Estate Tax Rationale

A good deal of the debate over estate tax repeal has revolved around issues of the amount of the tax burden and the economic class upon which the burden falls. Lost in the rhetorical shuffle is a clear articulation of a philisophical justification for the tax.

Thursday, Linda M. Beale, at her weblog, ataxingmatter, makes several good arguments in support of an estate tax. While the posting is entitled The World Bank on Estate Taxes, her discussion is significantly broader in scope than the World Bank's study (the necessity for estate taxes in developing countries).

One of the points that she makes even goes beyond the estate tax question. She notes:

The [amicus brief submitted by by Columbia, Cornell, Chicago, Harvard, New York University, Pennsylvania and Yale, in the case of Rumsfeld vs Forum for Academic and Institutional Rights, concerning the Solomon amendment that withholds federal research dollars from colleges and universities that prevent military recruitment on campus] articulates the essential role of research universities in the economic and social life of the country. Here are two short paragraphs explaining the importance of federal taxpayer dollars in support of basic research at major research universities.

By any relevant measure, the unencumbered provision of federal funds for university research has been .exceptionally productive.. Nat.l Science and Technology Council, supra, at 331. The results of that partnership are ubiquitous and indispensable; they touch almost every factor of modern life. The computer on which this brief was written is a descendant of the Whirlwind, the world.s first high-speed, general purpose, electronic digital computer, which was developed at MIT with federal funds. MIT, The Federal Government and the Biotechnology Industry: A Successful Partnership (1995), available here.The Internet, now an integral part of society, began as a network of computer science departments funded by the National Science Foundation. National Science Foundation, The Nifty Fifty, available here. (last updated Jan. 27, 2005). The biotechnology revolution, which has spawned most of themedications on which we depend, emerged from pioneering academic research conducted with funds from the National Institutes of Health. Arthur Kornberg, Support for Basic Biomedical Research: How Scientific Breakthroughs Occur, in The Future of Biomedical Research 38 (Claude E. Barfield & Bruce L.R. Smith eds., Washington, DC: American Enterprise Institute & The Brookings Institution 1997). Federally funded academic research on fiber optics paved the foundation for the modern telecommunications era. National Science Foundation, supra. Indeed, the social value of basic research conducted at America.s universities is difficult to overstate: secure credit-card transactions, lasers, doppler weather radar, sign language, even the yellow highway barrels that minimize injuries from car collisions. all of these mainstays of daily life, among many others, likely would not exist without it. See id.

These innovations have contributed enormously to the national economy. Studies estimate that roughly one-third of the total value of the NASDAQ market stems from federally funded university-based research. Margo Carmichael Lester, Federal Funding Spurs Private Innovation, LARTA Vox (Nov. 3, 2003), available here. In the high-technology sector, where federal funding of academic research is most robust, America is the world leader, accounting for about one-third of global production. National Science Board, Science and Engineering Indicators -2004, at 6-8. And because .U.S. high technology industries have been more successful exporting their products than other U.S. industries, [they] play a key role in returning the United States to a more balanced trade position. in a time of growing deficits. Id. at 6-11.

Without the fundamental research mission of our major research universities, we would likely never have discovered various technologies that we use daily to make our lives better, from medicines to the internet. And much of that research would never have been conducted without the support of federal tax dollars. The tax dollars paid by you and me (and, hopefully, by rich people too) turn around and support cutting edge research that in turn ultimately results in new businesses, new medical treatments, and even new forms of art. The cycle of tax dollars from entrepreneur to entrepreneur is the wonderful saga of a democratic society at work. That work is made more possible by mechanisms such as the estate tax.

Her posting also discusses the issue of why it is socially beneficial to tax concentrations of wealth.