Saturday, September 24, 2005

Mad blogs and Englishwomen

Avedon has the links today. First is Lorraine's open letter to the party power brokers, Dear Dems. Avedon is right in thinking every single progressive Dem should be printing this out and sending it to their legislators. She also reminded me to check Mad Kane who has posted some short podcast interviews with bloggers you'll recognize. I finally figured out how to access these myself and was able at last to listen to Mad's dulcet tones.

In another post, Avedon links to Digby for an an explanation on how welfare became a code word for lazy black folks. Avedon adds her own thoughts, well worth reading in full, but here's the money quote.
Digby is right that we need to remember how much of a role racism has played in keeping all of us from having the same sensible programs that other countries have long ago learned are necessary to a stable and prosperous society. And we need not to forget that. But we also need to remind people that taking care of our people isn't about taking care of 'just' blacks - it's about taking care of blacks too, because it's about everyone.
How true. I've been posting on the subject of poverty myself at the Detroit News and also on the repeal of the estate tax a/k/a welfare for the rich. Surprising hate mail on those. How do people get fooled into believing the repeal is some kind of boon for the middle class?
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5 Comments:

Blogger Bostonian Exile said...

How do people get fooled into believing the repeal is some kind of boon for the middle class?

Sometimes people have worked their way up from abject poverty to become small business owners. Despite the lack of a single day of high school education, sometimes they gradually take advantage of the opportunities around them, work nearly every day, weather a recession to come within a hairsbreadth of losing everything, surviving and then eventually thriving. Along the way, they provide for their families, and their extended families.

Sometimes, recognizing the value of the formal education they themselves lacked, they help their grandsons finish law school.

Is the story the norm? Does this happen to everyone? No, but it does show that the American dream is far from dead.

It seems to me that, at a minimum, we can find a level where those closer to the present line than Gates and Buffet need not worry about this issue hanging over their estate planning. It seems a shame to me to say to those from the "greatest generation":

"Thanks for helping to build America and to exemplify the opportunity here, for contributing generously to the welfare of others through the public and private sectors, and for making this land more prosperous.

"Before your final wishes are carried out, please make out your check to the 'United States Treasury'."

So, maybe a repeal of the tax is not a boon to the middle class as a whole, but I don't think it's necessarily accurate to disregard the fact that it is a boon to an increasing fraction of the whole who started life in the middle class, and particularly for those who started at a point where reaching "middle class" was a goal unto itself.

7:11:00 PM  
Blogger Avedon said...

The estate tax we're talking about is not paid by the middle class, it's paid by the very rich. And it's not paid by the person who earned the money, it's paid by people who didn't. You have to pay tax on money you get - that's always been true. Why is getting someone else's money when they die a special case?

(BTW, I am not, and never have been, and never will be, English. I'm an all-American girl. I think I have a bio over at The Sideshow Annex someplace.)

10:50:00 PM  
Anonymous Libby - The Impolitic said...

I know you're not English Avedon but the muse deserted me yesterday so I took a little poetic license and stretched the point. I mean you do live in England after all. In any event I couldn't think of another title.

Thanks for the comment on the tax. That's pretty much my take on it as well, although I would add that Gates and Buffet do not necessarily contribute generously to the public sector. In fact I suspect they have a legion of accountants to help them contribute as little as possible to the tax base and can thus look like heros when they embrace some pet cause and donate a billion or so. In terms of their net worth, it's still not that much.

Besides what's so hard about figuring their estate plans to include their fair share of the public debt? If they don't pay now, when Bush's credit bills come due, it will be the middle class who bears the burden. That would be your kids and grandkids Exile. Meanwhile the top tier who benefited from this irresponsible spending will still be slipping through the loopholes they bought with lobbyists and mega-donations to the politicians.

The American dream ain't what it used to be. When your granddad was chasing it, the mega-corps didn't have the power they have now. They stacked the deck against the little guy breaking through and the policies they support are designed to keep the poor down, not help them escape poverty.

Government spending is run amok. You can't finance all the wars and welfare for the rich tax cuts, on credit forever. And now there's reconstruction projects going to those companies that have already stuffed their pockets with our tax dollars instead of going to middle class businessmen. So if the billionaires don't pay on their assets, who is going to pay?

9:51:00 AM  
Blogger Bostonian Exile said...

First, a point of clarification. There are two taxes here: the "inheritance tax" levied by states, and the "estate tax" levied by the federal government. The former is paid by the heirs, the latter is paid by the person who dies (or rather that person's estate since metaphysics dictate that you can't take it with you).

Thanks for the comment on the tax. That's pretty much my take on it as well, although I would add that Gates and Buffet do not necessarily contribute generously to the public sector. In fact I suspect they have a legion of accountants to help them contribute as little as possible to the tax base and can thus look like heros when they embrace some pet cause and donate a billion or so. In terms of their net worth, it's still not that much.

I agree, though I would make two notes: 1) I was not defending the Forbes 400 (they don't need my help); and 2) this is why I think it is generally disingenuous for those from Warren Buffett down to, say, John Kerry to oppose the recent tax cuts without insisting on paying under the old rates. That Kerry did not even know what he did with his tax cut during the election last year (approx. $68,000), which is more than most Americans earn in a year, was rich on a number of levels. But, I digress. Back to the topic at hand.

Besides what's so hard about figuring their estate plans to include their fair share of the public debt? If they don't pay now, when Bush's credit bills come due, it will be the middle class who bears the burden. That would be your kids and grandkids Exile. Meanwhile the top tier who benefited from this irresponsible spending will still be slipping through the loopholes they bought with lobbyists and mega-donations to the politicians.

