Egalitarianism

It has been my understanding that the super-wealthy have been getting around estate taxes all along using trust funds. Moreover, this is a loop-hole that is basically impossible to close w/o practically eliminating charity trust funds as well. This would mean that people who are hit hard by the estate tax are only the moderately wealthy, hoping to give a few hundred thousand or a few million dollars in wealth to their children.

I think it would be great to tax inheritance heavily as it is one of the few non-distorting taxes. But as long as the tax only hits the unprepared and not the truly spoiled, it doesn’t seem as fair.

So, this is a place I feel like I might be able to get a decent answer. Is this how rich inheritances really work? (avoid estate taxes anyways) Or do we just not care?

Thanks for the link. Although I was having a bit of fun with the comrades in the Democratic Party who always try to divide Americans by economic class, I do truly believe that the only real reason to tax estates is envy. And I don’t think envy is legitimate public policy. Visitors–all visitors,rich or poor–always welcome to the blog of the free, Red State Lawblog.

Cheers from Nebraska, Rick Duncan

Actually, it IS a serious argument: It’s the difference between equality of rights, which more or less automatically leads to inequality of outcomes, and equality of outcomes, which can only be achieved by enforce INequality of rights.

Mr. Duncan, another reason to tax estates is to raise money for the government.

A third reason to tax estates, this time in comparison with other sources of money, is because it is by definition a tax on people who did not earn the money being taxed and would in no way be hurt by the tax.

Let me get this straight. A government program that is slanted to help the poor, elderly, and infirm is running out of money and we just passed a tax cut that is only ever applied to the richest 2% of people in one of the wealthiest countries on the planet?

Nah, I can’t imagine how this could be accuratley called exactly what it is.

MPowell, people leaving “a few hundred thousand” to their children are *already* unaffected by the estate tax, because that’s below the exclusion. In fact, Democrats proposed raising the exclusion to $7 million, but that still wasn’t enough for the Republicans. The repeal *is* about the superwealthy — the top 0.3% of estates — and that’s why the Mars and Walton families are behind it.

It’s an article of faith for the people who are spreading the lies about it (who still haven’t managed to find any of the affected “family farmers” to testify about it). There are people out there, possibly including MPowell, who have heard the lies and believed them, but aren’t ineducable.

1. The estate tax most definitely CAN be completely avoided through the use of trust strategies.

2. Most of the property that is passed taxably at death is NOT cash or liquid assets but illiquid assets like real estate and non-marketable securities (i.e., the stock in the family business) — KCINDC, happens often enough with closely-held companies. May not be a HUGE problem, but it happens often enough.

KC, are you suggesting that —all of the lies aside — one is ineducable if one has a philosophical objection to the notion of the government taxing wealth as it passes within a family?

I hope not, because that would be rather, um…arrogant.

John Emerson has a good point — the way things are going, you’ll be able to have him arrested for saying mean things about wacko Republican ideas.

Really, what do you expect? Either you’re in favor of ideas like fairness and equality, or you’re not. If you showed up and started advocating the divine right of kings, do you think we would just say “kudos to you my good man, for your fresh thinking”?

Of course not – that’d be ridiculous.

Now, divine right of Bushes, or God’s Own Party, would obviously be different.

As soon as someone pounds their stake into the ground and calls their dogma a “philosophical position”, discussion and education cease. Yeah, Nozick was ineducable. He assumed his basic position and then defended it.

My original point here was based on the fact that the “anti-death-tax” commentators at Jane Galt, besides having a firm and unshakable philosophical position on the question, and possibly because of their firm and unshakable philosophical position, felt no need to inform themselves about the actual facts, and kept repeating the same old apocryphal stories of poor farm families stripped of their land, etc., etc.

jet, you really need to start your own website; it would rival The Onion!

Democrats who voted against the CRA in 1964 included Thurmond. I forget, which party did he find his natural home in? Whose Senate Majority Leader praised his judgment?

I’m sorry that the Republican Party embraced racism. I truly am. But what disgusts me is that Republicans lie to themselves and the rest of us about it.

You might also want to look at Republicans challenges to affirmative action and their 1996 welfare reform for more instances of “treating everyone equally”.

Posted by jet · April 19th, 2005 at 8:49 am

If you live in Fantasyland, where up is down, black is white, and Republicans are not corrupt Plutocrats who kick the poor while fawning over the oligarchs.

I’d be in support of Democratic position here but for a few things. First of all, my sense is that the Dems proposal to establish a high fixed threshold and a high rate above that is a tactical compromise–what they’d really prefer (but lacking a minority cannnot have) is a low thresold and a high rate.

Philosophically, the Dem position (at least judging by the conversation here) seems to be, the original owner is dead, the undeserving heirs didn’t actually earn any of the money, therefore they have no natural right to any of it, therefore it really belongs to the state, and the heirs should count themselves damn lucky for any fraction they get.

