Support for estate tax

I agree with Jack Mandelbaum (7/7, Letters) that we need to be taxing the higher levels of income. So I don’t quite understand why he would favor eliminating the estate tax.

This tax affects only the richest 2 percent, so no ordinary “retirees” need worry about it.

The marginal tax rate has been decreasing for decades, which is why our middle class is getting smaller and smaller and why CEO incomes are skyrocketing.

President Theodore Roosevelt was the first to propose the estate tax in 1906 in order to prevent such vast inherited wealth that plutocracy starts to trump democracy.

Roosevelt said: “Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government.”

He recognized that the rich benefit from our system of property rights and protection of wealth, not to mention modern-day government subsidies to large corporations and tax loopholes available to the very rich.

Incidentally, to my knowledge no one has yet to find one “family farm” that was lost because of the estate tax.

Frank Strada
Overland Park

Comments

[CRD]

"Hourly compensation for workers has increased 3.9% over the last year. (Larry Kudlow, 7-10-06)"

CNN/Money Magazine cites a 4.2% inflation over the past 12 months in an article today:

http://money.cnn.com/2006/07/14/pf/college/lucrative_degree/index.htm?cnn=yes

"...but the increases didn't outpace the 4.2 percent inflation over the past 12 months through May."

That 3.9% raise for hourly workers doesn't look so good now, does it?

[CRD]

And since you don't appear to have read my post below, I'll cut a little snippet for you, just in case you were thinking about the impact of payroll taxes on the wealthy:

"The payroll tax places a greater burden on low- and middle-income families than the income tax because it is levied at a flat rate on the first dollar of wages and does not apply to wages above $94,200 in 2006."

[CRD]

"I had in mind all taxes, Federal, State, and Local."

Yep. Like I said, you don't have a leg to stand on.

State and local taxes tend to be regressive, not progressive, and hit the poor and middle class much more heavily than the wealthy.

[Engineer]

CRD
I had in mind all taxes, Federal, State, and Local. The totals run to a very high percent even without accounting for the tax costs included in the costs of the goods you buy. In discussing income taxes your figures seem to be based on a person's wealth. Is that the proper basis for Income taxes? It seems to me that my figures, based on income, are more correct as that is what income taxes are assessed on and are more revelant. You write of those with incomes of $10 Million, but there are relatively few with such incomes. In 2003 the threshold income for the top 0.1% was $1,350,000 (rounded up). But there still has not been a definition of 'the rich". Who are these people?
As to the question of how higher taxes on higher earners will result in more income for lower earners, this idea seems to me to be implied by the numerous complaints, and the way in which they are made, in various threads about the growing gap in income distribution.

[jack]

BTW although they didn't get all the inheritance taxes cut, the wingnuts did get them substantially cut again recently. The number I heard for who is affected was way below the "top 2%".

[jack]

The richest 5% control 59% of the wealth. Because of this they "pay over half the taxes". How unfair can you get?

Don't you all understand? The richer the rich get, the better off we all shall be! It's so simple. Or at least simplistic.

I made myself a place to rant. It is:

www.tatbo.com

Geuss what tatbo stands for?

[CRD]

"Mark may have been talking about total taxes paid, not Federal Income taxes. If so he may be corresct. It is seems impossible to find out the total of taxes one pays."

Jeez, do a little research, Lloyd. You simply don't have a leg to stand on here.

"The effective Social Security tax rate drops as income rises. This is due to the fact that only the first $87,000 in earned income is taxed. The tax rate on earned income up to that amount is 6.2%."
http://www.osjspm.org/101_taxes.htm#4

"The federal income tax is progressive. However, payroll taxes are very regressive, and most state and local taxes are also regressive."
http://www.osjspm.org/101_taxes.htm#4

"The wealthiest 5 percent have 59% of the wealth and pay 38.4 percent of federal taxes. The wealthiest 1 percent have over 38 percent of the wealth and pay 24.8 percent of federal taxes. These households have an average wealth of $10.2 million and pay only 3.5 percent of their wealth in taxes. By way of comparison, the bottom 40 percent of taxpayers have an average net wealth of $1,100 and pay 163 percent of their net wealth in taxes."
http://www.osjspm.org/101_taxes.htm#4

"Among taxpayers with incomes greater than $10 million, the amount by which their investment tax bill was reduced averaged about $500,000 in 2003, and total tax savings, which included the two Bush tax cuts on compensation, nearly doubled, to slightly more than $1 million.

