Wednesday, July 19, 2006

Response to a response to a response

We've got a good discussion on the estate tax going, so I wanted to post a response to Dan's response to my response to his original post, and I wanted to do it in a new post to it wouldn't get buried.

First let me say that I know Dan doesn't hate rich people. I was trying to be tongue-in-cheek in a Kanye West kind of way. In actuality, I don't think Dan hates anybody, with the possible exception of Ann Coulter (but he wouldn't be alone in that).

Next, Dan asserts that money is the main thing in taxation discussion. I'm not so sure I agree with that. I think good tax policy and fairness as well as the impact of taxation on the general economy are very important. Money is important in the way it is spent by the government, and I think we both agree that spending has been pretty egregious for a long time.

Next, with all due respect to Dan, the comment that neither Bill Gates nor Warren Buffett opposes the estate tax seems to be a non sequitur. After all, Gates is in favor of spyware, but that doesn't make it right.

Dan says he doesn't care about the study cited. This is odd because, upon further reflection I think it might support the estate tax from his point of view. If the primary purpose of the estate tax is the redistribution of wealth from the rich to the poor, this study would seem to indicate that this purpose is being achieved.

Next, I agree that taxation is applied to nearly all economic transactions. My concern is that we'll get to a point where taxation is being applied to non-economic transactions (i.e., dying).

And, Dan has an excellent point that putting tax money into a separate fund isn't workable. Much like the "social security trust fund" myth, all tax money is "fungible." So unless we could put the proceeds from all estate taxes into a super scholarship fund, my plan just wouldn't work. I hereby "take it back".

Dan is also right that we need to take a look at the current estate tax from a tax policy standpoint. My big objection to the current estate tax it that it is an attempt to shift the tax burden to fewer people -- and thus is not "fair."

In fact, I think it might be more fair to do away with the estate tax and institute some kind of inheritance tax (I read an article on this a few months ago, and if I could remember the source I would link it). In this plan, anyone who received inheritance income would be taxed according to their normal tax bracket.

The key difference between the estate tax and an inheritance tax is that with an estate tax, the tax owed is determined by the size of the estate when someone dies. The heirs are responsible for the entire tax bill. With an inheritance model, the heirs only pay taxes on the income that they receive from the estate.

And, if this were expanded to all estates (not just the richest), the rate could be lowered from 60% (or whatever the current level is), to the standard 0%-35%.

The bottom line is that class warfare shouldn't determine tax policy. Fairness and efficiency should.

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  1. I don't know squat about taxes. I'm no lawyer or accountant, and you pretty much have to be to understand them.

    But I do know (or at least THINK I know) that the purpose of the estate tax is to prevent the centralization of wealth.

    1. One man accumulates a lot of wealth.

    2. He leaves it to his family who accumulates an exponential amount of wealth simply by having a lot of wealth. No value is added, society doesn't gain anything. The money is just hoarded and accumulates.

    By having an estate tax, you encourage individuals (like Warren Buffet and Bill Gates) to dispose of their wealth before they die by contributing to worthy causes rather than seeing it wasted in government pork-barrel spending.

    How can an estate tax be a bad thing?

    Will average Americans ever be subject to this tax? No. We don't have "estates". Maybe a house and an insurance policy and a 401k. That's about it for most folk.

    Will filthy rich people who have benefitted from the American/Capitalist/Free Market system who can and should pay more taxes than they do while they are alive (and have a staff of accountants and lawyers looking for loopholes allowing them to skirt the tax laws) easily afford to do so be affected by this law? Yes.

    What, exactly, is your objection? Do you have some rich parents in poor health? Hoping to get a new Hummer to appease your grief at their passing?

    I'm not attacking you buddy, I just don't see how anyone other that those who would stand to possibly inherit large sums of money could possibly care about this issue.

    From what I have read, most wealthy people have no desire to leave their children with a bajillion dollars. They think that wealth should be earned. Just like they did it.

    Do we really want more Paris Hilton's? Will that move the world forward?

  2. Wow - tax inheritance just like income? Sign me up. But you'll be murdered in your sleep by the Republicans for suggesting such a thing.

  3. Don't worry about me, Dan. I've got a cute little cabin in outer Montana for just such an occasion.


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