Monday, June 05, 2006

Damn you rich people, damn you all.!

Culture: Poor Sebastian Mallaby having a fit that the estate tax may be going bye-bye. I am sure there are great arguments to keep it, but Mallaby's tone and jealous envy of those who leave wealth to their children comes across as a temper tantrum.

The nation faces rising inequality. Since 1980 the gap between the earnings of the top fifth and the bottom fifth has jumped by almost 50 percent. The United States is by some measures the most unequal society in the rich world and the most unequal that it's been since the 1920s. What is the dumbest possible response to this? Identify the most progressive federal tax and repeal it. The nation faces the prospect that inequality will damage meritocracy. When the distance between top and bottom widens, it becomes harder to traverse the gap; people of low birth are stuck at the bottom, and human talent is wasted. What is the dumbest possible response to this? Take the tax that limits what the super-rich pass on to their children and get rid of it. Send a message to hereditary elites: Go ahead, entrench yourselves! For most of the past century, the case for the estate tax was regarded as self-evident. People understood that government has to be paid for, and that it makes sense to raise part of the money from a tax on "fortunes swollen beyond all healthy limits," as Theodore Roosevelt put it. The United States is supposed to be a country that values individuals for their inherent worth, not for their inherited worth. The estate tax, like a cigarette tax or a carbon tax, is a tool for reducing a socially damaging phenomenon -- the emergence of a hereditary upper class -- as well as a way of raising money.
What is the number where fortunes go beyong healthy limits? If someone can figure that out it would make those of us trying to be wealthy know when to stop before we send people like Lenin...err..Mallaby into a childish fit.
The abolitionists don't respond to this question because there is no convincing answer. Paul Volcker, the former Federal Reserve chairman, has written that "we would be hard-pressed to find evidence that, compared with the alternatives, a reasonable estate tax significantly discourages work or innovation or savings." In other words, killing the estate tax and raising some other tax instead would damage the economy. And that's before you take into account the positive distortions introduced by the estate tax, such as more social mobility and higher charitable giving. Charitable bequests will fall by at least a fifth if the estate tax is repealed permanently.
Notice how nothing about cutting back on spending ever makes it into this article? I am still trying to figure out how he got killing the estate tax and raising some other tax damages the economy. All I see is praise for a tax that slows down or would stop those who are moving up the social ladder as if this is a bad thing.
People often remark on the perversity of popular support for estate-tax repeal. A majority wants to abolish the tax, even though only the richest 2 percent of households have ever had to pay it. Yet this shoot-your-own-foot weirdness is easily explained: Most people just don't know that, under the law's current provisions, a couple can bequeath $4 million without paying a penny to the government.
I think it's an aversion to paying taxes and those who are moving up the social/economic ladder don't like to pay taxes such as the ATM and the estate tax which is about leaving something for your children and family members when you die. More millionaries being made every year in America about 8.9 million so far and that number will grow into those who would pay the estate tax. The bottom line is Mallaby is mad that kids with parents who are rich are getting the chance to pass down their wealth without paying back into the social system at the rate he feels it should in the name of social justice. Explanation of the Estate tax here.

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