Wednesday, November 16, 2005

Ideas and their shaping

In academia, the prevalent view of the state of democracy in America, of the actual arrangments currently supposed to embody that idea, is sobering and bleak. Consider the estate tax. How to explain the fact that neither political party ever proposes massive hikes in the estate tax, although this move would be in the interest of all but a tiny fraction of the electorate? The answer is not too hard to see. Those who have large sums of wealth have the ability to shape the terms of public debate. Did somebody say oligarchy?


xtrachromosomeconservative said...

Maybe, neither party proposes massive tax hikes on the estate tax, otherwise known as the death tax, because it renders an event such as death as taxable. This seems unseemly to much of the populace regardless of their means. On a fundamental level, such a policy states that what you have accrued in this life is not that of yours or your family but that of the government. Or that your material assets are on loan from the government till you die. This seems to put the formulation of the United States on its head.

That said, it is true, in dollar terms, only a tiny fraction of the electorate benefits. It is something like 2 percent of estates constitute 50% of taxable revenues through the estate tax. That is not to say though that its impact is not widely felt. Many people have accumulated assets over $600,000 by the time of your death (in the d.c. that means owning a house outright), for instance a farmer or small businessman, and needn't be rich. Those assets are not liquid, but would need to be liquidated in order to comply with the estate tax, thus robbing the next generation of that capital accrued in the previous generation needed in order maintain the livelihood of said farm or small business.

Ilya said...

I haven't heard such bull coming from you in a long time. Estate, Death, Paris Hilton, whatever you want to call the tax, it is not even close to a tax on, or when, someone dies. It is a tax on children who INHERIT a super-large estate, usually an estate that they can not be said in any sense of the term "work" to have worked for. And the estate tax only applies to the richest 2%, other taxes, of course, apply to the regular home owner in D.C., as in your example. The estate tax is a very specific tax that benefits a tiny fraction of people. And the idea that it robs the next generation of capital is absurd, and applies equally to all taxes. What is left over after the tax is still a sizeable sum of wealth. But of course nobody likes to have money taken by the government. But this is to distract readers from the point, which is that 98% of the population would benefit from taking this money from %2. Why haven't the the former got their way? or why haven't they stormed their government to ask for the re-installation of the estate tax? I'm not denying that there is an answer to this question, just pointing out that the answer should be sobering to anyone who values democratic self-governance.

Maybe a little reminder of what the estate tax means in America is in order. "The estate tax was the most progressive part of the American tax system, because it rested on the principle that the wealthy few, if they were not willing to bequeath their money to charity, should not be permitted to pass it all directly to their heirs. It had been on the statute book for nearly a hundred years, and throughout that time it had been generally assumed that there was widespread support for the idea that unearned wealth passed between the generations, creating pockets of aristocratic privilege, was not part of the American dream. Because it was a tax that so obviously took from the relatively few to relieve the burden on the very many, there seemed no possibility that a sufficiently large or durable coalition of interests could ever be formed to get rid of it."

xtrachromosomeconservative said...

You make a persuasive case for the estate tax. But there is one falsehood that you have made, there is no cause for the reinstallation of the estate tax because it still exists. It is to be phased out in 2010 for one year and then applies again. But I do believe, going back to my original point about a tax being triggered upon death is correct, unless we are to call an inheritance as something that occurs other than at a time of someone's passing.

xtrachromosomeconservative said...

"And the idea that it robs the next generation of capital is absurd, and applies equally to all taxes." This statement is patently false though, it does not apply to all taxes. It is true that capital is taxed during one's life, but with the exception of property and personal property, those taxes are levied on the realization of a gain, and at a comparatively low rate so as not to discourage investment (capital gains and dividends are taxed at 15 %, they were taxed at 22% under Clinton). Property taxes and personal property taxes are taxed, depending on the state you live in, at a low rate as well. The estate tax is levies a rate of 60% on combined assets of above 600,000. So if you have combined assets at $700,000, the first 100k in of itself represents a tax liability of 60k. Not to mention the lower rate upon which estates are taxed up until the 600k amount. Not many people have 60k lying around, and are thus put in a position to liquidate theses assets in order to meet their tax obligations, thus the destruction of capital, and how it contrasts with other taxes. Ultimately, things like the estate tax don't hit those that it is intended to hit hardest, the extremely wealthy, they have things called accountants. Who it does hit are those that have saved and invested in capital through their businesses or homes.