Wealth has friends in Senate

Both of our Maine senators have voted to eliminate the estate tax. This is a huge tax windfall for the wealthiest 2 percent of Maine people and will inevitably transfer that part of the tax burden to the other ninety eight percent. There has been a well-funded effort to convince people that the estate tax is somehow unfair or will keep them from passing the family farm or business on to their kids. Neither is true. Make no mistake, repeal of the estate tax is about a transfer of the tax burden from the very wealthy to the rest of us.

There has been a tremendous amount of misinformation about the estate tax spread by the Bush administration and the inherited wealth lobby.

It may be difficult for President Bush and his cabinet to be fair about this issue since they are very rich people themselves. Repeal of the estate tax will save the heirs of Bush, Cheney, O’Neil and Rumsfeld between $80 million and $200 million.

One fallacy spread about the estate tax is that it keeps farms and small businesses from being passed on to family members. Not true. The present untaxed exemption is $2 million for a couple and scheduled to increase substantially.

Also, there are additional protections for family enterprises. Any farm or business that can reasonably be called small is simply not taxed by the estate tax. Senate Democrats have proposed that the exemption be raised to $3.5 million for individuals ($7 million for a couple) and additional protections added for family enterprises.

This was defeated by Republicans who want nothing short of total elimination.

Another fallacy is that the estate tax represents double taxation. In fact, much of the wealth subject to estate taxes has been accumulated by untaxed increases in the value of stocks, businesses and real estate not from taxable wages.

Thus, this income would not be taxed even once if the estate tax is repealed. Ordinary citizens pay taxes on their earned income. Asking wealthy heirs to pay tax on their unearned inherited income that exceeds $2 million is not double taxation. It is simply fair.

The recent transfer of wealth from the general population to the wealthy has been unprecedented. More huge fortunes have been amassed in the last 20 years than at any time in history. At the same time we have more people struggling to make ends meet.

According to Forbes Magazine there were six U.S. billionaires in 1981. By 2000 we had 289. The 10 largest family fortunes in the United States in 1999 were 10 times as large as the 10 largest in 1982. All this has occurred while the estate tax was in full effect. Permanent repeal of the estate tax will accelerate this trend.

This massive transfer of wealth to a small privileged class at the expense of working people is not only bad for the vast majority of Americans, it is bad for democracy. Huge accumulations of wealth by a few lead to distortion of the political process.

Bigger and bigger campaign contributions mean less and less influence by ordinary citizens. Repeal of the estate tax is an example of this distortion at work. One might think that Congress and our president would naturally oppose a tax law change that rewards the richest 2 percent of their constituents and punishes the rest. However, the inherited-wealth lobby has a lot of money and its political allies are determined to see the repeal made permanent for the benefit of their major campaign contributors.

Susan Collins and Olympia Snowe recently voted to make this windfall for the super rich permanent. Fortunately, they didn’t have enough votes this time. The Republicans have vowed to try again. If they succeed, this tax break for the wealthy will cause an estimated $840 billion revenue loss over the next twenty years making it much harder to properly fund social security, Medicare, education, veterans benefits, and our other social responsibilities? For instance, the chances of a significant prescription drug benefit will be near zero as this revenue loss is added to our already huge projected budget deficit?

You may want to express your opinions to Susan Collins and Olympia Snowe about their support of this outlandish windfall tax break for the very wealthy and urge them to change their mind. And don’t forget to vote in November.

John Alexander of Old Town is emeritus professor of civil engineering at the University of Maine.