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  • New York Times Gets it Wrong on Death Tax

    New York Times office in Manhattan

    In a front page article today, the New York Times has a story on the federal death tax and the impact its 2010 expiration has on a recently deceased billionaire. The article is riddled with errors, but the title of the article encapsulates perfectly the story’s biggest flaw: “Legacy for One Billionaire: Death, but No Taxes.”

    Billionaire Dan Duncan died in March of this year and left his family a considerable estate. Because the death tax does not apply for 2010, the New York Times wrongly claims that his heirs are getting the estate tax-free. This could not be further from the truth.

    Under current law, even though there is no death tax this year, Duncan’s heirs will owe a considerable amount of taxes on the assets they receive from the estate. That’s because they will still owe capital gains taxes on all the assets they acquire. The major difference is they will pay the capital gains taxes on the assets when they choose to sell them instead of now so soon after Duncan’s death.

    When they calculate the amount of tax they owe the heirs will have to use Duncan’s original basis (the cost of the assets when he purchased them) to determine the amount of capital gains taxes they owe. That mean’s no portion of Duncan’s estate will go untaxed. It is a question of when the heirs will pay the tax, not if.

    The New York Times article also fails to point out that Duncan paid substantial amounts of taxes during his life, including: income taxes, corporate income taxes, capital gains and dividends taxes, property taxes, sales taxes, payroll taxes, excise taxes and countless others. As did the workers he employed for years at his businesses. This is not a man that didn’t pay his “fair share” during his life.

    The New York Times article makes one other egregious mistake. It claims “the one year lapse in the estate tax was signed into law by President George W. Bush in 2001, an accounting quirk in his package of tax cuts.” This is flat out wrong and sloppy reporting. The 2001 and 2003 tax relief packages phased out the death tax by reducing its tax rate and increasing its exemption through 2009. In 2010 the tax relief bills repealed the death tax. Hence it is the expressed policy of both Congress and the President, and has been since 2001, that the death tax should die once and for all in 2010.

    The quirk is actually the resurrection of the death tax in 2011. The 2001 tax cuts were passed under budget reconciliation rules that we learned so much about during the healthcare debate. Policies passed under reconciliation cannot extend outside a 10-year budget window, so current law has always called for the death tax to come back in 2011 (ten years after passage of the 2001 tax relief legislation) despite Congressional policy that called for its permanent expiration.

    The repeal of the death tax is Congressional recognition at long last that the death tax has a profound negative impact on the economy, destroys jobs and lowers wages. Nor does it serve the purposes Congress originally passed it to serve. The New York Times reiterates the tired, old incorrect argument that the death tax is necessary to close the gap between the rich and the poor and to be a “recycling program for economic opportunity.” The facts are that the free market works well-enough on its own to guarantee all Americans the opportunity to earn high incomes and accumulate vast sums of wealth throughout their lifetime. And according to the research on income mobility, Americans also have an equally high probability of moving down the income scales during their lives as up it. The death tax is not needed to equalize opportunity.

    Posted in Economics [slideshow_deploy]

    8 Responses to New York Times Gets it Wrong on Death Tax

    1. West Texan says:

      The capitol gains is understood. The federal inheritance tax, however, is a double dip of the deceased's income regardless of an estate's worth. Besides, it's none of the NYT's business. They need to report on something worthwhile.

    2. Billie says:

      It is immoral and inhumane. May those that thieve from a man deceased and his heirs, live in misery for the rest of their lives. Who knows, the spirits of those deceits can and may aid in their misery…

      Oh and New York Times, I'm glad I stopped my great aunt from subscribing to you! You don't report everything and you distort much.

    3. Pingback: New York Times Gets it Wrong on Death Tax | The Foundry … | New York Blogs

    4. kevin habibe says:

      Talk about hypocrisy. It really is mindblowing.

      You have 4 posts on the opening page of the foudnry devoted to how bad the deficits and debts – then turn around and say the estate tax should be repealed.

      It clearly shows Heritage's and Repub's main concern is the uber wealthy. 99.8% of estates would pay ZERO estate tax at the 2009 levels since they would be below the $7 million/couple exemption (which Obama and most Congressional Dems want to extend permanently).

      Heritage and Repubs want to keep it repealed so the super rich are off the hook that all the lower and middle class estates would be hit with capital gains tax. All the while, they are complaing how the debts and deficits are terrible – you can;t have it both ways.

      And you comment that estate tax is bad for business and economy is extremely laughable. Lets just examine past history – it's not that hard to do – and it's why I presume Mr. Beach offers no citiations for his claims – because facts get in the way.

      Look at how job creation and economy did under the estate tax cuts after 2001 and 2003 'stimulus' plans were passed by Bush and Repub Congress. They averaged 11,000 new jobs per month after passing their legisaltion.

      Under Clinton and the previous estate tax rates, 216,000 jobs per month were created. Those are the facts – and they get in the way of your delusional argument.

