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« The ability to focus | Main | Dance of the giants »

June 05, 2006

Comments

Stephen

There is a counter point to be made that the estate/death tax is yet another form of double taxation. The money earned has already been taxes, and merely because one builds a legacy to live to their children and families, should they be penalized for it?

In the cut spending camp, I support:
-subsidaries to the excavation industries (coal, gas, mining, steel, agriculture, tobacco)
-pork projects in the omnibus/Christmas Tree bill
-keeping open unneeded military bases
-Federal flood insurance for those that choose to live near the coast in flood prone areas.
-Drastic reform of the Department of Education (and teacher's unions).

In the boost revenues camp, I support:
-progressive, consumption based tax, rather than income based or capital gains
-elimination of rent control
-increased sin taxes for alcohol, tobacco
-elimination of laws that limit property tax increases (California currently has one such law on the books).
-mileage based fuel tax, based upon the number of cars you own. (own one car that gets great mileage, lower personal property tax, own three gas guzzlers, increased personal property tax).

In other words, we reward good behavior by allowing people to keep more of their own money, and we penalize selfish or greedy behavior by making them pay government for it.

Sean Pecor

I am absolutely against the estate tax. That should say alot coming from a socially progressive fiscal conservative. My problem with the estate tax is the law of unintended consequences. For example, in order to survive as a working farmer one has to consolidate, consolidate. In fact it's not unusual in many agriculturally strong states (like Vermont and Virginia) to have 1,000+ acre farms. These are working farms. And guess what, when it comes time to pass your farm down to your heirs, the land and facilities value far exceeds the amount that would trigger the estate tax. So those who inherit have to sell a slice of the land or facilities just to pay the damn estate tax. This makes it just that harder to keep farms going, and spurs on more and more land into development. I'm sure there are countless other unintended socio-economic consequences.

Even if they implement an estate tax with a condition that excludes farms, I would still be against it. Because it has absolutely nothing to do with generating revenue and everything to do with a watered down form of socialism. In other words, the estate tax in theory siezes assets from the wealthy segment and redistributes it, placing it into circulation with lower income segments with the federal government as the proxy. Oh yes, this sure is a brilliant revenue generating scheme. Take those income earning assets from the folks in the highest tax bracket and give it to folks in the lower tax brackets. You're not gaining tax revenue over the long term you're losing it.

I'm getting so damn sick of the populist b.s. about how lower income folks are getting a raw deal while the rich get off easy. Get off easy? For Pete's Sake I own a small business with two employees (my wife and myself) and last year I paid close to $100,000 in taxes! Getting off easy? I'm getting soaked! And I remember when I was a lower income married father of one child, getting a tax refund check amounting to significantly more than I actually paid in taxes.

Maybe it's just that I'm in a raw sort of mood tonight, but I think if they want to raise income tax revenue they can start having middle income folks pony up more cash. And even though I'm an athiest, I agree with Stephen, increase those sin taxes :) I disagree with removing limits on property tax increases because removing the limit would, like the estate tax, hasten the division of land tracts, making land more expensive. Making land more expensive would not increase revenue in the long term, it would make everything more expensive, and heat up the economy. I really, really love consumption based taxes. I believe consumption based taxes would be the perfect mix of sticking it to the Man (make him pay $155,000 instead of $115,000 for that Porsche!) and sticking it the folks who spend rather than save.

Sean

ocracokewaves

Actually the problem is that as far as tax cuts go, even at 100K a year in taxes, you aren't in the sweet spot for the Bush administration.

I can recommend having a look at this set of charts. It also includes estimates on the impact of repealing the estate tax.

http://www.ctj.org/html/gwb0602.htm

What it shows is that the real tax cuts are only for the top 1% of income earners. That would be people earning $518,000 or more a year.

The folks in that group have an average income of $1,491,000 per year.

The percent of the tax break this group got will be 36% of the total tax break.

You're likely in the soak the who guys are doing well and trying to get into the next bracket group. That would be the folks making between $205,000 and $518,000.

That group which is the next 4% of tax payers is only going to get 8.3% of the total tax break.

Similar logic applies to the estate tax repeal. It is estimated that the income group making between $205,000 and $518,000 per year will end up saving about $4.9 billion in 2010. However, the group making over $518,000 per year will save $49.8 billion just in that one year.

You could probably completely exempt those making under $500K per year by just raising the exemption.

My take is this over $500K per year group needs to pay more taxes, but we have just given them 36% of the total tax breaks handed out so far.

There are 27 million taxpayers making between $100,000 and $500,000. I don't know how many are in the super rich group, but I bet it isn't very many.

Unless changes are made in the alternate minimum tax, by 2010 the tax break for this 27M person group will be only 1.2%. This is the group that it is getting soaked.

The very rich are the ones getting the biggest break. I would be all for any other other form of taxation. However, my guess is that any consumption taxes would face some extremely powerful lobbies.

I'm just not sure Sam Walton needs to using his bargaining power to keep from paying some taxes on his estate. The idea that a group of super rich like this won't change the country isn't supported by recent history. They obvioulsy have the lobbying power and the 27M folks in the next lower group aren't doing well at getting their share of the tax breaks.

We have 269 billionaires in the US. I wonder how many people we have making over $500K per year.

On another note Krugman has this to say about family farms. I don't know if he is right or not.

http://select.nytimes.com/2006/06/05/opinion/05krugman.html

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. In particular, advocates of estate tax repeal have never been able to provide a single real example of a family farm sold to pay estate taxes.

Sean Pecor

Okay, so now I have a new goal. To work my way up to $500,000 a year in salary so I can take advantage of those tax cuts ;)

I still think the estate tax would impact farms negatively. Perhaps the estate tax could never be linked directly but it's certainly a factor indirectly. Most farming families simply can't afford to pay the tax. I suspect they simply refinance and take an equity loan in order to pay the tax. Therefore, when things take a turn for the worst financially, and the bank forecloses, then that equity loan certainly contributed to the problem. Also, I'm not stating that they are pressured to sell the farm. I'm saying they're pressured to sell a slice of the farm.

I'm extremely distrustful of the CTJ reports due to their source of data (their source is themselves!). However, there is interesting data at http://www.taxfoundation.org/news/show/250.html. The source of their data is the IRS. The bottom 50% of income earners enjoy a 2.95% average tax rate on adjusted gross income (AGI). If you want to generate some tax revenue, increase 2.95% to 14.75%. Doing so would yield an additional $103 billion in revenue each year. Of course, nobody is going to get elected with that proposal. If you look at the table for years 1987 through 2003, you can see that the bottom 50% of income earners have enjoyed the largest % decrease in their average tax rate, a 42% reduction in their rate! The bottom 50% of income earners in our country have enjoyed a tax break nearly every year since 1987. Surprisingly, the biggest tax breaks for this group have been during the the current administration. By contrast, the top 1% of income earners have seen their average tax rate drop from 26.41% in 1987 to 24.31% in 2003. That's an 8% reduction in rate, which not surprisingly to me is the smallest reduction in tax burden among all groups in the document. With the largest % drop in average tax rate going to the bottom 50% from 1987 to 2003, it is also not surprising to me that the group with the 2nd largest % drop in rate are those in the top 26-50%. Therefore, the bottom 75% of income earners have enjoyed by far the largest drop in tax burden relative to their incomes since 1987. That doesn't make sense to me.

And according to the IRS data, to belong to the top 1% club one need only make an AGI of $295,495. Another thing I've learned from looking at these charts is that the overall tax rate for the country as a whole has dropped. I suspect this is due to economies of scale, thanks largely to a 20% growth in the number of taxpayers with positive AGI since 1987.


Sean

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