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Your Estate Is Now Safe

By "your", I don’t actually mean yours. I guess I do, but only if you own one of the top .2% of the biggest American estates who have been suffering under the onerous and tyrannical estate tax system. It’s tyrannical because the government actually claims that your heirs should have to pay taxes on money they inherit from you. You know, like they would have to pay on lottery money or unemployment benefits that they’ve been contributing to their whole working lives. If you ever need to take advantage of that unemployment insurance you’ve paid for, you have to pay federal taxes on that money. But dammit, taxing your heirs for receiving money they didn’t earn is a bridge too far!

I am a firm believer that if you had the forethought to be born into a filthy rich family, you shouldn’t be penalized for having better boot straps than the poor bastard who thought that being born to poor people was a good life plan. Why the fuck should you pay taxes on the money that you didn’t earn, but watched (when you weren’t at your tennis lesson) your parents earn. Or worse yet, weren’t around when your grandparents earned it, but are clearly bootstrapped to. I mean, being born to wealthy people is hard work. Why should a rich person have to pay taxes on money that drops out of the sky for them, the way you pay taxes on the money you spend 40 – 60 hours a week working for? I mean, it’s not the rich guy’s fault that you’re the kind of sucker who obtains money by working for it. Why are we punishing the innovation of being born rich?

We all know that the best way to stimulate the economy and create jobs is to let Paris Hilton have her grandfather’s money for free. She’s obviously going to spend it in a much smarter way than the government, who will probably squander it on a road or a republican war that even republicans don’t want to pay for.

Let me explain how the estate tax works for the 99.8% of you lazy moochers who aren’t familiar with it. In 2015, any inheritance you (again, I don’t mean you, you fucking loser) get is tax free for the first $5.43 million dollars. I’m sorry, when I said $5.43 million dollars, I mean per person. So if you’re inheriting from Mummy and Papaaa, you get $10.86 million dollars of free money. Just to give you a little context, the amount that was free in 2001 was $650k per person.

To recap, right before we launched two wars, heirs of large estates got $1.3 million dollars of free money from Mamaaa and Papaaa. Today, since we’re still paying for those wars, they get $10.86 million dollars of free money. That’s today, but don’t worry because republicans in the house just voted to make things more fair. They want to make the entire estate free for the heirs. They really are a party of the people. There are precisely 5,500 people whose estates will be affected by this bold move to fight the power and stand up for the middle class.

Obviously, the estate tax is an attempt to loot money from hard working children of billionaires, and it must not stand! Let’s review the origins of the estate tax. The estate tax was born in 1916, and it was proposed and passed under the auspices of fair taxation. Cordell Hull, who sponsored the legislation said,

"I have no disposition to tax wealth unnecessarily or unjustly, but I do believe that the wealth of the country should bear its just share of the burden of taxation and that it should not be permitted to shirk that duty."

Representative William Cox, who supported the estate tax said,

"It is the first successful attempt to make wealth bear its just and proportionate burden of taxation."

At its original implementation in 1916, the estate tax was set at 10% of all estates worth over $5 million dollars. It went up very quickly. For 1917, it was 15% on all estates worth over $5 million dollars. But in 1917, it was raised again to 15% of net estate in excess of $5 million plus war estate tax 10% of net estate tax in excess of $10 million. Huh. So because we were at war, the legislators at the time thought that raising taxes would be the prudent and fiscally responsible thing to do. Oh, but we’re just getting started on the increases. By 1932, the estate tax was 45% of net estate in excess of $50 million. And then here a’come FDR to raise it to 60% of net estate in excess of $50 million in 1934, but that didn’t last long. By 1935, he increased it to 70% of net estate in excess of $50 million. And then came 1940, where there was another war to pay for. He increased the estate tax to 70% of excess of net estate over $10 million plus a defense tax of 10% of the total tax computed under the basic and additional estate taxes (in effect, maximum tax was 77%). From 1941 until 1977, they decided not to fuck around with all that language and just set the estate tax at 77% of excess of net estate over $10 million. Can someone remind me when the golden era of economic expansion in the US was again? Jimmy Carter came in and changed the tax to 70% of excess over $5 million. And then Ronny, patron saint of the wealthy, set it at 65% of excess over $4 million for 1982, 60% of excess over $3.5 million for 1983 , and 55% of excess over $3 million for 1984 – 1988. For 1987 – 1998, the rate was set at 55% of excess over $3 million (effectively 60% for estates in excess of $10 million but less than $21,040,000 because of a surtax to phase out benefits of the graduated rates and unified credit). That was as low as Ronald Reagan could conceive of dropping it. But fear not, Buckley v Valeo was starting to being in dividends. For 1998 – 2001, Bill Clinton set the rate at 55% of excess over $3 million (effectively 60% for estates in excess of $10 million but less than $17,184,000 because of a surtax to phase out benefits of the graduated rate).

