Sure, the dead guy’s hardly in a position to bitch!
What is the tax rate on estates?
Ya want reasons? Waddaya think this is, GD?!
OK, here’s some, just for starters:
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Different social classes do exist, in a vertical-hierarchical order, even in America. In some respects they have identical interests, and in other respects conflicting interests. That’s plain common sense and you don’t need to be any kind of Marxist to see it. That does not automatically mean the lower classes are any better or any more deserving than the upper. It does automatically mean that siding with the lower classes’ interests in any case of conflict should be the default position of any person of truly good will – just because the lower classes are the only ones who really need extra support to get even a chance at a chance of a fair shake. “The poorest he that is in England has a life to live as much as the greatest he.” – Slogan of the Levellers.
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In many ways – not in nearly as many ways as some populist or socialist zealots would assume, but still in very many very real ways – the upper classes really are exploiters who accumulate their wealth by taking unfair advantage of the less fortunate. Only fair they should be forced to give some of it back to society. (Of course it’s true that, nowadays, upper-class people are also “workers” in the sense that they work, even if they are independently wealthy and don’t have to – it’s a cultural thing; and it’s also true that they are also, in some respects, creators of wealth and providers of employment. Things are seldom simple, and this is clearly not one that is.)
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Above a certain level, wealth means not only purchasing power but political power; and it runs clean against the very idea of democracy to allow the rich to wield political influence out of proportion to their numbers – which they do, especially nowadays. Being raised in the profit-centered ways of thinking of the business world (which cannot comprehend or acknowledge even the concept of “enough”), most of them (not all, but most) will only use that power to take ever unfairer advantage of everybody else and to build up their political power ever more and more in an endless and socially destructive cycle – which they do, especially nowadays.
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Even if a democratic and egalitarian society, which this is supposed to be does not strictly require equality of outcome, it does at the very least require equality of opportunity. Everybody should be born with roughly equal chances to make it in life. At present, we’re not, to put it mildly, and only a fool or a liar would say otherwise. Measure our present social order against anything you might come up with to meet the test of the veil of ignorance.
None of this means it is imperative to destroy the American overclass as a class; nor even to knock them out of their place at the top of the socioeconomic pyramid. Within limits, a case could be made for the positive social value of an elite class. What we do need, however, is a much flatter pyramid, with the top and the bottom a lot closer together than they are now. As George Orwell put it in 1941 in The Lion and the Unicorn: Socialism and the English Genius (Part III, Section II):
[shrug] It’s only a good start. A convenient collection-point. Something we’ve already got, know how to collect, and it’s just a matter of adjusting the rates up or down. IMO we also need a “wealth tax,” a tax in individual accumulated assets as distinct from incomes, just to pare down the fortunes/power of the superrich.
Asked and answered, I think.
I believe the top rate right now is around 46%. Don’t have a cite at this moment, but I can try to find one.
My error then. Hard to keep track of the “Bush can do no wrong”, “Bush can do no right” and “Look at each situation independently” parties.
Agreed. Let the recipients choose whether to carry assets at their parents cost basis, or to pay the taxes immediately. What do you mean my $3,000,000 home has a cost basis of $2,000? I’ve got to pay taxes on $2,998,000 of capital gains?
Eh – trying to parse Elucidator’s tortured prose is a kind of horror. Estate taxes are merely distasteful. If you put a high limit on them, then it’s the equivalent of saying “Let’s tax the rich, they can afford it.” In cases where the majority of the estate is in property, the end result could be having to sell real estate that’s been in the family for years. Nice way to turn a family farm into subdivisions.
Aside from being distasteful, it’s unnecessary. History tells us that people who inherit vast wealth often piss it away in a generation or so, in the process no doubt filling government coffers via random sin taxes. And the ones who don’t squander the money and invest it wisely – well, they too are contributing via income taxes.
Dynastic accumulations of wealth were condemned by (at least some of) the founding fathers as toxic to democracy and considering the creation of corporations we no longer need dynastic concentrations of wealth to fully realize the benefits of capitalism. Andrew Carnegie, Warren Buffett, Bill Gates, and George Washington (arguably the greatest man in modern history) all believe that dynastic accumulations of wealth are noxious to a democracy and creates an almost perpetually unlevel playing field.
I see that you have also recommended treating an inheritance as a regular transfer and taxing the transfer as a gift. I would have no problems with this but how would you treat the case of appreciated assets that are bequethed to heirs. For example lets say Mr. Smith died tomorrow and his only possession was 2 million dollars worth of microsoft stock that he bought for $5000 a few decades ago, under today’s rules, the estate would not pay any estate taxes (because the estate is too small) and the heirs would have a stepped up basis at death so that they could turn around and sell it the next day and pay no taxes. You proposal would tax the heirs on all 2 million dollars and might even tax the decedent on the unrecognized gains in the stock.
