To read this NYT piece on the estate tax, you’d think its biggest problems are that conservative spin-meisters dubbed it “the death tax” as it came out of the gate – and that they “portray [it] as the Internal Revenue Service reaching beyond on the grave.” (How dare they tell the truth like that?!) The article’s obviously biased author, Carl Hulse, argues: “Studies show that the tax hits merely a sliver of wealthy American families.” Well, ok then. As long as we are only raking a few people over the proverbial coals, why should we get excited?
Because the tax is unfair and ought to be illegal. It amounts to double-taxation since those who have accumulated wealth have already paid taxes on their income throughout their lifetime. The sums of money are not the issue. Whether you are worth $10 million or $1 million or a nickel ninety-eight, you should not have to stop off for a last visit to the tax man on your way to the grave.
Harry Reid doesn’t think so, though. Evidenced by the bulging of his veins during a recent Senate floor debate. The issue? A proposed amendment to permanently cut the death tax rate to 35% and to exempt estates worth less than $10 million per couple and $5 million for a single taxpayer. (Obama and his minions want a 45% rate with a $7 million exemption.)
Every Republican voted for the lower rate, as did 10 Democrats. But according to this piece in the WSG, Harry Reid called the amendment by Jon Kyl (R-AZ) and Blanche Lincoln (D-AK) “outrageous,” a “stunning act of hypocrisy,” and a tax cut for those “at the very top of the food chain.” And then (quote and comment from the WSJ):
“We can only turn the page from recession to recovery if we watch every single taxpayer dollar the way families watch every dollar in their budget.” We’d say Mr. Reid was being deliberately ironic, but Harry doesn’t do irony. He’s an outrage man. And speaking of which, he was at that very moment working to pass a 2010 budget outline that includes record spending and trillions of dollars in new debt.
Yeah, we all know Reid is on board with unprecendented federal spending and national debt.
But let me get this other part straight. Harry Reid equates your family income and budget with the federal government’s. This might seem like a reasonable comparison at first glance, but it’s faulty to the core. Your household income is likely fixed at its current rate. You have to (or should) limit your spending to what you take in. You cannot demand more income from your employer. And you probably aren’t borrowing large sums of money in order to “invest” in questionable and unproven endeavors.
The federal government’s revenue stream, on the other hand, is not fixed. Legislators can increase the government’s revenue anytime by voting to create or raise taxes. They don’t play by the same rules and live within the same limits we do; they make the rules and set the limits (or lack thereof). They can – and do – vote to spend whatever they wish, for whichever “stimulus” effort they want. Evidenced by the current budget and tax talk on The Hill. In short, there is no valid comparison. Harry Reid and friends know this, or should.
But back to the death tax. Bottom line: there shouldn’t be one. At all.
And the bottom line on Harry Reid and all those who support fleecing “a small sliver” of America’s wealthy as they draw their last breath? To quote that king of outrage himself, they are engaged in “a stunning act of hypocrisy.”
Hat tip for the WSJ/Reid portion: Veronique de Rugy @ The Corner
UPDATE: A reader emails, and another comments, on something I think a lot of people don’t realize: the estate tax applies to the recipient of the inheritance no matter the size of the gift. So, if a benefactor who exceeds the exempted limit leaves you, say, $100,000 in his will, it is you who will owe the IRS $35,000.
So much for only a small “sliver” of Americans being subject to this tax. The very wealthy often make numerous bequests of varying sizes to relatives and other people who are not particularly wealthy (otherwise the bequest wouldn’t mean much), and all these recipients, however poor, are subject to the 35% tax rate. Imagine a single mother living at or near poverty level who pays no (or next-to-no) income tax. She receives $50,000 from a rich auntie and must then write the IRS a check for $17,500. To her, that sum could mean a down payment on a small house, or cash payment for a decent new car, or a good start on a college education for her child…but instead, it will go to the federal government, to redistribute as it sees fit.
Does this seem just to to anyone? A suspicious mind might wonder if there is a deliberate intent to make sure the money doesn’t go to the descendants and/or friends of productive and successful people.
And Obama wants to raise the tax rate to 45%.