses Wal-Mart is killing, just ask him — "so what do you think the interitance tax [sic] is doing?"

Where to begin?

• The estate tax has been around since 1916.
• When extrapolating from one example to make a point, make sure the example itself proves the point. So before you say the estate tax has been destroying small businesses "like family farms," consider that even the anti-estate tax American Farm Bureau can't identify a single family farm that's ever been lost to the estate tax.
• The first $2 million of an inherited estate ($4 million for couples) comes tax-free. Of course, this figure has been adjusted slightly over the years, but still the estate tax has only ever fallen on the heirs of the super-rich (about 1 or 2 percent of all estates). It's quite unlikely that more than a few of the "bewildering array" of small-business owners in those good ol' days ever came close to paying it.
• Funny you should mention Wal-Mart. The Walton family is the wealthiest in America, and among those — including the Hiltons and Marses — lobbying hardest for estate-tax repeal. Paris Hilton pays the estate tax, not the owners of "corner lunch counters."
• "The ubiquitous extended warrantee [sic]"? WTF?

Fortunately, 41 United States senators exercised some sanity today by voting to uphold a filibuster and prevent a complete estate tax repeal. A "compromise" bill, which would cut the tax on unearned, inherited income for spoiled billionaire kids by a mere 80-90 percent, is expected shortly.

Addendum: Franklin Roosevelt said this in 1935: "The transmission from generation to generation of vast fortunes by will, inheritance, or gift is not consistent with the ideals and sentiments of the American people."

An economist in my family points out that this rationale was enough to justify the estate tax for the better part of two generations, but is no longer politically palatable.