Well, that philosophy rubs a lot of people the wrong way–even many of that vast majority who wouldn’t come close to paying anything under the current Democratic proposal. Why? Because providing for one’s children and grandchildren by leaving a legacy is a pretty basic desire. It is one of the things that gives meaning to people’s lives. And people are offended by a philosophy that implies they have no natural right to do this–that being able to leave their worldly goods to their family is possible only at the discretion of the state according to whatever arbitrary limit is in effect at the time of their death.

I think the Dems would do much better to push vigorously for the elimination of the “Angel of Death Loophole” which is patently unfair. Elminating it would generate significant revenues when heirs sold inherited property (and would apply to all estates, not just the uber-rich). This would neatly avoid the ‘small business’ / ‘family farm’ problem (even as a rhetorical device).

OK, what am I missing?

One of the things you are conspicuously missing is the rudimentary civility required to argue against your opponents actual position rather than the straw man “philosophy” you have chosen to foist on them.

Straw man? See response #15 in particular for a succinct expression of the philosophy I was describing:

but having died, I see no reason at all that those goods not return to the care of the greater society from whence they came. This, to me, is the essential arguement for an estate tax – it should be 100% – then there would be a faint chance of an egalitarian society developing.

In other words, your assets are not really ‘yours’, they are on loan from the state and therefore they should naturally revert to the state when you die.

What is Barry Ross’s position in the Democratic leadership, MW?

I must’ve missed the part where I made claims about the Democratic leadership.

Finally, why do libertarians object so much more vigorously to taxes on “unearned” income than they do to income taxes and payroll taxes?

But the estate tax, as constituted is not a tax on income (earned or unearned) but on wealth. As for capital gains vs labor. I believe they should be taxed equally myself and, in fact, I think the government should be collecting capital gains taxes it’s missing out on.

Why do lots of Americans object to estate taxes because of their effects on small businesses and family farms? Possibly because even though there is not much of that happening now, it has happened recently and, depending on what transpires, may happen again.

Beyond that, many people who would never be affected nevertheless object to the estate tax (and are persuaded to despise it as a ‘death tax’) because of what it embodies–the idea that your assets are yours to dispose of only so long as you stay below the threshold of what the government considers ‘rich’ (which threshold, of course, is subject to review at any time).

The ‘Angel of Death’ loophole, on the other hand, is both an unjustifiable boondoggle (avoidance of any taxes whatsoever on capital gains) and a major source of inheritance windfalls.

What would the effect be of eliminating both the estate tax and ‘angel of death’? Increase or decrease in tax revenues? How much?

The move against estate taxation rests on the idea that “property rights” is an individual right. The argument mw is setting forth grants this assumption. The argument against, presupposes that property rights is really a state right. An individual, who believes in property rights as an individual right, would naturally be against the estate tax regardless of that individual’s current wealth.

r. clayton – Your stance that “it is by the grace and actions of the state that people are able to build fortunes.” is an unproven presupposition.

Your stance that “it is by the grace and actions of the state that people are able to build fortunes.” is an unproven presupposition.

Of course, of course. Practically everything written in this thread is an unproven presupposition, including

the idea that “property rights” is an individual right.

The only way I know to make practical progress in such cases is to bring Damon Runyon into play and figure out how you’re going to bet it. It seems to me to be responsible and intelligent to place your bet on the state as one of the better ways of providing for fortune amassing and other individual rights, and it seems to me to be feckless and uninformed to place bets on means that have no, or a greatly emaciated, state to achieve the same ends. I have no proof of the intelligence or uninformedness of these bets. However, as I look around a real things – not airy philosophical extrapolations – I see plenty to support the intelligent bet and very little to support the uninformed one. I also see plenty to suggest that a bet on the state is perhaps not so intelligent, but I also see plenty to suggest that a stateless bet is far worse than anything a state can dish out.

r. clayton – You are correct that the ideas present in this thread are largly unproven. The idea that property rights is an individual right does have the benifit of being implied by the US constitution (Amendment IV).

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized. ”

Namely their persons, their houses, their papers, and their effects. The constitution strangely lacks the idea of all wealth generation being a result of state largess. The law of the land is already biased in favor of an individual right to property.

uncle Kvetch – Many individuals do infact believe that taxation is a form of legal theft. Some simply believe that you should only be taxed once. After that what you do with your resources is your business.

Some simply believe that you should only be taxed once. After that what you do with your resources is your business.

But giving your resources to your heirs is a transaction, assets change hands – this is a typical occasion for governments to collect taxes.

How is it so drastically different from a situation when your employer sends you a paycheck – from his resources, already taxed? In fact, your employer can even be a member of your family, your father, for example.

I agree that what one does with his resources is his business, but once he decides to give his resources to someone else – all bets are off.

That virtual moment when these resources are hanging in limbo – relinquished by the previous owner but not secured by the new owner yet – at this vulnerable moment the government pops up out of nowhere and says: ‘I am the only guarantor and only reason you are being able to perform this transaction and I want my share.’ And inheritance is as much of a transaction as any other, correct?

Does it make sense to you, James?