Friday, June 09, 2006

"We all pay the estate tax" 

The Senate failed to pass permanent repeal of the estate tax. And of course it's passed off as making sure the superrich pay their fair share, which is nonsense. Those who can afford tax planning buy it and avoid estate taxes. So who pays it? We all do, according to a new study by Steven Entin.
People can increase their productivity and labor by acquiring skills and training (human capital), by buying or inheriting physical capital to use with their labor, or by seeking employment that will let them work with other people�s physical capital. By discouraging capital formation, the estate tax makes it harder to combine labor with capital, which reduces the demand for labor and reduces opportunities for on-the-job training. It keeps the poor poor, and it keeps start-up businesses from growing to compete with older and bigger firms.

One of the worst features of the estate and gift tax is that the smallest and newest businesses, those with the least cash, are the least able to survive the tax. These include a large share of the businesses created by minorities. The estate tax makes it harder for successful minority business owners to pass the business on to the next generation.
Worth noting: this was to extend the estate tax phaseout that we are currently in, which leads to no estate tax in 2010 ... and a 55% top rate on estates over $4 million for a married couple ($2m unmarried) in 2011. But Harry Reid had to play the class warfare card, according to the Times.
A repeal, he said, would benefit a wealthy few "at the expense of every other American born and yet to be born for decades to come."

Mr. Reid called the fight over the estate tax a distraction and likened it to Republican efforts at passing a constitutional amendment against same-sex marriages.