This would also open up a large loopholes in the tax code. For example, life insurance. Right now, life insurance is generally part of the estate but is otherwise not taxed to the beneficiary, without the estate tax, everyone could put all of their money into life insurance and just borrow against their policy to live off of. There are a bunch of other examples.
All this is probably irrelevant detail, the policy that I need to convince you of is that large accumulations of unearned wealth are bad for a democracy. Otherwise you could somehow build in progreessivity in the transfer tax associated with a transfer to heirs and fiddle with the rules to get rid of loopholes (which would get me where I want to go but not for the right reasons).
The argument for why more wealth is justifiably the target of more taxes is also implicit in some arguments and I refer you to all the arguments for the progressivity of taxation. This segues into the evidence against the trickel down theory.
I am a proponent of much higher progressivity and higher top marginal tax rates (America had top marginal tax rate at or above 50% for all but 7 years between 1917 and 1986 and a tax rate of over 70% in all but 21 of those years and a rate of over 90% from 1950 to 1963). The economy of America grows because we are America (we are the land of dreams and opportunity, democracy, justice, rule of law, all that good stuff), not because we have lower taxes than the rest of the world. Our tax receipts grow because we are America, not because we have the lowest taxes in the world. I can point to decades where we had higher economic growth and higher tax receipts and higher tax rates than we had in decades with lower economic growth, lower tax receipts and lower tax rates. There was a time when a CEO made between 7 and 20 times as much as a line worker, now they make 200 to 400 times as much. You can see the divergence start almost exactly when they lowered the top marginal tax rates. When you pay the same tax rate whether you make $30,000 (the top marginal tax rate when Reagan left office) or 30 million. I would argue that such high pay is almost unjustifiable. I don’t advocate going back to 90% marginal tax rates (although I don’t see why I would object to 90% tax rates on income over 10 million a year or so) but a 50% top marginal tax rate is entirely reasonable.
People like FDR (along with most classical economists (heck I’d say all economists but these all conservatives consider themsleves economists)) consider trickeldown theory a thin veil for reducing taxes for the rich because that is bascially what it is.
IIRC, The IOU’s to the social security fund is not in the form of U.S. treasuries otherwise it would show up in the budget right now its all book entry and the interest rate is lower than you would get on long term treasuries. Some people think that the interst rate gap might be enough to save us but I don’t have any hard data on the interest rate actually paid to the social security fund. The fiscal discipline associated with actually having to put that debt on the books in the form of outstanding treasuries would be significant IMO.
I do not believe that the 3.7 trillion figure is discounted to present value, after all 3.7 trillion 50 years from now is probably less than a trilion dollars today.
For Heavens sake, Fin, don’t put yourself through that! I certainly don’t care, and can’t imagine anybody else giving a shit. A quick glance to the upper left, there’s my name, pick up your little basket and skip along, skip along…
To whom?
So I’ve heard! Family farms by the dozen going on the block due to da evil estate tax. Don’t have a cite for that, by any chance?
Well, they certainly support battallions of tax lawyers. As well as compliant congressmen, of course, worthy workmen who can be approached for employment at your local Republican party union hall.
Of course, the post you appear to be replying to, I was only nitpicking on the presumption that “taxing the same money twice” was some mutant abomination forbidden by God and Nature. Your post was interesting enough, I suppose, but it would appear that it is only posted as a reply in order to work in a bit of snark about my torturous prose. Which, as I have noted, you are under no obligation to subject yourself.
I agree with much of what you say but the veil of ignorance is a comparative tool for comparing equity between two alternatives and it also logically leads to socialism and away from the vibrant engine of capitalism. Isn’t there a balance between efficiency and equity?
The problem with a wealth tax is that it would be difficult to tax assets outside the U.S. so the truly rich would have all their money outside the U.S. and frankly why the heck would they stay here if they were truly wealthy, they could just as easily live in Barbados and just visit. A wealth tax is an idea worth pursuing but it is almost unworkable.
OK, here’s some, just for starters:
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Different social classes do exist… … the lower classes are the only ones who really need extra support to get even a chance at a chance of a fair shake. “The poorest he that is in England has a life to live as much as the greatest he.” – Slogan of the Levellers.
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In many ways… the upper classes really are exploiters who accumulate their wealth by taking unfair advantage of the less fortunate. … Things are seldom simple, and this is clearly not one that is.)
