Yes, especially for the top 1% and 0.1%. However, they're the ones who have enough money to pay for ways to hide their wealth from taxation, so an inheritance tax would be a high + low attack on the middle, further cementing the inequality divide.
Near me is a Gilded Age estate, a magnificent place. My understanding is that with the introduction of income tax, the family was eventually forced to turn it over to be a nonprofit in the 1970's. So, if my understanding is right, even folks who were staggeringly wealthy were not able to completely defeat the cross-generational effect of the law.
I earn money, I pay taxes, I save prudently. Now, when I die, the government decides it gets to tax that money AGAIN? Money that has already cleared of its tax burden and is mine?
Why? Just because some people arbitrarily decided that the amount I saved is too much? I did “too well” and now my family gets punished with another round of taxes before they can enjoy the fruits of my labor?
The only justification for estate tax are the people with guns who will i prison or kill you if you don’t comply.
> the government decides it gets to tax that money AGAIN?
This is what happens pretty much every other time money changes hands. I get taxed on my salary. I get taxed on my purchases made with the remaining money. I get taxed on the capital gains I make by investing the remaining money. The people I pay bills to get taxed on that income, and so on and so forth.
> This is what happens pretty much every other time money changes hands.
Money is usually taxed when there is an exchange. You buy a sandwich, you pay sales tax and the seller pays income tax.
Inheritance isn't an exchange. It's effectively a gift. Gifts normally aren't taxed. Or they are, but not separately -- if you earn a dollar you pay income tax, if you buy a thing you pay sales tax, if you give the thing to someone else it "isn't taxed" except of course for all the taxes that were already paid in acquiring it. Adding a further tax is in fact taxing the same purchase again.
Notice how abnormal "gift tax" is -- it isn't something people ordinarily pay. We have specific exemptions for moderate amounts and for charities because we don't really want it. The only reason it exists above a threshold is that everybody was using it to avoid inheritance tax. Neither should exist.
> We exempt moderate amounts because no one wants to track down the $100 in allowance they gave their kids when it comes time to file taxes.
I don't want to track down the $100 I paid a landscaper to mow my lawn, can I get the same exemption for sales and income tax?
> Charitable deductions are to incentivize donations to charitable causes
That's why they're deductible from income tax. The reason they're not subject to gift tax is that gift tax only exists because of inheritance tax.
Notice also the context here. Gifts are inherently charitable. That's what charity is. Should it really be different to give $30,000 to a scholarship fund compared to choosing a specific person and paying their tuition? Why should it be taxed differently when the scholarship fund decides who gets it instead of the donor?
That's more or less what some cities are going for albeit with shifting the released funds to community support programs, training, and other resources instead of into the pockets of donors and the rich via tax cuts and putting the strain on the deficit.
One issue is that most states and municipal governments are required to balance their budget each year or be in the black. I think there are only 2 states that don't have that law. Consider the loss of sales tax and more methods for municipal funding. Unfortunately, to meet that balanced budget requirement many may need to gut several departments through 2020/2021 and starting with the police budget is politically savvy but perhaps won't provide funding for alternative programs but just drop some red ink.
I don't think the federal government is functional, split as it is, to address these budget shortfalls and allow local governments to address these issues. I'm hopeful the (likely, by the sources I follow) pending economic disaster is recognized before the election and the feds work together to prevent another major recession slip. Unlikely but hopeful.
> That's more or less what some cities are going for albeit with shifting the released funds to community support programs, training, and other resources instead of into the pockets of donors and the rich via tax cuts and putting the strain on the deficit.
Agreed. The solution for my community? Simply reverse the trends in the graph found here:
even before the tax was cut by Bush only like 2% of estates were taxed. hardly the middle. your estate has to be millions ($23MM according to the article) for this to even begin mattering.
$23MM+ is the middle, though. Upper middle, but still middle.
You're not really a power player in national politics until you are a billionaire (i.e. the top 1%), and that's where the real power inequality lies. For example, Sheldon Adelson recently pledged to drop $100MM into Trump's 2020 campaign, and like the article mentions, he "used a different strategy involving trusts to avoid $2.8 billion in estate and gift taxes between 2010 and 2013".
