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Estate Tax

I'll trust that anyone reading this blog is well-read enough not to need a primer in why repealing the Estate Tax in the face of massive deficits is not the height of sound policymaking. For your delight and amusement I will, instead, offer some thoughts out of season. Taxing estates doesn't really seem like a great plan. If I die with a $10 million estate and want to give $5 to 2 million different people, there doesn't seem to me to be a good reason why the estate should be taxed. Better to tax inheritance since the actual concern is that I'll give $10 million to my son and he'll be rich, rich, rich without ever having worked. Second, perhaps it's politically effective, but I'm disquieted by the Paris Hilton-bashing. The problem is that not every wealthy heiress is a Paris Hilton. But every wealthy heiress ought to pay tax. Implying that the decadence of Miss Hilton is somehow integral to the case clouds the issue.

Speaking of which, fuck the small businessman. This is exactly the problem posed by obsessive focus on Paris Hilton. I might be an earnest, hardworking dude who works in the store. And somebody might die and give the store to me. The store may be worth millions and millions of dollars. If so, I ought to pay tax on it. Why? Because I've just inherited millions and millions of dollars, that's why. That I'm earnest and hardworking, and that my riches came in the form of a valuable store rather than a heaping plate of gold matters not a whit. What about those sad folks forced to sell the family business? Don't cry for them. Here you are, you inherit a store worth $X. You owe $Y in taxes, with Y being less than X. So you are "forced" to sell the store, and accept "only" $X-Y as your inheritance. Note that X is a figure in the millions, and Y a small proportion of X. This is a very good problem to have, abstracting away from the fact that someone you love has probably died and this is probably a bigger concern of yours that the tax bill. This is, in other words, a non-problem. The government ought, perhaps, to facilitate some kind of lending arrangement so that people who prefer to keep the store and pay the tax down over time out of operating revenues can do so.

The last point, however, is the first in importance. Liberals should not mistake getting self-righteous about estate tax repeal for having a serious program to combat inequality or reduce poverty in America. Repealing the estate tax is dumb. Putting it back in place would be a good idea. But a serious program to combat inequality or reduce poverty would be better. Ressentiment, my comrades, will only get you so far.

April 14, 2005 | Permalink

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Comments

Second, perhaps it's politically effective, but I'm disquieted by the Paris Hilton-bashing. The problem is that not every wealthy heiress is a Paris Hilton. But every wealthy heiress ought to pay tax. Implying that the decadence of Miss Hilton is somehow integral to the case clouds the issue.
I find it rather strange when the bloggers are talking about Democrats losing on cultural issues, you would have any problems with Democrats bashing Paris Hilton. we're using Paris Hilton to bash conservatives because for years conservatives have been claiming liberals are the ones who are decadent. It's rather sad we're stuck in the rather pathetic tit for tat insults, but conservatives haven't left liberals with much choice if they want to win right?

Posted by: Dan the Man | Apr 14, 2005 1:14:00 AM

"Liberals should not mistake getting self-righteous about estate tax repeal for having a serious program to combat inequality or reduce poverty in America. Repealing the estate tax is dumb. Putting it back in place would be a good idea. But a serious program to combat inequality or reduce poverty would be better."

Just because the estate tax by itself won't solve all the world's problems doesn't mean it's not part of a serious program to combat inequality and reduce poverty.

A trillion dollars in federal revenue ain't chicken feed. That's some serious dollars.

A trillion dollars would represent a not insignificant down payment on a Medicare for All program. A trillion dollars would fund college grants for a lot of deserving students.

And given that every dollar raised by the estate tax tends to be matched by another dollar that moves from heirs to charitable giving means the estate tax's impact on combatting inequality and reducing poverty is doubled.

The existence of the perfect should not cast aspersions on the seriousness of the good.

Posted by: Petey | Apr 14, 2005 1:18:28 AM

Huh?

The ESTATE is in limbo. It belongs to no one. That is the classic story. And, it is an ESTATE. A hunk of property, classically land. A hunk of property whose disposition society will limit to prevent the dead hand of the past from ruling the living. That is the issue for God's sake. Not like it is a new one.

What is the authority for taxing the receiver? "I had an idea?"

What does Paris Hilton have to do with anything?

Ressentiment? What the hell does that have to do with anything? Not just drinking the kool aid, but chugging it, IV ing it, whimpering for it. Their party line. On cue.

