During the last Bush Presidency, as you may recall, there was a coordinated campaign to eliminate the Estate Tax, which has existed in some form in the United States since the 18th century. Rebranding it the “Death Tax” under the guidance of Republican pollster Frank Luntz, wrote that the term “kindled voter resentment in a way that ‘inheritance tax’ and ‘estate tax’ (did) not,” and alluding constantly to imaginary family farms that would be destroyed if the tax were to remain on the books, Republicans were successful in passing legislation in 2001 that phased out the tax, which primarily affected the super-rich, over a ten year period. (Coincidentally wealth inequality grew at an unprecedented rate over this same period of time in America.) Thankfully, the tax returned in 2011, albeit in a somewhat watered down form. Forces on the right, however, have never stopped plotting to kill the legislation once and for all on behalf of their wealthy backers, who would love to be able to move wealth from generation to generation without taxation.
The most recent attempt to kill the Estate Tax, which I’d prefer to call the Patriot Tax, is being led by Texas Congressman Kevin Brady, the author of H.R. 2429, better known as the
Death Tax Repeal Act of 2013. As of right now, the bill, which could go to the floor of the House as early as this month, when Congress returns to D.C., has 221 cosponsors, the vigorous support of Koch brothers’ front group Americans for Prosperity, and a great deal of momentum. (Three of the bill’s cosponsors are Democrats; Representatives Mike McIntyre of North Carolina, Jim Matheson of Utah, and Sanford Bishop of Georgia. Representative David Price of North Carolina had been a cosponsor, but backed out in April.)
The following comes from an opinion piece in Forbes.
…H.R. 2429 has the support of a majority of the whole House and virtually everyone in the House GOP Conference. It has 221 cosponsors–almost the only Republicans not on there are the ones who traditionally don’t co-sponsor bills because they are in leadership or run committees…
House Ways and Means Committee Chairman Dave Camp (R-Mich.) has endorsed having a vote on H.R. 2429. 18 of the 21 GOP members of this tax writing committee are co-sponsors. Just last week, over 30 Members of Congress sent a letter to the leadership urging a vote on H.R. 2429 as soon as possible…
Reagan economist Steve Entin, now of the Tax Foundation, has a dynamic score which shows that repealing the death tax would actually raise more in pro-growth tax revenue than the meager amount the death tax collects today. That’s because killing the death tax will create hundreds of thousands of new jobs and free up economic resources currently trapped with insurance companies, lawyers, and estate planners. That’s probably why most states no longer have a death tax.
Killing the death tax has, in every poll taken for two decades, attracted supermajority support. Conservative activists – the ones the GOP needs coming out in force to vote this November – absolutely hate the death tax. Sure, it will face the same, tired class warfare arguments from the Left, but that’s never worked with our base voters, the ones that really matter in a midterm election.
It would be smart politics for the House GOP to energize, not demoralize, their base heading into the final election push…
I know, like me, your first inclination is probably to believe everything said by a Reagan administration economist extolling the virtues of trickle down economics, but, just in case you aren’t, here’s the other side of the argument, as expressed by Vermont Senator Bernie Sanders, who let it be known yesterday that he’d be bringing forward an alternative proposal – one that wouldn’t see the Estate Tax eliminated, but strengthened. Here’s his statement in its entirety. (Please read it. It’s important.)
The founders of our country declared their independence from what they viewed as a tyrannical aristocracy in England. More than two centuries later, today’s tyrannical aristocracy is no longer a foreign power. It’s an American billionaire class which has unprecedented economic and political influence over all of our lives.
Unless we reduce skyrocketing wealth and income inequality, unless we end the ability of the super-rich to buy elections, the United States will be well on its way toward becoming an oligarchic form of society where almost all power rests with the billionaire class.
In the year 2014, the U.S. has by far the most unequal distribution of wealth and income of any major country on earth. This inequality is worse than at any time in our country’s history since 1928. Today, the top 1 percent owns about 37 percent of the total wealth in this country. The bottom 60 percent owns only 1.7 percent of our nation’s wealth.
At a time median family income is $5,000 less than it was in 1999, the net worth of the top 400 billionaires in this country has doubled over the past decade. The top 1 percent now owns more wealth than the bottom 90 percent of Americans and one family, the Walton family of Wal-Mart, owns more wealth than the bottom 40 percent of Americans.
