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Barring some last minute deal it seems America is going over the “fiscal cliff.” Which given the perverted incentives of Washington may be just what some people are longing for:
For many Republicans, a cliff dive means blaming President Barack Obama for a big tax hike in the short term and then voting to cut taxes for most Americans next month. That’s an easier sell back home in Republican-heavy districts than a pre-cliff deal that raises taxes on folks making over $250,000 or $400,000, extends unemployment benefits and does little if anything to curb entitlement spending. If they back a bad deal now, they run the risk of facing primary challenges in two years.
For Democrats, the cliff is better than setting a rich man’s cutoff in the million-dollar range — or worse yet, extending the Bush tax cuts for all earners — and slashing Medicare and Social Security to appease Republicans. They, too, see an advantage in negotiating with Republicans who will feel freed from their promise not to vote to raise taxes once the rates have already gone up.
But there have been talks. One of the stumbling blocks appears to be the estate tax:
President Obama is reaching out to Senate Democrats and Republicans to strike an eleventh-hour deal to avoid the fiscal cliff, even as lawmakers grow increasingly skeptical about the likelihood of success…
The consensus that emerged during the meeting is that Senate Republicans could accept a deal that extends the Bush-era income tax rates for a vast majority of the populace and also extends the 35 percent tax rate on inheritances over $5 million per spouse, according to the GOP lawmaker…
Liberal Senate Democrats may balk at the prospect of extending the estate tax in its current form. Many liberals were furious after Obama struck a deal with McConnell two years ago extending all of the Bush-era income tax rates and setting the estate tax at its current level.
To recap the conservative position – taxation disincentivizes whatever activity is taxed. Tax income – people will be less productive. Tax sales – people will buy less goods and services. Tax capital gains – people will invest less. Tax inheritance… people will be less interested in inheriting money? Obviously this is an issue worth going over the “cliff” for.
Photo by Tom Jenssen under Creative Commons license.
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Thanks DS.
Don’t recall Ayn Rand defending the “estate tax.”
What was so funny about Rand is that you’d think that she, who allegedly hated “moochers and parasites” and anyone who didn’t work for what they had, would have hated the concept of noble families or trustafarians or legacies of any sort, but she didn’t. If all the “work” they had to do in their lives was to pop out of the right wombs and be filthy rich from birth, that was fine with her. In other words, just being rich made them superior in her view.
No, but dead people will be less interested in having earned it. Or something.
And “earned” often means having accumulated enormous capital gains, tax free, which can be passed on to Little Lord Fauntleroy with a step-up basis.
what i find ironic is that many of these bluehairs who serve as elected reps today fantasize about the supposed golden age of the 50s, when negros knew their place and gays were arrested and women were in the kitchen where they belonged. but anyway, the 50s: when “rich” meant having 2 homes, and maybe 3 cars instead of 1, and a staff of 2 (including the underpaid black woman). and taxes on the wealthy were much, much higher.
funny they always leave that last part out of the fantasy, today.
I disagree with the conservative position on the estate tax, but I see no reason to misstate it. They believe that the ability to leave money to heirs gives people who are already rich an incentive to make more money.
I truly don’t understand this. According to the deficit scolds who control things today, the major concern today the country faces is our massive deficit. The scolds must believe that he “fiscal cliff,” by raising revenues and lowering expenditures, will lower this deficit (the scolds poo-pooh Keynesian economics). Plus, these scolds don’t give a whit about the damage caused by cuts in “luxury” social programs such as food stamps for the hungry, etc. So the fiscal cliff should be a good thing to them, no? But they say it is a bad thing, and they expect us to unquestionably accept this evaluation. What really is going on here?
The Estate Tax is the perfect way for those who benefited most from our society to contribute to the continuation of our society. All of the debt conservatives like to carp about mostly benefit the rich and when they no longer need money (because their dead)their estates should pay back the debt we incurred for their benefit.
Everything the Koch brothers take with them when they die is theirs to keep. Everything they leave behind should be taxed to the hilt.
