WSJ: The Tax That Won't Die

Discussion in 'Economics' started by Tom B, Dec 11, 2009.

  1. Tom B

    Tom B

    WSJ: The Tax That Won't Die

    In less than three weeks, the hated death tax is scheduled to expire—with the rate falling from 45% to zero for 2010. Then the tax will be resurrected in 2011 at a rate of 55%. This bizarre policy dates back to 2001 when Democrats wouldn't let President Bush permanently kill the death tax, so Republicans bet that if the tax were eliminated for one year, it would never come back.
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    Well, the moment of truth has arrived, and House Democrats recently voted 234-199 to cancel the 2010 repeal and hold the rate permanently at 45% with a $3.5 million exemption. Senate Majority Leader Harry Reid now wants to do the same. But to suspend the Senate's health-care debate and turn to the estate tax, he needs 60 votes. All Republicans and some Democrats are saying no. Blanche Lincoln of Arkansas and Jon Kyl of Arizona will accept no more than a 35% permanent rate with a $5 million exemption.

    We've long argued that the economically optimal and fairest death tax rate is zero. The tax is applied to income that was already taxed when it was earned, so it is a double tax on savings and capital. The correct way to tax a gain in the value of assets bequeathed to an heir is with a capital gains tax of 15% when the assets are sold, rather than at the time of the funeral of the original owner.

    Study after study, including one co-authored years ago by White House economist Larry Summers, finds that a powerful motivation for entrepreneurs to grow their businesses is to pass that legacy to their children. The left disparages this as building "family dynasties," but most Americans think that it is immoral for the government to confiscate the fruits of a life's effort merely because of the fact of death.

    Democrats also say their rate would apply only to the richest 2% of estates. But a new study by economists Antony Davies and Pavel Yakovel of Duquesne University finds that the estate tax "impacts small firms disproportionately versus large firms" by encouraging well-capitalized companies to gobble up smaller ones at the owner's death. The study shows the result is to "promote the concentration of wealth by preventing small businesses from being passed on to heirs."

    Republicans and willing Democrats shouldn't give up on eliminating the death tax. The Kyl-Lincoln amendment to create a permanent 35% rate is far better than the confiscatory House bill. But the best strategic outcome now is to let the death tax expire in January as scheduled under current law, and return to this debate next year when the tax rate is zero. Then let liberal Democrats explain to voters on the eve of elections that they must restore one of the most despised of all taxes.
  2. "..... one of the most despised of all taxes."

  3. "What would Rupert do?"
  4. There is no possibility that the death tax will ever apply to me.
    I despise the financial transaction tax way more.
  5. the death tax is far preferable to an income or a corporate tax.

    So heirs pay taxes on an often unexpected chunk of money. It certainly does not help or hurt the dead.
  6. Mnphats


    Its already been taxed. No need to tax again.
  7. TZ is SUCH AN IDIOT... which is why I've had him on IGNORE for so long...

    It's not a matter of "not hurting the dead".. but rather a matter of "rights of property"..

    They money has already been "taxed up the wazoo"... likely at least twice or more, and as "personally owned property", should pass to the beneficiary of the owner's choice without being taxed yet again, simply because it changes owners.
  8. Personally, I like Buffett's take on estate tax:

    "I believe in keeping equality of opportunity," said Buffett. "You don't get to be a quarterback ... because your father was a quarter back 20 years ago."

    Society is better served by meritocracy than by aristocracy. An estate tax is a step in that direction.
  9. Tom B

    Tom B

    Buffet is a hypocrite. He is avoiding the estate tax by donating most of his wealth to the Gates foundation.
  10. Are you so daft that you cannot even interpret what you wrote?
    #10     Dec 11, 2009