Trying To Maintain Rationality

Thursday, September 01, 2005

Estate Tax Myths; It's Not A "Death Tax"

First off, please either (1) donate to the American Red Cross or some other charity of your choice, or better yet (2) try to get down to the Gulf Coast and help out, if you can.

While I've been spending the past few days soaking in the devastation in New Orleans and the abysmal (and late) emergency response, a recent mass email from RNC Chairman Ken Mehlman caught my eye:

For the last four years, President Bush and Republicans in Congress have championed a pro-growth agenda that has brought tax relief to millions of Americans. Historic legislation in 2001 and 2003 put America on the track to economic growth, and today our economic outlook is bright. There is more work to do, however, to ensure that tax-paying Americans can keep more of their own hard-earned income.

When they return from their August recess, Senators will consider a key issue: elimination of the death tax. The death tax is an unfair double taxation of income, which hurts America's small businesses and farms and threatens job growth. Unfortunately, Senate Democrats are working hard to oppose our efforts to eliminate this unfair tax.

Will you help bring tax relief to more hard-working Americans? Call Senator Dianne Feinstein at 202-224-3841 today and ask them to eliminate the death tax. Our party's opportunity agenda means allowing families to keep more of the money they earn. The historic tax relief in the President's first term was only the beginning. Americans deserve a tax code that is simple and fair. The Senate needs to do its part by making tax relief permanent and burying the death tax forever.

Call Call Senator Dianne Feinstein at 202-224-3841 today and ask them to vote to eliminate the death tax! Make your voice heard on this important issue. Call Senator Dianne Feinstein. Express your support for tax relief and economic opportunity. Elimination of the death tax would be a victory for fairness and job creation. Working together, we can help eliminate the burden of the death tax once and for all.

Thank you,
Ken Mehlman,
RNC Chairman

Erm. Never you mind for a moment the fact that he doesn't even address one of the 2 or 3 worst (and probably the most expensive) natural disasters in our nation's history... I guess that just about sums up your committee's priorities, you miserable jackass.

Anyhow. Let's take a peek at the realities of the ESTATE tax (info taken from pbwebsureveys.com's Estate Tax Facts page).

  • Myth: The estate tax is a “death tax.”
    Fact: The estate tax is not a tax on death. It’s a tax on the transfer of large amounts of money. Ninety-eight percent of Americans who die pass their estate on to their heirs completely tax-free — in fact, they get a valuable tax break on capital gains. Zero estate tax is charged on assets left to a spouse or to charity.

  • Myth: The estate tax must be repealed because it forces family businesses to close.
    Fact: This issue has been wildly exaggerated. Only 3 of every 10,000 people who die leave a taxable estate in which a family business forms the majority of the estate. A recent Federal Reserve study found that the average small business is worth $702,566, well below the level at which estate taxes kick in. Virtually all small family businesses can be protected by simply raising estate tax exemption levels.

  • Myth: The estate tax must be repealed because it forces family farms to sell.
    Fact: As with family businesses, this issue has been distorted. On April 8, 2001, the New York Times reported that the pro-repeal American Farm Bureau Federation could not cite a single case of a family farm lost due to the estate tax. Furthermore, only 3 of every 10,000 people who die leave a taxable estate in which a farm forms the majority of the estate. Like businesses, family farms can be protected by raising exemption levels.

  • Myth: The estate tax is “double taxation.”
    Fact: The phrase “double taxation” is a rhetorical device meant to confuse the issue. The fact is, much of what is taxed in an estate has not been previously taxed. The bulk of the largest estates, which consist of unrealized capital gains, would never have been taxed were it not for the estate tax.

  • Myth: The estate tax raises little revenue, so repealing it will have no effect.
    Fact: Permanent repeal of the estate tax will cost nearly $1 trillion over the next two decades. This will deprive the Treasury of resources that could be used to address pressing needs such as safeguarding Social Security and Medicare, improving education, or extending health insurance coverage.

  • Myth: The estate tax “confiscates” over half the value of all estates.
    Fact: For 98% of Americans, the estate tax takes away nothing. For the other 2%, the average effective tax rate is 19%.

  • Myth: The estate tax discourages work and inhibits capital formation.
    Fact: There is no hard evidence that U.S. capital accumulation has been held back by the estate tax. There is evidence, however, that large inheritances do reduce work effort and saving among recipients.

  • Myth: The wealthiest Americans use tax shelters to completely avoid paying estate taxes.
    Fact: Most estate tax revenue comes from the top 0.14% of Americans – the few thousand people each year with estates larger than $5 million. In 2001, an even smaller and wealthier group, the 1,337 people with estates greater than $10 million, paid over a third of all estate taxes collected that year – for an average tax of $6 million per estate.

  • Myth: The estate tax doesn’t raise enough revenue to cover the cost of collecting it.
    Fact: This staple of talk-radio shows is based on an imprecise guess made by a researcher back in 1987, and is flat out wrong. It was based on faulty assumptions, and is easy to disprove. While the estate tax raised over $20 billion in 2003, the budget for the entire Internal Revenue Service amounted to only $9.8 billion in that year.

  • Myth: The estate tax is unfair.
    Fact: Unfair compared to what? Should revenue come from a tax on wages? Should it come from sales tax? Or should it also come from the estates of multi-millionaires? The estate tax is eminently fair. It is collected from those most able to pay, and it encourages the recycling of wealth through the non-profit sector. It limits the size of family dynasties that would otherwise distort our democracy and shrink economic opportunity for succeeding generations.
If you're dumb and can't figure out how the above relates to Mehlman's email's points, please leave a comment expressing your stupidity. I'll get back to you as soon as I can.

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