There is no universe in which $23MM+ is "middle class". If you have that much money, you can live passively off of investment income basically for the rest of time.
> Sheldon Adelson recently pledged to drop $100MM into Trump's 2020 campaign
Okay but Tom Steyer (also a billionaire) spent $343M on his election, and won a humiliating 0.38% of the popular vote (0% of pledged delegates).
This universe. The upper class has become effectively hidden by the language we use to describe power dynamics in this country. And this is a problem because if they are hidden, then they can't be held accountable.
Yes, you can live passively on $23MM, but you can't influence national or global politics with your wealth, which is my point. Hence you do not wield the most power, hence you do not hold the most accountability. And sure, not all billionaires are created equal, but that doesn't disprove my point.
> you can't influence national or global politics with your wealth, which is my point.
> And sure, not all billionaires are created equal, but that doesn't disprove my point.
If your point is that billionaires can influence national or global politics by virtue of their wealth alone — that's a pretty steep claim and the burden of proof to substantiate it is on you.
Nevertheless, I'll try to show you why the empirical evidence is simply not in your favor.
Hillary Clinton outspent Donald Trump by 2x in the 2016 election, and still lost. In fact, she had far more corporate backing than Donald Trump, and still lost.
In the 2020 Democratic Primaries, Michael Bloomberg spent $1 billion (!!) on his campaign, and won just 9.4% of the popular vote (1.38% of pledged delegates).
As I already pointed out, Tom Steyer spent $343 million on his election, and won 0.38%. Interestingly, you would think he would have at least 1/3 of Bloomberg's vote, which suggests that the vast majority of the variance in Bloomberg's vote share can be attributed to his existing name recognition as a famous businessman/politician, and not simply the money. No amount of money was enough to make their core message resonate with ordinary voters.
Bernie Sanders spent $195 million on his election, having spent less than Bloomberg + Steyer and while having handily beaten both. Joe Biden spent $105 million on his campaign, less than Bernie, and still beat him by 3 million votes (and counting).
Elizabeth Warren spent $121.31 million on her campaign, and also handily beat Bloomberg + Steyer while having spent far less than them, while losing to Biden while having spent more than him.
Those are just the anecdotes (of which there are many more).
Decades of research[1] suggest that money probably isn’t the deciding factor in who wins a general election, and especially not for incumbents. Most of the research in the last century found[2] that spending didn’t affect wins for incumbents and that the impact for challengers was unclear[3]. Even the studies[4] that showed spending having the biggest effect, like one that found a more than 6 percent increase in vote share for incumbents, didn’t demonstrate that money actually causes wins. In a time period where voters are more stridently partisan, there are probably fewer and fewer people who are going to change their vote simply because they liked your ad.
While you may be right that money affords one the platform to disseminate their ideologies, at the end of the day, ordinary voters need to accept that ideology, go to the ballot box, and check the box next to the name. If I'm a left wing progressive, no amount of money will convince me to vote for a right wing politician (and vice versa). No amount of money will install a leader that cannot convince voters to vote for them in a democratic election. As such, the claim that $23MM+ is "middle class" continues to be beyond bizarre.
Agree with your points, but it's not about affecting who wins by campaign spending so much as it is controlling the winner after they've won, because then you own them. This is why lobbyists will donate to both sides.
> Compared to economic elites, average voters have a low to nonexistent influence on public policies. “Not only do ordinary citizens not have uniquely substantial power over policy decisions, they have little or no independent influence on policy at all,” the authors conclude. [1]
> much as it is controlling the winner after they've won
But they can only win re-election if (and only if) their constituents believe that they continue to represent their interests.
Also, direct donations to campaigns run by the candidates themselves are ALREADY capped, both for individuals as well as corporations. It is only uncapped for organizations that are not affiliated with the candidate directly (SuperPACs), and this is strictly regulated.
So the point that you're making is: upon winning the 2016 election, if a bunch of billionaires promised Trump that they would donate to an unaffiliated SuperPAC for his 2020 re-election bid if Trump enacted policies opposite to what he campaigned on, he might be able to win his re-election. There is no evidence of this happening. Trump's base will refuse to vote for him if he flip-flopped on his immigration stances.
