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Congress Sneaks Past Another Tax Increase
Despite all the rhetoric from Congress about wanting to cut taxes and give
working families a break, they have done it again. Both houses of Congress have
passed another stealth tax increase that will adversely affect nearly all
Americans. They are smart enough not to call it a tax increase, but it will
cause everyone’s taxes to climb more with each passing year.
I’m confident that you don’t mind having to pay more taxes, as long as
taxes are being raised for a good cause -- right? What better reason is there
for most Americans to tighten their belt and do without than to allow 10, 50
even 100 BILLION dollar estates to pass untaxed from one generation to another?
Yes, I’m talking about the Guardians Of the Privileged and their latest effort
to repeal the estate tax law.
Now hold on. Hasn’t it been proven that estate taxes don’t make the
government money because of offsetting revenue losses? How can I put this? NO!
There have been studies showing how under a very narrow set of circumstances the
government can lose more than it gains on selected estates. Let’s examine
these circumstances. If a small business owner died and the heirs had to fire
everyone and sell the assets to pay the estate taxes, the loss in revenue from
the taxes of the jobless employees could cancel out the government’s revenue
gains. This can’t happen where there is a surviving spouse who automatically
inherits the estate without tax liability. This can’t happen with estates
valued at less than the $675,000 that are currently exempt. This can’t happen
where the assets of multi-million dollar, much less multi-billion dollar estates
are held as stock in publicly traded companies, since the stock can change hands
without effecting the company’s assets. In fact, there are only a small number
of business estates in which the heirs could be forced to fire their employees
and liquidate upon the death of the owners. How small a percentage are we
talking about? Less than three percent of estates fall into the category where
small businesses and/or farms face liquidation. Put another way, more than 97%
of the money that the government collects through estate taxes is a positive
revenue source.
How much money are we talking about? Well, let’s look at 1995. That year
over 2,312,000 people died. As you can see from Table
21, which was taken from my recent book, A Broken Covenant -- the Rape of
the American Middle Class, only 78,023 (about 3% of those who died) had
estates valued at more than the $600,000 filing threshold. Together these 78,023
estates were valued at more than $136 BILLION dollars. Because of current
exemptions such as estates passing untaxed to spouses, the government only
collected a little over $14 billion in estate taxes that year. This amounted to
about 2% of the 731 billion dollars of revenue collected. The income taxes of
working Americans were nearly 2½% less because of the $14 billion gained from
estate taxes.
The portion of the nation’s tax bill paid by estate tax collections is
rising, because the number and size of mega-estates is rising. The government
estimates that the number of estate tax filings will increase about twice the
inflation rate or about 5½% per year based upon its historical models. Such
government calculations don’t seem to adequately take into account the
cumulative effect of years of tax cuts that have been overly generous to the
wealthiest among us. As you can see from Table 21, during the years 1995-1997,
the number of estate filings has increased more than 12½% per year, which is
better than twice the government’s projection. More significantly, the amount
of money in taxable estate returns has increased by over 15% per year. The
amount of money in taxable estates valued at 20 million dollars or more
increased over 36% per year.
If these trends continue, the amount of estate taxes collected annually by
2009 will probably exceed 100 billion dollars. This alone is enough revenue to
decrease everyone’s income taxes by over 5%. So about the time that estate tax
collections from the burgeoning estates of the mega-rich will significantly
reduce our income tax burden, the Guardians Of the Privileged will have
eliminated estate taxes completely.
During the past two decades the richest one percent have more than doubled
their share of the nation’s personal wealth. The lion’s share of the 40 plus
percent of wealth now owned by the top one percent is owned by the richest
one-third of one percent of the population. This accelerated migration of wealth
into their hands is squeezing the majority of Americans.
Copyright © 2000 by Stephen Rodnesky