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  • Senate Finally Moves on the Death Tax

    Almost seven full months into 2010, the Senate might finally get around to addressing the death tax. The death tax expired on January 1 of this year, but because of a quirk in the budgeting process it will rise from the ashes in 2011 with a punitive 55 percent rate and less-than-generous $1 million exemption level unless Congress acts soon.

    The long delay in the Senate has lead many to conclude that Senate Majority Leader Harry Reid (D–NV) does not want to address the death tax at all this year because he wants the death tax to come back at those punishing rate and exemption levels. The economy cannot afford for the 55 percent rate and $1 million exemption at any time, but now, in its badly weakened state, is an especially bad time.

    Senators Jon Kyl (R–AZ) and Blanche Lincoln (D–AR) are thankfully unwilling to see that happen. They will file an amendment that extends the death tax permanently with a 35 percent rate and $5 million exemption (indexed for inflation) to the small business bill the Senate is currently debating.

    The Kyl–Lincoln compromise is better than the bill that passed by the House of Representatives in December that set the death tax rate at 45 percent with a $3.5 million exemption. The House-passed bill is the preferred policy of President Obama and is the plan he offered in his two budget proposals.

    Even though the Kyl–Lincoln plan is an improvement over the other plans, it is still far from perfect. It is laudable that Senators Kyl and Lincoln want to get the Senate moving on the death tax and compel Reid to act even though it is obvious he does not want to. Ultimately, however, their plan does not go far enough. If the death tax comes back at any rate, it will continue to destroy an unacceptable amount of jobs and slow down the already anemic economic recovery. With so many unemployed and the economy basically at a standstill, full repeal of the death tax would be welcome news to those put back to work.

    It is long past time for Congress to abolish the death tax once and for all. Congress has ignored reforming the tax code for so long that the entire system is a large, unnecessary weight pulling the economy down. Repealing the death tax would be a good first step in the direction of fundamental reform that is long overdue.

    Posted in Economics [slideshow_deploy]

    13 Responses to Senate Finally Moves on the Death Tax

    1. Rob says:

      I'm sure the government wouldn't mind it going to $1 million bucks. It's just another stepping stone for them to cut that in half, too. "Oh, $500,000? That's just too much. How about you give that to us." Much in the same way that the definition of millionaire keeps getting a make-over.

      "Abolition of all rights of inheritance."

    2. Kevin Habib says:

      Always amazed at how Heritage has railed against any spending to help the economy because of the effect it has on debts and deficits, yet then turn around and ask for full repeal of estate taxes. The estate tax compromise will affect less than 1% of all americans, but bring hundreds of billions of much needed help to address deficits and debts, but as usual, conservatives are putting the top 1% of Americans above the other 99% and the entire economy of the country.

      Absolutely amazed that you want Paris Hiltons out there, who have done nothing to earn a single dime, to reap full inheritance, even though much of the estate had never seen a single penny taxed.

      it's time we care less about the Hiltons and Waltons and care more about the Joe the Plumbers. It's ok for you to give hundreds of billions of dollars back to the richest americans but can't bring yourself to spend 30b on unemployment benefits for the struggling Americans while there is close to 10% unemployment.

      And every economist knows, giving tax breaks to the wealthiest americans has far less bang for the economic buck than giving unemployment benefits. It's all about demand and until consumers are spending, businesses will not increase production or increase hiring.

    3. David, Phoenix says:

      The "Communist Manifesto" has a 10 point program for communism and items 2 and 3 state:

      * A heavy progressive or graduated income tax.

      * Abolition of all right of inheritance.

      If you're a Marxist, the wealthy "paying their fair share" is all that is needed to justify a progressive tax and a draconian death tax is needed to oppose additional "tax breaks for the wealthy". However, I am not a Marxist.

      Any money I make is (should be) mine. The fact that I pay nearly 50% in combined federal, state, county, and local taxes (including gas taxes, alcohol taxes, property taxes, excise taxes, etc.) is unconscionable. If I then invest some of what is left (and pay capital gains or other income taxes on any profits therefrom) and amass a sizable estate, those assets will have been taxed a minimum of once (at too high a rate, IMHO (since I'm not a Marxist)), but possibly doubly or trebley.

      If I can't be subjected to doubly jeopardy in a court of law, why should my estate be? Unless, of course, I live in a Marxist country…

    4. Pingback: » Financial News Update – 07/14/2010 NoisyRoom.net: The Progressive Hunter

    5. Bill Heinze , Santa says:

      Mr. Habib must have some kind of government job, the only people who have it made these days. Any one who struggles through self-employment and try to save a few bucks gets the shaft. I'm not talking about multimillionaires. I'm talking about hard working family's that try to invest in some real estate. God knows that there are no pensions or other benefits for the small business people.

    6. Dan, Boston says:

      Bill Heinze, if you have $3.5 million dollars invested in some real estate, I highly doubt that you are stuggling through anything.

      If you have less than that, then the estate tax does not affect you at all. And, in fact, 99.75% of the population has less than that, and so 99.75% are not affected by the estate tax.

      The entire Heritage Foundation is set up to only benefit that .25% of the population.

      Some will say the estate tax compromises job creation. I disagree. I think letting people come into millions (and in some cases billions) of dollars relatively tax free I think is a disincentive to work.

      Habib is right, you guys abhor the idea of pumping like 200 dollars a week to the unemployed, but letting the children of millionaires and billionaires get millions and billions tax free is a type of entitlement spending you're ok with.

      It's mind boggling!

      Also, you'd think with all the money the Heritage Foundation has they could find a new stock image for the anti-tax posts. I've seen that guy with empty pockets like a thousand times.