Like I said, people with $23MM net worth aren't influencing national elections with their wealth, though. That's what puts them in middle -- they may live a luxurious life, but they have very little real power.
You'd seem to prefer we ignore the existence of the ultra-wealthy, without appreciating the massively outsized influence they have. By pretending they don't exist or don't matter, you are holding them unaccountable for the power they wield on a national, and global scale. Yet they have the most responsibility to bear when it comes to inequality.
So you can scapegoat the middle class, but you're just doing a favor to those ultra-rich who hold real power, by eliminating their potential middle competitors for them. This is the high + low vs middle power dynamic.
I don't think it's unreasonable to define the upper class as the group who wields the most political power. Use whatever word you want, "overlord", "elite", "oligarch", it doesn't matter. You seem to be playing semantic word games to avoid addressing my central point.
I'm entirely comfortable with noting there's a special category of super-rich, mega-wealthy, upper-upper class, top 0.1%, whatever you want to call it.
Calling someone with $23M net worth "upper middle" class remains absurd.
you can't use a non-standard definition of a word and then complain others are playing word games.
you seem to think all that matters is inequality in political power but I think inequality in, say, quality of life, protection under the law or healthcare are also important and those exist well below the 0.01% (and in non-wealth dimensions).
Also, I'm nowhere near the top 0.01% but I do donate a good amount to political campaigns and I regularly get personal calls from congress people (presumably expecting more money). I don't think people in the bottom 50% get such calls.
Wikipedia's definition includes those who "wield the most political power", so I don't think it's non-standard, per se. Although, I have complained elsewhere in this thread that the language we use to describe class and power obscures the existence of "elites" who hold the most influence.
Because elite power is hidden, it becomes unaccountable. You can scapegoat the "upper class" asshole with a Lamborghini and infinity pool, but that's obscuring the massive influence of figures like the Koch Brothers and Sheldon Adelson.
I completely agree with you that protection under the law, healthcare, etc, are important and should be rectified. But the people who are ultimately deciding that are the ultra wealthy elites [1]. So taxing multi-millionaires is rearranging the deck chairs on the Titanic, rather than addressing inequality in a meaningful way.
To do this, elite power must be held accountable. To be held accountable, it must be seen, and not made invisible by "word games".
according to gallup polling between 1-3% of people self-identify as upper class. no matter your definition that's gonna include people with merely $20MM in wealth.
and i'll add that $20MM definitely gets you regular lunch with congresspeople and maybe even a ride on airforce one (I know someone who donated enough to Trump to get this and isn't a billionaire).
Well, it's not a well defined term, that's part of the problem. I think it's worth the effort to challenge the language used to describe class and power, though, because the terminology omits the existence of the elite. I've addressed that elsewhere in the thread so won't rehash it again here, but it has revealed to me some of the weird psychological barriers in place preventing the rehabilitation of the language we use. For one, the middle doesn't want admit to themselves how far they truly are from actual power and prefer to think of themselves as high or near-high. Second, the shear exponential scale of the power disparity between the middle and high is hard to comprehend.
>You're not really a power player in national politics until you are a billionaire (i.e. the top 1%)
the 1% of wealth starts at $10MM. wealth inequality creates important power inequality way before you start dropping $100MM on a presidential campaign.
100% with you on this. I am set to inherit a large sum of money when my grandfather dies (150-200k). And yes, 'large sum' is what I said. I honestly thought about writing 'life-changing' sum, because that will allow me to eliminate all of my debt, and substantially change my lifestyle.
I'm exactly who this would bite in the ass. I have neither the know-how, nor the real money to spend on moving things around to hide it from taxation.
Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay.
> Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries.
This is also the difference between an estate and an inheritance tax.
If someone has a $25 million estate and divides it evenly among 25 heirs, under an estate tax with a $23 million exemption and a 40% tax above that, each heir gets $968k. Under an estate tax with a $1 million exemption, each heir gets $616k. Under an inheritance tax with a $1 million exemption, each heir gets $1 million.
