Long Live the Death Tax
The Wall Street Journal editorial page despondently refers to ” the first tax increase of the new Democratic era.” Over the weekend, it was reported that Obama will propose to keep the Estate Tax from its scheduled repeal next year, and will push for reform. Obama wants to set the tax rate at 45% with a $3.5 million exemption ($7 million for couples).
I wrote about the “Death Tax” and how conservatives manipulate their most naive and uninformed supporters into caring about this issue. Emotional appeals and blatantly false information on the Estate (“Death”) Tax are all over the place, and should be laid to rest as quickly as possible.
Although it almost seems overdone at this point, it is worth remembering economic policy during the Clinton administration’s years. Under Clinton, the Estate Tax was 55% after a $1 million dollar exemption. Although the 1990s were exceptionally good for our economy, including family farms and small businesses, this rate was unsustainably high. That’s probably why it’s been gradually reduced ever since. During the Bush years, the Estate tax was rate reduced and the exemption was increased. Everyone knew this tax was going to become an issue because the 2001 tax bill that last addressed it laid out a timetable: the tax was set to be reduced and then completely abolished by the year 2010, but then in 2011 it would come back to the full previous Clinton levels.
Merely on a theoretical level, I support the Estate Tax for several reasons. The government has to tax somebody to get its revenue. Who better than dead people? Dead people who are fantastically wealthy. Almost no estates end up paying the Estate Tax, and those that do pay a relatively tiny amount because their marginal value above the amount exempted is small. Under Obama’s current proposal, only the top 1% of estates would pay the Estate Tax at all.
For example, the $7 million exemption for couples along with the lowered 45% rate means that if your parents’ estate is worth $10 million, you will only be liable for $1.35 million in Estate Taxes upon their death. The remaining $8.65 million should be enough to keep the lights on for a while. That is assuming they held all their assets in their own names and did nothing as far as estate planning goes (unlikely).
The Journal’s lament, echoed by wealthy anti-tax hawks and ignorant poor people across the nation is unfortunate. First of all, postponing or mitigating an irresponsible tax cut is not the same thing as a tax increase. Second, it is unlikely that Obama’s new Democratic era will include many more tax increases, at least for his first term. Finally, unless you take the position that all taxes and all government ability to spend is bad, it is hard to legitimately attack the Estate Tax. It is progressive, limited, and targeted. It is unlikely to cause significant harm to anybody.
Obama is right to refrain from extending further tax benefits to the wealthiest of the wealthy in America. Income inequality is rising as the rich get relatively richer and the poor get relatively poorer. The Bush administration’s extravagant tax policies designed almost exclusively to benefit the rich have only exacerbated the problem. America’s Gini coeffecient has increased almost 20% during the past forty years. Today, we face many economic problems, and we need to focus our resources in the most prudent ways possible. One problem we are not facing is children of millionaires losing their inherited mansions, and this is one expenditure that Obama is wise to postpone.
This question is not about the death tax but does relate to Obama’s economic plan. I read that he plans to create 3 or 4 million new jobs and we do have nearly that many unemployed now. My question is, are the unemployed qualified to fill the new jobs he plans to create? It seems many of the new jobs would be in construction of some kind or another, but many of the unemployed are office workers, clerks, teachers, financial consultants, etc. Does his plan require retraining and how long and how expensive would that be? I’ve enjoyed reading your comments about the economy and would like your thoughts on this.
Indeed. We are in a period of economic downturn. Raising overall taxes would exacerbate the problem.
As for the Death Tax. Isn’t it common economic sense to have it?
Here’s an interesting article about income disparity from the Huffington Post by Barbara Ehrenreich, the author of Nickle and Dimed: Rich Get Poorer, Poor Disappear.
The Death Tax is economic stupidity. Just one more thing to discourage achievement, encourage illegal means of protecting wealth, and exerting more control over people.
1) Nobody seriously believes that a progressive tax discourages achievement. No intelligent person, I should say. Such a statement is just asinine, especially when the tax isn’t even levied against the “achievement” until the achiever has passed away.
2) Is your argument that because this tax can be partially circumvented that it is therefore invalid? Under that standard, what tax is valid?
3) The control exertion argument doesn’t seem to apply to the Estate Tax any more than any other tax that has ever been conceived of. In fact, it is much less controlling since it will never affect the “achiever” while he/she is still alive and able to enjoy the achievements.
You have some talk radio catch phrases, sure, but I would be curious to hear more substantial arguments. I know you can do better, Derek.
I tend to think the estate tax is the least discouraging to achievement. Especially since:
1) It affects so few people and
2) It take from people who cannot achieve anymore
I can understand that dying people want to be able to leave money behind for their grandchildren to go to college. But nothing inherent in the death tax prevents that from happening. Especially since the group effected by the estate tax are the very richest in America.
