Looking to the Past in Planning for the Future: Does the Modern Estate Tax Fit within the Ideals of the Founding Fathers?
NEVADA LAW JOURNAL
THE FOUNDING
0 J.D. candidate 2006, University of Nevada, Las Vegas, William S. Boyd School of Law , USA
Essentially, the estate tax debate has become one of inherent freedoms, societal obligations, and fundamental fairness. The federal estate tax finds its constitutional basis in Article I, Section 8 of the United States Constitution, which reads, "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." 6
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FUTURE:
OF
FATHERS?
Alica Lerud*
I.
INTRODUCTION
In recent years, the federal estate tax has garnered a great deal of attention
from lawmakers, the media, and the general public.' Dubbed the "death tax,"
the federal estate tax is levied upon estates that exceed a certain value.2 The
estate tax has been attacked as being immoral and unfair by opponents.3
Supporters of the estate tax have argued that it is essential in the preservation of
democracy.4 Regarding this debate, one commentator has said:
Never in the course of human taxation has so much furor been generated by so many
about a tax that affects so few. While only 2 percent of estates in this country are
taxed and account for slightly more than 1 percent of all federal revenues, tempers
over the estate tax co5ntinue to flare in a strange combustion of moral indignation and
economic erudition.
B.S., University of Nevada, Reno, 2003. The author would like to thank Professor Steve
Johnson for his help and insights in preparing this Note. The author would also like to thank
Terry Lerud and Eva Wick-Lerud for their constant support.
l Karen C. Burke & Grayson M.P. McCouch, Estate Tax Repeal: Through the Looking
Glass, 22 VA. TAX REV. 187, 188 (2002).
2 Estate tax is levied only on the portion of the estate that exceeds the unified credit. In
2005, the amount of the credit was $1,500,000. From 2006 through 2008, the amount of the
credit will be $2,000,000. In 2009, the credit will be raised to $3,500,000. I.R.C. § 2010.
(2004).
1 Burke & McCouch, supra note 1, at 188.
4 See James R. Repetti, Democracy, Taxes, and Wealth, 76 N.Y.U. L. REV. 825 (2001)
(concluding that the estate tax works to further democracy by decreasing the concentration
of dynastic wealth and raising revenue).
I Jim Grote, The Estate of the Union, PLANNED GIVING TODAY, April 2001, at 1, available
at http://pgtoday.com/pgt/articles/the-estate_f-the-union.htm (last visited Mar. 20, 2006).
6 U.S. CONST. art. I, § 8, cl. 1.
With this clause, the Founders granted the United States Congress power to
impose taxes on the citizenry of the United States, with very few limitations. 7
Although many have tried to attack the constitutionality of the federal
estate tax on the basis of unequal treatment, this argument has repeatedly
failed.8 In upholding the constitutionality of the estate tax in 1921, writing for
the court Justice Holmes said:
[The] matter ...is disposed of . not by an attempt to make some scientific
distinction, which would be at least difficult, but on an interpretation of language by
its traditional use-on the practical and historical ground that this kind of tax always
hhaisstobreyenis rwegoarrtdhead vaosl uthmee aonftiltohegsiics.9of a direct tax .... Upon this point a page of
What history has to show us with regard to the estate tax will be an
increasingly important topic in upcoming years as Congress continues to debate
the estate tax. The purpose of this Note is not to debate the constitutionality of
the federal estate tax, but rather to examine how our Founding Fathers would
view the modem estate tax, and how the modern estate tax works to further the
founding vision. In 1789, Benjamin Franklin was quoted as saying, "In this
world nothing can be said to be certain, except death and taxes."' 0 The
question that this Note examines is whether Franklin, and other members of the
Founding Generation, would advocate these two certainties of life coinciding at
the same moment in time.
In order to discern whether the Founders would support the modern
formulation of the estate tax, this Note first examines the purpose and history
behind the federal estate tax. Although much debate regarding the estate tax
revolves around its use as a way to level inherited wealth, the estate tax has
historically been a revenue-generating device.' In addition, historical death
taxes were used only during times of exigency and war. 2 The modern estate
tax was originally enacted in 1916 to raise revenue for World War .13
However, unlike previous taxes, the estate tax was not repealed at the conclusion of
World War I, and today continues to exist in largely the same form. 4
A close analysis of the federal estate tax provides evidence that the
Founders did not foresee the use of a federal estate tax as a permanent means by
which to generate everyday revenue. Instead, the Founders apparently intended
to primarily use taxes upon commerce to fund the fede (...truncated)