* These taxpayers, whose average income was $26 million, paid about the same share of their income in income taxes as those making $200,000 to $500,000 because of the lowered rates on investment income."
http://select.nytimes.com/gst/abstract.html?res=F20C17FA3B540C768CDDAD0894DE404482

"The Treasury fact sheet focuses only on the individual income tax, one of the most progressive taxes. Not surprisingly, it shows that high-income households pay a large share of this tax. But the degree to which high-income households shoulder the tax burden is lessened once payroll taxes are taken into account. Although the progressive individual income tax is the single largest source of federal revenue, the payroll tax — which is regressive — is a very close second, accounting for between 35 percent and 40 percent of all federal taxes in recent years.[3] The payroll tax places a greater burden on low- and middle-income families than the income tax because it is levied at a flat rate on the first dollar of wages and does not apply to wages above $94,200 in 2006. According to CBO, more than three-quarters of workers paid more in payroll than in income taxes in 2000, the latest year for which these data are available.[4]

As a result, the CBO data show that the top one percent of households paid 22.6 percent of all federal taxes in 2003, significantly below the 34.6 percent share of individual income taxes that CBO estimates this group paid.[5]

The CBO data also indicate that in 2003, the top one percent of households received 14.3 percent of the before-tax income in the nation, eight percentage points less than the share of total federal taxes they paid. This indicates that the federal tax system overall is progressive, but not to the steep degree that Administration claims imply.

Furthermore, taxes also are paid to state and local governments, which tend to rely more heavily on regressive sales taxes and excise taxes. When state and local taxes are included, the gap between the percentage of the national income that high-income individuals receive and the percentage of the taxes they pay narrows further, a point that the noted tax expert Joseph Pechman demonstrated nearly two decades ago.

Estimates by the Citizens for Tax Justice confirm this conclusion. They show that in 2004, the overall share of federal, state, and local taxes combined that high-income households paid was only a little bit larger — less than two percentage points larger — than their share of the national income. Similarly, the share of taxes that middle- and lower-income households pay was just a little more than one percentage point lower than their share of the national income, according to the CTJ estimates.[6] It is only because the progressive federal tax system offsets the regressive effects of state and local taxes that the U.S. tax system as a whole is even mildly progressive."
http://www.cbpp.org/4-10-06tax5.htm

[CRD]

"Just how having the upper incomes pay more Federal Income Tax would increase the earnings of those with lower incomes is unclear to me."

Me too. I've never heard anyone make that claim.

However, Mark claims that cutting income taxes raises tax revenue, a theory that's never been shown to hold water.

[Engineer]

CRD
Mark may have been talking about total taxes paid, not Federal Income taxes. If so he may be corresct. It is seems impossible to find out the total of taxes one pays. When you buy something you not only pay sales taxes on the transaction, you must repay the tax costs experienced by others to sell, produce, and provide the raw materials required to produce the article purchased.
As to the amount of the Federal Individual Income Tax paid by various income groups the figure for 2003 are:
Threshold Income % Tax Paid
Top 25% $57,343 83.66%
Top 10% $94,891 65.84%
Top 5% $130,080 54.36%
Top 1% $295.495 37.27%

Obviously, the higher the income the more income taxes are paid and the higher incomes pay the major amount of the Federal Income Tax. Just how having the upper incomes pay more Federal Income Tax would increase the earnings of those with lower incomes is unclear to me. This seems to be a repeated theam on this thread But no one has explained how this would work. Of course, even many those in the top 10% income wise are not extremely affluent, so just whom are you going assess these higher taxes against?
Once again, who is it that make up "the rich" that so many urge be targeted?

[CRD]

"Hourly compensation for workers has increased 3.9% over the last year. (Larry Kudlow, 7-10-06)"

Openmind asks the right question when he asks about the inflation rate.

According to
http://inflationdata.com/Inflation/Inflation_Rate/CurrentInflation.asp

the inflation rate for the last 12 months through May 06 was 3.66%. (that's assuming that I keyed all the #s into the calculator correctly)

[CRD]

"The rich pay well over half of their income in taxes."

the Mark Robertson Bullsh*t detector is ringing again!

This may help, Mark:
_________________________
United States: Year 2005 income brackets and tax rates (posted in Wikipedia)
As of 2005 there are six "tax brackets" used to calculate the percentage of taxable income (of individuals) that must be paid to the United States Treasury. For the unmarried, these percentages are:

Income from $1 to $7,300, tax bracket is 10%
Income from $7,301 to $29,700, tax bracket is 15%
Income from $29,701 to $71,950, tax bracket is 25%
Income from $71,951 to $150,150, tax bracket is 28%
Income from $150,151 to $326,450, tax bracket is 33%
Income $326,451 and above, tax bracket is 35%
If an individual's taxable income falls within a particular tax bracket, the individual pays the listed percentage of income on each dollar that falls within that monetary range. For example, a person who earned $10,000 in 2003 would be liable for 10% of each dollar earned from the 1st dollar to the 7,300th dollar, and then for 15% of each dollar earned from the 7,301st dollar to the 10,000th dollar, for a total of $1,135. This ensures that every rise in a person's salary results in an increase of after-tax salary.