And if the slack-jawed spawn they leave behind can’t make a go of it after having the best of everything including living conditions, education, inflated wages and social contacts, they deserve to fail along with the vast majority of society.
yes, it is the perfect tax vehicle.
congressional staff for the goopers argued to me about what they say is the central tenet of American ethos: That our society is built on the entrepreneurial spirit of earning and daring and getting ahead.
OK.
if you accept that then the estate tax should be much higher. because creating a hereditary rich and ruling class is a denial of that spirit.
See http://www.canopycanopycanopy.com/10/to_have_is_to_owe
JMO but I want an estate tax at the higher rate of 45% and exemption lower than $5m. It is time we stopped the making of nobles and serfs in this country.
x2 fully agree. Tax them to the hilt, if they can’t take it with them.
I agree the estate tax should be zero if they can take it with them. If not take it all motherfuckers.
Tax Speculation
What is so sick is that instead of concentrating on taxes, why don’t we concentrate on expanding the economy. The problem right now is that the economy is not creating jobs, and Obama and his predecessors have shipped so many jobs off shore that everyone is walking on thin ice. I, for one, would love a create another business here, but that would be manufacturing, but if I have to compete with Asia, my capital is not safe. In addition to lower cost, my governments are also piling other costs on top, such as SS, unemployment insurance, health, all kinds of taxes, etc. We should be concentrating of how to create jobs. Instead, we have opened up a hole on one end to cheap products, but we have saddled our businesses with all kinds of expenses, to make them uncompetitive. There is no way around protectionism, since no 2 economies are alike, and my costs are driven by more than cost of labor. It is much to risky to open a new business, except in cases of big box stores which can buy politicians to create barriers to competition. If the government will protect my capital, I will invest in American economy. So, here we are, screaming about taxes, when the problem all along is a shrinking pie. And by the way, you pay taxes on profits and earnings. No earning, no taxes.
I’m not sure what conservatives “believe,” but I do know that lower estate taxes leave their heirs richer. It’s hard for me not to believe that that simple fact is the relevant incentive.
The estate tax will remain unchanged. Book it.
Remember to that one of Ayn Rand’s “idols” was a convicted serial murderer, William Hickman.
She admired him because he thought of no one else, but himself.
Both parties are going through the motions, because in the end they only have to appeal to their base, which is a pretty common base for both parties.
Look at the last election when only 57.5% voted. The party bases voted, but a lot of people, the people losing out on all these issues, voted with their feet.
According to voter participation dot org:
Ninety-three million eligible people did not vote in the last presidential. That is more than the total population of the top three populous states (CA, TX & NY). It is also more than the population of each of forty-six individual states.
The politicians know whom they have to answer to, and it ain’t you and me, generally speaking.
Agree completely.
http://my.firedoglake.com/dswright/2012/12/07/bridging-the-fiscal-cliff-a-wall-street-sales-tax/
If anybody can find a way to take their money with them it will be those two. THey inherited all that money from their hard-working father. Not really sure how much effort they have personally put into it.
I think a resonable tax on estates over, say $1 mil give or take is fair. Also don’t know what heirs they have,slack-jawed or otherwise. They are both despicable h uman beings. Hope their genes aren’t floating around somewhere.
Good idea. That seems fair. Well…….I’d lower the 45 to 39.
I feel you are right, they DID vote with their feet. Abstaining is not necessarily not voting.
Paul Krugman touches on that today: “We are at war with Eastasia, and always have been.”
http://www.commondreams.org/view/2012/12/28-1
The Kochs are doing everything they can to “take it with them” in the sense that they are making sure that in the relatively near future, when planet Earth has to get by without benefit of the Koch brothers living on it, most of the wealth will have disappeared along with them, the wealth I am talking about being a functioning country on a livable planet.
People themselves are actually creating jobs. We don’t need to subsidize government programs, which usually end up being in construction, and end up being involved with political paybacks and under the table kick backs. Voters in California were the first to codify state laws such that medical marijuana was available. Other states soon followed. And the state of Washington and Colorado have legalized the plant for everyone’s use – no need to even have a prescription.
