Imagine joining friends for a late-night game of Monopoly, but in this game, there’s a twist: At the start of the game, one player gets an entire side of the game board, from Pacific Ave. to Boardwalk, including the Short Line railroad. Instead of pondering easy questions like whether to be the shoe or the thimble, you’re now grappling with a more important question: Do you even stand a chance in such a lopsided game?
As you ponder the fairness of this board game, Congress is debating the very real future of our federal estate tax, a tax on inherited wealth designed in part to prevent one player from owning most of the board before the game even begins.
Recently, a new proposal was introduced in an effort to break through the stalemate that has led to the current tax holiday for the super wealthy. Because of the inability of Congress to reach agreement back in December, the year 2010 is slowly passing as the first since 1916 with no estate tax. Billions of dollars are now being transferred tax-free, while our national deficit grows. The heirs of the late Texas billionaire Dan Duncan stand to inherit, free of any estate tax, more than the average American earns in 4,000 lifetimes. No one questions the right of parents to pass on a legacy to their children, but how much is enough?
Despite its kitchen table status today, the Monopoly board game can trace its roots to Lizzie Magie, who created the game in 1903 as an educational tool to help people understand that free market economies, absent rules to ensure otherwise, naturally move toward monopoly control as wealth is increasingly concentrated into the hands of the few. It takes public policies, from anti-monopoly rules to progressive tax systems, to protect free markets from this self-destructive tendency. The fact is: any economic system is effective only to the extent that its more extreme aspects are reined in.
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Our progressive tax system, including the estate tax, helped guide our economy and fuel the broadly shared prosperity our nation experienced during the post-war period. However, that progressive tax system came under a 30-year assault which began in the early 1980s. We’ve seen the consequences of this backsliding and the misguided tax cuts for the wealthy. Instead of the promised trickle-down, we got stagnant wages for most Americans and the widest disparity of income our nation has seen since 1928, just before the Great Depression. It’s time to recapture the core values that made our economy work, beginning with the preservation of a strong estate tax.
The importance of this proposal cannot be overstated. Transfers of wealth from generation to generation impact every aspect of our economic landscape, even the persistent racial wealth divide. While we’ve made significant strides at closing the income gap in the half-century since the great Civil Rights victories, the gap in actual wealth is much harder to shake because wealth transfers forward. Even today, African-Americans have only 10 cents of net wealth for every $1 of net wealth that whites have. Latinos have 12 cents. Without a strong estate tax, the inequalities of the past will forever haunt our nation, leaving the Monopoly board permanently tilted.
Sen. Jon Kyl (R-AZ), Sen. Blanche Lincoln (D-AR), and other estate tax opponents are wrong in trying to weaken the estate tax. Congress should instead work to preserve a strong estate tax for the benefit of all Americans. This estate tax proposal represents the kind of commonsense solution that balances the desire to protect small businesses and farms with generous deductions, while ensuring that the super-wealthy give back to support the country that made their prosperity possible.
Even in a game – like Monopoly – we can see the need for rules to ensure that opportunity continually circulates throughout our economy to create a broadly shared prosperity for all, not just a select few. Preserving a strong estate tax is essential to ensuring that each subsequent generation has a chance to achieve the American dream. Without it, we have to ask ourselves, is the game hopelessly stacked? Should we even bother playing?