Posted by: razor | Apr 14, 2005 1:20:55 AM

It would seem that in re: small businesses and farms, the "right" choice would be to adopt the following:
If you inherit a sole-proprietorship, you do not owe estate taxes upon it so long as you continue to own and operate it. Should you sell it or (some of) its assets, estate/inheritance taxes will be levied at the moment of sale (upon the amount sold).

Oh and "razor", you are incoherent. I have no idea what you are trying to say.

Posted by: Rahul Sinha | Apr 14, 2005 1:32:44 AM

Why should we tax inheritances rather than estates? It seems to me that taxing estates would be more reliable in terms of raising revenue than taxing inheritances, for precisely the $5-each-to-2-million-people example you cite. It's all nice and well to talk about taxes as social engineering when you are, say, running a small, managable deficit of 1% of GDP or running a surplus or something, but we have a huge deficit, and a demographic bulge coming. It seems to me that right now, the way we should be thinking about taxes is as ways to grab lotsa money from people at gunpoint.

Posted by: Julian Elson | Apr 14, 2005 1:35:23 AM

"Oh and "razor", you are incoherent. I have no idea what you are trying to say."

I understand exactly what he is trying to say.

Posted by: Petey | Apr 14, 2005 1:35:32 AM

"If I die with a $10 million estate and want to give $5 to 2 million different people, there doesn't seem to me to be a good reason why the estate should be taxed. Better to tax inheritance since the actual concern is that I'll give $10 million to my son and he'll be rich, rich, rich without ever having worked."

This misses the revenue raising aspect of the estate tax. Again, a trillion dollars ain't chicken feed.

Posted by: Petey | Apr 14, 2005 1:38:51 AM

""If I die with a $10 million estate and want to give $5 to 2 million different people, there doesn't seem to me to be a good reason why the estate should be taxed."

In reality, this estate actually wouldn't be taxed, as charitable donations (which is what is really being described here) aren't taxed.

Posted by: Petey | Apr 14, 2005 1:42:10 AM

Um, the receiver IS effectively the one being taxed.

sheesh.

Posted by: praktike | Apr 14, 2005 1:49:40 AM

Yeah, but if we don't talk about Paris I can't do entries like this any more. :)

Posted by: Oliver | Apr 14, 2005 1:49:50 AM

Rahula

If you wanna understand, look up the word estate. The word is pregnant with meaning from back before there was contract law. The read about, oh, for example. progenitor.

Posted by: razor | Apr 14, 2005 1:53:26 AM

Spoken like a comrade. Bravo.

Posted by: Dick Durata | Apr 14, 2005 1:55:10 AM

Ressentiment, my comrades, will only get you so far.
And may I finally say I say with all sincerity, fuck that shit.

Talk of the abolition of the estate tax pisses me off the way the Iraq War pissed off others on the left.

Over the past 30 years, we have witnessed a situation where the very wealthy have essentially absorbed every single penny of additional national wealth.

And now they are turning their gains toward using the political system to further extend their wealth at the expense of the other 98% of the citizenry.

I'd say one of the problems of the past 30 years has been a lack of a politics of economic ressentiment. Enough of this shit.

Posted by: Petey | Apr 14, 2005 1:55:51 AM

"I'd say one of the problems of the past 30 years has been a lack of a politics of economic ressentiment. Enough of this shit."

To the ramparts!

I love Paris Hilton. Seriously. One of the very best amateur videos in my collection. I am in love, and she can have all my money.

Posted by: bob mcmanus | Apr 14, 2005 2:08:26 AM

Matt Y says, "But a serious program to combat inequality or reduce poverty would be better."

Here is the solution - GIVE THEM A JOB. Problem is that handouts are too easy and there's no motivation to get off govt assistance. If they choose to sit on their ass, they are choosing to live in "poverty."

Why do the so called person living in poverty pay in $1,000 in federal tax and then get a tax return check for $3,000? How is it that you can get back more than you've paid in federal tax? THAT my friend is govt charity at its finest.

Lastly, why should I have to pay taxes on an inheritance that my father has already paid taxes on? Does the fact that the money changes hands negate the previously paid taxed?

Posted by: jim | Apr 14, 2005 2:26:44 AM

Ooh, James Lileks will not like your comments, Matthew. As one friend of mine notes with amusement, he's gotten quite a lot of columns out of bemoaning all the painful difficulties produced for him by the fact that his father bequeathed him a sizable gas station.

