Alarming News

May 30, 2005

Quote of the Day

Why is it that liberals insist that things like the inheritance tax are necessary to level the playing field (so that one person doesn’t start out with some extaordinary advantage, and someone else starts with nothing), but they never talk about levelling the playing field in other areas? Why shouldn’t attractive people be forced to have deforming plastic surgery so that they look like everyone else? What about talents that should be restricted, or perhaps energetic people should be forced to sleep 8 hours a day so they can’t work harder and get ahead of their more-rest-needing counterparts?

Why is it just money that we should be redistributing?

-Joseph Weisenthal at Liberteaser

Posted by Karol at 01:14 PM |
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I don’t think I’ve ever heard that explanation for the estate tax before. We have a system that taxes income. The estate tax is an efficient mechanism for the capture of accumlated income. It is generally easy to administer (the exception being where the estate has a large percentage of assets that are illiquid for economic or emotional reasons – i.e., the family farm) and simplifies the tax burden for the recipients of inherited wealth (the recipients receive a stepped-up basis of the value of the property when inherited – by stepping up the basis, the recipients of the property don’t have to track the original value of the property when they eventually sell it). I’d say it’s more akin to making sure everyone is playing the same game…
And why I am contemplating the estate tax from my office chair on a gorgeous holiday, I cannot tell you…

Posted by: Alceste at May 30, 2005 at 1:39 pm

Oh…that reminds me of a story…I think it was Vonnegut…(brb, going to look for it)…
Found it!
Harrison Bergeron. Kickass story.

Posted by: kat at May 30, 2005 at 2:25 pm

I thought of the same story too. All newcasters were forced to speak with a lisp because one of them had a natural speech impediment.

Posted by: Marco at May 30, 2005 at 2:36 pm

I’m sure Wiesenthal got his inspiration from Harrison Bergeron.
I read Harrison Bergeron for a class in junior high school. I doubt it’s assigned much any more, as it so vividly lampoons the left. The teachers’ unions should hate it — if they are not too stupid to recognize it as an attack on their ideology.

Posted by: W.C. Varones at May 30, 2005 at 4:22 pm

Heh, I had it assigned in my Modern Short Story class in college.

Posted by: Shawn at May 30, 2005 at 6:28 pm

I know of a family that paid estate tax 4 times on their family farm over the decades.
Every year a large number of small companies sell to large companies or liquidate to obtain funds to pay the impending estate tax. Thus estate taxes eliminate thousands of jobs every year. Reducing the number of small companies is harmful to the economy and stability of employment.
The Senator from Minnesota (who was on the tax committee) told me that the Treasury gets $20 billion dollars in annual revenue from the estate tax. But the estate tax costs the economy $50 billion in economic disruptions including the cost of legal fees, loss of jobs and the flow of funds into non-productive assets.

Posted by: Jake at May 30, 2005 at 7:05 pm

I love that having been given a non communism explanation for the estate tax, Karol’s readers calmly transition to deriding teachers. Classy fellas, classy.

Posted by: Not Dawn Summers at May 30, 2005 at 7:58 pm

The Estate Tax is institutionalized, organized crime. It’s a robbery of 50 percent of a person’s accumulated assets that have ALREADY been taxed.

Posted by: Dorian Davis at May 30, 2005 at 8:46 pm

“Why is it that liberals insist that things like the inheritance tax are necessary to level the playing field (so that one person doesn’t start out with some extaordinary advantage, and someone else starts with nothing), but they never talk about levelling the playing field in other areas?”
Liberal answer to simple question: “It’s easy to administer, and makes seizure of assets from multiple people simple for the government.”
I’m hoping I’m misunderstanding Alceste here. The only reason we only tax inherited wealth is because it is easy. If it were just as easy and efficient to lobotomize the intelligent, physically disfigure the beautiful, cripple the athletic, so help us, the glorious left would implement such a policy.
Leave it to lawyers like Dawn and liberals like Alceste to dream of such a Brave New World.

Posted by: Sean at May 30, 2005 at 10:17 pm

Not all liberals like the estate or inheritance tax over here. May be missing something but it smacks of a certain.
“very sorry your loved one has died but we need to tax you for the privilege now”
Just plain wrong.

Posted by: Nick Saunders at May 31, 2005 at 3:50 am

France seems to have its barmy system as well. Maternal; gran died a few months ago and she had put the French portion of her estate into a high interest account on a 4 year contract. When my uncle went to execute the estate he was informed that my gran had not fulfilled the terms of the contract and a fee of several thousand euros had to be paid!!!!