To be clear, the intention behind an estate tax was twofold. It was the best way to pay for things because what better time to tax someone, than when it’s on money they didn’t break their backs earning? The second purpose was to prevent oligarchy. FDR correctly said,

"Great accumulations of wealth cannot be justified on the basis of personal and family security. In the last analysis such accumulations amount to the perpetuation of great and undesirable concentration of control in a relatively few individuals over the employment and welfare of many, many others."

I don’t care if you like that or not. FDR was right, and there’s nothing you can say to change that empirical fact.

Huh. As soon as we lowered the Paris Hilton tax, wealth started to become mega-concentrated in the hands of a smaller and smaller number of people. Today. 400 people own the same wealth as 50% of Americans. That is not a fucking accident. Taxation is always a redistribution of wealth. It always had been, and it always will be. First worlds have never been built in any way other than through an involuntary taxation system. The question is, do we want to redistribute across, or up?

During the time when the top estate tax was set at 77%, the top corporate and income tax rate was higher (at 91%). This forced reinvestment in companies and the country. There was no incentive to loot money from your company or your country because you were just going to pay it all out in taxes. That’s what created the greatest economic expansion in the history of our country. Again, I don’t care if you don’t like it. It is what it is and all of your theorizing and quantum physics, parallel universe nonsense isn’t going to change the empirical facts of what happened.

So let me share some estate tax fun facts so that you can really see (in case you’ve been confused for fifty years) who republicans champion.

  • In 2013, among estates that paid any tax at all, the effective tax rate was 16.6%. To put that into perspective, if you make 40k per year, your federal tax rate is 25%.
  • In 2013, a total of one hundred and twenty (that is the largest nonpartisan number I could find) small businesses and small farms paid any estate tax at all.
  • The largest estates are comprised of 55% in unrealized capital gains. This is money that has never been taxed. Not once. Capital gains become "realized" when you sell them. That’s when you pay taxes on them. If you’ve never sold stocks, that your parents bought for you when you were born, taxes have never been collected on that wealth. So a billionaire would have a very large amount stashed in unrealized capitalized gains, since they’re never really having to face a situation where they have to sell the stock they’ve been sitting on for generations, so that they can buy a sandwich.
  • Repealing the estate tax entirely, as republicans want to do, will cost $269 billion dollars over the next ten years.

So you decide: is the GOP the party of the people? Are you the person they’re fighting for? Let’s be clear, someone is going to have to pay that missing $269 billion dollars. Just like someone has been paying for every top tax rate cut. That unicorn republicans keep referring to, where spending less is an option has never happened. Remember, they never paid for their last two wars. Wars that will cost us money until their invention ISIS, and every other terrorist group that forms as a result of destroying Iraq are completely eradicated. And bomb, bomb, bomb, bomb, bombing Iran isn’t free either. So if you’re opposed to negotiating with Iran, you’d better get ready to pony up your share of that war plus the $269 billion dollars you want Paris Hilton and the Walton miscreants to have.

Someone has to pay. Who do you want that someone to be?               

           

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