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"Too Much" Comes from "Unjust Deserts"
From labor journalist Sam Pizzigati's webiste "Too Much" we learn that
Max Baucus has other things on his plate other than health care. www.toomuchonline.org/tmweekly.html
My book of the month is "Unjust Deserts" by Gar Aperovitz and Lew Daly. In it they make the case for how our society as a whole should share in the economic system. In it they trace the economic theories of who deserves what from Locke to Mill to our modern day thinkers Robert Dahl and Joseph Stiglitz. But it is to the "iconoclast economist" Thorstein Veblen they return to over and over. Our moral views, said Veblen in the early 20th century, have not kept up with this new industrial economic system i.e. "the productive effect of the industrial arts." (Note the use of "arts" after industrial.) The old dynamics of land, labor and capital need the added dimension of technology and knowledge. And that dimension is not attributed to one person, but to society as a whole. That holds even more true now than a hundred years ago. And Max seems willfully behind the curve of the wave of these ideas, or just firmly entrenched in the status quo.
Time for us to swim against the undertow of these bad ideas like cementing a new aristocracy. Jefferson reminded us that the divide would always be between aristocrats and democrats. Which side are you on, my friends? Which side are you on?
U.S. Senate Finance Committee chair Max Baucus from Montana is now drafting legislation that would end the uncertainty over the future of the federal estate tax -- and lock in place the current George W. Bush bargain-basement tax rate on the fortunes America's super rich leave to their heirs. A generation ago, the top estate tax rate on grand fortunes stood at 77 percent. The Bush 2001 tax cut has lowered this year's top rate to 45 percent. Senator Baucus wants that 45 percent made permanent. After deductions, the Center on Budget and Policy Priorities noted last week, the actual tax rate on large estates amounts to far less than 45 percent. If the Baucus freeze becomes law, the Center calculates, estates over $20 million would face taxes that average "less than one-quarter" of estate value. Senator John Kyl from Arizona wants to see estate taxes even lower. His proposal would drop the estate tax to 15 percent. Under current law, estate taxes will revert back to pre-George W. levels -- a 55 percent top rate -- in 2011. The Baucus approach would, over the next decade, cost the federal Treasury $609 billion. The cost of the Kyl plan: nearly $1 trillion. The only beneficiaries: the three out of every 1,000 Americans who die with fortunes large enough to trigger estate tax liability.This is the opposite of what we should be doing right now. We need to cap CEO compensation. It is ruining our companies. We need to tax estates so that we can stop this huge inequality gap that has restored an aristocracy to this country. If you make your money here in the U.S., it has depended on many many hours of innovation and labor by our forefathers and mothers. It has depended on, up until recently, a secure place with rules and standards.
My book of the month is "Unjust Deserts" by Gar Aperovitz and Lew Daly. In it they make the case for how our society as a whole should share in the economic system. In it they trace the economic theories of who deserves what from Locke to Mill to our modern day thinkers Robert Dahl and Joseph Stiglitz. But it is to the "iconoclast economist" Thorstein Veblen they return to over and over. Our moral views, said Veblen in the early 20th century, have not kept up with this new industrial economic system i.e. "the productive effect of the industrial arts." (Note the use of "arts" after industrial.) The old dynamics of land, labor and capital need the added dimension of technology and knowledge. And that dimension is not attributed to one person, but to society as a whole. That holds even more true now than a hundred years ago. And Max seems willfully behind the curve of the wave of these ideas, or just firmly entrenched in the status quo.
Time for us to swim against the undertow of these bad ideas like cementing a new aristocracy. Jefferson reminded us that the divide would always be between aristocrats and democrats. Which side are you on, my friends? Which side are you on?
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I don't mind seeing people provide for their kids or grandkids. Nor do I mind seeing methods put in place to ensure that small businesses get sufficient cash passed on that they remain viable, and thrive.