    7. Kevin Habib says:

      Sorry, Bill, I don't work for the government, but am one of those crazy people that actually believe in numbers and facts. Just because someone repeats a line over and over – it doesn't make it true.

      The facts are taxes are lower now than any other time you have owned a business. They are lower now than they were under Reagan.

      No self employed person will get hit by the estate tax. I can guarantee that you will not be hit by the estate tax. Less than half of 1% of all Americans will be touched by extending the 2009 levels of the estate tax.

      However, and i'm sure you are not aware of this, more Americans will be hit by taxes if there is no estate tax – like now – they are hit by the capital gains and dividends tax. Normally, they would not. So, basically Heritage just wants to shift the taxes from the very rich to the middle class. Great, just want our country needs.

    8. Tim, Louisiana says:

      It doesn't matter how you try to justify taking the money it is stealing someones property that they have left to their family. As long as they have played by the rules and paid the taxes along the way then we have not right to it. Dan and Habib you can justify it any way you like you are still stealing someones gift to their family.

    9. Fred Bates, Colorado says:

      It's time for our government to get off our death beds and stop sponging off the population with ever increasing tax hunger. Tax the wealthy is the popular mantra, because they comprise only about 1% or less of the population. The foolish call it fair. Tax someone else. Tax those who, through effort and initiative, have managed to acquire the wealth that others desire. Forget that those who have acquired wealth, invest, employ, and inspire. Our government does not create jobs other than more government jobs. It does not create wealth except for politicians, and it will not re-distribute the wealth of those who pay taxes. It only grows larger, hungrier, and more invasive on the private sector. I doubt that Kevin Habib is foolish. I have no doubt he's a total idiot…politically.

    10. Dan, Boston says:

      Tim, that type of moralizing might resonate when we have a surplus. Right now we're fighting two wars and we're trillions in the red. The estate tax is a way to fight that that only affects the wealthiest 0.25% of the population. That's less than one half of one percent. These are all multi-millionaires whose children will be fine for life either way.

      In fact $7 million (which is the estate tax exemption for a married couple) is already more than the average American earns in 2 lifetimes. A person can inherit that much money tax free, everything after that should be taxed.

      It's bad for society to let people get that much money without working for it. To me it seems un-American and against every idea of meritocracy we have. It's a disincentive to work and a disincentive to invest. An individual who inherits millions of dollars is not going to turn around and look for a job or start a small business, or pump it all into the stock market. Their going to leave it in the bank, collect interest, and spend the rest of their life in abject leisure.

      The Heritage Foundation tries to make it look as if yeoman farmers are the ones who pay the estate tax. In reality it's only the cigar and monocle crowd who are affected by this.

      The people inheriting that money didn't work a second for it, why should they get it tax free. Heck, you have to pay taxes when you win the lottery for goodness sakes. If you stand to inherit more than $3.5 million, then a tax will not affect any part of your life and is far less immoral than taxing poor and middle class people who have to pay taxes on soda, cigarettes, and sales tax.

      If we get rid of the estate tax, where do you think they'll start collecting that $20 billion a year? From you and me Tim! While the Rockefellers can buy that extra Swiss Chalet they wanted.

    11. Tim, Louisiana says:

      So you are saying that they have too much money and we should take it. Just because it is money gives us no more right to take it than if it was land. Whether they earned it or not ignores the fact that it was their parents and they set it aside for their children to have a better life. What the children do with the money is irrelevant, whether they create a job or burn it in the fireplace. Just because the government has a deficit is not an excuse to start confiscating property. Private property is one of the foundations of this country and just because someone inherits it does not make it available for the collective to take it away.

      I don't care how you justify it, taking someone’s property away without compensation is stealing

    12. Dan, Boston says:

      So all taxes are theft then? If that's your belief then I can't really say anything else to you about it.

      What I am saying is that taxes – while no fun – are necessary. Right now we need to be pragmatic. Taxes are the price of civilization. If we're going to tax people, we should do it in the ways that have the least amount of detrimental effect economically. People can inherit plenty of money tax free, money that their parents left to them to live comfortably. Nobody is talking about confiscating land, we are talking about taxing a source of wealth that is unearned by the recipient. Those fortunes – much of which are measured in capital gains which were never taxed at all – were enabled by the wonderful infrastructure, market conditions, and legal system that US tax dollars provide. Roads, cops, firemen drinking water, armies, sewers, subways, buses, courts, and bridges don't pay for themselves.

      Nobody makes their money all alone, and they owe some of it to maintain the infrastructures that got them there so that others may prosper too.

      And, frankly, I resent that I have to pay significant portions of my money in income taxes, sales taxes, cigarettes taxes, alcohol taxes, while others – who have likely worked far less than I have for what they have – get to inherit billions of dollars tax free, I spend a way larger percentage of my income on sales, tobacco, and alcohol taxes than any millionaire ever will.

      To me that double standard of taxation is fundamentally unfair. I think that all people should be free to inherit millions and billions, but also be accountable to society and pay their fair share like the rest of us.

      We all pay taxes all the time on all sorts of things. I don't begrudge it, it's the price we pay for a developed and prosperous nation. I don't understand why the children of millionaires and billionaires should get to be exempt from this process.

    13. Bill - Augusta, Ga. says:

      It is amazing to see how many people in our country think they are entitled to someone elses assets. I am a person that wants none of your money and don't want you to have any of mine unless I choose to give it to you. Gee, what a bunch of free loaders we have turned out to be. Get out and earn your own. There are plenty opportunities out there.

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