In terms of income, the top 1 percent earns more than the bottom 50 percent. Since the Great Recession of 2008, 95 percent of all income gains in the U.S. have gone to the top 1 percent. While the rich have become even richer, more Americans are living in poverty than at any time in our nation’s history. Today, half of Americans have less than $10,000 in savings. We have the highest rate of childhood poverty – 22 percent – than any major country on earth.
More than a century ago, President Theodore Roosevelt recognized the danger of massive wealth and income inequality and what it meant to the economic and political well-being of the country. In addition to busting up the big trusts of his time, he fought for the creation of a progressive estate tax to reduce the enormous concentration of wealth that existed during the Gilded Age.
“The absence of effective state, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” the Republican president said. “The really big fortune, the swollen fortune, by the mere fact of its size acquires qualities which differentiate it in kind as well as in degree from what is passed by men of relatively small means. Therefore, I believe in… a graduated inheritance tax on big fortunes, properly safeguarded against evasion and increasing rapidly in amount with the size of the estate.”
Roosevelt spoke those words on Aug. 31, 1910. They are even more relevant today.
A progressive estate tax on multi-millionaires and billionaires is the fairest way to reduce wealth inequality, lower our $17 trillion national debt and raise the resources we need for investments in infrastructure, education and other neglected national priorities.
I will shortly introduce legislation that will:
• Call for a progressive estate tax rate structure so that the super wealthy pay their fair share of taxes. The tax rate for the value of an estate above $3.5 million and below $10 million would be 40 percent. The tax rate on the value of estates above $10 million and below $50 million would be 50 percent, and the tax rate on the value of estates above $50 million would be 55 percent.
• Include a billionaire’s surtax of 10 percent. This surtax on the value of estates worth more than $1 billion would currently apply to fewer than 500 of the wealthiest families in America worth more than $2 trillion.
• Close estate tax loopholes that have allowed the wealthy to avoid billions in estate taxes. Some of the wealthiest Americans in this country have exploited loopholes in the tax code to avoid paying an estimated $100 billion in estate taxes since 2000. My bill would close those loopholes.
• Exempt the first $3.5 million of an estate from federal taxation ($7 million for couples), the same exemption that existed in 2009. Under this legislation, 99.75 percent of Americans would not pay a penny in estate taxes.
This legislation would exempt more than 99.7 percent of Americans from paying any estate tax while ensuring that the wealthiest Americans in our country pay their fair share.
I agree with former Labor Secretary Robert Reich who wrote, in support of this legislation, that America “is creating an aristocracy of wealth populated by heirs who don’t have to work for a living yet have great influence over how the nation’s productive assets are deployed.” He is right in calling the proposal that I’ve laid out “a welcome step toward reversing this trend.” Let’s fight together to see that it is implemented.
Sanders, of course, is right. Our country is fast approaching a point of no return relative to wealth inequality, and something needs to be done, and done immediately, if we’re to avoid the bloody mess that surely lies ahead. If you have a moment, please write or call your member of Congress and urge him, or her, to vote “no” on H.R. 2429. And, once you’ve done that, call your Senators and urge them to assist Bernie Sanders in whatever way they can, as he attempts to do the politically unthinkable… and ask the 1% to put the future of their country ahead of their desire to subvert our democracy in favor of an American aristocracy.
And, just so we’re clear, this was never about saving small family farms, as the Republicans have claimed. Tom Buis, the former president of the National Farmers Union, has said it best a few years ago. “Family farmers and ranchers are insulted by those who use farmers as the reason for eliminating estate taxes,” Buis said, “when the real beneficiaries are the nation’s multimillionaires.” This fight against the Estate Tax, regardless of how they attempt to position it, has always been about building dynasties, not helping preserve family businesses.
And, for those of you Tea Partiers out there who who claim to care about the “founding principles” our nation was built upon, you should know that our founding fathers supported the idea of an inheritance tax. In a letter written in 1783 by Benjamin Franklin to Robert Morris, the Superintendent of Finance (Treasury Secretary) under President George Washington, Franklin calls resistance to taxes “highly blameable,” and urges the passage of laws that would compel payment. Franklin then goes on to state in this letter, “All Property except (that) absolutely necessary for Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents (inheritance) and all other Conveyances of Property, and even of limiting the Quantity and Uses of it.”
Yes, contrary to what you may have been told by the likes of Rush Limbaugh, America wasn’t built by people who fled England because they hated taxes, but by people who wanted desperately to create a government of their own, which didn’t just exist to serve the rich and powerful. Our founding fathers hated the idea of aristocracy, and I suspect, where they here with us today, they’d be rallying to the side of Bernie Sanders.