      And ask yourself how the economic and fiscal picture was at the end of Clinton's admisnistration and at the end of Bush's adminsitration – Clinton left record projected surpluses and Bush left record projected deficits.

      The fact is, in 1993 the Democrats passed a Omnibus budget act that created 4 straight years of surplus. Not a single republican voted for it saying it would kill jobs and destroy the economy – as they have shown over the last 3 decades – economics is not their strong suit.

      I'm just blown away by the hypocrisy.

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    6. Lou, Tucson AZ says:

      Kevin Habib says: “And ask yourself how the economic and fiscal picture was at the end of Clinton’s admisnistration and at the end of Bush’s adminsitration – Clinton left record projected surpluses and Bush left record projected deficits.”

      Really? Clinton’s “projected surpluses” were as fictional as Obama’s claims that record deficit spending will cure our economy. Clinton’s surplus, and it’s well documented, were smoke and mirrors with accounting gimmicks on top of it all. Obama is Jimmy Carter, the sequel. Carters approach to the economy as well as international affairs didn’t work, and Obama dusting these same loser ideas won’t work now. Hmmm…do I recall Obama promising to create 8 million jobs when he was running for office? It’s really sad that people are as blind as you, and keep repeating the same lie, somehow thinking it will suddenly become true.

      As for the evil “uber rich” who you claim don’t pay their fair share, baloney!. The majority of the taxes paid in this country are BY the “uber rich”. How is that fair when nearly 50% of the people in this country pay little or no taxes at all? (I suspect you are part of this group Mr. Habib) Who creates the jobs? Poor people?

      I’m blown away by your hypocrisy and quite frankly, your ignorance.

    7. Dan, Boston says:

      This is mind boggling. Classic Republican move, when the Dems accomplish something tangible, something that punctures Republican demagoguery and hot air, people like Lou in Tucson claim quite literally that it never happened. Good one Lou.

      Don't get me wrong, I'm not going to sit here and talk about how great Bill Clinton is, Frankly I think of him as the best Republican president this country ever had. Opening up free trade, fostering explosive growth, balancing our budget, slashing welfare, setting up a marginally responsible tax structure – these are the types of "fiscal responsibility" that Republicans allegedly aspire to. I will never forgive Clinton for TANF, NAFTA, or some of the other dubious acronyms permitted on his watch that aided the powerful at the expense of the meek.

      That doesn't change the fact that holding his fiscal policies up to the Republican record since 2000 shows us which policies have been fiscally responsible, and which have been costly and detrimental to our economy and deficit. Huge tax cuts that were never paid for on things like capital gains,dividends, and the estate tax, runaway spending on defense, expensive war contracting that reeks of boys club back room dealing, and finally the reckless deregulation of our financial system,

      These policies put us in the poor house, these policies of HUGE government spending on wars that pump little back into our economy created the deficit and the depression. If Republicans want to keep on that kick and run this country even deeper into the ground with their get rich quick schemes and flashy, easily digestible rhetoric then fine. However, the people that want to pull up the boots straps and get down to the nitty gritty of fixing things up here know that it's going to take sacrifices from everybody. The middle and working classes have already paid their dues in the recession. It's time for the wealthy to follow suit. Their tax breaks have to end and they have to become members of society that contribute to our recovery. Giving wealthy individuals and corporations tax breaks will not create jobs, only larger dividends, bonuses, and lobbying expenses for CEOs and their boards,

      It's time for high taxes on the wealthy, and it's time for the gasbags like Limbaugh and Beck to step aside and let the people who actually care about this country to work fixing America. Real CEO pay has skyrocketed since the 1970s and real worker pay has actually gone down. Middle and working class effective tax burdens stayed about the same for most of the 20th century, while the wealthy have gone from as high as in the 60% range right down to about what everyday folks pay. That's absurd. The richest have benefited the most from the prosperity this nation represents, if they care at all about the American way they should be paying their dues to this country. No fancy graph or demagoguery about big government, no Limbaugh quip or Beck blackboard leasson can justify that fact or that lack of patriotism.

      But I guess Lou and his Republican buddies can just call it fiction and stick their heads further in the sand.

    8. Steve, San Jose, CA says:

      Unless the law has changed (quite possible), when someone dies, the heirs receive the estate at the current appraised value. When my father died the Chrysler stock he bought at about $7 had appreciated significantly. When my mother inherited it, the basis became the price on the day he died. Same with the house. The basis became the appraised value at that time. So no capital gains was paid on any appreciation prior to his death. In fact, if the stock was at $10 at his death then she sold later at $9, she had a capital loss of $1 per share even though she had really gained $2 a share. I asked a tax attorney how the IRS could let something like that go and was told that years ago all the gain was taxed but there was so much flak regarding record keeping that it was impractical and was dropped. Can you imagine inheiriting a home that had been in the family for 60 years and having to figure out all the capital improvements made over that period, or even the original purchase price?

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