Clicking on banner ads enables JWR to constantly improve
Jewish World Review Nov. 13, 2003 / 18 Mar-Cheshvan 5764

Amity Shlaes

Amity Shlaes
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Chris Matthews
Michael Medved
MUGGER
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Leaving a little something for the kids? Good luck


http://www.NewsAndOpinion.com | One of the big things weighing on parents' minds these days is what inheriting family wealth will do to their children.

They fear that by passing along the family fortune they are condemning their sons and daughters to a multidecade adolescence featuring risky behavior inappropriate to chronological age, visits to the psycho-pharmacologist, and Patagonia parkas.

Anyone who has logged time among the confused offspring of America's prosperous cannot deny that such fear is legitimate. At least for some families. In others, however, the younger generation puts on a necktie from Brooks Brothers and generally rises to its responsibilities.

Less convincing therefore is the argument that tends to come next, which is that the nation needs an estate tax to keep American children and grandchildren safe from the corrupting influence of cash.

Here is the appropriate rebuttal. You fear that your grandchild will be spoiled by your son's money, Grandpa Gates. That's fine; keep that money away from that grandchild. But don't in your sanctimony deprive me of the opportunity to leave my child the family business should I choose to do so.

Now Congress has set about creating an opportunity to call the bluff of the moralizing estate taxers. In a bipartisan effort, lawmakers in the House and the Senate have backed legislation that would make it easier for parents to resolve their dark conflicts in sweet charity. The Senate version, known as the CARE Act, is sponsored by Rick Santorum (R-Penn.) and Joseph Lieberman (D-Conn.). For reasons too nasty to print in a family newspaper, Senate Minority Leader Tom Daschle (D-S.D.) is holding up that legislation's processing in conference. Nonetheless, the ideas in the bills are so big as to be worth considering.

Donate to JWR

The first involves that standard American savings vehicle, the Individual Retirement Account. Under the CARE Act, IRA owners would be allowed to roll over a share of their IRA cash into a charity without triggering any tax liability. That would mean the charitable deduction would no longer be the only big tax break available for charitable giving--a relief, since that deduction fades out for higher earners anyhow.

The "charity rollover" could alter a certain national ambivalence about IRAs, which are supposed to be the consolation of our old age. But for those of us who have amassed some capital and continue to earn income into our sixties and seventies, they are no consolation.

Indeed, as JP Morgan's Don R. Weigandt points out, "they are like a form of toxic waste. Any time you touch one, there are going to be significant tax consequences." Income tax gets levied when you draw down cash from your IRA, an event that becomes mandatory six months after your 70th birthday. Or, you may pay estate tax on it. And the kids also can pay tax when they collect the money.

The charitable rollover would fix all that. It also represents a giant boon for the non-profit sector. Weigandt notes the amount of cash resting in tax-favored accounts of the IRA class now stands in the trillions.

The non-profits are therefore lobbying like maniacs for the new legislation. These are in any case challenging times for them. In a survey published recently, the Chronicle of Philanthropy reported that donations to bigger charities and non-profits in 2002 were down. Certain groups, such as the American Heart Association in Dallas and the Alzheimer's Disease Association in Chicago, did very well. But, overall, the takings were 1.2 percent lower than the year earlier. The decline contrasts with an average annual gain of 12 percent for the preceding five years.

But the charity legislation does not stop with IRA rollovers. For the first time, Congress would allow the 83-million-odd households that take the standard deduction a chance to enjoy tax benefits from their charitable giving. For them, Congress would create a special one-line charity deduction. This means lower-earning households may exploit the charity deduction without losing the financial advantages of the standard deduction, often substantial for them.

A purist would revolt against the fussiness of all this compassionate conservatism. An overall cut in the income tax rate should be the first choice. That would reduce the necessity for deductions and make withdrawals from IRAs less painful. There is also the issue of moral hazard. Won't increasing the charity world's already troubling tax advantages "spoil" those non-profits, turning them into big corrupt babies themselves?

Still, the big story for the moment is the IRA rollover, which might at least make the brooding parents among us a bit more honest. Those who want to offer their children the bracing experience of financial independence now have another method for doing so, so that they themselves may climb clean and broke into their virtuous graves.

The rest of us then can make the repeal of the estate tax permanent and work toward a system under which we all can dispose of our cash as we see fit, instead of disposing of it for tax reasons. Now wouldn't that be a fine legacy?

