Tuesday, June 08, 2010

The Estate Tax and the Liberal Mentality

The New York Times waxes indignant about how the estate tax is kaputt for 2010. Never mind that it returns with a vengeance in 2011.

“The ultrawealthy in this country will still be able to pass on enormous wealth to the next generation,” said Chuck Collins, who studies income inequality and has worked with billionaires like Warren E. Buffett and Bill Gates to promote an estate tax. Mr. Collins argues that the tax is a “recycling program for economic opportunity.”
Oh really? A brief history of the National Estate Tax.

Let's understand how the estate tax works. It is a tax on *assets*, not on *income*. There are literally millions of people and businesses who are asset rich, assets painfully acquired over many years nay decades, but still of modest income. Farmers, ranchers, owners of many rental properties, owners of a restaurant or a restraurant franchise, to name a few examples.

Oh, but the Leftists "don't want rich heirs sitting on their asses, and then able to pass that on to their idiot children", in the words of one such Leftist whose name escapes me.

For starters, you simply *cannot* sit on your tush when you inherit a farm or a restuarant (which in more expensive California, a single farm, family restaurant, or apartment building easily passes the proposed 2011 asset dollar limits). Or several rental homes or an apartment complex. You have to manage it. Which is a full time job.

Oh, but the guy or gal might be wealthy enough to hire someone else to run it? That's called giving someone a *management* job! Not a bad thing.

Many of these inherited businesses are family businesses which employ dozens, perhaps hundreds of people, but which throw off modest cash flow. All of a sudden the patriarch dies and the business is inherited by his children, who are now hit with a big tax bill just because daddy died. Sometimes, they can't pay that bill without selling assets, laying people off or selling the business outright. Does that seem fair?

Even if you do think it's fair, when they sell, a productive taxpaying asset is at least temporarily and often permanently taken out of action, and the acquirer usually takes the opportunity to eliminate duplicate positions and there are layoffs. Not good for the economy.

Never mind that income from the inherited asset STILL must be taxed and still is. That is, if you don't break up the productive asset. Instead, out of some communistic notion of "fairness" a productive asset is broken up, reducing its income stream. The only people getting rich from that are the real estate agents and the lawyers. The former might get rich anyway should the heirs sell it on their own.

And the same people who advocate this kind of punitive taxation THEN turn around and complain about "big corporations who gobble up family farms and family businesses"--the very assets families are forced to sell in estate tax!

Oh but some heirs are idle, like the Kennedy brats? So what? Notice how the fortune Old Joe Kennedy built is about run out. If an inheritor is productive with his or her money, it serves him or her; if not, it destroys him or her. But you look on and you cry that money corrupted them. Did it? Or did they corrupt their money?

I don't envy worthless heirs; their wealth is not mine and frankly, I am not sure I would have done any better with it. I don't think that it should have been "redistributed" to load the world with fifty little parasites instead of one big one, or worse still, larding up a parasite government that pays out thousands of ghetto people to be idle.
Meanwhile, their Demunist uberlords use legal talent to set up tax-exempt "foundations" with their estates, which turn around and hire *their* idiot children. But the liberal rank and file doesn't seem to mind that.

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