{"id":895,"date":"2010-07-27T22:33:52","date_gmt":"2010-07-28T03:33:52","guid":{"rendered":"http:\/\/civilsocietytrust.org\/blog\/?p=895"},"modified":"2010-07-28T20:32:15","modified_gmt":"2010-07-29T01:32:15","slug":"vampires-zombies-and-the-estate-tax","status":"publish","type":"post","link":"http:\/\/civilsocietytrust.org\/blog\/2010\/07\/27\/vampires-zombies-and-the-estate-tax\/","title":{"rendered":"Vampires, Zombies and The Estate Tax"},"content":{"rendered":"

Is there any hotter subject for TV and film these days than the vampire?\u00a0 The mass-appeal of these blood-seeking creatures appears to be at an all-time high, with shows like True Blood<\/a>, The Vampire Diaries<\/a> and the Twilight Saga<\/a> series of books and films bringing home the bacon.<\/p>\n

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Wealth-sucking creatures that will stop at nothing...<\/p><\/div>\n

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Just when you thought it was safe to get back into the economy...<\/p><\/div>\n

Then there are those perennial horror favorites, zombies, that defy all attempts to do them in.<\/p>\n

It seems like Congress is trying to capitalize on the craze as well.\u00a0\u00a0 Witness the up-and-coming,\u00a0 back-from-the-dead behavior of the Estate Tax, also known as the Death Tax, coming soon to every estate-planner’s office near you.<\/p>\n

I once heard the expression, “When is my money finally mine?”\u00a0\u00a0 Apparently our current Congress has an answer: never.\u00a0\u00a0 This Congress, gleefully implementing every supposed remedy for income inequality, hopes to allow the Estate Tax to come back to life at the end of this year, when it will make the astounding jump from 0% to 55% overnight.<\/p>\n

In the strangest of ironies, the toughest vote<\/a> here will be to not have one.\u00a0\u00a0 That is, thanks to the ridiculous implementation of the infamous “Bush Tax Cuts” of 2001, Congress simply needs to sit on their hands for the tax to kick in. \u00a0 Perhaps the Republicans at the time assumed their rein would continue, and that they’d simply renew the tax. \u00a0 Had they stuck to the previously successful strategy and principles of being the party of limited government, they would have had that chance. \u00a0\u00a0 Now the Democrats will need to look the public in the eye and attempt to convince them that allowing this tax zombie to return is exactly what the economy doctor ordered.<\/p>\n

Treasury Secretary Timothy Geithner, leading a group of regulators created by the new “Fin Reg” legislation, has begun making the rounds<\/a>.\u00a0\u00a0 He spoke with reporters in Washington DC on July 22nd, as reported in this Bloomberg story<\/a>:<\/p>\n

Geithner, responding to a question about the absence of a federal estate tax, said it is \u201ca terribly troubling thing that the United States of America would let that lapse.\u201d The tax should be restored to 2009 levels, he said.<\/em><\/p><\/blockquote>\n

That would remove this year’s unlimited estate tax exemption and restore the amount to $3.5 million, with any assets beyond that level being confiscated at the rate of 45%.\u00a0\u00a0 Believers in big government<\/a> and practitioners of class warfare see no problem with that.<\/p>\n

First of all, they look at the revenue potentially generated by the tax and think they can better put it to use than the deceased’s family would. \u00a0 Second, they remind us at every opportunity that only a tiny fraction of taxpayers would even be affected by the legislation, a tyranny of the majority action if there ever was one.\u00a0 Lastly, they see it as a natural opportunity to fight income inequality. \u00a0\u00a0 The problem, of course, is that they are demonstrably wrong<\/a>.<\/p>\n

Above all, keep this in mind:\u00a0\u00a0 An estate tax swiftly transfers wealth from a person with a proven track record of creating it, to an entity with a proven track record of destroying it. <\/strong><\/p>\n

When people fret over income inequality that would supposedly be exacerbated by inherited wealth, they forget that even more important than the wealth is the knowledge of how to put that wealth to good use.\u00a0\u00a0\u00a0 As Arthur Brooks discusses in his recent book, “The Battle”<\/a>, sudden influxes of wealth (think lottery winners) often enter into a world of hurt:\u00a0 the knowledge of how to handle the money is not attached to the money itself, so it is typically squandered.<\/p>\n

By contrast, any responsible person leaving substantial funds to their heirs will take considerable care to ensure that the funds are preserved.\u00a0 If these funds are in the form of a family business, be it a farm, automobile dealership, or baseball team (witness George Steinbrenner’s sad departure<\/a>), the knowledge embodied in the success of that business is typically passed to the heirs as well.\u00a0\u00a0 But in the face of an estate tax that might claim half of the value of the business beyond the state-sanctioned “exemption” (i.e., that which the political process deems “fair” for the owners to retain), the owners are often forced to sell substantial parts of the business, if not all of it, just to pay the taxes.\u00a0\u00a0 And with that, it is often the case that jobs are lost, and economic activity is arbitrarily curtailed.<\/p>\n

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Die Estate Tax, Die!<\/p><\/div>\n

Of course, an entire industry exists to attempt to mitigate these effects:\u00a0 the “estate-planning” business.\u00a0\u00a0 I welcome comments that will address how buying large insurance policies that serve only to pay the estate taxes create lasting economic activity.\u00a0 Absent the estate tax, such policies and tax-dodging advice would not be necessary. \u00a0 The current setup would seem to be more like a cushy arrangement between the legal and insurance industries, and government, something that aides the “corporate cronyism” atmosphere that creates so much cynicism about “free-market capitalism”.\u00a0\u00a0 Instead of purchasing new equipment or raising wages, the business owner instead spends substantial sums of money to ward off Dracula.\u00a0\u00a0 Should these products include sunlight, garlic and crucifixes in their advertising?\u00a0\u00a0\u00a0\u00a0 In any case, there is something perverse about a government tolerating private industry selling products that seek to ameliorate the effects of its laws.<\/p>\n

Like so many public policy issues, the estate tax boils down to the simple question of Who decides?<\/em> Will a family’s wealth be taken, redistributed and wasted by a political process<\/a>, or will it be treated as the private property that it is and utilized according to the owner’s wishes?\u00a0\u00a0 As the American Family Business Institute describes<\/a>, the ideological roots of the estate tax are found in Karl Marx’s Communist Manifesto<\/a>:<\/p>\n

In one word, you reproach us with intending to do away with your property. Precisely so; that is just what we intend. <\/em><\/p><\/blockquote>\n

Voters in the upcoming election will need to decide a question that is elemental to this country’s existence:\u00a0\u00a0\u00a0\u00a0 Will private property be predictably left in the hands of those that created it, or will it be arbitrarily bled by vampires and fed to zombies?<\/p>\n

Free Subscription<\/strong><\/a> ~ Follow on Twitter<\/strong><\/a> ~ Read More on Taxation<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Is there any hotter subject for TV and film these days than the vampire?\u00a0 The mass-appeal of these blood-seeking creatures appears to be at an all-time high, with shows like True Blood, The Vampire Diaries and the Twilight Saga series of books and films bringing home the bacon. Then there are those perennial horror favorites, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"_links":{"self":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts\/895"}],"collection":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/comments?post=895"}],"version-history":[{"count":23,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts\/895\/revisions"}],"predecessor-version":[{"id":920,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/posts\/895\/revisions\/920"}],"wp:attachment":[{"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/media?parent=895"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/categories?post=895"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/civilsocietytrust.org\/blog\/wp-json\/wp\/v2\/tags?post=895"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}