Class in America

A member of the Tennessee Legislature, Stacy Campfield, has actually proposed a bill to confiscate large or fairly large lottery winnings from the poor who receive government assistance, because he doesn't think they should be playing the lottery. Confiscating from the poor what is now legally entitled money in Tennessee is the definition of fascism. Campfield, speaking on the Ron Reagan Show, a radio program, implied that playing the lottery is bad. Since Campfield is on the government payroll, we wonder what "vices" that he has in which, maybe, a similar bill might be proposed. Of course, we don't think nothing of the sort should come to light whether it relates to the rich, poor or in between. We hope the people of Knoxville, Tennessee (where Campfield's district is) will reject this government intrusion into the lives of the poor, who shouldn't be told how to spend their money, when it is time for Campfield's re-election.

Meanwhile, President Obama told bankers attending a conference at the White House to show restraint in pay compensation. In other words, he rightly thinks the salaries of executives are too huge. On the other hand, the president implied that there was no hurry for them to return the T.A.R.P. bank bail-out money that was extended to them by Uncle Sam. Take your time, he implied. If only creditors in general were as sympathetic to their debtors, lots of Americans wouldn't be as stressed out in these difficult economic times.

Finally, our Washington state senators, Patty Murray and Maria Cantfield, showing their misplaced priorities, voted for a partial repeal of the estate tax and a general lowering of this tax, a tax which is effectively levied on less than one percent of the population, the super rich in America.

Copyright 2008 - 2009, Party of Commons TM

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This essay was written by the New York Times editorial board, originally published on April 1, 2009, and published here through the Fair Use Doctrine regarding copyright law (Title 17, U.S. Code).

NEW YORK TIMES EDITORIAL

The Senate budget debate began this week against a backdrop of war and recession, rising unemployment and surging foreclosures, runaway health care costs and diminishing insurance coverage — to name just a few of the nation’s big problems. But for Senator Blanche Lincoln, Democrat of Arkansas, and Senator Jon Kyl, Republican of Arizona, the most pressing issue is clear: America’s wealthiest families need help. Now.

The two senators plan to propose an amendment to deeply cut estate taxes for the fraction of the top 1 percent of the population still subject to those levies.

The proverbial millionaires next door — the plumbers, contractors and accountants who amass substantial wealth through hard work and modest living — are not the intended beneficiaries of the proposed cut. The Obama budget already takes care of them, because it retains today’s law, which imposes the estate tax only on couples with property worth more than $7 million, or individuals with property worth more than $3.5 million. That means 99.8 percent of estates will never — ever — pay a penny of estate tax.

The heirs of the remaining 0.2 percent of estates are who Ms. Lincoln and Mr. Kyl are so worried about. Their amendment would increase to $10 million the level at which the estate tax kicks in. It would also lower the top estate-tax rate to 35 percent from 45 percent.

With all the serious work before Congress, it is a colossal waste of time to have to rebut the false claims and warped premises of ardent estate-tax cutters. Ms. Lincoln’s and Mr. Kyl’s colleagues in the Senate should make short work of it and move on to urgent matters.

In addition to creating the false impression that the estate tax eventually hits everyone — by mislabeling it a “death tax” — opponents routinely denounce the 45 percent top tax rate as confiscatory. In fact, the rate applies only to the portion of the estate that exceeds the exemption. As a result, even estates worth more than $20 million end up paying only about 20 percent in taxes.

Another misleading argument is that the estate tax represents double taxation. In truth, much of the wealth that is taxed at death has never been taxed before. That’s because such wealth is often accrued in the form of capital gains on stocks, real estate and other investments. Capital gains are not taxed until an asset is sold. Obviously, if someone dies owning an asset, he or she never sold it and thus never paid tax on the gain.

If those arguments aren’t enough to stop the Lincoln-Kyl show, lawmakers should consider this: The estate tax creates a big incentive for high-end philanthropy, because charitable bequests are exempt. On Tuesday, Independent Sector, a nonpartisan charitable coalition representing thousands of public charities, private foundations and corporate-giving programs, urged the Senate to reject the Lincoln-Kyl amendment and to keep the tax as proposed in the Obama budget.

Finally, reducing the estate tax from the level proposed by Mr. Obama would cost an additional $250 billion in forgone revenue over 10 years, at a time when the nation already has to borrow heavily for real needs. Ms. Lincoln and Mr. Kyl have made rumblings about offering a way to offset that cost. Let’s hear what they say, and once we see how they’ve come up with a quarter-trillion dollars, let’s talk about better ways to use the money.
The purpose of the estate tax has been to keep the formation of landed gentries, so to speak, from gaining too strong a foothold in America. The estate tax has long been distorted by media propagandists, but the estate tax is only paid by the estates of the very rich, and generally not by the estates of ordinary millionaires who came to their wealth through commonplace fields of work and frugality. Not that surprisingly, given the records of Patty Murray and Maria Cantwell favoring their wealthy "bosses", and to some extent themselves, over commoners, Washington's two senators voted to repeal the estate tax for some multi-millionaires and reduce estate taxes, generally, through a budget provision. The estates of individuals with property less than 3.5 million dollars already do not pay an estate tax, but the exemptions didn't go far enough for Murray and Cantwell. This tax affects less than one per cent of the population.

The United States has long been a nation that has used progressivity in taxes to bring an element of fairness in the economic realm, and still the overwhelming majority of wealth in America is held by the top few percentile. We are now in the "Second Gilded Age" of American history. The proportion of wealth in America has increasingly shifted to be held in increasingly fewer hands, and Murray and Cantwell want to shift that even more. The vote by Murray, in particular, fits in well with her other bonus for the very rich, the "Wall Street" bail-outs.

With our nation in dire economic trouble, the treasury running huge deficits, jobs being outsourced to foreign destinations, and many Americans in serious economic straits, you would think Murray & Cantwell would find a different priority than repealing estate taxes.

Post-script:

At this point, it is not clear whether the budget provision in question will become law, but it passed the Senate by three votes. In other words, Murray and Cantwell could have defeated this proposal if their votes had been different.

Copyright 2008 - 2009, Party of Commons TM

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