Wednesday, December 16, 2009
Ben Franklin Was Right: Death and Taxes Are Certain, But Do They Have To Be At the Same Time?
Elaine Meija of the NC Budget and Tax Center makes an impassioned plea to keep the federal estate tax at higher rates after it expires in 2010. The question everyone should ask is: “Why do we ‘need’ to keep this tax in the first place?”
If the purpose of the estate tax is to ‘punish’ wealthy families for working hard, taking risks or just plain being lucky, then just say so. Don’t hide behind the pretense of taxing wealthy people by trying to do something ‘good’ in the public interest; we all want that.
The truth of the matter, from a federal budget perspective, is that the estate tax does not raise a very high percentage of federal revenues. Ms. Mejia asserts that we would increase our debt by $1 trillion if we allow the estate tax to expire. We have not collected $1 trillion from the estate tax over its entire history since 1916! It is expected to raise only between $26-$30 billion per year as it is today and even that presumes many wealthy people will just pay the tax willingly without a fight and not use every available financial planning tool to minimize their exposure.
The estate tax has been never been that important in terms of raising substantial amounts of revenue relative to overall federal tax receipts. In 1969, estate taxes accounted for only 2% of all federal tax revenues. By 2007, estate tax revenue had declined to 1% of all federal tax revenues.
Here is a revolutionary idea: How about if we ‘pay for’ these ‘lost’ estate taxes by cutting spending in other categories of the federal budget?
Surely we can find savings in the rest of the bloated federal budget of over $3.5 trillion to cover the $26 billion we would ‘lose’ from estate tax revenues, can’t we?
Check out the most powerful book in Washington from the Congressional Budget Office (CBO) Budget Options, Volume 2 that has a couple of trillion dollars of savings outlined in exquisite detail.
All Congress has to do is pass them.
How about in the defense budget to begin with? We could save $17 billion, or just under the amount ‘lost’ by the repeal of the estate tax, by buying DDG-51 Destroyers to replace the canceled DDG-1000s.
How about in the area of welfare? We could increase the percentage of rent payments made by tenants in certain federally-assisted housing from 30% to 35% over a 5-year period and save $24 billion over a 10-year period.
How about in Medicare or Social Security, two of the largest cost components of the federal budget? Here’s one idea that deserves some consideration: Take all senior billionaires and multimillionaires off of both programs. There is no reasonable rationale why Bill Gates and Warren Buffett should be ‘forced’ (yes, it is the law; they are forced to go on taxpayer-subsidized Medicare) into receiving Medicare benefits. They can buy their own hospitals if they so desired.
Ms. Mejia paints an attractive utopian ideal when she implores Senators Hagan and Burr to extend the estate tax so they can ‘(p)rovide opportunities to middle-class families or improve their economic status.”
You know how these families can have their lives improved? By being able to start their own business or enterprise and not have the federal, state and local governments confiscate so much of their hard-earned profits (it is not easy to make a profit year after year…ask any banker or real estate person here in Charlotte). Or perhaps a wealthy person, or their progeny might invest the family fortune in a new business and then hire the same middle-or-lower income people to do a real-live paying job.
Government does not create wealth, ever. Government can only redistribute wealth already created by clever and ambitious people willing to take a chance and sell a product or service to people who want it.
We have more than enough tax tools in our quiver through income and payroll taxes than to worry about taxing dead people in their graves, don’t we?
The problem is not that we don’t tax the American people and economy enough. Our current fiscal dilemma has to do solely with the fact that we are spending too much on everything. We have never cleared out the detritus from federal programs established as far back as 80 years ago and we continue to add on more daily it seems.
Before you fall victim to the popular populist notion of ‘making the rich pay their fair share’ (they already pay for 42% of our income tax revenue today as it is), think seriously about where you want this nation to go in the next 10 years. Is it towards a higher tax, higher spending, higher debt-ridden national economy or one that is leaner and more efficient and allows the economy to grow and expand on its own?
It is up to you to decide in your political views and in your voting decisions in 2010, 2011, and 2012.
Ben Franklin courtesy of www.