By Jack Kemp
April 12, 2001 for Townhall.com
In a week when President George W. Bush’s tax cut plan suffered major setbacks in the Senate, 49 leading African-American businessmen and businesswomen, including Bob Johnson of BET, Earl Graves of Black Enterprise magazine and Alice Houston of Automotive Carrier Services, took out an ad in newspapers across America to urge Congress to repeal the “death tax.” Ironically, this ad makes the case better than the president’s own party has made it.
As these leading African-American entrepreneurs point out, “The estate tax will cause many of the more than 1 million black-owned family businesses to fail or be sold when the 55 percent estate tax is imposed on already undercapitalized minority-owned businesses. The entire black community suffers when these minority- and family-run businesses that provide jobs and services in underserved communities are forced to shut down to pay the estate tax.”
As first-generation, risk-taking capitalists who have earned their wealth the hard way, these business leaders understand the profound impact of tax incentives and penalties. Their arguments also dramatize why the capital gains tax rate should come down, as well, because that tax locks in assets that could realize greater value if put in play in the marketplace.
These business leaders who have struggled long and hard to achieve economic success don’t say a word about tax rebates, refunds, lockboxes or budget caps. What they care about is the true economic effect of destructive taxes on jobs, businesses, savings and the economic aspirations of Americans of all races and backgrounds who want a better life for themselves and their families.
If the administration’s tax proposal had been expressed in these terms from the beginning, and had Republicans spent more time reminding us of these profound truths about federal taxes, they would not now be in the position of trying to negotiate with themselves and with senators who would rather retire debt than help American entrepreneurs grow this struggling U.S. economy.
The estate and gift taxes are not taxes on wealth, as their advocates would have you believe. They are taxes on the process of wealth creation, as these businesspeople understand. They tax success and undermine income growth for all workers by depressing the return to capital investment. They are just another government-imposed obstacle that prevents those on the bottom rungs of the economy from achieving the American dream.
Abraham Lincoln said it best: “I take it that it is best for all to leave each man free to acquire property as fast as he can. Some will get wealthy.
I don’t believe in a law to prevent a man from getting rich; it would do more harm than good.” Nothing violates the spirit of Lincoln’s sentiment more than for the government to tell people they are free to acquire as much property and wealth as they can during their lifetime but will not be free to pass the fruits of their success along to their heirs when they die.
It is ironic that the Senate passed most of the Bush budget but reduced the Bush tax cut by $400 billion. Hopefully the balance (or more) can yet be restored in conference. But note that under the estate tax repeal bill passed by the House, the static revenue loss from repeal is under $200 billion. Since the president is trying to fit a modest tax cut package into an artificially tight budget box, the Senate action is an arrow aimed straight at the heart of the drive to repeal the death tax. It is hard to imagine a more profound signal of disrespect to African-American business leaders and to Asian, Latino and all hard-working entrepreneurs.
I would beg Bush and Vice President Dick Cheney to call the signers of the African-American business leaders ad along with other minority entrepreneurs into the Oval Office and let them tell the American people that death taxes, capital gains taxes and high marginal income tax rates aren’t taxes on the rich but on the poor, and on others who want to get rich.
With support like this on his side, the president should be empowered to come out strongly and unambiguously for a cut in the capital gains tax, as well. That’s equally important to small and start-up entrepreneurs of all creeds and races trying to raise capital. As these black leaders’ ad points out, “More capital investment means higher incomes for all workers.”
It’s late but not too late. These African-American leaders and a coalition of minority entrepreneurs and businesspeople can save the tax cut, not just for the Bush administration alone but more importantly for the people of America. Capitalism without capital is just an abstraction, but it becomes a reality when capital begins to flow into the hands of every working American who has aspirations for a better future.