But large amounts, passed onto the next generation, tax 'em hard I say. There's been a terrible problem created by the increasing inequities in income & wealth in America this past decade. And if it's not dealt with, it will produce ongoing economic problems (remember the middle class?), political problems (money money Daschle money), and deepening cultural divisions (the rich can fly away, buy away, and the rest... scramble.)
Do it, and bloody well do it now, when there's some kindof popular attention being paid to what happened with the hyper-rich, and a desire for change. Once you wait, and the guns get trained on the "failure" of government to right the economic ship, the moment will have passed.
February 4, 2009 1:30 PM | Reply | Permalink
The Republicans remain masterful at defining the debate, and you pretty well laid out their talking points in this first paragraph. It sounds perfectly reasonable to grant low "estate taxes" when framed in this way. But as you point out, it avoids the reality of what is being discussed.
From another perspective, I would say that the proverbial "silver spoon" defines unearned income in its extreme. As such, it should be taxed at a rate significantly higher than any other income if we are to promote tax fairness
It's important to remember that the taxes to be paid upon transfer of a business would be upon the equity portion of the gifted estate. By definition of the tax schedule, there should be sufficient equity in any such transfer to pay the tax and leverage the remainder of the equity for a loan to effectively purchase (earn) the business. In this way, the heir is gifted the down-payment for the business, which is more than equitable given that s/he has undoubtedly already experienced benefit of the parents' ownership of the business.
Providing for kids and grandkids is an admirable goal for our tax code as well. But it is difficult to justify anyone gaining a huge gift of unearned income that is taxed at the same level as the working stiff's income that barely supports him and his/her family.
February 4, 2009 1:57 PM | Reply | Permalink
Well reasoned. We have a ranch. I believe that if you stay and ranch or farm, then any estate taxes you have is spread out over 9 or so years. I don't have the stats. And that still is for a very big farm or ranch. Ours isn't. We avoided all that by having the ranch turned over to my husband and we paid his Dad an annuity every year.
But people around here come up to me fearfully and are worried about their mother's house that's worth $150,000. Rather than educate his constituents, conservatives and the Farm Bureau keeps them fearful. That's not right. It only benefits the upper strata like the Ted Turner ranch and some of these other mega ranches.
What did the Walton heirs do to deserve being 5 of the richest ten families in the U.S.? "Unjust Deserts" defines "deserts" as "deservings". And the Waltons spend huge sums of money to get legislation to get rid of the estate tax. Now that's "shameful".
February 4, 2009 2:43 PM | Reply | Permalink
Ok, but define "large amounts."
It's easy to be a proponent of the estate tax when someone like, say, Paris Hilton is the poster child.
I do think that we need to address equity in this country. But 77%? What's the asset value bracket for that percentage?
I also think, if I'm correct, it's taxed twice if it's left to grandchildren, right? Is it factored in at all how many inheritors there are? I'm thinking it's not, but please correct me if I'm wrong. What's the max you can pass down before taxes?
It's also my guess that anyone who would be taxed at that rate is wealthy enough to hire someone to distribute their estate within the loopholes, like living trusts and maximum lifetime gifts and all that.
I admittedly am not an expert in taxes of any sort, but I have to say that there's something that bothers me about this approach to closing the equity gap.
February 4, 2009 2:04 PM | Reply | Permalink
A lot of European nations, fed up with feudalism, have very high estate taxes. Having had their landed gentry, they don't want to go down that road again. Northern European countries have less income disparity than we do and they do quite nicely as far as productivity is concerned. Their unemployment is quite low because people are by and large content at their jobs without being zombies as in communist system. This is all laid out in the brilliant book "The Predator State" by James Galbraith.
But back to what is just and unjus. New thinking that is still confined to academia about how to manage unearned income is being brought out into the light by Alperovitz and Daly with a very accessible book for lay people. We need to discuss these new ideas. Because the old ways don't work.
