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Trump Should Take On The Real ‘Global Elite’ — His Kids

Trump Should Take On The Real ‘Global Elite’ — His Kids

If you have a weak stomach, the GOP convention promises to be emetic.

Not only will Donald Trump, a certified thrice-married birther, be accepting the nomination of the party that gave us Abraham Lincoln and, much more recently, decades of braying about traditional marriage, but you’ll also have the abdomen-churning pleasure of watching his children and his third wife speak directly to the nation.

Meanwhile, both living former Republican presidents and the GOP’s last nominee for president will be spending the week trying to pretend that 2016 isn’t happening.

For anyone who cares about America, decency and tolerance, this convention will be an informercial for what’s gone wrong. But the inclusion of the Trump family suggests there could be useful message broadcast out of Cleveland — if only in the subtext of Trump and his older children’s speeches.

To understand why, lets look at some numbers.

Amidst the constant stream of grim news that has marked this fateful yar, we actually got some good news this week. The latest data from the IRS shows that the incomes of the bottom 99 percent of Americans grew 3.9 percent in 2014, which just happens to be the year Obamacare went into effect. It was the best yearly growth for working families since 1998.

In the same year, the top 1 percent saw their income grow at an even faster 7.7 percent.

America’s richest families have captured most of the real income growth since the recession ended in 2009, continuing a trend that began in 1980 of massive and luxurious gains for the few million people at the top while the 300 million or so other Americans enjoy almost no new wage increases from the most radical series of technological advances that have ever been crammed into four decades.

Privilege. It quickly become one of the most politicized words in the English language as we were told to “check it,” or were accused of envying it while getting rich on a few dollars a day in food stamps. But privilege is the beating heart of the twin crises of our time — climate change and inequality. Some billionaires just really resent being asked to not boil the planet or pay taxes, even if the inevitable alternative is famine, drought, and massive social unrest.

And foremost among these billionaires is the likely Republican nominee for president, who will be the first presidential nominee in almost fifty years not to release his tax returns, despite two dozen promises to do so.

Donald Trump has promised to make climate change worse by refusing to believe it’s actually a real problem. And his solution to economic inequality?

Cutting taxes for the rich and their corporations, slashing regulations that protect workers and the environment, and completely eliminating the inheritance tax.

Getting rid of any taxes on the giant inheritances that a tiny fraction of Americans who have won the lottery of birth and stand to gain millions from their relatives’ deaths has long been a Republican passion project. Congress, which tends to be far richer and far more likely to be the beneficiary or benefactors of great inheritances, has shockingly obliged.

The tax was nearly eliminated by conservatives until it was reinstated after President Obama’s re-election in 2012.

The right has done an amazing job of getting the public on their side in this issue, which is a tribute to their marketing abilities. Bloomberg‘s Barry Ritholtz explains:

In 2013, 2,596,993 Americans died, according to the Centers for Disease Control and Prevention.

About 5,000 of them paid a tax after that mortal event. To be more accurate, their estates paid whatever tax was owed. That means 2,591,993 Americans died that year without paying any tax.

In other words, just 0.19 percent of all deaths in 2013 resulted in a tax. When 99.81 percent of all deaths don’t create a taxable event, calling it a death tax is mathematically nonsensical.

What is the actual trigger for this taxable event? If your estate is worth less than $5.43 million dollars in 2015 (or $10.86 million dollars for a couple), you are exempt from the federal estate tax.

Republicans have made this perfectly sensible and necessary tax unpopular by branding it a “death tax.”

“Why would someone use the phrase ‘death tax’ when more than 99 percent of deaths don’t result in a tax?” Ritholtz asks. “Because he is either a) innumerate, b) ignorant or c) trying to deceive you. There are no other possibilities.”

Remember when Trump said he was taking on “global elites?” Apparently he’s doing it that by making sure that his kids’ kids’ kids’ never have to fly coach.

In exchange, we get around $320 billion added to our deficit, which is about 160 times the funding to fight Zika that President Obama has requested and that the GOP Congress has refused to fund without cuts and other important civic needs like flying the Confederate Flag. Or almost as much as we’ll “save” by passing costs on to seniors if we enact Paul Ryan’s Medicare voucher plan.

Democrats need to fight the fire that’s burning up our economy with fire. They should start calling the inheritance tax a “global elite tax.” Mostly because it is one.

Some of these global elites will be functional and somewhat impressive people like Ivanka Trump. And some will have the dull stares of Trump’s two older sons, who some genius nicknamed “Uday and Qusay.”

The children of the wealthiest, who are sucking up most of the gains of the economy, will earn multiples of what most Americans will earn in a lifetime on the day their parents die. The least we can do is expect they’ll be taxed for it the same way you’re taxed for the money you sweat all week to earn.

Of course, the greatest commercial for a “global elite tax” on inheritances is Trump himself.

