The estate tax raises very little money. In fact, even at its height the estate tax accounted for only a little more than 1% of federal revenues. A congressional Joint Economic committee report estimates that Americans spend as much avoiding estate taxes—paying attorneys and accountants—as they do paying estate taxes. A study by a Stanford professor concluded that “True revenues associated with estate taxation may well have been near zero, or even negative.”
It’s no longer a matter of tax policy or economics—the arguments in favor of the estate tax have all been demolished. Instead, the estate tax survives purely because of politics.
The real motivation behind the estate tax is a deep-seated hostility to property rights, and a misguided fear of family dynasties. But people don’t keep money in mattresses anymore. Money inherited from an estate is either spent, saved, or invested—all of which are better for the economy than sending it to Washington, where bureaucratic overhead consumes at least 50 cents of every dollar.
If you truly own your property, you have the right to dispose of it any way you wish. You can sell it, give it away, or direct who will receive it when you die. This control is the essence of property rights. If you can’t control what happens to your property, you don’t really own it.
I'd have to say that I agree with his argument. What's funny about this is that I'm reminded of something I read in the Financial Times the other day. Here's how they summed up the political view of the estate tax:
The policy arguments over estate tax are by now rote. Those against it (usually Republicans) say it is unfair; those for it (mostly Democrats) say it redistributes wealth.
Democrats are mostly for it because it redistributes wealth. This in turn reminds me of a quote I read just yesterday. I can't recall it perfectly, but someone remarked that the difference between the left in Europe and America is that the Europeans didn't mind calling themselves socialists, whereas the Americans adopted the banner of Democrat.
Anyway, I didn't mean for this to become one of those party politics discussions. If you're interested in the issue of estate tax and property rights, give Ron Paul's piece a look. You can read the full essay here.