And by the way, we must not have many friends since the PC is on the list of blogs that are friends of the PC.
I was laughing at that as well
:p
Long live the death tax!
And really, David, that is tres sad and pathetico (friending oneself, which even facebook, social network for cool kids, wallflowers, and losers extraordinaire, does not allow). I didn’t think mentioning it would warrant anything but a lighthearted jest, and I know Shakespeare says “To thine own self be true,” but…EHM…
How many times do you believe that a dollar should be taxed, David?
Although tax policy in this country is insanely complicated, it generally boils down to the idea that money should be taxed whenever it changes hands.
When Wal-Mart makes profit, it is taxed. When Wal-Mart pays its employees, it is taxed. When its employees spend it (at Wal-Mart), it is taxed.
It is more complicated with deductions and such, but I think that is the underlying philosophy. Why should money changing hands from a deceased person to living heirs be treated fundamentally different?
“It generally boils down to the idea that money should be taxed whenever it changes hands.”
Very well, although I completely disagree and it seems to me that your viewpoint is not supported by at least one of your examples.
How is money changing hands when Wal-Mart makes a profit?
And if you believe that money should be taxed whenever it changes hands, why should the “death tax” be levied only when it changes *certain* hands?
To be logically consistent, I would expect that you would believe that the “death tax” should apply to all estates/decedents/heirs, not to just those you consider to be “fantastically wealthy.”
Certainly, the “death tax” can be progressive, limited, and targeted—qualities that you apparently admire in a tax regime—and yet still apply in all instances when money changes hands. Such a taxation system would apparently meet all of your criteria. Why is it that you are not advocating the application of such a system?
Regardless, I take it that you believe that lenders, who issue loans to a borrower, should be taxed? And that the borrower, during the repayment of the loan, should be taxed as well?
I didn’t mean for this to get too technical, but there is an easy answer to these things you are raising. I didn’t mean that money MUST be taxed whenever it changes hands – just that it is the general rule of thumb. It is therefore not unreasonable to begin examining one situation where money changes hands (when an estate is passed on) to see if it is appropriate to tax it. That rule of thumb isn’t meant to be the final word in the debate, just the first step. I laid out my other reasons for specifically advocating the Estate Tax (as proposed by Obama) in the original article.
That being said, I noticed that you have neglected to specifically address the Estate Tax. Your technicalities and side issues really do nothing to show that Estates should not be taxed. Is that your position? If so, why not?
I believe that Estates should not be taxed. Regardless of their value. End of story.
I also believe that a dollar should only be taxed once (preferably when it is first earned, but I’m open to other suggestions).
It is curious that you consider my comment(s) to be “technicalities and side issues.” I am disappointed by such a comment, although I do understand that it may be easier to brush aside criticisms of one’s viewpoint and reasoning by issuing such a dismissal.
Tellingly, however, you haven’t answered the questions I posed in my second post. And if, as you claim, “there is an easy answer to these things [I am] raising,” then what is the answer?
To add to the above post:
In an earlier reply, you state ” . . . the [Estate] tax isn’t even levied against the “achievement” until the achiever has passed away.”
This is an incorrect statement.
The “achievement” is taxed, quite probably, on a yearly and repetitive basis.
For example, if the “achievement” is based on one’s land-holdings, then property taxes take a yearly cut from one’s “achievement.” If the “achievement” is based on one’s stock and portfolio, then income taxes (whether through dividends or interest income, or the outright sale of the capital asset itself) take a yearly (for dividend and interest income; a one-time cut for capital gains) cut from one’s “achievement.” And so on.
Accordingly, the “achiever” has been taxed repeatedly on their “achievement”. Exactly why the “achiever”, or, more accurately, the “achiever’s” heirs, should be taxed again on said “achievement” is unclear to me.
And, to make a more stark example, say the “achiever” cashes out on all their holdings on December 31 of a certain year. Their basis in said holdings is low, and so they are subject to a very high tax bill. On April 16th of the following year, the “achiever” dies. Between the date of the sale and the “achiever’s” death, the proceeds from the sale were stashed under the “acheiver’s” mattress (it was quite thick and plush upon his death, as you might imagine). On what basis does the government have to again tax the “achiever’s” estate?
Let me go general first and then specific.
In general, you are taking issue with our entire tax system and not really addressing my article or argument at all. I can understand your position somewhat, but I think you present a very elementary view of economics. I described a basic rule of thumb that says that whenever money changes hands (as a gift, earned income, return on investment, or purchase of goods or services, etc.) it is generally subject to taxation by the government. If all of these types of monetary exchange were not taxed, then people would escape taxes almost entirely by trading money in nontaxable ways. The rule of thumb is not always applied, though, and that is why we have to look at individual taxes to see if they can be levied fairly and if they would be beneficial to the needs of the government and the country as a whole.
