Washington Post to Employees: Skew You

By March 13, 2008Taxation

Today’s Washington Post editorial page brings up the same old tired arguments against repealing the estate tax. They recycle the one that we always hear about how the tax doesn’t hit very many people – and fixing it would be a “skewed priority.”

It’s true – it’s a tax that you only pay once – when you die – so each year the number of people it hits isn’t very high. But, the way the tax is applied is unfair and unworkable. It forces heirs to sell off businesses to pay the tax – which means factories are shut down and jobs are lost. If even one business is lost to bad policy, than that policy should be changed.

Let the Washington Post go to the workers who are unemployed because of the tax and explain to them that they’re only one business – that helping them really would have been a “skewed priority.”

Join the discussion One Comment

  • Linda M. Beale says:

    As a tax lawyer who supports a fair tax system that will work for the benefit of ordinary Americans, I must take issue with Dena Battle’s entry on the estate tax.

    Dena Battle completely misunderstands how the estate tax works. The reason it hits very very few people is because it has a very very large exemption that ensures that only the wealthiest families pay any estate tax at all on death of the family matriarch or patriarch. Because so little of an estate is taxed, those who end up paying any tax at all pay tax at a very low rate (about 14-17%) on the whole estate. In addition, there are special provisions that allow estates that consist of family farms to pay whatever minimal tax liability they may end up with over 14 years.

    As a result of these provisions under current law, ONLY MULTIMILLIONAIRES pay any federal estate tax, ever, They comprise about 1% of the total US population, and thus very very few of the estates of people who die are subject to the tax.

    Ordinary Americans need to understand that the drive to end the estate tax was started by 18 of the richest families in the US (including the Walton Wal-Mart heirs, worth at least $6 billion each). Those families put together a coalition to fool ordinary Americans–80% of whom earn less than $80,000 a year–into supporting estate tax repeal, even though repeal ONLY helps those few multimillionaires.

    The coalition continues to say that family farmers and small business owners lose their farms and businesses because of the estate tax. This has been shown to be false, but they continue to repeat it over and over, so that people like Dena Battle obviously also believe it now as well. The coalition actually TRIED very hard to find someone who had lost a family farm because of the estate tax: they could not find a single one. A very few business owners have to pay some estate tax, but again, they are not “small” in the way most people think. It is only MULTIMILLIONAIRES who have to pay any tax at all.

    The idea that the estate tax is the death knell for workers in an estate-owned business is also offbase. In the cases where heirs decide to sell a business, it is usually because they want to cash out and each get their inheritance out of the business. When they sell, the business keeps operating, because the buyer has a large investment and wants it to work. In fact, the new owner often is more successful than the old, because they bring a reinvigorated interest to the business. The result if the heirs sell in part to raise money to pay whatever minimal estate taxes are due is the same–the business keeps operating, and the workers keep working.

    Here’s why repealing the estate tax is truly unfair to most ordinary Americans. The top 1% of this country (about the only ones subject to the estate tax) own more than one-third of the wealth of the entire country. Much of their wealth is in financial assets. They often pay no income tax, because the invest in items like municipal bonds, and take advantage of the tax-exempt interest that is not included in their income subject to tax. (Dick Cheney, for example, had several millions in tax exempt interest in some years on his public returns.) Most of their increase in wealth (appreciation in assets) NEVER GETS TAXED UNDER THE INCOME TAX–stocks and bonds and mansions are passed from one generation to the next even while they are worth more and more. The gains in wealth are not subject to income tax because death is not treated as a time to finally tax that gain in wealth over the lifetime of the decedent. And the heirs get a “step up in basis” in the assets and can turn around and cash them out–so they don’t have to pay a penny of tax on that gain either. As a result, a great deal of the wealth and the high flying lifestyles of the wealthy is enjoyed without paying any income tax. What tax they do have to pay on capital income is at a very preferential rate–lower than most people pay on their wage income.

    The estate tax is therefore about the only way in our tax system to compensate for the unfair advantage given to the wealthy in our income tax system through the preferential rate on capital income and the rule that lets items owned by the wealthy escape tax on the total gain enjoyed throughout the lifetime of the decedent at death.

    If the estate tax is repealed, there will be another $23-30 billion hole in the federal budget. According to renowned economist Joseph Stiglitz, the U.S. will be spending a total of about $3 trillion on the costs of the war in Iraq (replacing armaments to taking care of the thousands of disabled veterans). Just who is going to pay for all of that if the wealthy don’t pay their share? It will be the ordinary workers who have been fooled by the elite of this country into thinking that the estate tax hurts them (it doesn’t) and into thinking that the Iraq war isn’t costing them their livelihoods (it is).

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