June 5, 2006

Breaking the bank for bank owners

The effort to repeal the estate tax is perhaps one of the most blatantly wrong-headed and greedy initiatives out of a lot of greedy and wrong-headed competition.

This issue has infuriated me from day one, not only because it represents the reverse Robin Hood principal so popular among the right, taking from the poor to give to the very, very rich, but because of the blatant lying propaganda campaign rolled out to try to garner support with the public, talking almost exclusively about the iconic farm family who have to sell their precious farm that's been in the family for over a century to pay "death taxes".

Nothing could be further from the truth. Very few, if any, farms have had to have been sold, and very few even qualify for estate taxes.

The repeal of the estate tax is one of the most glaringly greedy and irresponsible measures enacted by the gang who've managed to achieve the moral contortion of identifying themselves as chest thumping corporate Christians, while simultaneously fighting to avoid paying their fair share of taxes and relentlessly doing all they can to cut government assistance to the needy and poor.

The effort to repeal the estate tax is perhaps one of the most blatantly wrong-headed and greedy initiatives out of a lot of very greedy, wrong-headed ideas trotted out by the right.

This issue has infuriated me from day one, not only because it represents the reverse Robin Hood principal so popular with the right, taking from the poor to give to the very, very rich, but because of the blatant lying propaganda campaign rolled out to try to garner support with the public, talking almost exclusively about the iconic farm families, salt of the earth, who have to sell their precious family farm to pay "death taxes".

But that's all baloney. Very few, if any, farms have had to have been sold, and very few even qualify for estate taxes.

The always excellent Princeton economist and author Paul Krugman recently dealt with the right and the estate tax repeal issue.
Shameless in the Senate
The Senate almost voted to repeal the estate tax last fall, but Republican leaders postponed the vote after Hurricane Katrina. It's easy to see why: the public might have made the connection between scenes of Americans abandoned in the Superdome and scenes of well-heeled senators voting huge tax breaks for their even wealthier campaign contributors.

But memories of Katrina have faded, and they're about to try again. The Senate will probably vote this week. So it's important to realize that there's still a clear connection between tax breaks for the rich and failure to help Americans in need.
Any senator who votes to repeal the estate tax, or votes for a "compromise" that goes most of the way toward repeal, is in effect saying that increasing the wealth of people who are already in line to inherit millions or tens of millions is more important than taking care of fellow citizens who need a helping hand.

To understand this point, we need to look at what Congress has been doing lately in the name of deficit reduction.

The Deficit Reduction Act of 2005, which was signed in February, consists mainly of cuts to spending on Medicare, Medicaid and education. The Medicaid cuts will have the largest human impact: the Congressional Budget Office estimates that they will cause 65,000 people, mainly children, to lose health insurance, and lead many people who retain insurance to skip needed medical care because they can't afford increased co-payments.

Congressional leaders justified these harsh measures by saying that we have to reduce the budget deficit, and there's no way to do that without inflicting pain.
But those same leaders now propose making the deficit worse by repealing the estate tax. Apparently deficits aren't such a big problem after all, as long as we're running up debts to provide bigger inheritances to wealthy heirs rather than to provide medical care to children.

And the cost of tax cuts is far larger than the savings from benefit cuts. Under current law — what I once called the Throw Mama From the Train Act of 2001 — the estate tax is scheduled to be phased out in 2010, but return in 2011. According to the Joint Committee on Taxation, making repeal permanent would cost more than $280 billion from 2011 to 2015. That's more than four times the savings from the Deficit Reduction Act over the same period.

Who would benefit from this largess? The estate tax is overwhelmingly a tax on the very, very wealthy; only about one estate in 200 pays any tax at all. The campaign for estate tax repeal has largely been financed by just 18 powerful business dynasties, including the family that owns Wal-Mart.

You may have heard tales of family farms and small businesses broken up to pay taxes, but those stories are pure propaganda without any basis in fact.

8 Comments:

At 6/05/2006 9:38 AM, Blogger nicodemus said...

Are you saying this to push my button? The issue of the family farm is not a myth. It is true! I know because when my grandfather passed away, his farm, the landholding and and assets were worth probably 3 million. Estate taxes probably ate up 1.5 -2 million. There wasn't much left and by the time it trickles down, if I am alive I will probably be too old to enjoy it.
And I am not a spoiled rich kid and my family is not a greedy corporation. I have worked hard and so have my ancestors. Why should the federal government get all that we've worked for?

So when you say that losing the family farm assets due to the estate tax is make-believe, all I can say is that I wish that were true.

 
At 6/05/2006 12:20 PM, Blogger The Inside Dope said...

Nico,
I stand firmly behind what I said about no family farms being lost due to an estate tax.

I also don't believe that taxing estates worth several million dollars is regressive or improper.

I'm sure that there are literally tens of millions of people who fervently wish they could have that problem.

 
At 6/05/2006 4:07 PM, Blogger nicodemus said...

Dope, If you think that family farms have not been lost and that families have not been impacted, then you haven't been around much and you haven't talked to the right people. Why don't you stop in those coffee shops that you drive past so many times?! You won't meet any evil, greedy corporations there but you will meet farmers who have been adversely affected by the estate tax.