Your elementary view of economics leads you to say things like “a dollar should only be taxed once.” That is a bumper sticker response that doesn’t reflect the complicated and circular nature of our modern economy. At which point exactly, on the circle of economic interchange, would you tax said dollar?
Back to the specific. I specifically wrote about the Estate Tax because I think the general debate about tax philosophy is much harder to have differing sides come together on. It’s why I write articles about government programs that I think would be beneficial rather than the generalized concept of the social contract or the welfare state or the ability of government to enact programs at all.
Also, specifically, your hypothetical is absurd. Nobody who has an estate worth more than the exemption amount would put money in a bed, and such a silly person would no doubt be the overwhelming minority of those subject to the Estate Tax. A tax cannot be deemed unfair because of such an unlikely scenario.
I would like to hear any specific arguments that are actually against the Estate Tax. There are better arguments out there than what you are making, and I’m disappointed.
“. . . but I think you present a very elementary view of economics.”
Ha! So instead of addressing my points, you dismiss them as being “a very elementary view of economics.” How very convenient for you.
” . . . and that is why we have to look at individual taxes to see if they can be levied fairly and if they would be beneficial to the needs of the government and the country as a whole.”
Very well….yet you have never fully addressed why you believe that the Estate tax is “levied fairly”. Why should it be applied to the “fantastically wealthy,” and not to everyone? If, as you implied, the best people to tax are dead people, why shouldn’t (or doesn’t) the government tax *all* of them?
“At which point exactly, on the circle of economic interchange, would you tax said dollar?”
Already answered in a previous posting.
“Also, specifically, your hypothetical is absurd.”
It may be an “absurd” hypothetical, but it reveals the fallacy of your argument(s). And, in any event, it is curious that you sidestep (or, more accurately, wholly neglect to answer) the question posed by it.
“I would like to hear any specific arguments that are actually against the Estate Tax.”
Respectfully, it is the clear to me that you really don’t want to hear such arguments.
Ultimately, it seems to me that your argument(s) for the Estate tax is:
A. Some people, who in your view are “fantastically wealthy,” have a net worth that you, for whatever reason, believe is high enough to be worthy of punitive taxation;
B. You don’t like the idea/fact that the rich are getting richer while others do not share in the wealth, so you believe that taxing the estate of a wealthy decedent is an acceptable way to both level the field and fund governmental services; and
C. The Estate tax rate isn’t really *that* high, and it is “unlikely to cause significant harm to anybody,” since, after all, once someone has ten or so million dollars, what is a $1.35 million tax really going to do to them?
Unsurprisingly, in making your argument(s), you reinforce the point that it is awfully easy to spend someone else’s money…and that it is exceptionally easy to tax them on it as well. And, to use your words, “I’m disappointed.”
Mr. Poster, I really do want to understand what your alternative tax philosophy is, but “taxing a dollar once” just doesn’t make any sense. If you want to throw out the general rule of thumb of taxing whenever money changes hands, please tell me when that single taxation could occur. I can’t imagine how you could reduce it down to one single instance and still have an effective tax scheme, but I am open to hear about it.
An absurd hypothetical does not invalidate a generally reasonable policy. It never does, and good thing – because there is an absurd hypothetical waiting out there for every imaginable policy.
…and it isn’t just someone else’s money. I promise, when I am dead, I would be fine with the government applying this tax to my estate. I would probably fall beneath the exemption, but I don’t think it would hurt my heirs too much to pay it.
“. . . I really do want to understand what your alternative tax philosophy is, but “taxing a dollar once” just doesn’t make any sense.”
So now, instead of discussing the merits of your post(s) (namely, the estate tax and the–or your– justification thereof), you would prefer to discuss the merits of something else entirely. Shocked, I say…
But, no matter.
Taxing a dollar once does make sense. If you tax a dollar at the point when it is first earned by the recipient, then all further investment and/or use by the dollar (or, more specifically, the remainder thereof) would be free of all taxation. The biggest issues would be what tax rate to levy against the earned dollar and how to allocate the taxes received among local, state, and federal governments, but once the tax rate is fixed and the allocations are made, everything else falls into place. Just as assets and the source of the same can be traced in divorce proceedings, so too can the source of a dollar for taxation purposes.
