The casualty list from the bear market is long and growing. The investment funk has transformed CEOs from celebrities forging a new economy to malefactors of wealth. The popular idea of a 40-something retirement funded by double-digit stock returns has gone the way of the 35-hour workweek. The movement to privatize Social Security is out of political steam as stocks drop lower for nearly three years. The fashionable notion that federal surpluses stretched as far as the eye could see proved false as the budget deficit is $150 billion—and counting.

The death of the idea to abolish the estate tax is next. President Bush ran on a platform to eliminate the so-called "death tax." The estate tax provision in last year's tax bill ranks among the most bizarre features of the U.S. tax code—and there's plenty of competition. The estate tax rate gradually declines to zero by the beginning of 2010 only to be reinstated at the end at the year at the old 55 percent rate. The Senate nearly voted to permanently repeal the estate tax as recently as June. But the current economic and social climate is no longer hospitable for eliminating taxes on transfers of vast wealth. No, not when the bear market has exposed ethical bankruptcy in executive suites, widespread corporate chicanery, and infectious greed among the pin stripe elite.

This doesn't mean that the estate tax debate is over. Just about every supporter and opponent of the tax agrees the current law as written is an abomination. Lawmakers will be forced to revisit it. Short of repeal, America should reform how it treats bequests. For one thing, the aging of the population, along with the remarkable increase in entrepreneurial success in the new economy, argues for keeping the estate tax exemption high. Estate tax reform could become part of a broad movement to bring down all tax rates in return for eliminating many tax shelters, including the intricate world of trusts. However you come down on estate taxes, there is no justification for the mind-numbing complexity of the existing rules.

Of course, rewriting the estate tax laws won't be easy since it involves confronting classic trade-offs between equity and efficiency. For example, the estate tax modestly reduces wealth accumulation and does induce tax avoidance and evasion. Yet it also encourages charitable giving and leans against concentrated wealth. Most important, the tax gives concrete expression to the strong belief that equality of opportunity is an American ideal. Rather than birth into an aristocracy, money and power should spring from one's own brain, savvy, and pluck. This is why the Gilded Age tycoon Andrew Carnegie called the estate tax the "wisest" tax.

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