The main thing is to encourage it to be distributed to a large number of heirs because if 10 people get $1m they will spend far more than 1 person getting $1m and will pay sales tax, property tax and so on with it, also the people they spend it with will do the same and so on. The problem comes when folks pass $10m + pools down through generations.
Large accumulators of wealth simply dodge estate taxes all together. They put the money in a foundation and their heirs get a draw on the foundation for the rest of their lives.
Whatever reforms are put in place should focus on minimizing that ability to dodge the taxes.
Estate taxes are strange things in that they don't affect the poor and middle class because few people inherit more than 1 million dollars and we have exemptions for family farms and inherited small businesses.
It also doesn't hurt the ultra-rich, who easily evade inheritance taxes.
It hits a very narrow band of wealthy between the middle class and the ultra-rich.
I wonder if some sort of "non-person wealth tax" is mechanically feasible.
The goal is "big piles of money eventually go away"; estate/inheritance taxes stand at the boundary of individual ownership to try to chip away at the big piles of money when it is passed from one generation to the next.
The "loophole" is that non-person entities, in the form of corporations or trusts, do not die. Your family establishes a trust, dumps money into it, and within that trust it can be invested and grow indefinitely, even if money is taxed as it is taken out.
Assuming we don't want to just make non-corporate entities mortal -- require them to "die" and be replaced by a successor organization every 60 or 80 or 100 years -- the problem becomes "how do we keep an immortal entity from just sitting on an ever-growing pile of money, indefinitely".
So what if we just created a wealth tax and applied it to these immortal entities, of, say, 3% per year?
Could you apply it to all non-person entities, family trusts, for-profit corporations, non-profits, universities, etc? (If there is an exempt category, you're obviously going to suddenly have a lot of family chapels with billion dollar endowments.)
What would be the side effects, and which would be positive and which would be negative?
Assuming you taxed for-profit corporations on their wealth, and adjusted corporate income taxes appropriately, which sectors would benefit and which would go away? Would it be a good or bad thing for those sectors to become non-viable?
How hard would it be to reconcile internationally, could you tax entities sanely for the portion of their wealth resident in a jurisdiction, or would it be impossible to do fairly without leaving big tax havens?
With corporations and other vehicles there is a mechanism where by the ownership and beneficial rights are passed - shares are exchanged. If shares in family trusts were valued accurately - perhaps by compulsory audit for entities > $nnM then the transfer of ownership could be taxed.
But there's a large exception. You won't be taxed on that amount. You presently get the first $23 million tax-free before any inheritance tax kicks in... and then only for the amount above $23 mil.
$23 million, assuming a low yield of 5% annually, means that a person is receiving $1.15 million every year. The average income in the top 5% of the Bay Area is $808k/year [1]. This is ignoring every other source of income, and only looking at passive income received as a result of already having significant wealth.
> I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay.
Except, the point doesn't really stand, does it? Those with "extreme wealth" will indeed be taxed, because those sums would be much greater than 150-200k. Some percentage will find ways to avoid it, but that is true with any law, and those that do will have to make some tradeoffs to do so. "The rest of us", which in this case includes you (and me), will not at all be affected by this. We would only be affected by this as we get closer to having that kind of extreme wealth ourselves. And that's the whole point of only taxing the larger amounts -- that it does not impact the rest of us, and in fact you are precisely not someone this will "bite in the ass".
To go a bit further, you yourself say that you consider 150-200k to be a large sum of money, maybe even life-changing. All of these estate taxes, with their minimums in the millions, would absolutely still let you receive life-changing amounts of money as inheritance -- much larger than what you already consider to be life changing -- and only start taxing the portion of it that is more "excessive".
> Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay.
So you know that a) you will pay zero taxes under current law even if you received fifty times as much money and b) you'd pay zero taxes under the proposal in the article and yet c) you still use yourself as an example of someone who would pay taxes. Do I have it right?
> An even better approach would be to replace the estate tax with an inheritance tax. Under an inheritance tax, heirs would simply pay income and payroll taxes on their inheritance above a large exemption, just as others do on their wages.
> If an inheritance tax exempted the first $1 million received over one’s lifetime and applied the highest income and payroll tax rates to amounts above that threshold, it would raise $790 billion over the next decade.
