Originally posted by: Mill
I agree with much of what you say, but a few caveats:
1. Many middle class individuals(two income earners and strict savings and good investments) can easily have an estate over 1.5 million. I know you mentioned 3 million for couples, but that is assuming they are die at the same time. If not, one spouse can pass on to the other spouse, and then their estate can be > 1.5 million. Even though it is going to double, I don't believe in discriminating on that 2% of the country simply because "they can afford it." PAWs (Read the Millionaire Next Door) can easily amass fortunes that the death tax would apply to, yet they don't live a life anywhere near that of people who make HALF of what they make. Why is there a penalty for saving?
True, some upper-middle class people save enough over the course of a lifetime to qualify for the tax. But that's
really an argument at the margins; for the most part, the tax applies only to the wealthiest. (Again, for better or worse.) Plus, the cutoff is scheduled to increase to $3 million for a single person by 2009.
As for penalizing saving, I would agree if the tax applied to even a substantial minority of the population -- the vast, overwhelming majority of which still has an incentive to save because the tax will simply never apply to them. (Or, more properly, to their children.)
2.That's nice and all, but it ignores that people in those brackets do not get federal credits such as EITC or the other plethora of federal aid programs such as Pell Grants, loans etc. While they may used skilled accounting, that doesn't mean they are trying to scam out of their fair share.
Gah, bitten by my own rhetorical flourishes. I wasn't laying blame, merely pointing out that the actual
effective estate tax is only a fraction of the putative tax. If there are exemptions or deductions to be had, by all means take them. God knows I do.
This is doubly true because one of the chief deductions is for charitable donations, which explains a lot of the huge posthumous grants to universities, museums, etc. Not going to criticize that.
||edit|| If you're going to cite the cutoffs for Pell grants and the like, you should include the opposite, and much more substantial, effect of levying payroll taxes on only the first $88,000 of income. Certain benefits/deductions/exemptions/etc. favor the wealthy, and some favor the middle class or the poor. (The structure of the income tax code itself is a whole different beast, of course.)
3. We've gone over this time after time. Property is already taxed -- money used to purchase investments was already taxed in the form of income tax. And dividends, etc were already taxed.
Perhaps I'm not as well versed in this as I might be, so I'll ask a question:
When I was a freshman in high school way back in 1992, I made about $8,000 by winning a writing competition and then selling the article. Both forms of income were taxed. I immediately invested the rest, something like six grand, in stocks -- a great move in 1992, right before the huge expansion of the 90s. By now, my portfolio sits at around $46,000. I haven't added any funds to it since the initial investment, so I've made something like $40,000 in capital gains by doing, essentially, nothing. (I know, I know, capital vs. labor.)
To my understanding, that $40,000 has never been taxed at all. Is that the case?
Hmmm. Maybe we could attempt to draw a line between earned and "unearned" income, however one might choose to define the line between the two. Probably impossible in practice, though.
4. I don't really recall anyone talking about that much, but there are MANY small business owners that have a large estate, yet relied on razor-thin profits to make a living. Saying that they are the wealthy elite does a disservice to them.
Aren't there already a boatload of exemptions for small business owners? If there were, and we could make them comprehensive, would you change your position?
-HC-