Friday, August 12, 2016

So What About Trump's Plans To Abolish The Estate Tax For The Few Hundred Very Richest Families?


Duke Hugh and Barron Trumpanzee

A few days ago, Sahil Kapur, reported how Trump's dull and quickly forgotten-- particularly by Señor Trumpanzee himself-- economic speech was meant to stop the hemorrhaging of support from within the fractured GOP. Brian Ballard, a Jeb! donor who is now the Trumpanzee finance chair for Florida, told Kapur he was "heartened" by Trumpy-the-Clown's speech. "Now we have a tax plan and an economic plan that we can get conservatives to rally behind and feel good about." Ballard, like many Republicans were especially excited by Trump's promise to end the inheritance tax, which he called "the linchpin of the conservative movement." A Paul Ryan spokesperson couldn't agree more and tweeted "Three cheers for getting rid of the death tax."

They're all excited about a tax that kicks in after $11 million for couples. Actually $10.9 million. You pay nothing on the first $10.9 million and, few people pay much on the money after that either, since it's elementary for slick attorneys to shelter it. Loopholes abound. The Rush Limbaugh/Fox News trope that the money has already been taxed is false since that kind of loot is primarily unrealized capital gains, which has not been taxed before-- not money from a piggy bank. "American workers,"belched the chronically constipated Trumpanzee, "have paid taxes their whole life, they shouldn’t be taxed again when they die." They're not. Unless they were working as alchemists making gold bars. As Money Magazine's Alicia Adamczyk explained, "While calling it a death tax suggests that the estates of all people who die will be taxed, the reality is that given that the size of the exemption, very few Americans are affected." How few?
According to a 2015 report from Congress’s Joint Committee on Taxation, 4,700 estate tax returns reporting tax liability were filed in 2013, out of 2.6 million total deaths in the United States. That means the estate tax hits roughly 0.2% of Americans, or 1 out of every 500 people who die.

In fact, households affected fall somewhere between the 95th and 99th percentile of all U.S. households: According to the Wall Street Journal, the top 1% of households have a net worth of at least $6.8 million, while the top 5% have a net worth of at least $1.9 million.

And what about Trump’s claim that small firms and family farms are being driven “out of business” by the tax? The Tax Policy Center found that in 2013, 20 small businesses and farms paid any estate tax nationwide.

The decrease in estates affected has occurred because the tax threshold has risen significantly over the years. In 2003, for example, the exemption stood at $1 million, and more than 73,000 returns were filed.
Hillary's tax plan is somewhat more reasonable but still far too favorable to the very rich. She would drop the current exemption from $10.9 million for a couple to $7 million and she would increase the rate over the exemption from 40% to 45%.

A few days ago someone tweeted that 25 year old Hugh Grosvenor, the new Duke of Westminster, had just inherited something in the neighborhood of $11,733,200,000. Close to $12 billion. That's pretty awesome for someone who doesn't have a Facebook page or a Twitter account. I inquired what the rate would be in England for the inheritance tax on an estate of that size. The Guardian wondered as well-- and did an article on why Lord Hugh won't be too discomfited. The rate is actually the same as in the U.S.-- 40%. And, like the U.S., you don't really have to pay that. If Lord Hugh did, he'd have to write a check for $4,693,280,000. That would keep the National Health System afloat for a while. The young Duke "however, avoids a significant cut to his £9 billion inheritance because the estate is held in a trust." That's the biggest loophole.
Britain’s generous trust law [generous to billionaires, not to actual people] ensures that the country’s largest fortunes are largely kept intact. This is borne out by statistics which show that duties are a modest source of revenue for the Treasury. HMRC collected total tax of £534bn in 2015-16, of which inheritance tax receipts represented £4.7bn.

“The benefits of trusts are that they don’t form part of somebody’s estate,” says Ian Dyall, a manager at the financial adviser Towry. “In a discretionary trust, you have a whole pick list of potential beneficiaries which the trustees can choose to appoint benefits to. Because of that, you can’t point a finger to any potential beneficiary and say that’s your money. Money can stay in the trust and cascade down from generation to generation and nobody pays inheritance tax on it.”

Instead of one-off taxation, trusts are subject to charges every 10 years from the anniversary of their creation. Known as the inheritance tax periodic charge, it can amount to 6% of the funds held. There are, however, plenty of loopholes. Agricultural and business property relief applies, and the Grosvenor assets will have been managed to take full advantage of that.
Most of the Duke's loot is tied up in 500 acres of primo Mayfair and Belgravia land that was given to the family in 1677, like Eaton Square and the land the U.S. Embassy is built on but they own property all over the place, including Silicon Valley. Takeaway though is that Lord Hugh won't be paying $4.7 billion or one billion or much of anything, just some money on the immense profits the estate throws off. That may make sense in the U.K. where the social system is organized around an hereditary aristocracy. Here on this side of the ocean it's supposed to not be that way. Little Barron Trumpanzee doesn't need to inherit billions or even millions. As Andrew Carnegie famously explained, "the parent who leaves his son enormous wealth generally deadens the talents and energies of the son, and tempts him to lead a less useful and less worthy life than he otherwise would." Winston Churchill agreed and referred to an estate tax as "a certain corrective against the development of a race of idle rich." Idle in terms of socially useful productivity but immensely powerful. Robert Reich gets it right: "If we continue to reduce the estate tax on the schedule we now have, it means that we are going to have the children of the wealthiest people in this country owning more and more of the assets of this country, and their children as well.... It's unfair; it's unjust; it's absurd."

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At 10:20 AM, Anonymous Anonymous said...

And to those Berniecrats who consider voting for Gary Johnson, the Libertarian - don't expect him to do a thing about this. He has a laissez-faire attitude towards economic policy and wants to get rid of the estate tax altogether. A vote for him would be a bad, very bad "protest vote" in the wrong direction.

At 11:04 AM, Blogger DownWithTyranny said...

I think it would be a very low information "Berniecrat" who would vote for Johnson. The vast majority of Berniecrats are voting for Hillary and the ones interested in protesting the corruption of the Democratic Party are gravitating towards Jill Stein. In the end, Johnson will pull his voters from among traditional Republicans, depriving Trump of votes, not Hillary. He and Weld were both 2-term Republican governors.

At 6:32 PM, Anonymous Anonymous said...

Gary Johnson seems to be a nice guy, but he wants to cut Social Security, Medicare and other programs that help people. So why would anyone vote for him - just because he is a nice guy?


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