Estate Tax Surcharge on Billionaires? They're Asking for It
Estate Tax Surcharge on Billionaires? They’re Asking for It
September 13, 2010
SAN DIEGO (ETFguide.com) – While most of America doesn’t want higher taxes, a tiny cadre of super-rich Americans is calling for a return of death taxes, also referred to as “estate taxes.”
Under current law, the estate tax rate is zero in 2010 but is scheduled to revert back to 55 percent on estates worth more than $1 million in 2011 if Congress doesn’t act. And while Congress is good at doing nothing, there’s a really good chance they’ll be doing a whole lot of nothing in tax legislation over the next few months.
Asking to be Spanked
The September 1, 2010 Wall Street Journal ran an opinion piece titled “Bring Back the Estate Tax” authored by former Secretary of the U.S. Treasury Robert Rubin and hedge fund billionaire Julian Robertson.
While Mr. Rubin and Mr. Robertson's passionate public plea to bring back the estate tax almost triggers heartfelt teardrops, it’s perplexing behavior probably worth further investigation by social science researchers. As men of business, one would think they already know the government doesn't need any further help with inventing more taxes. Both gents should get out and circulate with more warm blooded mammals.
One of the main arguments in favor of restoring estate taxes is to help the U.S. government to combat escalating federal deficits. Have we become that gullible as a society to actually believe that estate taxes will coral the federal deficit? (If you’re among the fanatical few that believes this, please contact me, because I can get you a good deal on a nice bridge with a few toll booths.)
That leaves just two final questions: Is this how you celebrate after winning a $27 million tax dispute Mr. Robertson? And if things are so bad deficit-wise, then why don't you and Mr. Rubin lead by example and name the U.S. government your primary beneficiary right now?
According to all indicators, both of these Wall Street aristocrats have contracted a severe case of Stockholm Syndrome. But they’re hardly alone.
Over the past several years, billionaires like Warren Buffett (NYSE: BRK-A) and Bill Gates (NasdaqGM: MSFT) have publicly advocated estate taxes too. In 2007, Buffett testified in front of the Senate Finance Committee arguing that keeping estate taxes would help to close the gap between super-rich and the middle class.
Are You “Super-rich” Like "Them?"
The other problem with estate taxes is determining what the proper definition of “super-rich” is.
For instance, using the same general standard as Buffett, Gates and Robertson, if you own a $1 million home, a $1 million retirement account and $1 million in other possessions, then you’re considered “super-rich.” And because of your “super-rich” status your estate and all of its property deserves to be taxed at a 55% rate once you die. Forget about all the years you paid taxes on the income to acquire your personal possessions because they don’t matter.
On the other hand, it’s quite probable that individuals with a $1 million home, a $1 million retirement account and $1 million in other possessions would emphatically disagree they’re “super-rich” people and in the same league as big-mouthed billionaires like Robertson or Buffett.
This supports my theory that today’s billionaires are definitely from another planetary universe. If they can’t see that a $50 billion estate and a $3 million one hardly deserve the same estate tax rate, it’s probably because they’ve been associating with too many dyslexic tax assessors.
Spurious Arguments Aside…
Contrary to what arguments in favor of estate taxes claim they are not healthy for the economy or for society.
Research studies by the Tax Foundation link the existence of estate taxes to a strong disincentive towards entrepreneurship. One study conducted in 1994 found the 55% rate for estate taxes back then had approximately the same negative impact as doubling an entrepreneur’s top effective marginal income tax rate.
Other studies confirm problems with estate taxes by illustrating the high collection costs for the federal government. Some economic reports have estimated the compliance costs of the federal estate tax to be just about equal to the amount of revenue generated. In other words, estate taxes are nearly five times more costly per dollar of revenue compared to federal income taxes which makes them one of the government’s most inefficient revenue streams.
A 90% Estate Tax Surcharge for Billionaires!
Here’s another problem with reinstating estate taxes: Not enough millionaires have been polled to see what they think. Do they support it? Or are they against it? (Unfortunately, Robert Rubin doesn’t count because as a former government worker his opinions are automatically cancelled out.) Does anybody know why big-mouthed billionaires are the only ones talking?
This brings us to a climactic conclusion which includes one novel idea proposed nowhere else but right here: Congress should pass a 90% estate tax surcharge on just billionaires, that way they can get the estate tax bill they’ve been begging for. This would go a long way towards satisfying their insatiable desire for more taxes. It will also create the economic equality they’ve been seeking. Once they’ve had their estates thoroughly plundered and ransacked then they can be poor, broke and overtaxed just like the rest of America. Welcome to the club!
In the meantime, as Congress does nothing, death will once again become a taxable event. Even for semi-rich middle class folks that don't deserve it.