In this series on the Estate Tax I will be quoting portions of the article “The Economic Case Against the Death Tax,”(Heritage Foundation, July 20, 2010) by Curtis S. Dubay. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Capital is any resource that individuals or businesses use to generate income. Like anything else, when the income accruing to capital is taxed, its price rises and less of it is purchased. Less capital means slower productivity growth, lower wages, and fewer jobs. As such, taxes on capital should be minimal or nonexistent. In fact, there is a general consensus among economists that there should be no taxes on capital. The death tax:

For those Americans who think that their estates may one day be subjected to the federal death tax, the tax sends a signal that it is better to consume today than invest and make more money in the future. Instead of putting their money in the hands of entrepreneurs or investing more in their own economic endeavors, Americans are encouraged to consume it now rather than pay taxes on it later.

Allan J. Favish wrote a brilliant article (“Obama on Taxes,” Dec 16) in which he showed how President Obama has contradicted himself lately concerning his view on raising taxes on the rich for purposes of “fairness.”

Basically President Obama said in his Democratic Presidential Debate in 2008 that as president he would still raise the capital gain tax even if it lowered the revenue received. Here’s is the transcript from the debate broadcast by ABC News on April 16, 2008 and moderated by Charles Gibson and George Stephanopoulos:

GIBSON: All right.  You have, however, said you would favor an increase in the capital gains tax.  As a matter of fact, you said on CNBC, and I quote, “I certainly would not go above what existed under Bill Clinton,” which was 28 percent.  It’s now 15 percent.  That’s almost a doubling, if you went to 28 percent.

But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money.  And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I’ve said is that I would look at raising the capital gains tax for purposes of fairness.

We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year — $29 billion for 50 individuals.  And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries.  That’s not fair.

And what I want is not oppressive taxation.  I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don’t have it and that we’re able to invest in our infrastructure and invest in our schools.

And you can’t do that for free.

OBAMA: And you can’t take out a credit card from the Bank of China in the name of our children and our grandchildren, and then say that you’re cutting taxes, which is essentially what John McCain has been talking about.

And that is irresponsible.  I believe in the principle that you pay as you go.  And, you know, you don’t propose tax cuts, unless you are closing other tax breaks for individuals.  And you don’t increase spending, unless you’re eliminating some spending or you’re finding some new revenue.  That’s how we got an additional $4 trillion worth of debt under George Bush.  That is helping to undermine our economy.  And it’s going to change when I’m president of the United States.

GIBSON: .But history shows that when you drop the capital gains tax, the revenues go up

OBAMA: Well, that might happen, or it might not.  It depends on what’s happening on Wall Street and how business is going.  I think the biggest problem that we’ve got on Wall Street right now is the fact that we got have a housing crisis that this president has not been attentive to and that it took John McCain three tries before he got it right.

And if we can stabilize that market, and we can get credit flowing again, then I think we’ll see stocks do well.  And once again, I think we can generate the revenue that we need to run this government and hopefully to pay down some of this debt.

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Lane was born in Columbia County. He is a graduate of Magnolia High and Southern Arkansas University. Lane’s work experience includes working on his family cattle farm and employed in his father’s (J. L. Jean) logging contractors business.
His government experience spans over 22 years. Lane is currently serving in his 15th year as Mayor of Magnolia, Arkansas. Two terms as a member of the Columbia County Quorum Court. Lane also served four years as a Columbia County Election Commission.

Lane was appointed to a four-year term by then Governor Mike Huckabee to the Arkansas Economic Development Commission. He also served five years on the Southern Arkansas University Board of Trustees. Lane currently serves on the board of Magnolia Economic Development Corporation, President of the Lower Southwest Arkansas Solid Waste Board and a member of the executive board for the Southwest Arkansas Planning and Development District.

Lane’s other business and civic interest includes President of Reeves Land and Timber Company and a Board Members of Farmers Real Estate Corporation. Lane is also a member of the Magnolia Rotary Club and board position on our local WAGE and Adult Education Boards.

Lane is married to the former Judy Leonhard of McNeil, Arkansas. Lane and Judy have two children, Kelli Taylor and Gray Jean. They also have one grandson, Charlie Taylor. Kelli is married to Mark Taylor of Magnolia.

Lane and Judy are members of the Jackson Street Church of Christ in Magnolia, where Lane serves as a Bible school teacher for youth.