He likes to brag that he started off with “a small million dollar loan,” which was anything but small in the 1970s and was also matched exponentially by a $70-million loan guarantee from his father, who was still paying him a six-figure salary into the 1980s and was still bailing him out in the 1990s.

Denying that even this booster rocket filled with privilege aided his ascent gives Trump the fantasy that he’s self-made — that he some how overcome his childhood of attending schools and making connections that gave him access to wealth and power beyond the imagination of most Americans.

Opponents of affirmative action often talk about the stigma the beneficiaries of the program must carry knowing they got some assistance from a program designed to expand our economy’s gene pool. But those who benefit from the inbreeding of wealth suffer no stigma. Instead, they get to invent myths in which they’ve conquered all with the help of small loan, ignoring the millions of Americans who have to take on loans in hopes of earning the college degree and doing better than their parents.

Of course, Hillary Clinton’s descendants will benefit from the great machinery of wealth perpetuation conservatives have built, even if she wasn’t born into privilege as Trump was. And she, like most rich people, is structuring her wealth to avoid estate taxes.

But at least she’s not trying to destroy any hope that we can move beyond an economy that has been captured by the malefactors of great wealth.

While Trump cuts taxes for the richest, Clinton’s plan makes sure that millionaires pay at least the same tax rates as nurses and adds a surtax for those who earn over $5 million to fund services like universal pre-K. She would also raise the estate tax on her family.

Our winner-take-all economy has led to a winner-take-all political system in which birth increasingly determines success in life.

When the Trump kids speak, it’s our chance to see the global elite in their natural environment — on a platform built by their parents’ success. When you see them there, think about setting them free from the burden of dependency as we take on the feudalism of the global elite.

Why Republicans Want A Bigger U.S. Estate Tax Repeal Than Ever

Why Republicans Want A Bigger U.S. Estate Tax Repeal Than Ever

By Richard Rubin, Bloomberg News (TNS)

WASHINGTON — Congressional Republicans have narrowed the estate tax so much that it affects only about 5,500 wealthy American households a year. Now they want to eliminate the tax altogether — with a bonus for heirs.

Under the latest plan, backed by farmers and business groups, estates would pay no taxes. Furthermore, heirs wouldn’t owe any capital gains taxes on the increased value of assets over the deceased’s life.

That move — simpler and more generous than previous repeal efforts — would let billions of dollars in income and assets escape all U.S. taxes. The plan would cost the U.S. government $269 billion in lost revenue over a decade.

The House of Representatives will vote this week on the latest effort to repeal the tax, which is now paid by only 0.2 percent of U.S. estates. Republicans are drawing attention to what they see as an unjust levy by bringing up the legislation at the annual tax-filing deadline.

They’re also shrugging aside criticism from President Barack Obama, who calls the plan a budget-busting handout to the nation’s wealthiest families at a time when lawmakers should focus on the middle class. Instead, they’re moving in the opposite direction, making repeal more attractive for business owners and creating an even wider gap between the parties on how to tax inherited wealth.

The new Republican plan is different from past repeal bills in a technical yet important way. If it became law, families would be able to pass assets across generations and avoid capital gains taxes on both real gains and so-called phantom income attributed to inflation.

“When you look at the bill, it actually doesn’t make sense; it would get a bad grade in a law school final exam,” said Ed McCaffery, a law professor at the University of Southern California who favors repealing the estate tax. “That is telling old people, clutch onto things until they die. That’s not how the American economy works.”

The first full House vote on estate tax repeal in ten years would reaffirm Republicans’ position to kill what they have long labeled the “death tax.”

It would also let the more than 60 percent of House members who were elected since the last repeal vote take a formal position on the issue.

Repeal won’t happen anytime soon, not with Obama proposing higher estate taxes and only one Senate Democrat siding with the chamber’s Republicans during a test vote on the issue last month. Instead, the House measure is a marker for the 2016 campaign and a signal from Republicans to business groups that repealing the estate tax is a priority.

“The death tax is the wrong tax at the wrong time, and it hurts the wrong people,” said Representative Kevin Brady (R-TX), lead sponsor of the House bill.

He said business owners already pay hefty taxes during their lifetimes and said some families’ holdings have been subject to the estate tax multiple times.

“They are double and triple taxed,” he said.

Republicans and business groups point to the difficulties faced by family businesses, including the expenses of tax planning to minimize or avoid the tax.

“We are often asset-rich but cash-poor,” said Andy Harig, director of government relations for the Food Marketing Institute, which will bring 200 grocers from across the country to Washington this week. “A lot of our members are sometimes surprised when they do the valuation to find out what their businesses are worth.”

Obama and other Democrats say estate tax repeal — especially now with a $5.43 million per-person exemption — is actually about protecting the very wealthy.

