By David Connell

Before we get started with our main topic of the month, I want to take the time recognize the work of one of our readers. Last month we started what will be an occasional feature of this column: "The Outrageous Insurance Quote of the Month." Unfortunately we had no submissions this month, but we did receive an excellent response to last month's quote equating insurance agents to Al Qaeda. In a letter to Thomas Bray—last month's perpetrator—W. Todd Hickman, RFC, CRA, CRC, of Asset Growth Associates of Texas writes:

I'm curious how you can equate a profession that cares for widows and orphans to one that creates widows and orphans. (As if an Al Qaeda operative would spare women and children.)

The families who wisely purchased life insurance on loved ones lost in 9/11 understand the value of life insurance, and in most cases did so because of the help of an insurance agent. There was no waiting on a government entitlement for these families …

Good show, Mr. Hickman, and thank you for sticking up for the industry. Remember readers, if you see an outrageous quote regarding our industry, send it to me at dconnell@naifa.org, so we can share it with the rest of the class and let the author know what we think.

To me it's unseemly to link the deaths of over 100 American soldiers and uncountable Iraqi civilians to a piece of tax legislation.

Debating war and estate taxes
All right then, on to the new stuff.

When the country is involved in a military action, political debates tend to be framed in relation to the war—even if they are only marginally related to it. A recent debate over estate tax reform provides a case in point.

As the war began, members of Congress were performing their elected duties debating federal budget legislation, and the attendant tax cuts and spending. As part of a tax cut proposal, Sen. John Kyl (R-Ariz.) proposed an acceleration to the repeal of the estate tax. The measure passed by a slim 51 to 48 majority.

This fairly hum-drum bit of news did not sit well with William H. Gates Sr.—the father of the Bill Gates—who has long argued for an expansion of the estate tax to help pay for increased government spending on social programs. Gates, you see is one of a handful of folks that are so incredibly wealthy they can afford to be truly liberal. Giving lots and lots of their money away to the government or others truly doesn’t effect their bottom line.

In a letter to the editors of The Washington Post, Gates and Chuck Collins, co-founder of Responsible Wealth argue that, "There is something unseemly about Congress' obsession with repealing the estate tax, the nation's most equitable tax on accumulated wealth, at a time when life and death are at stake."

The two go on to state that throughout American history (they cite the Civil War, Spanish-American War and both World Wars) "the 'conscription of wealth' was perceived as equitable at a time when many citizens were sacrificing their lives, sometimes as soldier proxies for wealthier citizens."

The debate over the estate tax has its place, but to me it's unseemly to link the deaths of over 100 American soldiers and uncountable Iraqi civilians to a piece of tax legislation. The fact is, the military action in Iraq is nothing like the wars cited by Gates and Collins and does not depend on the funds of the estate tax to be prosecuted. As I write this column, Iraqis are pulling down statues of Saddam Hussein after less than a month of fighting. This is not the protracted "generational war" that the World Wars were—there is no draft, GM is not reconfiguring its factory floors to build Abrams tanks or Bradley fighting vehicles. Quite simply, funding is not the issue here—at least in relation to the funds garnered by the estate tax.

Debating the estate tax is worthwhile, but doing so in reference to the war is, at the very least, counterproductive. It misses the mark and allows for the traditional arguments against the tax to make more sense. For proof, check out Sen. Kyle's response, also printed in The Post's op-ed section:

Small-business owners of more modest means … are seriously crippled by the costs of complying with the federal death tax. Minority-owned businesses spend on average, $9,000 on estate tax planning and $28,000 a year on life insurance premiums. The overall total for the average family business is $125,000 over five years.

In yet another letter to The Post, Rep. Jennifer Dunn (R-Wash.) piles on, "70 percent of family businesses in the United States do not survive the second generation, and 87 percent do not make it to the third generation. The death tax is a major reason for this."

You can tell that Rep. Dunn and Sen. Kyle have done this before and that perhaps Mr. Gates is relying too much on his good name. Just analyze their arguments: Gates stretches the issue in an attempt to make it apply to a situation it doesn't, and uses obscure historical references like the Spanish-American War and Harlan E. Read (who?) to try and make it stick. On the other hand Sen. Kyle and Rep. Dunn use concrete statistical analysis and political soft points—minority and family-owned businesses, family farms and fat-cat lawyers—to drive home their side of the argument.

Whether you are in favor of the estate tax and think it needs to be tweaked, or believe it is counterproductive in the long run, it's clear who has won this battle in the overall debate.

For in-depth coverage of Bill Gates Sr.'s battle to save the estate tax, check out The Washington Post Magazine's cover story "Sharing the Wealth."

Am I missing something? Did you read an essential story on investor confidence? Is Law and Order sticking it to the insurance industry again? Have you read a book that deals with the financial services industry? Is this a poorly written column and a disgrace to the industry? Sound off on "Media Watch" by emailing your thoughts to David Connell.

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