Who does Gordon Smith represent?
Chuck Sheketoff
This week the US Senate is planning to take up proposals to repeal or effectively repeal the estate tax.
In 2009, when the amount of wealth exempt from the tax rises to $7 million per couple ($3.5 million per person), as it will under current law, only about three-tenths of one percent of estates are expected to be taxed. Stated another way, 997 out of 1,000 estates would pay no estate tax at all in 2009 under current law with the $7 million per couple exemption; only 3 of every 1,000 estates would owe an estate tax.
Gordon Smith is fond of saying that when he and Ron Wyden vote the same way, everybody is pleased with the bipartisanship, and that when they vote differently they represent all of Oregon. Well, that line, while politically cute, doesn't hold much water with regard to the estate tax. Does Gordon Smith really think his job is to represent just three-tenths of one percent of Oregonians? Apply that standard to another important issue - immigration, racism, homophobia, and it doesn't hold up.
And because repealing the estate tax is costly and will increase the deficit, repeal harms all Oregonians. Over ten years, including interest, repeal will add $1 trillion to our national debt. As I've noted earlier, that's $1.9 billion a week to improve the lives of the Paris Hiltons of Oregon. Six weeks of estate tax repeal will cost taxpayers more than the five years of cuts to Medicaid that the junior Senator from Oregon valiantly tried to save.
The children who must face this nation's unprecedented debt face a Birth Tax of about $28,000.
Will Gordon Smith vote this week to increase the Birth Tax by voting to repeal the estate tax to benefit three out of 1,000 Oregonians?
UPDATE
On June 8, 2006, Gordon Smith voted in support of the procedural move to bring repeal to a vote. Ron Wyden voted against the move and the effort to get a repeal vote failed. Read the Oregonian's editorial Repealing the estate tax would be irresponsible (pdf).
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Jun 5, '06
The estate tax can be viewed as a double-tax. Income is taxed while a taxpayer is alive and then what remains of that income is taxed when it is passed on. However, death also provides a huge tax benefit -- the basis of property is reset at FMV at the time of death (i.e. if Grandpa buys land in 1950 for $1,000, passes it on to Grandkid in 2000, and Grandkid sells it immediately for $100,000 Grandkid pays no capital gains tax even though the property appreciated by $99,000). The estate tax was created as an imperfect way to re-capture these lost capital gains. At the time, the taxing authorities believed it was too difficult to track basis through generations.
What's the point of talking about the history of the estate tax? Because any argument about taxation should be based on principles of equity and fairness -- not simple proposals to tax rich people. Our current tax system is not equitable and not fair and the people who are the biggest losers are the working poor (not the middle class, as many people would have you believe). A real conversation about tax fairness would go a long way to changing the system for the better (actually, it probably wouldn't becasue the first step would be to eliminate or significantly reduce the home mortgage interest deduction).
Tracking basis through generations would be more fair and equitable than keeping the remants of an imperfect estate tax system.
12:04 p.m.
Jun 5, '06
Gordon Smith does not represent any Oregonian who cares when Republicans govern through debt, distraction, division, and the scape-goating of foreigners and minorities.
The Myth of Moderate Smith is gone. I spoke with his Washington office this morning, and they confirmed that he approves of carving anti-gay discrimination into the U.S. Consitution, and will vote tomorrow - on 6/6/06 - in support of the "Federal Marriage Amendment".
12:07 p.m.
Jun 5, '06
Gordon Smith does not represent any Oregonian who cares when Republicans govern through debt, distraction, division, and the scape-goating of foreigners and minorities.
Just to be clear - and fend off the easy swipe - it would be no better were Democrats to govern this way.
12:09 p.m.
Jun 5, '06
Nice one Chuck. One thing about the illusionists who pass themselves off as magicians, is that they never never quit spinning, and Senator Smith might be .....er.......predisposed by finacial status to agree with them.
To save the mouth breathers some time, three additional points:
1) It's not a tax on the dead. They are, after all....well....dead. It is a tax on a windfall profit delivered to heirs of an estate. They didn't do anything to earn that money beyond being born into the right family.
2) When David Cay Johnson of the New York Times requested evidence regarding family farms or Mom and Pop grocery stores that had been destroyed by existing law back in 2001, not one example was forthcoming from any agency, gummint or otherwise.
3) "Double Taxation" is a meaningless phrase in this so-called debate. Money gets taxed in the US whenever it changes hands for those of us not fortunate enough to have a battalion of tax lawyers sheltering our money in the Bahamas.
12:30 p.m.
Jun 5, '06
Pat -- that's a brilliant point - that we always tax money when it changes hands. Of course it's true, but I for one had never thought of it that way.
Can we change the name of it from "estate tax" (and away from "death tax") to simply the "inherited income tax"?
12:36 p.m.