Contrary to a popular belief, there is no point at which one is better off earning less money (or giving to charity to obtain deductions). That is, because the marginal tax rate is always far less than 100%, an individual is financially "better off" realizing "more" income than "less" income, even though the marginal tax rate applicable to the highest level of income of that person increases as income increases.
___________________________

Mark Robertson sez:

"Once again, if you really want the "rich" to pay more in taxes then you should be for cutting their taxes."

That dog just won't hunt.

On Reagan's tax cuts:

http://home.netcom.com/~rdavis2/taxcuts.html

"The argument that the near-doubling of revenues during Reagan's two terms proves the value of tax cuts is an old argument. It's also extremely flawed. At 99.6 percent, revenues did nearly double during the 80s. However, they had likewise doubled during EVERY SINGLE DECADE SINCE THE GREAT DEPRESSION! They went up 502.4% during the 40's, 134.5% during the 50's, 108.5% during the 60's, and 168.2% during the 70's. At 96.2 percent, they nearly doubled in the 90s as well. Hence, claiming that the Reagan tax cuts caused the doubling of revenues is like a rooster claiming credit for the dawn.

Furthermore, the receipts from individual income taxes (the only receipts directly affected by the tax cuts) went up only 91.3 percent during the 80's. Meanwhile, receipts from Social Insurance, which is directly affected by the FICA tax rate, went up 140.8 percent. This large increase was largely due to the fact that the FICA tax rate went up 25% from 6.13 to 7.65 percent of payroll. Hence, the claim that the doubling of TOTAL revenues proves the effectiveness of tax cuts is including revenues which resulted from a tax hike to prove the effectiveness of a tax cut. This seems like the height of hypocrisy.

Hence, what evidence there is suggests there to be a correlation between lower taxes and LOWER revenues, not HIGHER revenues as suggested by supply-siders. There may well be valid arguments in favor of tax cuts. But higher tax revenues does not appear to be one of them."

and more:

http://en.wikipedia.org/wiki/Reaganomics

"The belief by some proponents of Reaganomics that the tax rate cuts would more than pay for themselves was influenced by the Laffer curve, a theoretical taxation model that was particularly in vogue among some American conservatives during the 1970s. Arthur Laffers model predicts that excessive tax rates actually reduce potential tax revenues, by lowering the incentive to produce. But while Federal Government tax revenues did increase significantly following the tax cuts of the Reagan years, that was mostly because of already scheduled increases in the Social Security Payroll Tax -- while in contradiction to the Laffer Curve, revenues from the individual and corporate income tax fell substantially as a percentage of GDP. The dramatic increase in spending produced the budget deficits of that era."

and, for good measure, on Kennedy's tax cuts:

http://www.slate.com/id/2093947

[openmind]

"Hourly compensation for workers has increased 3.9% over the last year. (Larry Kudlow, 7-10-06)"

First, does that include all working classes? That could easily be driven by the top wage earners which would conceal the earnings of the working class.

Also, what was the inflation rate for the last year? If you think that 3.9% makes up for the increases in energy costs, you are crazy.

The whole pie may be expanding, but the portion of the pie that makes its way down to the lowest wage earners is decreasing.

[Mark Robertson]

Once again, if you really want the "rich" to pay more in taxes then you should be for cutting their taxes.
Many continue to live in the static economic world where the size of the economic pie remains the same.
In the 11 quarters since President Bush's June 2003 tax cuts, the U.S. economic pie has expanded by 20% or 2.2 trillion. Hourly compensation for workers has increased 3.9% over the last year. (Larry Kudlow, 7-10-06)
In the first 9 months of fiscal 2006, tax revenues have climbed 206 billion or 13%. Topped in U.S. history only by last years 274 billion or a 15% increase. Individual income tax payments are up 14.1% this year, and nonwithheld individual tax payments, including capital gains payments, are up 20%.(WSJ, 7-12-06)
Corporate tax payments are also through the roof.
Since the top 50% of earners pay 97% of the taxes, the rich are obviously paying much more in taxes.
After the major tax rate reductions of Presidents Coolidge, Kennedy, Reagan, and now President Bush, treasury revenues have massively surged, and the rich have dramatically increased their tax payments.
And Karl Marx was a great supporter of the disastrous and criminal death tax.
The rich pay well over half of their income in taxes. Tax rates should actually be cut much more for the rich, to really get the economy roaring and all economic levels prospering. Thankyou.

Mark Robertson
Independence