Thus, if I earn $1 and, after taxes, have, say, $.40 remaining, if I put the 40 cents in a bank account and earn a penny in interest, the penny would not be taxed. If the 40 cents bought a share of stock that ultimately became worth $400, the profit from the sale of the stock would not be taxed. And so on, whether the 40 cents was used to buy a house, clothing, food, medicine, or whatever.
As it is now, the $1 I earn is first taxed through income withholding taxes (let’s say at 25%), leaving me with $.75. If I put the 75 cents in a bank account, and earn (for the sake of simplicity) 5 cents, I get taxed on that as well, leaving me with around 4 cents (or a total of 79 cents). If I want to take my earnings and buy a item (that, say, costs 75 cents), I pay tax on that as well (say, around 6 cents). Oddly enough, 6 cents tax on the 75 cent item ends up costing me 81 cents—more than I have in the first place from the efforts of my labor and good investment decisions.
But, you might say, this is an absurd example…it doesn’t really address the underlying issues. I disagree.
But, you might protest, what about property taxes or accounting for certain deductions (say, student loan interest, mortgage interest, medical expenses)? They would no longer exist because either they are no longer necessary or are accounted for in the tax revenue allocations.
It all comes back to my original question: how many times do you believe that a dollar should be taxed?
And, in the case of the estate tax, why should it be taxed at least once more for the “fantastically wealthy” than it is for everyone else?
“An absurd hypothetical does not invalidate a generally reasonable policy.”
True, but why do *you* believe that the estate tax is a “generally reasonably policy”? Because you say that it is? Because it only affects the “fantastically wealthy”? Because you do not approve of certain individuals having more than what you think that they should have?
Ah, that’s what I thought you meant by “taxing the dollar only once.” The implication of what you said means that we only have an earned income tax from salaries and wages, and eliminate taxes on capital gains, dividends, gifts, inheritance, bonuses, property, sales, excise, sin, etc. That is a lot of eliminating and would require outrageous amounts of income tax to make up for it, I think.
Also, such a system would be ridiculously unfair. Here is a not-so-absurd example of how people would behave under your overly simplistic tax regime: Regular people who actually earn income through wages and salary would see incredible tax increases because they would be necessary to make up for lost revenue because of that long list of taxes that has been eliminated. Upper class people, however, would end up paying almost nothing in taxes, because their means of income would not be considered “income.” So, in your effort to only tax the dollar once, you end up never taxing the dollars made by those who make the most and can afford to pay such taxes. CEOs who make $1 salaries and millions in stock options would never contribute to funding the government at any level. You do realize that implication, right?
If there are giant loopholes in the tax code like that, because we choose to simplistically live up to the mantra of taxing the dollar once, people will crowd into the loopholes. That is why we have the general rule of thumb that whenever money changes hands, it is taxed. That keeps people from transferring money tax-free and avoiding taxes altogether.
I know this is a digression from the original topic, but this addresses your foundational criticism I think. I still think the view you articulate is elementary and unwise. Bumper sticker philosophies do not have to rule when we are discussing things as complicated as the modern economy and fair tax regimes.
Funny how your automatic assumption was that Random Poster was a Mister. But I would have likely made the same assumption.
I’m not going to get into the specifics of your argument, but I would like to add a couple of things from my disrespectful corner. In my experience people like Random Poster make a couple of assumptions that are faulty from the get-go:
(1) that they made their own money all by themselves. They likely did but they were aided and abetted by an economy and government that allowed them to do so with ease, not to mention that for the last 300 years in this country, it has been inarguably easier to make money easily if you’re a protestant white guy. These are always the folks who want to confer some sort of virtue or credibility on themselves simply because the environment has been kind to them. Thus the phrase, ‘getting born at third base and thinking you hit a triple.’
(2) that nobody has the right to take it from you. Try not paying your property taxes for a couple of years and see if you still own your stuff after that. Not to mention that if you happen to live in an area where it would be much nicer if you weren’t here, like in the way of a well-connected developer, what might happen to your stuff.
(3) that everybody is treated fairly by the system. Even if you went by the whole idea that a dollar gets taxed every time it changes hands, that happens much more frequently down the food chain than up the food chain. I can’t believe it’s 2009 and we’re just now talking about a modest stock-exchange levy. That should have happened decades ago.
(4) that the government has any place in propping up your chosen family structure. As far as the government is concerned, why do your adult children get off the hook just because they’re your adult children? The government has an interest in protecting and nurturing small children but when they’re 50, I think they can handle themselves.
A few things for you to masticate, Random Poster.
” . . . eliminate taxes on capital gains, dividends, gifts, inheritance, bonuses, property, sales, excise, sin, etc.”
I enjoy sin quite a lot, but I have yet to be taxed on it. Perhaps I’ve neglected to fill in the appropriate tax form all these years?