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Above a certain level, wealth means not only purchasing power but political power; …
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Even if a democratic and egalitarian society, which this is supposed to be does not strictly require equality of outcome, it does at the very least require equality of opportunity. Everybody should be born with roughly equal chances to make it in life. At present, we’re not, to put it mildly, and only a fool or a liar would say otherwise. Measure our present social order against anything you might come up with to meet the test of the veil of ignorance.
None of this means it is imperative to destroy the American overclass as a class; … What we do need, however, is a much flatter pyramid, with the top and the bottom a lot closer together than they are now.
[shrug] It’s only a good start. A convenient collection-point. Something we’ve already got, know how to collect, and it’s just a matter of adjusting the rates up or down. IMO we also need a “wealth tax,” a tax in individual accumulated assets as distinct from incomes, just to pare down the fortunes/power of the superrich.
I would be tickled to the point of soiling myself if somebody could come up with one instance of this happening. Ever.
Otherwise, it’s just the same old tired bugaboo bullshit trotted out to get the lower social orders up in arms about something that would never affect them.
-Waste
The family farm scenario is theoretical. I have not found a single instance where someone had to sell the family farm to pay estate taxes, please provide a link if you find one (the average family farm is worth less than a million dollars).
History tells you that welath gets pissed away in a generation or so? With professional financial advisors, this has not been the case since the Civil War and there are vast enclaves of wealthy familes that precede the Civil War (basically all wealthy families other than pslaveowning families in the south. Its a lot easier to stay rich than to become rich.
It happened to plantations after the Civil War but other than that, I can’t think of an example (you said EVER).
Don’t Call Me Shirley, surely you could find more time in a year to post more than 46 times. I’m enjoying your contributions. Keep it up.
Yeah, I did. I also was under the impression that we were talking about the estate tax and other red herrings. Y’know, the title of the thread?
And since the estate tax wasn’t implemented until the administration of Teddy Roosevelt, it came more than a fortnight or so after the end of the Civil War.
Sure. That quote from Orwell was part of a 6-point plan for a socialist Britain, but taken by itself it’s perfectly compatible with capitalism – that is, it’s a redistributive system, but it does not necessarily involve the state running the industries.
The most persuasive utopian novel I’ve ever read was Pacific Edge, by Kim Stanley Robinson. It takes place in America (Southern Cal, in particular) after a “Green Revolution” (how it happened is never described, but there’s no hint any violence was involved). The state enforces an upper and lower limit to personal incomes – 10 to 1, as Orwell envisioned. Everyone is guaranteed an annual income of $10,000 a year and nobody is allowed more than $100,000. So you can be a “useless eater” (or “artist”) and live on the public tit if you’re satisfied with a very meager standard of living, but few choose to do so – “everybody wants to be a Hundred,” even with the knowledge that’s as high as you can go. So there’s lots of energy and enterprise in the economy. The state also intervenes to break up any business enterprise that grows too large for all its managers and employees to know each other personally – that personal intimacy and interaction is deemed to have a social value, which outweighs the efficiency of “economies of scale” that otherwise leads to the formation of huge corporate combines. (Also, although Robinson does not mention this, such a policy prevents business enterprises from growing into megacorporations that might rival or surpass governments in power and reach, as so many of them do here and now). Apart from those two things (and enforcement of very strict environmental-protection regulations), however, the state does not own or operate the economy – practically all economic activity is private-sector. In sum, it’s about as far as you can get from the Stalinist model. It’s still capitalism, it’s just tamed and housebroken.
And “family farms” they were not. (The plantations might have been subdivided into family farms, if that “40 acres and a mule” policy had ever been applied outside the Sea Islands and for more than week. See “distributism.”)
Not likely. Most of the Gain taxable to the Estate is usually Capital gains, which have never been taxed. Stocks, real estate, and such. The very rich don’t really have a giant “money vault” like Uncle Scrooge, it’s mostly all invested.
The problem with the Estate tax is the lies that the GOP dudes that call it the “Death Tax” tell- horror stories of family farms sold because of the tax*, this “double taxation” bullshit, small family businesses lost, and so forth.
- they have tried to find one of these, but have failed. But they keep telling the story anyway and dudes like Finagle keep buying it.
Up to $345,800 plus 39% of the excess over $1,000,000 (but it’s a whole lot more complicated than that, as any high-level tax system usually is).
That’s not what trickle down means. It is the “theory” that if the rich make more money it will eventually get to the poor. Cite. Course it hasn’t worked too well for the past five years.
BTW, pretty much everyone agrees that the Administration overstated the forecast deficit (and understated revenue) to look good. Tax revenue as a percent of the GDP is still down - with normal (though slow) economic growth saying that tax revenues have increased in absolute terms is not saying much.