Andrew Carnegie, the industrial giant and philanthropist, was born on this day (Nov. 25) in 1835. His life and legacy is somewhat of a conundrum: he was both a hard task-master and cruel industrialist as well a warm-hearted, benevolent man who greatly wanted world peace—and who favored an inheritance tax.
The Coming (?) Change is the “Death Tax”
As of this writing, the both highly touted and highly criticized tax reform bill currently being considered by the U.S. Congress is still in flux. But the present estate tax provision will most likely be unchanged in the final version of the bill, which possibly will be signed into law. DJT is promising this will be done before Christmas.
The opponents of the current estate tax provision, which seem to include most Republican legislators, are wont to call it a “death tax.” Further, they emphasize how unfair it is to the families of hard-working people who wish to pass their accumulated wealth on to their descendants.
So, changing this provision is one of many changes in the tax reform bill, which has already passed by the House. The Senate version, yet to be voted on, currently has the same projected estate tax change as the House bill.
Misleading Claims about the “Death Tax”
Sam Graves is the U.S. Representative from the district where I live. In his Nov. 15 email newsletter to people in his district, Rep. Graves decried the estate tax, writing that “a tax that kicks in when you die is absurd.” His main point: “Farmers are hit especially hard by the death tax.”
What Rep. Graves failed to mention is that currently $5,490,000 is exempted from the tax that he thinks is so despicable. (I wonder how many farmers in north Missouri have an estate worth more than that.)
According to the Center on the Budget and Policy Priorities (see here), in 2017 only two out of every 1,000 estates will owe federal estate tax—5,500 out of the nation’s 2,700,000 estates (about 0.02%); only 80 of those (0.003%) are small farms and businesses.
The tax bill already passed by the House doubles that exemption immediately and eliminates it completely after six years—and this in the name of tax reform for the benefit of the working middle class.
But guess who benefits from this change in the estate tax? The wealthiest people in the land, of course—including the Trump children who will potentially gain as much as $1.4 billion if the tax reform bill is signed into law by the President.
Carnegie’s Surprising Support of Estate Tax
Many of you perhaps read my article about the questionable philanthropy of Andrew Carnegie and two other wealthy people. (You can read/review that article here.) In reading about Carnegie before writing that article, I was surprised at what he said about the need for an estate tax.
In a June 1889 article titled “Wealth,” Carnegie wrote,
Of all forms of taxation, this [the estate tax] seems the wisest. Men who continue hoarding great sums all their lives, the proper use of which for public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share. By taxing estates heavily at death the state marks its condemnation of the selfish millionaire's unworthy life.
Near the end of that article, Carnegie asserted that the person who dies rich “dies disgraced."
When Carnegie died in 1919, he had already given away over $350,000,000 (over $5 trillion in 2017 dollars) of his wealth. After his death, his last $30,000,000 was given to foundations, charities, and to pensioners.
Kudos to Carnegie!