Every weekday JewishWorldReview.com publishes what many in Washington and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.


JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.

Up

11/05/03: Never, Never will we Desist
09/30/03: Tax, lies and a few supply-side parables 10/09/03: Free markets are the key to rebuilding Iraq

09/25/03: Don't be sentimental, Mr. Bush
08/12/02: Howard Dean, Robin Hood
05/29/02: Berlin Diarist: To believe that by self-improvement and restraint, we can end tyranny
03/27/02: The curse of oil
11/12/02: Political Correctness at the Fed (No joke!)
10/31/02: Local enforcer who has changed national laws
10/12/02: No Mirror for Europe; US is a picture of unity
08/14/02: Keeping your financial eggs at home
07/24/02: New Democrats' unaffordable luxury
06/26/02: The evolution of eminent domain is the story of the lasting power of Supreme Court decisions to alter the American cultural fabric
06/20/02: The distinction between known risk and uncertainty: What was lost in the Martha Stewart flap
06/11/02: Europe, long waiting for a chance to assert itself as independent from the US on the world stage, is clueless to terror's threat
06/04/02: A Cold Warrior's lessons for the Middle East
05/21/02: Geography does matter when it comes to development, but aid must nonetheless be linked to good governance
05/14/02: The increasing number of new claims is hurting innocent companies and making a mockery of the Common Law system
05/09/02: Aid, development and guilt in our times of terror
04/30/02: Wine lovers may at last be able to stray across state borders. The Internet is coming to the aide of free trade
04/23/02: Taxation by way of Madison Avenue
04/17/02: Special relationships and free trade do not mix
04/08/02: Is terror the flip side of globalization?
03/20/02 Bush gives aid but seeks results
03/13/02 The Danger in policy by numbers
02/26/02: States' smokescreen for tax hypocrisy
02/20/02: Echoes of leadership against a global threat
02/13/02: Jackson Vanik May be a Useful Analogy When Thinking About the Middle East
02/07/02: Budgeting for victory: Requiem for a peace dividend
02/05/02: The detectives of 1930s pulp fiction had a nose for clients bearing gifts. Sadly, those consulted by Enron did not
01/22/02: Allow all American children a decent chance
01/15/02: Do not disturb the profit-sharing revolution
01/09/02: It is dangerous to elevate a currency as a political emblem if the need for other economic reforms is obscured
01/03/02: There is only one way for a free thinker to bring up children
12/20/01: Why America's economy always bounces back
12/18/01: When it comes to taxes, Washington lawmakers can learn a thing or two from The Honeymooners
12/13/01: Bush opens a new era
12/12/01: A flamboyant reversal for the Democratic party
12/06/01: Threat of an oil embargo on the U.S. is a bluff
11/29/01: Which is more important--the war or diplomatic comity?
11/20/01: Unbalanced by a wealth of oil and diamonds
10/17/01: Afghanistan Needs a General MacArthur
09/27/01: The US has gained an understanding of the costs of war for which its European allies have hitherto wished in vain
09/13/01: War against terrorism will rise from the ashes
08/15/01: Geography is no excuse for the state's economic stagnation. Its policymakers should take a leaf from Ireland's book
08/07/01: Teamsters may pay a heavy price for winning its batle in Congress
07/25/01: Towards a patent-free nirvana?
07/17/01: History proves the lasting value of tax cuts
07/10/01: Stem cell research has awakened a bitter debate in Washington but voters care more about other electoral issues
07/03/01: America foots the bill for Europe's largesse
06/26/01: America the litigious, land of the lawyer's fee
06/20/01: Five reasons for gloom about global growth 06/18/01: Show pity for Alice in Tax Wonderland
06/13/01: America must take a French lesson in trade
06/11/01: Time to dream the impossible dream for Iraq
06/07/01: Whatever happened to simple?
06/04/01: When the relationship between companies becomes as close as a marriage, the eventual break-up is often very painful
06/01/01: Loving and hating the Bush tax bill
05/30/01: Will Grisham soon be unemployed? In America's courts these days, there's no room left over for legal fiction
05/22/01: Republicans sample the rhetoric of confidence
05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/29/01: Clueless
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
11/07/00: What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes

© 2003, Financial Times