“Regular people who actually earn income through wages and salary would see incredible tax increases because they would be necessary to make up for lost revenue because of that long list of taxes that has been eliminated. Upper class people, however, would end up paying almost nothing in taxes, because their means of income would not be considered “income.” ”
First, define “regular people” and “upper class people.”
Second, are you confusing “upper class people” with “high net worth individuals”?
Third, I dispute that “regular people” would see “incredible tax increases.” They are already paying such taxes; the difference would simply be *when* they must pay them. And, perhaps, levying all of the already-being-paid taxes into one lump sum tax would be a good way for people to realize how much taxes they are, in fact, paying. You wouldn’t have an objection to that, would you?
Fourth, “upper class people” would have already paid the taxes on their income–how do you think that they became “upper class people”?
“CEOs who make $1 salaries and millions in stock options would never contribute to funding the government at any level. You do realize that implication, right?”
This issue could be solved by adequately defining what constitutes “earned income.” Additionally, you seem to imply that such individuals are currently “contributing” to funding the government at the same rate that “regular people” are, which is hardly an accurate suggestion.
(I also take issue with your use of the word “contribute.” Taxation is not akin to depositing some coins in the church plate. But I digress…)
“If there are giant loopholes in the tax code like that . . . people will crowd into the loopholes.”
Perhaps, although it is strange for you to be making this argument, given that in one of your earlier replies to (presumably) derekglover, you remark “[i]s your argument that because this tax can be partially circumvented that it is therefore invalid? Under that standard, what tax is valid?” I’m guessing that a little logical consistency is too much to expect?
“I know this is a digression from the original topic . . .”
Yes, it is, but that’s fine. Its rather enjoyable, at least to me.
“I still think the view you articulate is elementary and unwise.”
I guess that I’d be more troubled by your impression(s) if you managed to adequately support your own arguments pertaining to the original subject matter.
Speaking of, still waiting for your response to my earlier question(s).
Or is your “bumper sticker philosophy” on this matter simply: ___________________________ ???
Neffs:
With regard to your first point:
Let’s say you have two people, X and Y. Both grew up in the same area, had the same basic family structure, went to the same schools, both opened their own businesses (which, oddly enough, offered very similar products). X was wildly successful; Y, not so much. All along the way, however, they paid the same taxes (although in differing amounts). Why should X, upon his death, be subject to additional taxation due to his greater successes? What has X received (particularly from the government) that Y did not that justifies the invocation of the estate tax?
With regard to your second point:
Honestly, I don’t understand what you are getting at.
With regard to your third point:
I think that a stock-exchange levy is a horrible idea. At the very least, it discourages capital investment.
With regard to your fourth point:
Again, I’m not entirely sure what you are getting at, but I do not believe that the government has any place in propping up my chosen family structure. More directly, however, I was not aware that the estate tax only applies when the decedent is “fantastically wealthy” and has adult children. This is news to me…
First, define “regular people” and “upper class people.. Second, are you confusing “upper class people” with “high net worth individuals”?
This is silly. We aren’t drafting legislation, so we don’t need to draw lines. We are speaking in generalities, and upper class people, high income people, and high net worth individuals all mean that we are talking about the same approximate group of people. If we stay general, then we can have a conversation that spans from basic tax philosophy to application of the income tax to the Estate Tax.
Third, I dispute that “regular people” would see “incredible tax increases.” They are already paying such taxes; the difference would simply be *when* they must pay them. And, perhaps, levying all of the already-being-paid taxes into one lump sum tax would be a good way for people to realize how much taxes they are, in fact, paying. You wouldn’t have an objection to that, would you?
I somewhat agree with the point you make. If you eliminated all of the embedded taxes and lumped them together, it wouldn’t have to be all that much higher incrementally. However, my point was not the consolidation aspect, but the exemption for the wealthy. Because under your income tax-only scheme, millionaire investors, real estate developers, and trust fund babies would never pay any taxes ever because they don’t make money from salaries and wages. If we give tax breaks (tax eliminations) to the top few percent, who do pay a high total amount in taxes, then that difference in revenue will have to be made up by the people who are paying the tax. Which brings me to the increase in taxes that would be leveled against the middle class (or “normal people,” ha).
Fourth, “upper class people” would have already paid the taxes on their income–how do you think that they became “upper class people”?
No, they haven’t. I think I’ve already established this, but rich people do not make money from salaries and wages. They make money on interest, capital gains, dividends, bonuses, stock options, etc. It’s naive to think that everybody starts out at the bottom, working a desk job with a salary and then rises to the top where they just coast off of income from investments.
—
Your answer to the CEO dilemma seems to be that the “issue could be solved by adequately defining what constitutes ‘earned income.’”