And what has Obama’s response been? While he stated after his election, in late 2008, that he would not meddle in the affairs of states where The People had spoken, by Autumn of 2011, he allowed his DOJ and even ICE! to go in and bust up medical marijuana collectives. Within short order, some 6 thousand well paying jobs had been destroyed. And while these California citizens now went on unemployment or General Assistance, people in local county and city governments knew that programs that the med marijuana tax revenue had supported might now go under. And a total of $ 125 million dollars had gone to the state of California directly. Plus much more ended up as tax revenue for the state – at harvest time, the legit growers are out spending money on everything from furniture to travel.
Of course, there is an upside for one group of people regarding Obama’s DOJ going after the marijuana people – the Mexican cartels, some of whom are suspected of offering up campaign monies. They are now going to be able to flourish as they did before.
I am still thinking that no matter what it takes, Obama and the Inner Cabal will do whatever in order to see that the Bush and Obama tax rate cuts for the rich do NOT expire. Even if it takes an army of cloned robots to show up at the Capital Building as Senators and Honorable Representatives, and yell out “Yea!” to the Fiscal Cliff avoiding legislation.
That, of course, is absurd. As with most conservative positions, it doesn’t bear a moment’s actual thought.
If the Koch brothers want to leave planet Earth, I would contribute!!!!
Now you’re just being a party pooper.
Elise, I realllly hope you are wrong. BUt, I won’t bet against it.
This just in…
I think it’s unlikely anything will happen before the new year. Obama has no power and the republicans have no incentive. The democrats…..they’re uselesas and clueless.
Heh. I read that piece of non news as possible news that some kind of deal was reached, and there are details to iron out now. Otherwise, all of the participants would have been whining to the cameras about how the other side won’t do anything. But whaddoIknow?
Obama is right about one thing. The rest of the world must think we are nuts. This is a repeat of the 2011 disaster that got us the sequester. So what now?
My crystal ball says they split the difference. That way they both can say they “won” on taxes.
Really? I thought they just considered that money as theirs and do not want to give it to the government, but to their family. But honestly, the limit is so high we’re pretty much talking about the Walton family who are projected to “keep” 80 billion dollars and have spent $200 million on change the law on the estate tax.
And who says investing in government has no return on investment?
If you get right down to it, our society was built on exploiting the poor and everyone who was not a WASP male, while using public resources to protect those WASP males who were already rich. And indentured servitude and slavery. All while citing lofty principles, of course.
And, all those things exist in the U.S. today, including slavery. On the bright side, slavery does at least violate the law now.
Whether the law is actually enforced, however, is a separate issue, as it is with every law.
Yes, but unless the inheritance tax rate is 100%, there is always incentive to make more money to leave to your heirs.
One could argue that an inheritance tax rate of 0% gives people zero incentive to work once they have an amount they consider adequate put aside for their heirs.
So, somewhere between 0.00001% and 100% inheritance tax is the number that will give the most incentive to work. And that statement assumes that the only incentive to work is to leave money to your heirs, which assumption is contrary to what we know about people like, say, Warren Buffet, who is working in his 80s and does not believe in inherited wealth.
It also assumes that giving people incentive to work is a good thing for society. Encouraging early retirement may be a better thing for a society with a paucity of jobs to offer.
Also, it is not really an incentive to work, but an incentive to accumulate wealth, perhaps passively, and then hoard it so that it can be transferred tax free.
However, our now schizophrenic society considers that a disadvantage. We want money in the stream of commerce, being used for productive purposes, to the greatest extent possible, consistent with a capitalistic society.
That is why we adopted the British rule against perpetuities in our trust laws–to prevent people setting up trusts that tie money up for too long.
Obama seems more than willing to say anything that he think will get him what he wants at any given moment.
The world thinks we’re crazy to cut Social Security in favor of keeping our defense spending insanely high, too.
ha! well, that’s the thing. deficit scolds ONLY scold spending, never tax cuts. In 2002 I HARANGUED the Concord Coalition with emails and phone calls (remember, the Bush tax cuts passed post-9/11), and I was ignored. They didn’t have a problem with that fiscal irresponsibility. They never do. Ever.