Estate Taxes: I differ from most Libertarians on this one.

It is hard to find those on the right or from the Libertarian movement that support an estate tax.

Those that hate the idea of the estate tax point to the fact that much of the income that created the estate has already been taxed at least once. And what right does the government have to tax an estate that has already been taxed? But there are plenty of other examples of double taxation. Federal, state and sometimes city income taxes are on the same income. And then if one buys a car after having paid the income tax, you will then pay sales tax on the purchase - this is clearly double taxation. And then you pay gasoline tax and annual license fees in the future. Not double taxation - at least triple or quadruple taxes are the norm.

Critics also point out that some inheritors must sell family farms or small family businesses in order to pay these taxes. I say “tough luck”. After all you are still getting an exemption of several million dollars and only then under the new tax you must pay 35% of the rest in taxes. So if Daddy left you a Gentleman’s club worth $10 million (and if this was his only asset) then you would have to pay $1.75 million in taxes ((10-5)*.35=1.75). So you are telling me that you can’t finance the $1.75 million on a business worth $10 million and still make a nice living?

If you can’t find a way to finance the $1.75 million then you may have to sell Daddy’s pride and joy, walk away with $8.25 million and find a way to eke out a living. And another entrepreneur probably more efficient and hardworking than you will buy the business and keep it humming and maybe even grow it.

The bottom line is that the federal government needs some (but far less than they are currently seeking) revenues. Something is going to get taxed.

But the three taxes that I favor over others are inheritance taxes, consumption taxes and higher gasoline taxes (a special component of consumption taxes). Forget the fairness issues (after all it only fair to tax everyone but me is the prevailing thought). But as a country we clearly need to consume less (while producing more) and we especially need to consume less gasoline. Gasoline (unlike electricity) is where we have a huge and growing dependence on the third world. We are at great risk of war if the oil spigots stop meeting our foreign oil addiction. And this is also a massive part of our foreign deficit and our country’s growing national debt. At 20 million barrels a day of imported oil (at $90 per barrel) adds up to about $650 billion dollars a year of money we are sending out of the country.

But back to inheritance taxes. By their very nature, wealth that is simply handed over to the next generation encourages the next generation to get softer, to consume more and is a disincentive for new generations to go and create their own wealth.

One inheritance tax exception that I support along with the vast majority is that there should be zero inheritance tax for a surviving spouse (and this has been the norm for most proposals).

The inheritance tax just enacted in Washington is actually a fairly reasonable compromise. The first five million is free from inheritance tax and then it is taxed at a 35% rate. Not bad.

Second and third generations on average tend to squander wealth that that has been created by their parents and grandparents. They tend to consume these estates rather than build them. This is clearly a generalization but you will find far more examples of this than where they have built on their parents wealth and generate more jobs than their parents would have done with the same money.

In general the more you tax something the less of it you get. But we will not have fewer deaths with an inheritance tax. But the more we tax consumption and gadgets and gasoline the less we will use.

On the other hand our taxes on employing workers (the employers share of social security and Medicare taxes and unemployment insurance premiums), and income taxes result in fewer workers being hired and fewer people working. There is no way to get around some of these taxes but they are by their very nature counterproductive.

So since we must have some taxes, I would start with the inheritance tax.