I guess if you define earned income as money received by an individual as a result of wages, salaries, bonuses, sale of property or capital, dividends, gifts, or inheritance, then I would be fine with that definition. But that would bring us back to the status quo…
If you don’t include any of those things in your new definition of “earned income,” then certain individuals will be able to have lots of money coming in (income) without ever being subject to taxes.
Of course such a new regime would be detrimental to the middle class and beneficial to the upper class.
As for your mistaken identification of logical inconsistency… there is a difference between a specific tax that can be partially circumvented (the Estate Tax can sometimes be mitigated by good tax planners who use trusts, pre-death gifts, and other mechanisms) and a tax regime that allows thousands of wealthy individuals to have completely tax-free income. No inconsistency.
—
Or is your “bumper sticker philosophy” on this matter simply: ___________________________ ???
I try not to have bumper sticker philosophies on anything. I think it is hard to establish concrete, consistent philosophies on anything, let alone something like tax policy. I have a lot of thoughts on it in general, but I think taxes need to be addressed on a much more micro level. Broad, sweeping rules are not reasonable for something this complicated.
I don’t need to jump in on the Neffs-Poster argument, but I do want to throw this in there about your comment: I think that a stock-exchange levy is a horrible idea. At the very least, it discourages capital investment.
I’ve heard this idea that “_____ tax is bad because it discourages _____,” a lot and I think it is silly. You can fill in the blanks with anything, and so it means nothing. It could apply equally to any tax imaginable.
Does the income tax discourage people earning income? Does the property tax discourage people from owning property? Etc…
I suppose on a very simplistic level, taxes do alter the arrangement of financial incentives involved, but “discourage” is completely the wrong word. It is far more complicated than that.
*Why should X, upon his death, be subject to additional taxation due to his greater successes?*
Because we tax according to what you have. If you have more at the end of the game, then you are benefiting from the services and environment provided by your government–public money educated your employees, public money is providing your sewer and water and security, public money is enabling you to get ahead. We’re not taxing the guy who didn’t succeed because he didn’t make anything. If you don’t understand the part about public money enabling you to succeed, perhaps you’d like to take your business to Latin America where you will need private security to keep from getting kidnapped, or to some other less stable government where you might get invaded and taken over by the actual government. You folks always threaten “it will discourage investment” but given the choice between doing absolutely nothing with your money and participating in the economy, you never seem to just stay at home.
Here’s my problem with you Grover Norquist ‘shrink government until you can fit it in the bathtub and then drown it’ douchebags. If my government is indeed going to do nothing for me then I don’t want one at all. I don’t want to pay for my governor’s salary or any of that crap if it’s not going to actually do something for me. So either provide actual useful services or get the hell out.
Also, if the Estate Tax kicks in after the first MILLION DOLLARS, then you are FANTASTICALLY WEALTHY.
We are, quite likely, never going to agree on this issue.
Nevertheless, a few parting remarks:
“No, they haven’t. I think I’ve already established this, but rich people do not make money from salaries and wages. They make money on interest, capital gains, dividends, bonuses, stock options, etc.”
The first three are taxes on income received from the proceeds of already-taxed money. Bonuses are taxed on their own (25%, usually), and–in my experience–represent are new capital, not the return of previously tendered capital. And (which I probably should have stated earlier that . . .) stock options are, typically, taxed at the time of their exercising (and the tax rate can be quite steep!).
Thus, with regard to the latter two examples, taxes would still be levied under a “tax a dollar once” plan, as such occurences would still mark the first time a dollar is earned by the recipient.
“It’s naive to think that everybody starts out at the bottom, working a desk job with a salary and then rises to the top where they just coast off of income from investments.”
Everybody? Yes, that would be naive. But there are thsoe who have become wealthy in such a manner. I think that you may be unfairly, or unintentionally, disparaging their efforts.
“I guess if you define earned income as money received by an individual as a result of wages, salaries, bonuses, sale of property or capital, dividends, gifts, or inheritance, then I would be fine with that definition. But that would bring us back to the status quo…”
No, it would not. Furthermore, as you said, we are not “drafting legislation,” but if your concern is that stock options would be exempt from “earned income,” (presumably because you believe that earned income necessarily means wages and salaries), then Congress could easily include within such a definition “anything paid, received, or acquired in lieu of a salary or wage.”
“Of course such a new regime would be detrimental to the middle class and beneficial to the upper class.”
Not necessarily. But, in any event, I’m a little confused by your positions. Do you believe that tax policy should treat everyone the same? Or do you believe that tax policy should favor certain individuals or groups? If so, under what basis?