“One of the laws that my friends on the other side of the aisle are trying to pass right now is a new, deficit-busting tax cut for a fraction of the top one-tenth of one percent,” the president said on April second in Louisville, Kentucky. “That’s fewer than 50 people here in Kentucky who would, on average, get a couple million dollars in tax breaks.”

The new twist this year is the way that Republicans have structured the legislation, breaking with their approach in bills from 2000, 2001, and 2005.

Back then, they paired estate tax repeal with what’s known as modified carry-over basis. Under that system, heirs who choose to sell inherited assets pay capital gains taxes on the full gain since the asset was purchased, minus an exemption to protect families outside the very top of the wealth scale.

In what became the law for 2010 only, heirs could reduce that tax with a capital gains exemption of up to $1.3 million, with an extra allowance for surviving spouses. That approach ensured death wasn’t a taxable event and allowed heirs to defer taxes until they chose to sell.

This year’s bill is different. It retains what’s known as the step up in basis, which lets heirs defer taxes until they sell and avoid taxes entirely on any increases in value that occurred before they inherited the assets.

That bypasses the complexities and legal fights around carryover basis. It can also be a potent combination, extending rules that now apply for people with less than $5.43 million to the entire population.

Consider a married couple who starts a business with one million dollars and both die in 2015 when the business is worth $50 million. They leave the business to their daughter, who sells it for $60 million in 2017.

Under current law, the couple would have a $10.86 million exemption from the estate tax and pay a top rate of 40 percent on the rest. The daughter would then pay a 23.8 percent capital gains tax on a ten million dollar gain, for a total tax bill of about $18 million.
Under previous Republican plans, the couple would have paid no estate taxes. The daughter, however, would have to pay capital gains taxes on the entire $59 million gain minus the exemptions, for a total tax bill of about $13 million.

Now the parties are moving further apart, because of the Republican approach and Obama’s proposal earlier this year to impose capital gains taxes on appreciated assets at death.

Under the latest Republican plan, the family would pay taxes only on capital gains that occur after the couple’s death — for a total bill of $2.38 million. Obama would charge them about $30 million.

The basis rules are especially important for farmers, who often have assets tied up in land that has appreciated in value, said Pat Wolff, a tax specialist at the American Farm Bureau Federation. Farmers sometimes choose to sell parts of their land, and the basis rules in the Republican measure make that easier and less expensive.

“We asked that the death tax repeal be a straight up repeal bill and not create new taxes for farmers and ranchers,” she said.

Lawmakers should rethink the bill, said Patricia Soldano, a California estate planner who has spent 20 years backing repeal.

“You very possibly would have assets in which the appreciation on those assets is untaxed,” she said. “And I don’t really think people are suggesting that.”

The combination of estate tax repeal and the stepped-up basis rules would be “pretty close” to ending the capital gains tax altogether, said Lawrence Zelenak, a Duke University tax law professor.

“Anybody who can afford not to would never sell an asset during life again,” he said. “It’s just this massive tax favoritism for transfers at death.”

Photo: Judith E. Bell via Flickr

Betting The Farm On A Lie

Betting The Farm On A Lie

Few things sell ideas in American politics like a good farm story.

Just ask Representative Dave Reichert. He held a hearing recently on the impact of the estate tax on farms and small businesses.

An outspoken critic of the tax, Reichert was inspired by a recent story featuring the McBrides — an old farming family from the town of Issaquah in his suburban Seattle district.

The McBrides first got noticed over the summer, when The Seattle Times reported that they had sold the last farm in Issaquah, a sign of the changing economy and demographics of the community.

The McBride family had farmed the land for over a hundred years and over the course of six generations. The 12.5-acre lot sold for $4.5 million to a developer planning to build a luxury housing development called Avery Pointe, where houses start in “the low 700s.”

Jim McBride — son of the 97-year-old patriarch, Ralph McBride — claimed they’d sold the land because of the estate tax. “All my parents’ wealth was in that land,” he insisted, “and we couldn’t afford to pay the taxes that come with inheriting it at the current property value.”

Five days later, the paper cited the Issaquah farm in an editorial decrying the estate tax as an attack on family farms and calling for its immediate repeal.

Frank Blethen, the publisher of the paper, is an outspoken critic of the estate tax and a longtime funder of efforts to repeal it. So his embrace of the McBrides’ account is unsurprising.

There’s just one thing: The story is completely false. There’s no way the McBride family sold their farm because of the estate tax.

At the federal level, estates worth less than $5.4 million for individuals and $10.8 million for married couples are exempt. So if all or even most of the McBride family’s wealth was in the land that sold for $4.5 million, they’d still have fallen below the exemption and would have paid no federal estate tax.

And in Washington state, farms are 100 percent exempted from the estate tax. If the family had kept the farm and the kids had inherited it, they wouldn’t have paid a dime on the bequest.