Oh, I should also add that not all wealthy Americans are blind to the risk that comes with severe wealth inequality. Bill Gates Sr., Warren Buffet and a few other billionaires have come out over the past several years in defense of taxes. They know that stability is important, and, more importantly, they know that they couldn’t have made their fortunes if not for the infrastructure investments made by their predecessors. They know that their fortunes were made thanks to the contributions of others, and they know that true patriots pay their taxes.
19 Comments
However, Bill Gates and Warren Buffet avoid the estate tax by giving their money to a foundation, which Bill controls and Warren agrees to, such that they can champion issues that they believe in, get a large tax write off, and generate another form of dynasty.
“Pay your taxes.”
Is it enough to merely “pay taxes” if the mechanisms to distribute revenues is inefficient and benefits no one? This is certainly true on the State level, which is exactly why I despise my property taxes so greatly. Feeding money to bad schools or local level corruption does no one any good at all.
Perhaps, we might change the way we view taxes altogether. Create a national consumption tax like that of the Scandinavian countries that could fund crazy things like universal health coverage and an income floor which guarantees a reasonable income for all Americans.
Continuing to depend on the rich to solve our problems is a dead end. Progressive taxation puts the brunt of power in the hands of the wealthiest since they pay (in absolute terms) the most money.
Please excuse the grammatical mistakes above, There is no way to edit these posts…..
But consumption taxes are regressive, Peter, placing a greater burden on the poor.
http://www.jstor.org/stable/40722031
Let the rich do what they want. The Revolution will come faster that way.
As my friend Nate pointed out on Facebook — if we’re going to have an aristocracy we might as well get serious about it and bring back noble titles. In an American twist, I propose we put these titles up for sale. Naming rights meets aristocracy! Appropriate for Capitalism™!
Proposed titles:
“Prince of New York City” — $500 million
“Earl of Brooklyn” — $200 million
“Count of Washtenaw” — $2 million
“Duke of Ann Arbor” — $1 million
“Baron of Ypsilanti” — $250,000
“Viscount of Howell” — $5
Archduke of Water Street has a nice ring to it.
The estate tax is entirely too easy to avoid if you are a member of the ultra-rich because of the current laws and regulations regarding irrevocable trusts. The only solution to make people such as this actually pay their estate taxes would be to pass legislation that would revoke these irrevocable trusts in addition to simplifying the collection method of the estate tax to avoid making death a taxable event. In this way we could protect the small business owners and farmers that truly feel the impact of the estate tax.
In this way we could protect the small business owners and farmers that truly feel the impact of the estate tax.
Myth 5: Many small, family-owned farms and businesses must be liquidated to pay estate taxes.
Reality: Only a handful of small, family-owned farms and businesses owe any estate tax at all, and virtually none would have to be liquidated to pay the tax.
TPC estimates that only 20 small business and farm estates nationwide will owe any estate tax in 2013.[10] (TPC’s analysis defined a small-business estate as one with more than half its value in a farm or business and with the farm or business assets valued at less than $5 million.) This figure represents only 0.00075 percent of all estates — that is, about one out of every 130,000 estates of people who die this year. Furthermore, these 20 estates will owe just 4.9 percent of their value in tax, on average.
These findings are consistent with a 2005 Congressional Budget Office (CBO) study that exploded the myth that many small businesses and farms have to be liquidated to pay the estate tax. CBO found that of the few farm and family business estates that would owe any estate tax under the rules scheduled to be in effect in 2009, the overwhelming majority would have sufficient liquid assets (such as bank accounts, stocks, bonds, and insurance) in the estate to pay the tax without having to touch the farm or business.[12] Because the current rules are even more generous than the policies CBO analyzed, even fewer estates today would be forced to sell farm or business assets.
Furthermore, for the few taxable estates that would face any liquidity constraints, there are special provisions written into the law for them — such as the option to spread estate tax payments over a 15-year period and at low interest rates — that would allow them to pay the tax without having to sell off any of the farm assets.
Are regressive taxes necessarily bad if they can support wider and better public services? Many countries have high consumption taxes or VAT which disproportionately impact the poor. Again, Sweden comes to mind. Canada is another.
But public services to improve the lives of the poor are far better in both those countries.
