The $1.35 trillion tax cut probably is the most complex tax legislation ever passed. Some features are not only puzzling and confusing but even peculiar and weird. They offer minuscule tax relief at the present, a reduction of some 5 percent of federal revenue during the latter part of the decade and, in an unprecedented quirk of legislation, repeal the cuts in 2011. And while the tax take is reduced temporarily, the burden of government continues to rise uninterruptedly. Government spending, which is the true measure of the cost of government, is scheduled to climb at a 10 percent rate. The first Bush budget increases federal spending to just under $2 trillion. At this rate of growth it is likely to approach $3 trillion in four years and exceed $4 trillion in eight.

The law temporarily reduces federal estate taxes, which seize assets left to heirs in a will, by way of a boost of the exempt amount from $675,000 currently to $3.5 million in 2009 and by a reduction of the top rate of 55 percent to 45 percent. For a brief moment--in 2010–the tax will actually disappear but return again in full force thereafter. It is yet unclear whether estates will then be subject to both federal estate taxes and capital gains taxes on appreciated assets.

The proponents and sponsors of estate taxation usually justify the taking with two arguments, one ideological, the other psychological. The former mistrusts and discredits the private property order, favoring a system of collective or government ownership and management. It condemns and denounces large estates as unearned wealth derived from cruel exploitation of working people. As large business profits are seen to be filthy lucre so are the estates of wealthy businessmen; they should rightly be taken and used for the common good.

The psychological argument springs from what may be the strongest passion in the human heart. It is envy of the possessions and successes of others. "If envy were a fever," an old proverb asserts, "all the world would be sick." Envy is so pervasive that some politicians seeking the applause of their electorates never tire of throwing stones at the successful and wealthy. It is a social and political force more powerful than any fear of the harmful consequences it may have on the body politic.

Clever politicians seek to hide their resentment and malice by waxing eloquent about the desirability of political, social, and economic equality in a democratic society. They may even quote Thomas Jefferson's Declaration of Independence: "We hold these truths to be self-evident that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness." But it is also self-evident that Thomas Jefferson did not mean to deny these unalienable rights to entrepreneurs and capitalists or to grant government the right to confiscate their property for the benefit of others. Such interpretations of equality obviously run counter to the law of nature which does not endow all men with equal ability and productivity. Some individuals, highly talented and motivated, create great enterprises giving employment to hundreds of workers and serving thousands of customers. Most individuals are content to offer their services to these enterprises; some may choose to remain idle and dependent on the labors of others.

The advocates of estate taxation blithely ignore that, in a market order commonly called capitalism, a rich man's wealth mainly consists of means of production, that is, of factories and stores, means of transportation and communication, all of which render human labor more productive. Estate taxes consume the very capital which gives employment and productivity to workers. They rarely ever diminish a rich man's share of personal wealth consisting of his consumer goods – his home, his automobiles, and perhaps some luxuries; his heirs usually keep and enjoy them and continue to live in a style to which they are accustomed. Confiscatory death duties obviously do not reduce the differences in the levels of living but may actually aggravate them.

Death duties are no painless levies, what the taxmen want us to believe; they actually affect the conditions and actions of three parties – wealthy owners, their heirs, and the public.

Owners who created the wealth usually are aware of the confiscatory nature of their future estate levies and therefore may adjust their life styles while they are still alive. They may seek early retirement in leisure and play, enjoy their wealth, or give it away. Wealthy retirees support the fastest growth industry of our time, housing and entertainment of a large leisure class congregating in affluent retirement communities. Or they may redirect their talents and efforts toward estate tax avoidance or evasion in order to leave more wealth to the family.

The loss of capital is compounded by an army of tax accountants and attorneys who thrive on the administration and distribution of estates. The indirect costs of estate taxation often decimate productive capital as effectively as the death duties themselves. Billions of dollars are spent every year for devising and administering trusts and foundations which, loaded with tax attorneys and accountants, wage expensive battles with their counterparts in government, all frittering away productive capital. Many billions of dollars are sent abroad in search of reliable tax havens.

Death duties do not visibly destroy capital goods such as factories, oil wells, refineries, or stores; but the heirs may be forced to sell all or part of the estate in order to raise the cash needed for the tax payment. The cash consists of someone's savings which will never build a factory or store, never drill an oil well nor manufacture a tool or die. They merely replace the capital consumed by government.

When the death duties fall on a large private enterprise many stockholders may take the place of the family paying the duties. Their investments are simple replacements of productive capital lost. The media may then speak of the "passing of an era." When the duties fall on numerous small enterprises the heirs often face great difficulties not only in meeting the tax liabilities but also in continuing the business with a smaller capital base. No matter how capable and industrious they may be, the loss of working capital may force them to close or sell the business. Every year countless small businesses close their doors under the impact of confiscatory death levies.

The impact of death duties probably is most severe on family farming. When the tax progression first reached a confiscatory 70% rate in 1935, land values were greatly depressed and the average farm value did not exceed $5,000. Very few farmers were affected by the estate tax. In recent years land prices have soared to astonishing levels which, together with modern machinery and equipment required to operate a farm, has made many farmers multimillionaires. Inflation continually creates more millionaires and adds more to estate tax rolls. They are unintended victims of the envy tax.

Faced with high estate taxes, many young farmers may choose to sell off some acreage in order to pay the levy. They are likely to encounter rising production costs on the reduced acreage, which may lead to losses and financial difficulties. Every year thousands of farm heirs desert the land and seek refuge in commerce and industry. They may sell out to large corporations which actually may not fear operational losses that offset the profits earned in other corporate activity. For a multiphase corporation, farm land constitutes an excellent hedge against inflation and monetary depreciation. For the public as consumers of agricultural products, the loss of family farms may reduce output and raise food prices.

Although death taxes are a rather insignificant source of revenue for the federal government, they are very popular with economic and social reformers. Guided by spurious economic notions and base resentments they won't admit to, they are bent on breaking up large estates in order to prevent the transmission of great individual wealth from generation to generation. They favor progressive tax rates which may actually succeed in decimating concentrations of productive wealth, especially when the same property is subjected to two or more exactions following the death of several successive owners. They also may accomplish what few intended: to pave the way for the command system. But estate taxation is utterly unsuited to change human nature and achieve economic and social equality.