” . . . .there is a difference between a specific tax that can be partially circumvented (the Estate Tax can sometimes be mitigated by good tax planners who use trusts, pre-death gifts, and other mechanisms) . . .”
Methods and actions which, under the “money should be taxed whenever it changes hands” line of thought, you believe should be subject to taxation, correct?
“. . . and a tax regime that allows thousands of wealthy individuals to have completely tax-free income.”
Not to get far afield here, but such a tax regime almost currently exists (i.e., investing in tax-exempt bonds), and you don’t have to be wealthy to avail yourself of it (although, admittedly, it typically only makes sense for higher-income individuals to invest in them).
“Broad, sweeping rules are not reasonable for something this complicated.”
Respectfully, I submit that taxes (and tax policy) are complicated because of the very arguments that you are making. Everyone seems to have their own favored industries (say, clean energy), behaviors they want to incentivize (say, homeownership), and family and income groups they want to (as the case may be) favor (say, large families) or punish (say, the “fantastically wealthy”).
Strip all of that out of the tax code and you get a very simplistic, very rational, and very workable policy. A simple tax a dollar once policy, for example.
But, instead, there are those who wish to use tax policy to further their own view(s) on how things should be. Which brings me back to the estate tax issue.
So instead of posting long and, in my view, poorly supported comments on the matter in an attempt to justify your position, why not simply be honest and just write “I think that people who have X amount of money have too much and should be forced to give some of it to the government”?
Because, as far as I can discern, that is what your position really is.
I’m about to go home for the day, so after this, I’m out, but…
“I’ve heard this idea that “_____ tax is bad because it discourages _____,” a lot and I think it is silly. You can fill in the blanks with anything, and so it means nothing. It could apply equally to any tax imaginable.
Does the income tax discourage people earning income? Does the property tax discourage people from owning property? Etc…”
Yeah, I think the income tax does discourage people from earning income, and the property tax most certainly discourages people from owning property.
If you are interested in buying a house with a mountain view, for example, and all other things are equal, would you buy in a high property tax area or a low property tax area?
And with regard to a stock-exchange levy, if I have $100 to invest and two options that are likely to give me a 7% annual return before all taxes and fees, why would I chose the investment that will charge me a buy-sell levy? Personally, I’d go with the investment that offered the lowest fees.
And if that means that companies won’t be getting my money, well, that’s really too bad. Shame that they had to lay off some employees due to their difficulties in raising capital, eh?
Well, then those two financial entities are going to have to COMPETE FOR YOUR BUSINESS BY LOWERING COSTS.
And as long as I’ve got my yell on, let me also ask you this. How is it, and I’m making the assumption that you’re here because you’re somehow attached to a cofC so excuse me if that assumption is incorrect, that you are interested in getting out of as much of your tax burden as possible and you worship at a church that actively teaches you to ‘sell what you have and distribute to the poor.’ How do you square Jesus’ admonition with actively dodging your taxes and hoarding your property? Arent’t they fundamentally opposite positions?
It is definitely right for financial entities to lower costs to compete. However, they are taxed, and have no choice but to pass it on to the consumer.
I think most sincere Christians have no problem giving to the poor. But many of us don’t trust the government to do it efficiently.
If I could give 25% of everything I make to the poor, with no hope of personal gain, and my tax burden was reduced to about 5% I’d do it in a heartbeat.
So much of my tax-dollar is mismanaged, that I’d be surprised if 10% made it to causes I’d support.
david once again shows his absolute contempt for private property rights and promotion of economic non-freedom.
hooray! three cheers for statism, liberty be damned.
ps- i may die, but at least the gov’t will never die.
Hooray for ineffective ideologues with radical agendas and nonsense philosophies!
Where would the blogosphere be without it? Never mind that libertarian ideology should have died–if not decades ago–most certainly as a result of this economic downturn, these people will never stop.
wow, those are some real arguments you have there. you have shown me great insight and proposed true solutions. forgive my insolence o-defenders-of-thievery. the government has to tax somebody afterall. at least it’s probably none of us, why should we care?
Jesse, we all get that you are a libertarian and you have criticisms of the foundation upon which our entire economic and political structures operate. But we can’t have the foundational libertarian debate over and over on every new issue that comes up. It just isn’t new or interesting anymore.
As a side note, you and the rest of the libertarians lost the war decades ago. And now, every time a new skirmish comes up, you try to resurrect the ancient war, but nobody is listening.
Besides, your flamboyant libertarian catch phrases (“contempt for private property rights,” “economic non-freedom”) are especially non-applicable to the Estate Tax.
