Pity the rich. Imagine slaving away your whole life and then, after piling up $10 billion or $20 billion, or even $10 million or $20 million, you die and a bunch of government "grave robbers" come along and impose the "immoral" estate tax on your otherwise lucky heirs. This is the world according to Rep. Dick Armey, the GOP House majority leader and cosponsor of the somewhat morbidly titled "Death Tax Elimination Act."

Other than death and taxes, nothing is more certain than an ample supply of this kind of demagoguery as Congress begins to debate legislation to repeal the federal estate and gift tax.

GOP conservatives -- with the surprising support of nearly 50 Democrats -- appear to have a majority of House members in favor of repealing the federal estate and gift tax. If they succeed, it will be history's largest per capita tax cut -- worth millions of dollars to each of a few thousand wealthy souls each year who would otherwise expire into the tax code's cold embrace.

The few, the proud, the really rich

Who wants to be a millionaire? We all do, of course, particularly if that can be accomplished on game shows or by playing Lotto. Unfortunately, fewer than two of 100 Americans will become eligible for the dubious honor of having their wealth taxed after they die.

To be taxable at all, an estate (or what is left after charitable gifts) must exceed $675,000 -- or $1.3 million for a couple. This exemption will increase to $1 million per person by 2006. And although the top marginal estate-tax rate is 55%, there are so many loopholes that the average effective rate is 17% -- and only 5% for estates of less than $1 million, according to a recent analysis of the estate tax by the nonpartisan Center for Budget and Policy Priorities.

As a result, only the very largest estates pay the tax. Of the 2.3 million Americans who died in 1997, for example, fewer than 43,000 paid any estate tax. IRS data show that about half the roughly $17 billion in estate taxes collected that year was paid by just 2,400 people, or about one in a thousand decedents.

Owners of family farms and small businesses, the poster children for lobbyists favoring repeal, rarely pay the tax because they get a double exemption. In 1998, fewer than 1,500 taxable estates had significant farm or small business assets. IRS data show family farms and businesses accounted for less than 4% of all taxable estates valued at less than $5 million.

Tax that fellow behind the tree

If the estate tax affects only 2% of us, why not repeal it? First, because there are other tax cuts (and needed public investments) of broader benefit to the living. The estate tax will generate more than $50 billion annually by 2010 -- precisely when Social Security and Medicare will need infusions of general revenue to pay benefits to retiring baby boomers. Vice President Al Gore might ask presumptive GOP presidential nominee George W. Bush this fall: "How will you fund your huge income-tax cut for the most affluent 10% if Congress returns such a big chunk of the budget surplus to the wealthiest 1%?" If the nation really has a spare $50 billion a year, a more progressive option would be to reduce the regressive payroll tax that nicks every dollar of wages (up to $76,200) by 15.3%.

A second reason to maintain the estate tax is that it partly compensates for an even costlier tax loophole that primarily benefits wealthy heirs and heiresses. When someone dies and leaves stock, real estate or other assets to either heirs or charity, any accrued capital gains are permanently exempted from income taxation.

This exclusion of capital gains at death is defended on the basis that imposing both the income tax and the estate tax simultaneously would be confiscatory. But it will cost other taxpayers -- including wealthy people who pay capital-gains taxes -- $36 billion this year and $200 billion over the next five years. It is also inefficient because it "locks up" tens of thousands of homes and stock holdings that would be sold if tax avoidance was not an issue.

America's worsening inequality of wealth

A third reason to maintain some form of wealth tax is that while income inequality is worsening, inequality of wealth is widening much faster.

In a recent study using Federal Reserve Board data, economist Edward Wolff found that the average net wealth (including home equity) of the poorest 40% of U.S. households fell by 76% between 1983 and 1998, from $5,000 to only $1,100. Over this same period, "the top 1% received 53% of the nation's total growth in net worth, 56% of the nation's total growth in financial wealth and 47% of the nation's total increase in income," Wolff concluded. In all three categories, the most affluent 20% of U.S. households captured about 90% of the nation's wealth and income growth.

A fourth reason to oppose a repeal of the estate tax is that it would severely damage the charitable sector. The United States, compared with European nations, has a larger charitable sector and a smaller federal government. One reason our private nonprofit sector thrives is that the wealthy would rather take credit for giving lots of money to charities while they are alive (and receive a tax deduction) rather than pay more in estate taxes after they die.

A final reason for the estate tax is the one Congress gave when it was enacted in 1918: the small "d" democratic virtues of breaking up concentrations of great wealth and promoting equal opportunity. Free-market advocates claim they abhor policies that pursue "equality of results" because they distort the efficiency of competition based on talent and hard work. Yet with or without an estate tax, the children of the wealthy are born on third base.

For that reason alone, recycling a fraction of wealth from the 2% who benefited most from America's unique political economy is hardly an unreasonable burden.

A more fair and efficient compromise

Unfortunately, many middle-class Americans believe endless stock-market gains soon will expose them to the "death tax." If President Clinton and congressional Democrats are seeking a compromise, a fair and efficient tradeoff would be to raise the $1-million exemption with revenue saved by embracing the one progressive feature of the Death Tax Elimination Act. The bill would narrow the exclusion of capital gains from income taxation.

This so-called "carryover basis" provision passes a decedent's deferred capital-gains tax liability onto his heirs (although not to charities) -- delaying, but not forgiving, the tax debt. Narrowing this loophole would save $4 billion a year, enough to fund a significant increase in the exemption level for the (upper) middle class and for family-run farms and small businesses.

Even better: Let's begin debating a way to replace a portion of the tax on wages with a broader-based tax on wealth.