Tuesday, June 29, 2004

William Blatt (Miami) presented Why Did Congress Repeal the Estate Tax But Not the Gift Tax? at the Critical Tax Conference at Rutgers-Newark. Here is part of the Introduction:

Part two of the article presents the conventional explanation for the decision to retain the gift tax — that retention of the gift tax was necessary to protect the fisc. A side effect of the gift tax is that it blocks many income shifting techniques. Retention was necessary to forestall a hemorrhage in income tax receipts….

Part three of the article offers an alternative, deeper explanation for this decision … [that] must accord with someone’s values. Part three of the article then tries to define these values. This is not easy because such values are illiberal. The sociological literature describes how bequests create obligations that cannot be reciprocated, ones which bind future generations. The decision to tax gifts but not bequests preserves dynastic wealth. Seldom advanced in public debate, that effect appeals strongly to a small but powerful group in the country. Finally, part three looks for evidence of these values in the legislative arena…. Evidence of such values may also be found in the personal dynastic ambitions of the President and the Senate leadership. That group may have played a pivotal, if passive, role in retaining the gift tax.