What property rights do deceased people have, anyway? Whatever it is, it should be much less than what living people have.
david, when you die, where will your possessions go? do they just disappear? no, of course not.
you already recognize property rights when discussing this topic. if you don’t then all you are saying is that the state owns all the property and they are just letting people keep whatever they don’t take.
your position is so arbitrary it’s hard to even respond to.
i am not going to change my political philosohpy because you and yours can’t understand my position or claim that i lost some war that you speak of (which allegedly occurred before i was born).
how can I know what you even understand about my position since you refuse to even accept it as acceptable or debatable?! whereas, because of some ideological “war” that transpired before any or most of us were born, yours is the de facto correct one, because: “hey, we won the war!”
but lets not have that discussion because the lines are so clear and boring it’s just not worth discussing “anymore”. yeah right. and what else would you have me do your almighty? i mean, you do speak for “everybody”, don’t you?
“a libertarian and you have criticisms of the foundation upon which our entire economic and political structures operate.”
i would claim that the classical liberal/laissez-faire ideas, which i see america as being founded upon, are libertarian in nature.
so what’s wrong with having criticisms of the policies now and throughout the ages?
oh, i c, you are bored. i’m sorry about that, but you have to deal with reality my friend. you can’t pretend these ideas don’t exist or aren’t relevant. i may speak in individual terms, but i am not the only one. if you continue down this trajectory of discussing politics (and possibly making policy) you will encounter it again and again. i’m sorry these ideas put a cog in your central planning. but hey, that’s life. get used to it.
you claim your pragmatism trumps. well, in a backwards sense you are right. other people can be pragmatic too. i mean, how many people with the means to pay an estate tax are going to hole up in their house to fight back the IRS? why do you think measures taken by the government, like taxation are done incrementally? for very good reasons, i assure you.
“middle-of-the-road policy leads to socialism” its really quite a simple argument to understand.
governments engage in lies and war, and one always leads to the other.
There are still people arguing the Divine Right Theory of kings out there. I’m pretty sure. But that doesn’t mean that any time we discuss modern policy, we have to establish the very basis of democratic rule and debunk God-sponsored monarchy every single time. At some point, society just recognizes that sure, some ideas are still “out there,” but they no longer need to be constantly addressed as they are brought up for every discussion.
I didn’t unilaterally decide that extreme libertarianism was irrelevant in modern dialogue. The natural clash and progression of ideas in the marketplace did. The easiest evidence can be seen in US elections – see every one since 1932 for examples. See especially: 1932, 1964, 1996, and 2008.
“society just recognizes” – so you do speak for everyone,
and you still ignore the larger issue (and your post by continuing to address what you claim is “irrelevant”):
if the heirs of inheritance aren’t entitled to money or property, who is? why do you insist on politicizing and taking people’s private property and claim it benefits everyone by doing so? is there some reason that inheritance is subject to confiscation? or do you just see a lot of money and flock to it because you think of the common good you could do with all that money? why not go out and earn it yourself and do what you want with it?
Because if you try to operate a government using libertarian philosophy you end up with feudalism. The only people who have services are those who can pay for them, and they’re only available to those people and folks they extend their largesse to.
There are no libertarians in a fire.
hey neffs, i have a blog if you want to comment on the merits or faults of various political philosophies, specifically libertarian.
it might take a few words so that we may understand why you hold such a view. my fist inclination is to ask you: what is ‘libertarian philosophy’?
since the classical liberal theory really exposed and fought the “ruling class”, or the “old order”, i find it interesting that you claim classical liberals are the ruling class or possibly promote and encourage a feudal society. the evidence that one might use could be the situation we have today in america. america was founded on libertarian principles and now we have a feudalistic society in many respects. but i would argue that’s not a result of adhering to classical liberal theory, but from deviating from those principles.
Mises on Liberalism:
“The goal of the domestic policy of liberalism is the same as that of its foreign policy: peace. It aims at peaceful cooperation just as much between nations as within each nation…. The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind…. Liberal thinking always has the whole of humanity in view and not just parts…. Its thinking is cosmopolitan and ecumenical: it takes in all men and the whole world. Liberalism is, in this sense, humanism; and the liberal, a citizen of the world, a cosmopolite”
sorry david, but since no one was responding…..
please comment on my blog if anyone would like to respond. neffs?
Well that’s a very nice invitation but I have to say no thanks. I’ve had that conversation with libertarians, both friends and people I just met, some drunk, some stone cold sober, many many times and it always leads to the same sorry conclusion. Libertarianism, like communism, is a great idea that is completely impossible to get on the road.
I’ve had that conversation so many times that I’ve gotten pretty adept at spotting the spittle-flecked corners of the mouths of people who are going to spring it on me, and making an abrupt dodge into the kitchen for more chips. I find it just works better that way.