February 4, 2009 2:53 PM | Reply | Permalink
It's entirely possible to transfer ownership via trust or using annuities and the like, well before the issue of an "estate" is raised(i.e. before the owner dies).
A question I like to ask, given those circumstances, is this:
If your own parents don't trust you with the money and or property while they are still alive, why the hell should I trust you with it under any circumstances?
February 5, 2009 12:08 PM | Reply | Permalink
Good diary. We need to fight agaisnt the landed gentry again.
Back to the 18th century.
Baucus is a real idiot.
February 4, 2009 2:19 PM | Reply | Permalink
I agree with you, Quinn and Sleepin. There are plenty of deductions in the estate tax code to provide for children. And the spouse pays nothing in taxes.
Some loop holes have to be closed as a matter of fact. Trusts that remain in force for a hundred years.
Yeah but look at all the good these trusts accomplish.
Baloney, those are charitable trusts. And all monies put in charitable trusts go tax free, anyway.
February 4, 2009 2:24 PM | Reply | Permalink
What "Unjust Deserts" takes on is "the great man" theory. If Alexander Graham Bell got run over by a bus on his way to the patent office, then Elisha Gray who got there too late or Antonio Meurci who didn't have the money for the patent would have "invented" the telephone. They were all standing on the shoulders of other people. Since the mid 19th century we have built the university system and land grant colleges for research for the benefit of all the people. Our tax money develops drugs, yet we pay huge prices for them. Our tax money developed the internet. Should we now pay a toll for fast service?
How do we come up with a just system? Well it starts by not revering the great man. It's by not going gaga over somebody just because they have money. Nobel laureate economist Henry Simon said that "if we were generous with ourselves. I suppose we might claim that we 'earned' as much as one fifth of our income." The other 80% was the "the patrimony associated with being a member of an enormously productive social system..."
That includes physical capital and intellectual capital.
Cool stuff.
February 4, 2009 3:11 PM | Reply | Permalink
I think I'm in the twilight zone here. Or maybe the simple truth is that I should have been paying attention when I wasn't.
My mother, who died in 1995, inherited 100% of my father's estate in 1990. She was a cautious steward; the estate did not grow, as it might have done, but neither did it diminish.
When she died, my sister and I did not get a farthing until the executor promptly paid the government @ 1/3 of her aggregate estate consisting of stocks, bonds, real estate, fine art and cash. The estate was "modest" -- certainly by Wall Street standards -- but, to a Democrat like me, it wasn't chump change, either, and I was grateful for what I got.
But y'all are talking about raising the estate tax? Huh? Despite the fact that I know I must sound like a Repug in this instance -- on what basis should money and assets derived essentially from my father's hard slog forty years of work -- assets which had already been fully taxed, which he paid ontime and gladly -- be taxed again?
Feel free to educate me. Finance is certainly not my forte. I truly want my tax dollars -- whether derived from my own efforts or those of my progenitors -- to benefit the maximum number of people. But taxing twice?
February 4, 2009 5:49 PM | Reply | Permalink
Snark alert!
Cronyism..... and I iz yr crony... suggests an exception should surely be made in yr case.
February 4, 2009 5:57 PM | Reply | Permalink
Belle, the estate does not even get taxed until all expenses are deducted and then there is no tax for any monies left up to five million.
February 4, 2009 7:21 PM | Reply | Permalink
dd... we don't know the size... and it would be impolite to ask....
February 4, 2009 7:24 PM | Reply | Permalink
DD: You must be talking current George W policy -- not the policy in effect in 1995 when my mother died. I promise you: nothing even near $5 million was the subject of taxation.
February 4, 2009 8:12 PM | Reply | Permalink
Belle, I meant nothing personal. Not at all.
I will review the Dem plan. I was just regurgitating what I had heard on cable. There is more going on here in such complicated legislative language.