Jun 5, '06
Whenever anyone says "double-tax", keep an eye on your wallet. It's almost always sleight-of-hand getting you to focus over there while they transfer your money to someone who already has a whole lot more than you do.
Find me money that is only taxed once. I pay FICA taxes on my income and then I pay federal income taxes on that same income and then I pay state taxes on that same income. Then, of course, I pay gas taxes, property taxes, sales taxes and numerous other taxes with that same income that has already been taxed multiple times.
Estate taxes do two things. Like all taxes, they help pay for things. The other thing they do is help keep all the money in the country from ending up in the hands of a small number of families. Because of other changes in our tax structure, even with the estate tax those few at the top have been accumulating a larger and larger share of the wealth this country produces. You've heard the expression, "money talks". The more concentrated wealth gets, the louder it talks--leading to "The Golden Rule"--he who has the gold makes the rules. At some point, that's the end of democracy. That's why we have an estate tax.
Those who have benefitted the most from our economy and our system of government get to give some of it back so that more other people can have the same opportunity.
That's where fairness comes into this equation.
Jun 5, '06
The Associated Press is still offering a $10,000 "award" to anyone who can prove an American family lost its business because of the estate tax.
The money is still sitting there six years after the original offer during the 2000 presidential campagn.
So, any takers?
Of course not, those peeps richer than rich!!!!
Jun 5, '06
The tax system is structured (in theory) such that money is taxed every time it changes hands in an economic transaction i.e. the person paying the money receives something in exchange from the person receiving the money. The easiest examples are wages and sales of property; however, the logic of the tax code includes gifts and other transactions that might not be viewed as giving any benefit to the payee as economic transactions as well (the fiction is that the giver of a gift recieves a warm and fuzzy feeling). Death transfers are different because the payee merely steps into the shoes of the dead person -- there is no economic transaction.
Besides, there are so many deductions, exemptions, credits, etc. in the tax code that there are plenty of economic transactions where there aren't any taxes (i.e. sale of personal residence).
I actually proposed a change in the tax system that would increases taxes on windfall profits for all people (regardless of income) and I'm a mouth-breather? How about this one -- eliminate payroll taxes on the first $20K in income and eliminate all the home ownership tax breaks? Is that "progressive"? How come "progressive" conversations about taxation never deal with the fairness and equity of the entire system? Why is there so much talk about TV taxes and cigarette taxes and cell phone taxes but nothing at all about home ownership tax breaks? Are "progressives" interested in making real financial sacrifices to improve the equity and fairness of the tax code or do they want to turn their back on the huge burden of payroll taxes while claiming it's only the rich who are fleecing the system?
Jun 5, '06
and if inheritance is a "windfall" shouldn't all estates be taxed regardless of size?
Jun 5, '06
So many spent by the government is automatically righteous? Individuals will always spend to enrich themselves and the government's kitty won't go to a litter of suckling contractors permanently affixed to the government's teats? That's funny. It's just very funny.
Jun 5, '06
1st off, Paris Hilton earns a good deal of her money the old fashioned way -- doing unspeakable, obscene, mean, and idiotic things on television. Wayward scions; Patrick Kennedy, William Kennedy Smith, and Edward Kennedy might be better poster children for the estate tax.
2nd, not all transfers of money are taxed. Transfers between spouses are largely exempt. It is up to the people and the legislature to decide if all (or only "small") inheritances are taxed and at what rate. Historically the inheritance tax has encouraged charitable giving. It might also instill some work ethic in the wealthiest 1% and perhaps stem the flow of capital into 100 foot yachts and 10,000 squarefoot monstrosities in the hills surrounding Oregon's cities. Besides, if you really want it you can always marry your step mother.
Jun 5, '06
I agree wholeheartedly with Leo (posting above)
Oregon's Republican US Senator, compelled by his "Mormon faith," is voting for the Federal Marriage Amendment. The FMA would scar the US Constitution - as Oregon's constitution is now scarred - by selectively reducing basic constitutional protections for gay and lesbian Americans alone. According to Gordon Smith, the Constitution should embody his idea that some U.S. citizens deserve less representation (and fewer rights) than he does.
Senator Smith has the right (Constitutionally protected) to personally oppose gay marriage, as Southern Christians in the 1960's had the right to express disapproval of interracial marriage.
But what you don't do in this country is deny your fellow Americans basic constitutional protections by amending our founding documents to reflect your own faith-based, evidence-free prejudice.
What's next? No voting for gays and lesbians? No freedom of assembly? No freedom of speech?
Please contact our gay-bashing, rightwing Senator Gordon Smith to let him know how you feel. Republican Senator Gordon Smith (up for re-election in 2008) PORTLAND OFFICE: (503) 326-3386 DC OFFICE: (202) 224-3753
Jun 5, '06
Jeff,
Assuming your not an anarchist and believe there is some useful role for government, why don't you spend your energy fighting for good government, tougher corruption sentences, campaign finance reform, independent audits, sun shine rules, greater efficiency, competitive bidding, etc.? All I ever hear from the right in Oregon are sound bites about "their money", "their property", and "their sippy cup." It's like there is no such thing as community.
