My view is that first and foremost, Congress needs to deal with the one year repeal of the estate tax. That is not only unworkable, but can lead to the bizarre situations set up over the past few months on this blog. I also believe that the estate tax needs to be either eliminated or overhauled. Why? First, by creating the unified credit on a per individual basis as opposed to a couple basis, it creates a need for unnatural planning. Second, it discriminates against non-citizen spouses (who do not get a marital deduction for what they inherit). Third, it discriminates against unmarried people and their significant others. The estate tax itself is also discriminatory. It discriminates against people who save. It discriminates against entrepreneurs and innovators. It discriminates against farmers (who are land rich and cash poor). My view is that the tax ought to be repealed completely. But understanding that government needs money to pay the bills and dead people don’t squawk as much as the living, I can live with an estate tax. The fix ought to be this. First, the rate. The rate ought to be the same as the capital gains rate because all other assets have already been taxed. This seems to be the fairest method of dealing with this. Second, there should be an exemption of $10 Million per couple and $5 Million per individual. This reduces the number of estates filing to a fraction. The exemption should be indexed to the inflation rate for real estate nationwide (this helps farmers to some degree and small businesses which own real property). The underlying issue and one that is one of philosophy is that of “inherited wealth”. Our Founding Fathers abhorred royalty. Concentrations of wealth create an economic royalty which can lead to a political royalty. After all, kings and lords owned lands which they rented to serfs who worked the land and turned over the profits to the Kings and Lords through duties. An estate tax in essence redistributes that wealth, but not to the people, but to the Government which increases its power and size. The Founding Fathers also abhorred a strong central government. So, with an estate tax you have two competing issues one of concentration of wealth (which is bad) and bigger Government which is also bad. The Government is ill served to play the role of Robin Hood and so which is the greater evil. Inherited wealth or big government. Inherited wealth can be toxic, but to grow it has to invest or it gets consumed. Increased Government hurts growth due to the need for it to micromanage everything. I have no problem with taxes being levied to pay for necessary Government functions, but I do have problems when Government uses the tax code to change behavior. The estate tax is one such area abused in this way. If you need an estate tax to pay for the essentials of Government, then by all means levy one. But don’t enact one to punish the rich, or to redistribute wealth or to grow government. That is not what taxes are for.