February 5, 2009 12:48 AM | Reply | Permalink
Tain't no big mystery. No doubt from what you write here you're a flaming Marxist. Now the bloated government is grabbing hold of what's yours you want to whine, whine, whine, now don't you??
That's what you get with Marxism baby. Dual code all the way. You got the politburo members, then you got the peons.
Geithner and Daschle would have never paid their taxes if they hadn't lusted after power to the point they came out trying to bluff their way through it.
And it isn't just taxes either. It's equal protection under the law. Just look at that Kennedy punk who killed that girl a while back flying that airplane illegally. Burnt that punk before an autopsy was possible.
Look at his thug uncle who killed Mary Jo Kopechne. Not only was the drunk SOB not prosecuted, the deviate state of Massachusettes re-elected the murderer.
If there's Marxism in your future, get ready for the dual code.
February 4, 2009 8:02 PM | Reply | Permalink
.
Hmmmm . . .
It's baaaaackkk . . .
~OGD~
February 4, 2009 10:55 PM | Reply | Permalink
Will you be my pee-on? Because I get the feeling you may enjoy being peed on.
February 5, 2009 8:32 AM | Reply | Permalink
Are there any Republicans out there who actually believe in good government??
No, it's not raising. Baucus is talking about making the temporary reduction permanent.
Taxed twice? Not really. And a good estate planner can help ease tax liabilities by putting some assets into a trust long before death.
February 4, 2009 8:24 PM | Reply | Permalink
Actually Thomas Paine was the first American to propose an inheritance tax to be put in a National Fund for the good of the people. It's evolved over 200 years off and on and the "national fund" has been defined in different ways. Today there are ideas that include that money being dispersed to every 18 year old to use it for college or use it to start a business or buy a home.
It will take us awhile to return to a "we are all in this together" kind of deal. And to get used to the concept of "that's enough for me".
But your situation is like many of us. It's personal. It's not just cash. It's a painting. Or a necklace. It evokes memories. It's a connection to your father in good times. It's cold hard cash in bad times.
None of this is easy. But I was very interested, no, actually buoyed by the ideas in this book. And intrigued that philosophers have been debating this for centuries.
February 4, 2009 8:44 PM | Reply | Permalink
oops, this was a response to wwstaebler.
February 4, 2009 8:48 PM | Reply | Permalink
Finance is not my forte either. I believe that the concept is based on the theory of "earned" and "unearned" income. Your father earned it and your mother by being his wife. Anybody else is "unearned". So it's taxed at a different rate.
The debate over how much that rate should be is debated in Congress and in economics and philosophy departments. The ceiling for what doesn't get taxed has been raised. DD probably is right about the 5 million. Most small businesses, farms, and ranches can pay off taxes a little each year if the children stay in the business.
February 5, 2009 9:29 AM | Reply | Permalink
Feral Cat: For very personal reasons -- having to do with the here and now, rather than with points of principle, or historic record -- I left a heartfelt query for you on your montanamaven blog. Please check it, and respond to me, if you will, personally, at my personal email, which was noted. Thank you, in advance.
February 4, 2009 7:15 PM | Reply | Permalink
Okay. Sorry I was going to respond above to your question,but got busy at work.
So i will read email for sure.
February 4, 2009 8:06 PM | Reply | Permalink
Is there a proposal about which would liquidate the Kennedy's bootlegging criminal empire fortune? That's what needs to be targeted. Nary one of them worthless SOBs have hit a lick since the 40s.
That's the 'estate' that needs to be taxed out of existence. I know of three people who've been murdered by the Kennedys who would probably be alive today if the Kennedy patriarch had gotten the same treatment by the federal government as his cohort Al Capone.
February 4, 2009 7:29 PM | Reply | Permalink
I reported the above accusations of murder by the Kennedys as abuse. That goes over the line in my opinion.
February 4, 2009 11:14 PM | Reply | Permalink
Your opinions are consistent with Marxist doctrine.
February 5, 2009 9:10 AM | Reply | Permalink