Are schools important? Are roads important? Is Medicaid important? Are police important? Fire protection?
How important? Can you use your sound bite super powers to educate children with a stick of chewing gum and some duct tape or do we have to spend real money?
2:52 p.m.
Jun 5, '06
blizzak,
Look at the time stamps on the posts, I was not targeting you when I wrote it. We were writing simultaneously and your post went up first.
But, enough of that. To your points:
money is taxed every time it changes hands in an economic transaction i.e. the person paying the money receives something in exchange from the person receiving the money. Then you go on to say .....however, the logic of the tax code includes gifts and other transactions that might not be viewed as giving any benefit to the payee as economic transactions as well (the fiction is that the giver of a gift recieves a warm and fuzzy feeling). Death transfers are different because the payee merely steps into the shoes of the dead person -- there is no economic transaction.
I'd argue that there is no logical distinction in your example re gifts vs. inheritance. The dead person is dead and can suffer no harm anymore than they can reap a benefit. To the beneficiary the money is unearned and hence a gift.
<hr/>To your proposals:
eliminate payroll taxes on the first $20K in income and eliminate all the home ownership tax breaks? ......Are "progressives" interested in making real financial sacrifices to improve the equity and fairness of the tax code
and
shouldn't all estates be taxed regardless of size?
Sign me up when you get your petitions circulating. I couldn't agree with you more.
Of course the reason that this estate tax is so surreal is that we've had 100 years of tweaking since the original version, and that's like......a hundred years in DC time.
4:51 p.m.
Jun 5, '06
Death transfers are different because the payee merely steps into the shoes of the dead person -- there is no economic transaction.
That's hilarious. A gift is an economic transaction but an inheritance isn't? Steps into the shoes of the dead person? It must get crowded in that pair of shoes when the person has more than one heir.
There's no such rule as "money is supposed to be taxed every time it changes hands" or "money is supposed to be taxed whenever there is an economic transaction." Our tax structures have grown piecemeal--more like a neighborhood where the lots have often been redrawn and the houses have been repeatedly remodelled than like a carefully planned development.
In our system, money changing hands is commonly a place where we look for an opportunity to levy a tax. There are a lot of reasons why that makes sense but it isn't the reason for the taxes.
There is one fundamental rationale behind all taxes in a democracy--to pay for things we collectively want. Following that comes the desire to encourage some kinds of behaviors, structures or results and to discourage others.
Fairness is a subjective ideal and to my mind is about ability to pay and capacity to benefit. The nitty-gritty reality of fairness is that in a democracy if people don't think a system is mostly fair they won't support it and may stop cooperating in it.
I personally think it's ludicrous to claim that it is fair to tax the income of taxi drivers and wait staff but unfair to levy a tax when a huge amount of money is being passed from a very rich person's estate to his heirs.
There's a larger question of fairness involved if you eliminate the estate tax and further concentrate the wealth of the country in fewer and fewer hands while making the gap between them and everyone else larger and larger. An eventual return to feudalism would not strike me as a step in the right direction.
Jun 5, '06
Not quite. Some of you posters don't know the first thing about taxati on. First of all there is no taxation on every transaction. Only sales transactions have sales tax applied, and that is only in states that have a sales tax. - It is stupid to have a business pay tax on revenue. Then even a business in the red would pay taxes. The other alternative is that you tax profit. In this scenario you are not taxing every transaction either. So your premise is simply wrong. Secondly, the person that makes the money has already been taxed on the income to themselves if it has become personal wealth. When they are taxed a second time on that same money- this is called double taxation. Yes sometimes it is triple or quadruple taxation. Does that make double taxation any better? No... Lets switch things around and have poor people pay 46% of their income in income taxes too, does that make the system fair now to you? I think not. The rich are getting raped. Go watch a movie if you like robinhood that much. Here in the real world that stealing from the rich just works as an incentive for them to hid money, or a dis-incentive for them to make money. People argue this point, come on are you more motivated to make $5 or $10 an hour if you are doing the same thing.... The same answer applies to the rich.
5:34 p.m.
Jun 5, '06
While I hope this discussion turns back to the initial question – Who does Gordon Smith represent? - I can’t help myself and must clarify one of the issues under discussion. Because of the stepped up basis in inherited property, Oregon is losing over $500 million this biennium alone.http://www.oregon.gov/DOR/STATS/docs/ExpR05-07/FullReport.pdf (PDF page 77). Significant wealth goes untaxed because of the administrative nightmare and errors that would occur if stepped up basis was not the law.
