Posted on 04/17/2015 7:43:15 AM PDT by SeekAndFind
Class warriors on the left argue that the United States should be more like Sweden, and we agree: Senate Republicans should move forward with a plan to repeal the inheritance tax, which the House passed Thursday.
Sweden had an inheritance tax for 110 years, and though the rate was sometimes quite high, the tax never became an important source of revenue. In the United States, the hated death tax produces only a fraction of a percentage point of federal revenue, though it imposes very heavy costs on a small number of families and businesses. In Sweden, the tax provoked various kinds of investment-distortion and tax-avoidance behavior, as it has in the United States. And in Sweden as in the United States, the bloody-minded support for the tax on the left has never been a question of raising government revenue; instead, it is “primarily related to an ideology of redistribution” and the “ideological momentum of the Social Democrats,” as Sweden’s Research Institute of Industrial Economics put it.
That’s certainly the case with our own Social Democrats, who don’t even do voters the courtesy of putting “Social” in their name. Senator Debbie Stabenow (D., Mich.) complained that repealing the death tax would amount to “helping the wealthiest people in the country.” And of course it would help some wealthy families — notice she did not protest that it would hurt anybody. It is a strange philosophy indeed that faults members of Congress for desiring to help a group of Americans. But if the Democrats are in fact feeling bent out of shape by the ways in which some very wealthy families organize their bequests, they should buttonhole the nearest Kennedy and have a frank discussion about trust law.
The inheritance tax is deeply unpopular, even though a relatively small number of households — a few thousand, typically — pay it in any given year. It is unpopular for many excellent reasons: It constitutes a special burden on certain asset-rich, cash-poor businesses, notably farms and small businesses whose assets are mainly made up of real estate, which often must be broken up and sold off to pay the taxman. The inheritance tax discourages capital formation, encourages counterproductive tax-avoidance behavior (such as pulling money out of productive investments to distribute as $56,000 Christmas gifts, coming in just under the gift-tax threshold), punishes thrift and family financial discipline, and elevates narrow ideological concerns over both public policy and individual liberty. That’s a lot of damage to do in exchange for seventh-tenths of 1 percent of the federal tax haul — roughly the amount the federal government spends annually on the maintenance of vacant and abandoned buildings (if someone in Congress happens to be looking for a spending offset).
The ideology at work here holds that the federal government has a duty not to secure citizens’ liberty and security but to act as a leveler, ensuring that as nearly as possible, nobody enjoys a leg up in life as the result of having a well-off family. This is absurd for many reasons: Metaphors aside, economic life is not a footrace in which one’s well-being is determined by an ordinal ranking. Second, given all the benefits that people may derive from their families (from good habits to good genes) the government cannot achieve such a thing. Thirdly, even if effective leveling were possible, it is not the government’s business — nor is it desirable. One of the reasons that people work, save, and invest is to better not only themselves but their families, including not only their children but also their grandchildren and descendants unborn. Intrusion into that dynamic is destructive.
The Republican bill would repeal the inheritance tax in toto. It would also leave heirs not having to pay taxes on capital gains that accrued before they owned the assets. The instinct here is a good one — while we’re feeling cosmopolitan, we’ll take Switzerland’s tax-free capital gains along with Sweden’s tax-free inheritances — but reducing or repealing capital-gains taxes is something that should be done categorically rather than having a special category of untaxed financial assets, which is itself a distortionary measure. The more investment decisions are dominated by the tax code, the less productive our investment environment is. That said, this capital-gains issue need not hold up the imperative to kill the inheritance tax now.
Funny thing about the Democrats’ trust-funder rhetoric here: For wealthy Americans, inherited assets constitute a relatively small share of their holdings, about 15 percent; for middle-class Americans, the inherited share is in fact quite a bit higher. The number of very wealthy families that inherited their money is a mixed bag (Waltons and Hearsts), but a small one. Perhaps there are better ways to express social disapproval of Paris Hilton than by pillaging families that inherit a wheat farm or an office building from their parents or grandparents.
I read that this will be filibustered by the Dems. Probably so. If not, what is the expectation re: Obama veto?
There is nothing more loathsome and cowardly than robbing dead people.
Let’s face it. Any sensible law, be it the Keystone pipeline, inheritance taxes or the death tax, will be VETOED by Obama. Senate DOES NOT have 2/3 majority to override it.
Obama does not care anymore since this is his final term.
Therefore, any POSSIBLE substantial change you expect has to come from a TOTALLY Republican government (like the Dems had in 2008-2010 ).
For those of you have say there is no significant difference between the two parties... THIS IS ONE MAJOR DIFFERENCE.
In the past Obama has stated that he would support this tax even if it REDUCED revenue to the Federal Treasury, in the name of “fairness”. Absolute certainty of a veto.
Anybody who has the least bit of familiarity with taxation matters should know that we have an ESTATE tax, not an "inheritance" tax.
The distinction, moreover, is not just a matter of semantic nit-picking. The distribution effects and overall economic impacts of a true inheritance tax can be quite different from the effects of an estate tax.
Why worry about the tax? With the Marxists in power no one will have anything left to inherit anyway.
Its not about robbing dead people, it about robbing families of wealth to make them serfs of the state. Remember they did not build that so they don’t deserve that.
Thankfully we don’t have that tax in Norway.
“Its not about robbing dead people, it about robbing families of wealth to make them serfs of the state. Remember they did not build that so they don’t deserve that.”
The answer to “you didn’t build that” is twofold:
- as the experience of lottery winners demonstrates, even keeping
a fortune - let alone a business - together is far easier said than done. And,
- Neither society nor government decided to put the particular.business in the particular place. The founder of that particular business made that decision and MADE IT WORK. While the rest of society stood around speculating on how long it would be before the new venture folded up, as so many new ventures do.
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