Posted by: Nick Saunders at May 31, 2005 at 3:53 am

A combined response/series of (admittedly oversimplified) hypotheticals for Dorian/Sean:
(1) You buy stock at $20, it goes up to $50. You sell it. You’re taxed for a $30 gain on your income.
(2) Now, assume you die instead of selling your stock when it’s worth $50. If you have an estate tax, the estate pays the tax on the $30 gain. If the recipient of the stock later sells it at $60, he’s only taxed for the $10 gain (his basis in the stock steps up to the $50 at the time of death).
Effectively, the same net gain is taxed (at different rates) as would have been taxed if one person had bought the stock at $20 and sold it at $60 – it’s just that two entities pay the tax.
(3) If there is no estate tax, then the government has at least two choices.
One (the one I think that is favored by my friends on the right): the recipient gets the $50 stepped-up basis and tax is only paid on the realized gain in the future (i.e., the $10 gain when sold at $60). But this leaves $30 of gains untaxed. The question is then why should this income be untaxed simply because someone died (proving I may be a liberal, but I am a coldhearted bastard liberal if nothing else). This also leaves the system open to manipulation and provides a mechanism for tax avoidance. (I would suggest that the minimum estate size requirement for the tax strongly reflects this particular rationale. The smaller the estate, the lesser the benefits of tax avoidance.)
Alternatively, if you don’t step up the basis, i.e., you pay tax on the $40 gain when sold at $60, then you capture the taxes that were owing; but this system is very difficult to administer when you track the underlying bases for all the bequeathed property when the recipients realize a gain on the property.
But the bottom line is that the estate tax is not functioning as separate tax but instead serving as a mechanism to capture taxes that would already have been owed if the property was transferred.
(This whole discussion, of course, assumes that we have a system that taxes capital gains. We would likely disagree on that too, but I was assuming that we live under the tax system actually in force.)

Posted by: Alceste at May 31, 2005 at 10:11 am

I think sex needs distributing, I can’t be getting my rightful quota!
Actually Inheritance Tax is an effective income tax. The dead person doesnt pay it but the beneficiary, for whom it isnt an asset they acquired by working. If your income tax is at 25pc then IHT should also be at 25pc.
SEAN: How about we tax the rich and the beautiful to give the poor and the ugly more money and prettier faces? Free cosmetic surgery for those who earn under $40k a year.

Posted by: Monjo at May 31, 2005 at 10:45 am

What a great rationalization … I’m not lazy, I’m just levelling the playing field for those less talented. ;)

Posted by: Joe Grossberg at May 31, 2005 at 10:51 am

Leave it to lawyers like Dawn and liberals like Alceste to dream of such a Brave New World.
And to think NDS, you had feared that reading Alarming News had turned me to the dark side.

Posted by: Alceste at May 31, 2005 at 11:42 am

You are overcomplicating a very simple thing:
A tax code should be levied at an equal, or relatively equal, percentage for everyone who pays it. It is immoral–and a violation of equal protection–to penalize a whole class of people for productivity and success.

Posted by: Dorian Davis at May 31, 2005 at 12:02 pm

Dorian: Isn’t your argument then directed against taxing capital gains in general? It’s not the estate tax that’s the problem, it’s the taxation of accumulated wealth. Assuming we do tax capital gains (and rightly or wrongly, a policy decision has been made to tax accumulated income when realized), then the estate tax serves to make sure that everyone is paying the same in taxes not to create some sort of penalty.

Posted by: Alceste at May 31, 2005 at 12:15 pm

If liberals want to burder the poor with the estate tax too, at least that will be consistent. The poor are also able to accumulate wealth that isn’t subject to income tax. But the only way a person could justify the taxation of ONLY the top income bracket with the estate tax would be a sense of entitlement to somebody else’s possessions. In other words, theft.

Posted by: Dorian Davis at May 31, 2005 at 12:57 pm

So the argument is now against progressive taxation? How did we end up here? (Your first comment talked of assets that have already been taxed – whatever happened to that argument? And what exactly is this pre-estate tax?) Anyways, you’re now spouting policy arguments regarding a flat tax (good luck convincing regular folk that a progessive tax is per se immoral), which is fine (and you’re right of course); but, as you are wont to do Mr. Davis, you make it frustratingly difficult to have a dialogue.

Posted by: Alceste at May 31, 2005 at 10:51 pm
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