If we continue to rely on the rich (whether true or not) to pay for everything, then the rich will decide how the money is spent. Taxing the poor directly may be unpalatable to some, but the fact that they are not taxed (at least visibly) gives them little to bargain with politically.
I can’t say that such a system would work in the US, but it does elsewhere.
I can say that the current system is not working at all and, though politically useful, leftist obsession with extracting as much as possible from America’s richest is a practical dead end. Left leaning America needs to start thinking in broader terms.
My suggestion and I am sorry I am repeating myself:
Create a fixed consumption or VAT tax for the entire nation and introduce wage subsidies which are 1) paid directly to working individuals (like the EITC) and 2) guarantee an income floor for all Americans equivalent to the current income median.
A system like that would quickly pull people out of poverty all over the country (rural and urban, blue state and red state) and help insure a stable market economy.
Pete
Why do you keep mentioning Sweden as your ideal tax system? It’s very similar to our’s.
They have a progressive tax, plus a (as you would call a VAT or consumption tax).
Sweden has a progressive income tax, the rates for 2014 are as follows:
0% from 0 kr to 18,800 kr (~0 – 2,690 USD)
Circa 31% (ca. 7% county and 24% municipality tax): From 18,800 kr to 433,900 kr (~2,690 – 62,140 USD)
31% + 20%: From 433,900 kr to 615,700 kr (~62,140 – 88,180 USD)
31% + 25%: Above 615,700 kr (88,180 USD and up)
Value added tax
The value added tax (mervärdesskatt or moms) rate in Sweden is 25%, with exceptions for food and services like hotel room rental fees (12%), and for sales of publications, admission tickets to cultural events and travel within Sweden (6%)
Are you an idiot? or just the stupidest phd that admits how stupid he is?
Put downs are completely unwelcome, Dragon. Do us a favor, show us how bright you are without the insults.
If you spent your time working instead of reading and ranting, you could be one of us.
Regressive taxes would be more acceptable if we had a more economically egalitarian society. We don’t. The rich actually benefit much more from public services than the poor. E.g. Things like our legal system and law enforcement and even our military are designed to protect people and their property. Those with property have more to protect and thus, benefit more. Sure some social services benefit the poor more than the rich but even then, since many of them create a public good, I would submit that the rich still benefit enough that it isn’t unreasonable to ask them to pay more.
By the time they realize there’s no hiding from the world that they’ve created it will be too late for them. Unfortunately it will be too late for us too.
There will come a time when not even private armies can protect you .
If you ask the wealthiest to pay more, they will simply demand more. It’s a dead end and liberals are wasting their political time.
And even if they pay more, so what? Does the money “trickle down” to the poor through policy? I highly doubt it.
The population of the low and middle class is higher than that of most countries around the world. It could very easily provide for itself through a mechanism like national consumption tax.
Egalitarian or not, we already have things like the EITC which raise the incomes of poor working Americans. We can expand that program easily to guarantee a minimum income for all Americans, but liberals aren’t asking for this achievable goal.
The trouble, of course, is that liberal America is more interested in proving smug political points than improving the lives of Americans.
@ Peter
It seems you’re suggesting we should institute higher (effective) taxes on the “middle class” to help the poor (through a VAT, or some such) … while expecting nothing more from the wealthiest 1%.
The problem with your theory is that, at the rate we’re going, there will soon no longer BE a middle class.
Already, the wealthiest one percent possess 40 percent of the nation’s wealth; while the bottom 80 percent own seven percent —and this gap only continues to grow as the very wealthy and multinational corporations continue to gain an increasing stranglehold over both major parties, and all three branches of government.
At this point, it is pretty clear that the wealthiest won’t be satisfied until the have accumulated virtually all significant wealth (and power).
Addressing the problem of rapidly-growing income inequality in America is not a “smug political point” — it is imperative, if we hope to preserve any semblance of a functioning democracy.
I will leave the irony of Peter Larson accusing *anyone* of being smug for another discussion.
I will say that the EITC is something I completely support. I suppose it is possible to make it great enough while also increasing payments of other social welfare programs, primarily those which support the disabled and the retired who aren’t eligible for EITC, to allow for regressive taxes. I still don’t see any reason why regressive taxes are in any way superior to progressive taxes. So what if the rich demand more if they have to pay more? We don’t have to give it to them. If they want to renounce their citizenship, all we have to do is have a high tax on wealth leaving the country along with a “don’t let the door hit you on the way out” policy.