In fact, critics of the estate tax have tried and failed to find a farm lost as a result of the estate tax for the past 15 years.

David Cay Johnston took on the task in 2001, when the estate tax was much more robust than it is today, and couldn’t find a single one. That reporting for The New York Times won him a Pulitzer.

There are 2.2 million farms and 28.2 million small businesses in the United States, according to official data. In 2013, only 120 farms and small businesses owed any federal estate tax at all, and their average value topped $50 million — more than 10 times the worth of the McBride estate.

Which brings me back to Reichert. Perhaps he’s just deeply concerned about this tiny fraction of very wealthy estates. Perhaps he was misled by the intentionally misleading editorial in The Seattle Times.

Or perhaps he’s doing what estate tax opponents have been doing for decades: not letting facts get in the way of a good story.

OtherWords columnist Josh Hoxie is the director of the Project on Opportunity and Taxation at the Institute for Policy Studies.

Originally posted at OtherWords.

Photo: khawkins04 via Flickr

Congress Should Reinforce The Inheritance Tax, Not Scrap It

Congress Should Reinforce The Inheritance Tax, Not Scrap It

Real wages have stagnated for decades. Home ownership rates are down. College debt is weighing down young people entering the workforce. Millions of low-wage workers eke out a living on a minimum wage of $7.25 an hour.

As the American Dream slips away for millions of people in this country, one faction of Congress is doing its best to aid a select group of folks that least needs a helping hand: trust fund babies.

More than 222 House members — nearly all of them Republicans — have co-sponsored legislation to abolish America’s inheritance tax, a levy that only applies to the estates of multi-millionaires and billionaires.

Technically called the estate tax, and derided by its opponents as the “death tax,” this part of the tax code affects only 1 out of every 500 Americans.

If Congress abolishes it, the already wealthy will gain the privilege of passing unlimited inheritances to their children once they die. Scrapping it would rip a $210 billion hole in the federal budget over the next decade, according to the Tax Policy Center.

The lawmakers determined to kill the inheritance tax go out of their way to hide the facts and pose as populists.

Take Representative Kevin Brady, a Texas Republican and lead sponsor of repeal legislation. He circulates advertisements with two young farm kids next to a pickup trick with the caption, “The Death Tax crushes family farms, ranches and businesses.”

And a Kentucky PAC spent $1.8 million airing a TV ad featuring a farmer who bemoans the burden of the inheritance tax and praises Senate Minority Leader Mitch McConnell (the farmer, John Mahan of Lexington, did not complain about the $405,692 in federal farm subsidies he received between 1995 and 2012).

The inheritance tax “continues to be the number-one reason family-owned farms and businesses aren’t passed down to the next generation,” Brady recently (and wrongly) claimed.

It’s hard to fathom how a tax that 99.8 percent of households don’t pay could be a bigger threat to farmers than volatile farm prices and competition from corporate agribusiness. But don’t bank on opponents of the inheritance tax letting the facts muddle their political agenda.

As a strong supporter of the inheritance tax, I’ve seen this playbook before. Between 1996 and 2004, America’s plutocrats, including the Walton and Mars families, invested millions in a propaganda campaign designed to save themselves billions.

They plastered the media with images of farm families, alleging that the inheritance tax would be the “death of the family farm.” The only problem was, when pressed by Pulitzer Prize-winning reporter David Cay Johnston, foes of the estate tax couldn’t produce a single example of an actual farm lost because of the inheritance tax. It was a complete myth.

Congress wound up weakening the tax in 2001, when opponents failed to abolish it. Now this tired debate is back, with those phony farm images and fake populism.

Here’s what really matters: Couples with less than $10.6 million in wealth are exempt from the inheritance tax. So are individuals with wealth under $5.3 million.

The inheritance tax is important because the very richest Americans already benefit from enormous loopholes that enable them to pay taxes at rates lower than average workers. The inheritance tax levels the playing field.

And the huge family fortunes now being passed onto the next generation are creating a new wave of American aristocrats.

Who are the real faces of the inheritance tax? Try the sons and daughters of the billionaires who make the Forbes 400 list, standing next to their family limousines.

There is a real problem with the inheritance tax: Billionaires are paying expensive lawyers to weasel out of paying it. Casino mogul Sheldon Adelson, for example, used a system of trusts to funnel $8 billion in wealth to his heirs. This maneuver let his family dodge about $2.8 billion in estate taxes that would be due after his death.

Instead of abolishing the inheritance tax, lawmakers should focus on closing the loopholes that empower the richest Americans to legally dodge it.

Chuck Collins is a senior scholar at the Institute for Policy Studies and co-editor of www.inequality.org. He is co-author, with Bill Gates Sr., of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes

Cross-posted from Other Words

Photo: Ervins Strauhmanis via Flickr

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