Jun 5, '06
I'm definitely more motivated to make $10, with the first $5 untaxed and have the extra $5 taxed at 50%, than I am to make only $5 with no taxes.
The first scenario leaves me with $7.50. The second leaves me with $5.
How does that added tax on my higher earnings disincentivize me to earn it?
5:36 p.m.
Jun 5, '06
Some of you posters don't know the first thing about taxati on.
You seem firmly ensconced in that group.
People argue this point, come on are you more motivated to make $5 or $10 an hour if you are doing the same thing.... The same answer applies to the rich.
We're talking estate taxes here. The tax isn't paid until the person who earned it is dead. The person who loses money based on the tax is the heir. All the heir does is accept the transfer of the money.
Anyway, it's silly of you to think that Bill Gates or Warren Buffett is somehow going to be less motivated to do what he does if there's going to be a tax on his estate. I don't think it's anything like the difference between a person earning $5/hr or $10/hr. By the way, both Bill Gates and Warren Buffett think we should keep the estate tax.
Jun 5, '06
Maybe they were saying the heir has less incentive to bump off the estate owner in the presence of an estate tax. In a civil society that might not be all bad.
Jun 5, '06
Here in the real world that stealing from the rich just works as an incentive for them to hid money, or a dis-incentive for them to make money
If the wealthy are really willing to rationalize their tax evation as you suggest, maybe the real world needs both fewer loop holes and more IRS audits. From what I hear the IRS enforcement division brings in 5 times what they cost. If the federal government was run like a business they'd just keep increasing their enforcement budget until the direct return on investment was something more like 10%.
Jun 6, '06
When Bush was elected, the exemption level for the estate tax was $675,000. Today, the amount of free money for those lucky enough to get in the right gene pool has trebled. Further, the tax rate on estates’ value above $2 million was 55%. Now it is 46%. What’s the problem we’re fixing here? What’s the complaint of the beleaguered multimillionaire class that needs attention? The estate tax is fixed, don't ya think?
So far, the heirs of Oregon’s own wealthiest citizen, Phil Knight, have received a Paris Hilton tax benefit of $666,000,000 since Bush took office and began estate tax reform. That’s right, they’ll have an extra $666,000,000 to spend because of estate tax reform.(1) Enough. We’ve got more important things to pay for in this society that private aircraft and baseball teams for Knight’s heirs.
It’s time to re-reform the estate tax but in a different direction. Let’s make it a truly progressive estate tax rate. We’ve long said in this country that we believe in progressive taxation, where those who have benefited more from our society pay the most. So let’s reform the tax rate, say $1 million tax free, 40% tax on the next 4 million, and rising after that in steps until estates valued at over $200 million are taxed at 65%, and those over $500 million are taxed at 70%. Amen!
Oregon has at least four wealthy families who would pay at the top rate, as they have a net worth IN EXCESS OF $500 million.(2) So tell me, if the parents have $500 million, will the kid’s be in jeopardy if they only an astounding $150 million of their parents’ earnings? No, but the estatewill have done something to pay back American for how we’ve helped folks like Knight profit and use the services of our democracy (think of his use of the court system alone in the last year), and do something to limit the political and financial aristocracy in America.
Repeal the estate tax? Hell no. In 2006, the Food Stamp Program will provide approximately $33.1 billion in benefits to 29.1 million people. We can cover virtually all of this cost by keeping the estate tax as it is today. Or we could kill the estate tax, benefiting the heirs of the 6300 Americans expected to pay the estate tax next year.
Notes : 21 of 30,000 Oregon decedents would be expected to pay the estate tax with a $5 million exemption according to data from United for a Fair Economy.
(1) If Phil Knight’s $7.4 billion is taxed for the benefit of his fellow Americans at 46% rather than 55%. (2) Allyn Ford, owner of Roseburg Forest Products (one of the 10 largest landowners in American, Forbes October 2003), Richard Wendt, of Jen Weld, Tim Boyle, Columbia Sportswear and Phil Knight, Nike (at $7.4 billion in 2004, Forbes October 2004)
Jun 6, '06
The America I grew up in was supposed to be the land of "equal opportunity". That was a big part of what we were all about and what distinguished us from the rest of the world. The estate tax was part of what was supposed to level the playing field and help prevent the creation of an aristocracy.
Well, it looks like those ideas have become passe. Gordon is there for the aristocracy.
Jun 7, '06
So Jody, you just want to take property away from people who you judge as having too much? Sounds like you studied at the feet of Stalin, Mao and Castro.
Sorry but just because you think someone has more money than they need isn't a good justification for taking it away from them. Once you start operating under that kind of philosophy it is easy to justify all kinds of other forms of repression for the "greater good".
Jun 8, '06
This just in to the newsroom... The Paris Hilton Daddy's a Zillionaire Tax is still law... meaning Paris can go HER ENTIRE LIFE without ever working a single minute or her life.
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