Posted by: Bruce Moomaw | Apr 14, 2005 2:33:49 AM

The purpose of citizens is to pay taxes. Government has no reason to tolerate citizens otherwise. Dead or alive, what difference does it make? They should pay. Let's lobby to add this text to the next Democratic Party platform:

If you drive a car-car I'll tax the street
If you try to sit-sit I'll tax your seat
If you get too cold I'll tax the heat
If you take a walk I'll tax your feet
Tax man

Well I'm the tax man
Yea I'm the tax man

Don't ask me what I want it for
If you don't want to pay some more

Cause I'm the tax man
Yea I'm the tax man

Now my advice for those who die (tax man)
Declare the pennies on your eyes (tax man)

Cause I'm the tax man
Yea I'm the tax man

And you're working for no one but me

Posted by: Jim | Apr 14, 2005 2:49:35 AM

When a rich person dies, the estate should be confiscated and re-distributed, folks.

This is the least we could do for the poor bastard.

For it is easier for a camel to pass through the eye of a needle than for a a rich man to enter into the kingdom of God.

Earth to earth, ashes to ashes, dust to dust; in sure and certain hope of the Resurrection to eternal life.

Posted by: abb1 | Apr 14, 2005 3:35:11 AM

"Speaking of which, fuck the small businessman. This is exactly the problem posed by obsessive focus on Paris Hilton. I might be an earnest, hardworking dude who works in the store. And somebody might die and give the store to me. The store may be worth millions and millions of dollars. If so, I ought to pay tax on it. Why? Because I've just inherited millions and millions of dollars, that's why."

NO, you haven't inherited millions and millions of dollars, you have inherited something that is worth that. Liquidity can't mean nothing, especially in issues of estate - there is so much more involved. I find it hillarious that this kind of argument comes from the same people (typically) who bemoan the fall of family agriculture and local commerce to Agribusiness and Walmart. A Farmer who inherits a $1million dollar chunk of land is not the same as a blue-blood who has an equal sized trust fund. The cash value of the farm is useless to the farmer because his livelyhood depends on the illiquidity of the asset.

Posted by: Sweeney | Apr 14, 2005 3:38:16 AM

Sweeney,

So, the small farmer's son sells the land to someone else who then will become a small farmer. What's wrong with that? I could never understand your argument.

Why does it seem important to you that a small business or chunk of land is transferred to a family member, biological realtive of the former owner? Is this some kind of feudalist concept or eugenics project?

Thanks.

Posted by: abb1 | Apr 14, 2005 4:03:46 AM

A Farmer who inherits a $1million dollar chunk of land is not the same as a blue-blood who has an equal sized trust fund.

...which is why the first $2 million plus is exempted from the estate. Smarter monkeys, please.

Posted by: Kimmitt | Apr 14, 2005 4:07:26 AM

Yes, but even if this is a $10 million business or chunk of land - what's the compelling public reason to keep it in the same family? I don't get it. The heirs will probably sell it anyway. I know I would.

Posted by: abb1 | Apr 14, 2005 4:15:40 AM

OK, Matt, this is a Pundit's Fallacy you've committed. Sure, your policy explanation is ever-so-sound, but bashing trustafarians WORKS much better than, say, a scion of Rich New York Jewry explaining ever-so-reasonably why the Inheritance Tax is good.

Posted by: bobo brooks | Apr 14, 2005 4:29:32 AM

Bashing the Paris Hilton Relief Act of 2005 may be unfair to Paris Hilton but it is good politics. Anyway, she deserves to suffer. Pay back time for The Simple Life :>

Congratulations, Paris Hilton ! You've been promoted from gas bag to punching bag ! Hope you enjoy your very first role in public policy.

Posted by: Fifi | Apr 14, 2005 5:37:04 AM

It's perfectly understandable to look at some guy begging on the street and think, (Not, "will he STOP blocking traffic!) that something ought to be done about it. That's compassionate and all, and the only problem with Democrats is your reflexive assumption that you're entitled to do that "something" with somebody else's money, instead of your own.

But when you look at somebody who has just gotten rich, and think, "Something has to be done about that!", that's nothing but spite. You'll never understand the trouble you have winning people over, until you grasp that most people think spite is a vice, not a virtue.

Posted by: Brett Bellmore | Apr 14, 2005 5:48:32 AM

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