This begs the question of what is a "fair share," a point on which we are likely to disagree. However, there are cases where such planning is impossible short of liquidating a business. Some estate taxes are more easily covered than others due to a variety of factors, and the actual number of liquidations vary depending on which think tank's position paper you read, though I have not seen a single one that reasonably disavows all possible liquidations. My bottom line is that the forced liquidation of a single small business is indicative of an estate tax system gone awry.

Also, we're not just talking about Bush's credit bills (don't get me started on his atrophied veto pen), but we're also talking about LBJ's, Nixon's, Ford's, Carter's, Reagan's, and I believe even Clinton has a couple outstanding. Save for a few years in the late 1990s, this country's fiscal policy has been a chronic problem since the late 1960s. That Bush is unpopular right now makes this a particularly convenient time to raise the estate tax issue, but it's about fixing America's fiscal irresponsibility, not just Bush's.

The American dream ain't what it used to be. When your granddad was chasing it, the mega-corps didn't have the power they have now. They stacked the deck against the little guy breaking through and the policies they support are designed to keep the poor down, not help them escape poverty.

This strikes me as guilt by association, and it seems that you really want to be taxing the entities you see as the source of the trouble: the multinational corporations. After all, to put your argument in concrete terms, if you and a friend (perhaps one with a hyperactive pituatary gland, if that helps the visual)walk into a china shop, and your friend intentionally knocks over a vase, should the shop owner look past your friend and expect you to pay for it? I don't think so.

Government spending is run amok. You can't finance all the wars and welfare for the rich tax cuts, on credit forever. And now there's reconstruction projects going to those companies that have already stuffed their pockets with our tax dollars instead of going to middle class businessmen. So if the billionaires don't pay on their assets, who is going to pay?

Just to underscore: I was neither defending billionaires on this point, nor anyone who comes remotely close to that level of wealth. That said, it seems the remedy is, if we agree for now that these are evils to be corrected, to vote the Democrats into office in '06 and '08 (I can't believe I just typed those words, even if only for sake of argument) and see if they do better, since this seems to be more about Bush's policies than an inherent imperative that these particular assets be taxed. The Democrats can then raise whatever revenues they have the stomach to bear politically. They can cut spending, bring the troops home, and so on. Many avenues are open to right the ship.

My point: I'm not defending billionaires; in fact, you and I might even find some common ground on how to tax those assets. But, the estate tax is a tricky thing that still has the potential for profound and perverse effects on the final wishes of self-made individuals. Even if those effects are minimized, the tax is unfair unless those effects are eliminated.

Do I have an immediate vested interest in the repeal of the estate tax? Heh... Let's just say that there is a very practical reason why I subjected myself to law school. But at the same time, I recognize that there is a very real possibility that my grandfather's business may not outlive him. Actually, the really perverse thing is that in such a scenario, his company would be purchased by an even bigger one. How's that for increased concentration of wealth?

In any event, I recognize that I am unlikely to sway you, and that you are even less likely to sway me. This is just one of those few issues deeply influenced by my upbringing. All the same, I appreciate the opportunity to opine honestly on this.

12:25:00 PM  
Anonymous KS said...

Here are a few figures to clarify the effect the estate tax has on average, middle-class Americans:

The first $3 million of a couple's estate ($1.5 million for an individual) is exempt from the tax, and the current tax rate is 47 percent.

By 2009, the exemption rises to $3.5 million for an individual and $7 million for a couple, but the tax rate drops to 45 percent.

According to the Tax Policy Center, "less than 1 percent of estates pay any tax—with the vast majority of the population owing nothing. In 2004, this translated into an estimated 18,800 estates. Under current law, this number will decline even further as the estate tax exemption rises. By 2009 (when the law will allow a couple to pass $7 million and an individual to pass $3.5 million of any estate to their heirs tax free), less than 0.3 percent of estates will owe any tax."

As far as the effect on small businesses goes, the Small Business Council of America believes repealing the tax will actually hurt businesses because "the president’s proposal would eliminate the ”stepped-up basis” rule, under which someone who inherits a small business does not owe capital gains taxes on the increase in the business’ value while the decedent owned it." The Council claims 40,000 estates currently take advantage of this “stepped-up basis” rule each year.

What about farms? The National Farmers Union believes that the cost of repealing the estate tax would jeopardize Congress' ability to adequately fund farm, nutrition, conservation and disaster programs. This is of concern to farmers because they have to contend with falling commodity prices and sky-rocketing energy costs. Meanwhile, the CBO estimates only 65 family farms would be subject to the tax by 2009 with exemption of $3.5 million ($7 million per couple).

The CBO also said charities will suffer if the tax is repealed since there will be no motivation to protect estates from taxation. They estimate that charities received between $13 and $25 billion in 2000 because of the estate tax. A large chunk of that money gets used to help the needy and without those contributions people will suffer even more.

The CBO also estimates repealing the estate tax will increase our deficit by nearly $400 billion over 10 years. We're already in debt up to our eyeballs and eliminating this source of revenue is financial suicide.

Repealing the estate tax does not make sense. It will increase the size of our deficit, reduce tax revenue and charitable giving, and not really protect small businesses or farms. It will not protect the estates of most Americans either since the exemption levels are sufficient to protect most of us. Repealing the tax will only benefit the top 1% of Americans who derive most of their income from investments anyway and not their labor.

4:42:00 PM  

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