Saturday, July 15, 2006

Tax The Rich

The Estate Tax, a.k.a. the "Death Tax," debate is being driven (literally funded with millions of dollars) by a small group of extremely wealthy families including the Wal-Mart billionaires, the secretive Mars candy empire owners and the Cox family media moguls. Some of the key individuals arguing against taxing large estates have grown wealthy themselves by servicing these families (e.g., Grover Norquist). However, most of the folks fighting to eliminate the Estate Tax are just ideologically opposed to taxes in general, and this tax in particular.

Many Republicans simultaneously oppose an increase in the minimum wage (unchanged since 1997) and support total repeal of the tax on estates. Pundit Charles Krauthammer claims it is wrong to tax money once and then tax it again after someone dies. It makes a good sound bite but is almost completely wrong. Most taxes in America are collected on "transfers." That is, when you receive a paycheck from your employer, it is taxed. When you receive interest on your savings account, it is taxed. And when you die and transfer your estate to someone else, it is taxed. The difference for really large estates is that most of the wealth has never been taxed. For almost all sizeable (several million dollars and up) estates, a huge proportion is generated by appreciation in values (for stocks, art, real estate, etc.). Until there is a transfer, this increased wealth is not taxed. And if Krauthammer and friends don't like double taxation, let's eliminate sales taxes, gasoline taxes and state income taxes.

This potential problem can be overcome without creating billion dollar loopholes for Bill Gates and Paris Hilton. Just increase the size of the exemption that already exists (currently $2 million, effectively $4 million for married couples). There is no need to give $800 billion in tax cuts to a small group of people who are members of the lucky sperm club.

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