Taxing my grandfather's estate was a total travesty (Then again, I guess he should have done better estate planning when he were alive). As a result, the majority of his fortune was sent to the IRS. Instead of staying in the family, his money went to people who don't know a bale of hay from a pile of manure.

Maybe that is your idea of "progressivism" or social justice?

"The ability to tax is the ability to destroy". The estate tax is regressive and punitive and it should be abolished. Family farms and all of the land and assets that were a product of generations of hard work should be kept in the family. Period.

Dope, instead of watching planes in the sky like a little boy or an animal, I challenge you to spend some time doing your homework: 1) go talk to some farmers and find out about this and other economic problems they face 2)Better yet, call the Farm Bureau and ask them whether the estate tax is a good idea. See what they tell you.

 
At 6/05/2006 10:17 PM, Blogger Fly-on-the-wall said...

I've long been in the camp of those who want to see estate taxes backed off but not eliminated entirely. I would far far rather not tax a penny of the income of a self-made individual than see 100% of that individual's 8-figure (or more) estate pass tax-free to persons who did nothing more than be born in the right family.

 
At 6/06/2006 12:09 AM, Blogger The Inside Dope said...

Nico,
I've done my homework. I don't think listening to farmers bitch about estate taxes is going to change my views or enlighten the debate.

I know that the actual figures show that nothing like you suggest actually occurs. The number of farms lost due to the estate tax is a big fat zero. If necessary, I can try to dig them up.

Sure, no one LIKES paying their fair share of taxes. But I somehow fail to see how the same people who hold themselves out as super-patriots and staunch lovers of the greatest country on earth simultaneously don't want to give a penny back to the government in exchange for their good fortune.

And I think you hit the nail on the head when you were honest enough to concede that your grandfather or whoever's losses were largely the result of poor estate planning.

I'm talking about people losing their farms due to estate taxes, not simply resenting paying them.

That falsehood is what the right constantly trots out as their emotional trigger to convince people this tax is bad, bad, bad.

The only trouble is that it's utterly false. No one has ever lost their farm due to estatate taxes.

Now some may have taken a huge hit, as apparently happened to your family.

I'm sorry for that, and it's clear that you're very bitter about it.

But it's not the duty of the government to ensure that your relatives had proper estate planning. I'm sure there's thousands of loopholes out there created specifically for people to avoid just such tax burdens.

After all, it's the wealthy who fund campaigns and have the ear of congressmen, who then insert their wishes into the tax code. It's already chock full of sops, dodges, and specific examptions for any number of interests, some of which benefit one company and one company only. I'm sure that there are ways to avoid paying too heavy a tax bill when dealing with an estate worth millions.

I'm sure your family worked long, hard, and honestly and struggled through the tough times and planned well through the good.

But the fact that the land they bought long ago has appreciated a few thousand percent probably hasn't hurt either.

And by the way, I didn't know that only boys looked at planes. I think you're off your rocker, personally. There were a few thousand people looking at them this weekend and they weren't all boys.

And neither was I aware that animals stood around looking at planes. This is rather facinating news to me.

Do your cows do that? Bossie say to Elmer, "Look. There goes United flight 1162 to Denver, right on time."

What do YOU do? Stare at your shoes all the time?

Sorry for having some things I enjoy. I'm sure you'd be happier if I were bitter and sour all the time. You seem to prefer that frame of mind.

We don't have to agree on this issue, but you don't have to get nasty about it when I neither believe your premise nor agree with you on this issue.

That only causes me to respond in kind. Then of course, you'd likely accuse me of being nasty.

Sorry about your feeling ripped off by the government. Perhaps it will lighten your load knowing that all of your family's estate taxes may have gone towards manufacturing a fraction of one smart bomb that blew up in a Bagdhad residential neighborhood during "shock and awe".

That should give you comfort.

 
At 6/06/2006 1:53 AM, Blogger The Inside Dope said...

Fly... agreed that we can argue around the edges, but giving up the simply massive amount of taxes generated by the estate tax is folly at this time.

The figures I've seen indicate that it would nearly be enough to provide health care for every uninsured child in the country. Nearly a trillion dollars over a relatively short period of time, though I don't have the exact figures at hand unfortunately.

But it most definitely is not peanuts we're talking about.

And yes, it is at it's essense, the Paris Hilton tax break program, as those like her that stand to inherit literally several million dollars would be able to do so without paying a dime.

And as I point out, these folks can well afford to hire the most brilliant tax avoidance accountants and lawyers on the planet to minimize their exposure.

As I say, I'd wager most of them have a huge chunk of their wealth stashed in numbered off-shore accounts anyway.

And welcome back Fly. Very good to see you here. Hope you continue to contribute.

 
At 6/06/2006 5:47 AM, Blogger nicodemus said...

