Let
me cut to the chase. This posting is about Estate
Taxes, known in the tax world as Transfer
Taxes, or called by either dim or conspiring Conservatives as The Death Tax. It is also a posting
about how you can know something about your world and still not have a
conceptual understanding of it.
We
all know there is a concentration of wealth in the United States. Historically
there has always been a small wealthy class and such has been no different in
other countries around the world. Yet the subject makes news, mostly in the
liberal intellectual circles, and for good reason.
It
is perhaps the single most destructive condition that can beset growth in a
modern economy and undermine democracy as a viable social structure. If wealth inequality in America was a cancer,
we are now at stage 4.
Politicians
pander to it from different directions. Economists and authors address it to a
limited audience. People like Bernie Sanders try to elevate it to the level of a
populous revolution. For the most part
all of this is ignored by the vast majority of Americans.
Statistics
regarding this concentration float about somewhat. A common one, for example,
claims that 40% of all private assets in the United States are owned by 1% of the
population. Another is that the bottom 80% of the population own 15% of the
Nation’s wealth. Although the numbers
may vary slightly, there are none that contradict the vast disparity or the
general accuracy.
In
an attempt to confuse the issue the subject is often misdirected (by interested
parties and media alike) to differences in published rates of income, where the disparity is around
one-tenth as extreme. Income minus expenses is the engine of wealth
accumulation, but, as is commonly known; most wealth is accumulated by “income”
that never sees the light of day, statistically speaking.
Whenever
you hear wealth disparity described in terms of income either you or the source have been led astray.
My
befuddlement relates to why these blatant facts are so meaningless to a
majority of adults in America? Even most
of those few who see the extreme nature of the inequality are neutral as to the
problems created therein. What are the problems? Immense.
They
include stagnation of economic growth, disenfranchisement of the working poor,
undermining of democratic rule, formation of oligarchies, increase in class
dependencies, and international policies that are not representative of the
nation as a whole…to name a few.
However,
the affects are the subject of another post. Here I want to look at the why in the question why don’t people care, and the how
in the question how can we make it better.
Most
Americans, say 90% (just a guess on my part, could be bigger), live in a world of
5s, 10s, and 20s. Whether it is the person who lives with assistance, who works
paycheck to paycheck, or who lives comfortably without financial fear, he or
she moves through their fiscal life with numbers they can understand.
The
use of money is conceived in multiplies of what one can actually hold in their
hand. Children are still taught about finance with coins placed in their grasp.
A $10,000 windfall is a big deal. It
doesn’t matter if generations affected by inflation view the cost of a tomato differently;
it is still understandable, despite how inflation may impact behavior.
What
people don’t understand is hundreds of millions of dollars, or billions, or
trillions. These numbers are a conceptual black hole for everyday Americans and
therefore are not calculated into how we intellectually or emotionally view the
world.
Bernie
Sanders consistently makes reference to the Billionaire
Class without giving it much definition. I define it as individuals with
over $200 million in net assets that have relative liquidity. I do so because I feel that number is a point
in which the number itself loses all meaning to the average American. It could
be more or less, but no matter. There is
no rational association the average American can make with someone who controls
that kind of wealth...and the wealthy know it.
You
know the truth when you hear Americans of limited means honestly argue that the
wealthy are “the jobs creators”, that they pay “more than their fair share of
taxes”, that addressing the issue is “class warfare”, that they achieved their
great wealth from “hard work” (as if they dug it from the ground), that they
are burdened by “Government regulations”, that Government spending is un-American,
or that the only answer to national concerns like education, health care, or
even the military is the “free market”. These everyday Americans cannot
assimilate the wealth of those they are unwittingly defending. They are
sadly duped.
How
in this muddled mess can we change things? There are many ways to begin to tilt
the nation toward greater equality and, as a side effect, greater prosperity…
too many to cite here. The one I want to address is by far the best, because
it, over time, redirects assets based on the obscene accumulations
themselves. It is Transfer Taxes (aka
Estate Tax, “Death Tax”, Gift Tax, Inheritance tax).
These
Transfer Tax laws currently affect less than one-tenth of one percent (>0.001)
of Americans. You’re not even in the
game until your taxable net worth is over $5.3million (twice that for couples).
However the tax laws are extremely complex and over the years modifications
(aka loop holes) have been built into the law allowing the tax to be dodged in
part or entirely. Current revenues
from Transfer Taxes amount to less than three-tenths of one percent (>0.003)
of the Federal Budget.
If
you are an ordinary American citizen and want to make one small step in the
right direction, support those who advocate rigorous Transfer Taxes. Leave or even increase the current starting level of
taxation ($5-10 million), but tax rates should rise above that to total taxation of 50 to 75% or more. Your
individual with a billion dollars in net worth would leave his/her heirs to struggle along
on say $300 million. Are you kidding me?
There is no argument here, just a lack of conceptual understanding.
This
is not injustice. The “system” in the
words of our current billionaire leader “is rigged”, and has been for at least
the last 50 years. It’s been rigged for a selective few (including him) and redistribution into
spending for the benefit of the nation as a whole is in order. The revenue from
those transfer taxes could, for example, cover the cost of healthcare for the entire nation
for decades and beyond.
Think
about that the next time you pay a health insurance premium or forgo health
care due to cost; while Trump and his family pay for concierge doctors from the
money they find in their sofas. Perhaps that's something you can understand.