No animosity on my end dope, just a good lively debate. And thanks for starting my day with a well deserved laugh... I like the part about the 2 cows watching Flt. 1162 to Denver. LOL. I do have a sense of humor and, it feels good to lighten up and put my bitterness aside.
Back on the topic, I wish Grandpa had listened to brilliant tax lawyers or had known about offshore accounts. He knew of some loopholes, yes, but was too hardheaded and thought he could take it all with him. And oh what I would give to be in the same class as Paris Hilton, but a farmboy doesn't travel in those circles. I hear that she is turned on when a man pays cash for a new John Deere tractor.

 
At 12/07/2006 10:17 AM, Anonymous JohnC said...

I suppose we should also, as Robin Hood might, tax the wealthy with heftier tariffs. Hell why don't we just take their land, their assets and their wealth and leave them impoverished like the ones you rightly protect with your stance on the "death tax". To further that argument, those rich, or soon to be poor you will be taking away from have surely enjoyed the benefits that others less fortunate have not, surely they will return to riches by the grace of their former peers or through any slight merit they may otherwise have enjoyed. Conversely, those that were less fortunate will be given the gates to salvation. We haven't done nearly enough since the NEW DEAL, we must need a NEW NEW DEAL, why don't we call your stance one cornerstone of such a great Liberal advance. This would then allow the government the necessary funds to help those in need. That would occur wouldn't it? That does occur now doesn't it? Don't be obtuse in thinking that increasing tax revenue will do anything for the poor, as the poor do nothing to increase tax revenues, and the government is nothing more than a company managing America

While you debate injustices in the USA, millions of people will both succeed and fail. It is a byproduct of capitalism and democracy. Freewill inherent within people and allowed to come to fruition in America can allow some the ability to flourish or fail based on their motivation and or lack thereof to succeed. Granted, there are people that life passes by, I'm not an advocate of stomping out dreams or holding people back. Life can be and surely is unfair for too many people. However, the broader definition and or explanation of your article spells out your frustration with America in general, and the gap between the haves and the have nots. This is not a moral dilemma or an ethical consideration. It's a matter of justification.

Where in the constitution does is say every American is guaranteed healthcare rights? Where does it say that people have a right to a job, to a car, to the same TV your neighbor has, to a full stomach even? Where does it say the person who makes the financial gamble in starting their own business and making it successful, undoubtedly through many years of financial struggle and personal loss(read emotional, stress etc..), should be penalized in their passing such an estate along to their heirs. Why should society benefit from income or property that has ALREADY been taxed; and assuredly heavily? There may very well be reasons why there should be a tax. Just as there are reasons NOT to tax such monies. Your position is that your are absolute in your position and of course I would have to oppose you!
What I will oppose though is not necessarily your politics directly but your position, which will of course oppose your politics. If we continue to progress our taxes upon the wealthy, then we begin to remove incentives that have long given people reasons to succeed. I believe is taxes are allowed to continue, that progress towards the "great equalizer" we will harbor apathy in the impoverished, and increased resentment in those whom these taxes are levied against.
Getting back on point, your real estate tax position has merit in some aspects, but loses traction in application. If you totally oppose the prospect, then you close your mind to the possibilities. I can agree with you that Companies can and will take advantage of such laws if allowed to exist. However, how much income tax will be lost as opposed to transitioned? Will the economy benefit in the end? Should the government depend on death to exist? I for one would want the government to be more responsible, which I will admit is like asking a three year old to perform calculus while cleaning their room, and reciting Shakespeare. Instead of holding persons of attained assets accountable, why don't you point your finger and the true culprits which is the men, and to a lesser degree women, in so called positions of "power" who manage to mismanage the monies they are coercing from us. That is the question we should all be asking. How to make the dollars that are available more active, instead of trying to get more dollars from active individuals and or companies.
Personally, I oppose death tax for reasons I must admit are selfish. My father died when I was 24 years old. I was completing my Bachelors degree and was employed part time trying to pay part of my college tuition so as not to incur any more debt than needed. I made maybe 12,000 a year, paid for whatever tuition and living expenses I could and borrowed about 10-15k a year for the rest. He was technically poor, living on his social security and modest retirement pay he was again below poverty line. He had no real estate ie land, but had an annuity fund of say $45,000 which drove his retirement pay. When he passed, I was given that $$$ as inheritance. I paid a lot of taxes on that money and while I still got $28,000 in my opinion I shouldn't have paid the government one dime of that. My father had earned that money and that money had been taxed. I was below poverty at the time, so was he, so where is the justice in that? I'd gladly give the Paris Hiltons of the world the opportunity to pass along their wealth to their children so that people life my father and myself could pass along their modest estates untaxed. The Hilton’s make up a small percentage of the population, and while their dollars are disproportionate to their numbers, it still stings the average person when their parents lesser fortunes are taxed upon death further adding to the suffering incurred with that loss.
If you want to make things more equitable, then start by making government more efficient. Start by making taxes more equitable to begin with in principle and practice, not just principle. Surely, you can understand the rich get breaks the average person doesn't that makes estate tax abatement a feather in the wind!!!!!!! More so, by not taxing the poor in any degree, you create resentment from those who are paying. The haves and the have nots are at odds and in a class war more pronounced. I don't have an answer for the ills of our immediate world. I have opinions which certainly are flawed. However, I don't agree with your position, that much I'm certain of. For personal reasons both real and imagined.
thx

 

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