Tim Worstall

More Economic Idiocy at the NY Times.

Another leader from the NY Times.

When Congress returns from its monthlong summer vacation next week, two
of the leadership’s top priorities include renewing the push to repeal
the estate tax, which affects only the wealthiest of families, and
extending the tax cuts for investment income, which flow largely to the
richest Americans.

Umm, no and no.

The estate tax. Affects only the wealthiest of families does it? How much have the Kennedys paid over the past five decades? Virtually nothing, for the money is in a series of trusts. How much will Warren Buffett’s estate pay? Nothing, for as he has already announced, all will go into a trust.

The thing is, given the current way the estate tax is set up, is that the truly wealthy, those with over $100 million, don’t pay it.

Of course, it would be possible to refute this point. Very easy in fact. Perhaps the owners of the NY Times, the Sulzburger and Ochs families, would care to reveal how much they have paid in estate tax as the business has been passed down the generations? As the shares are held in trusts I think the answer would in fact be $0.

And taxation on investment income? Don’t they realise that the long term benefits actually flow to overwhelmingly to the society at large? In a country with a nett zero (yes, zero) savings rate, the idea that we might make saving a little more attractive by reducing the tax burden on it appears, well, attractive. We would expect more savings, thus more investment in businesses and assets. And we know, from research by Nordhaus, that of every $100 in wealth created by entrepreneurial activity, 97% goes to the society at large, only 3% sticking to the fingers of the investors who create  it.

Sounds like a pretty good idea to me.

In

3 responses

  1. dsquared Avatar
    dsquared

    Tim, spare us this faux-populist talking point. Inheritance tax is paid by the top percentiles. What you’re talking about is minor differentiation within the top tenth of a percentile. Perhaps you’re planning on running for office in Martha’s Vineyard on a ticket of “standing up for the ordinary millionaires against the billionaires”, but I doubt it will play anywhere else.
    Tim adds: But one of the justifications offered is that the estate tax stops the plutocratic accumulation of wealth down the generations. Which it doesn’t.
    If the talking point was”millionaires pay it but billionaires don’t ” then I would be perfectly happy with what they are saying. It’s just that if they did that then their rationalisation would look pretty weak.
    Or, if you prefer “I’m Punch Sulzburger and I think you should pay the estate tax but I should not”.

    Reply
  2. Rob Read Avatar
    Rob Read

    If the government taxed the things like land asset value and scrapped those other taxes based on punishing financial success then we wouldn’t have to worry about such things as inheritance tax.
    The only cost of inheritance should be the cost of changing the deeds of ownership!
    Adam Smith got it WRONG when he said wealth was created by the size of the market. Wealth is created by the degree on InterCONNECTIVITY of the market.
    Eradicating government barriers to market connectivity should see a HUGE increase in wealth.
    The are voluntarily progressive in that a billionaire in a mansion will pay considerably more than someone who lives a more humble existence.

    Reply
  3. knzn Avatar
    knzn

    I liked your previous post about Times idiocy, but on this one, you’re wrong on both counts. Dsquared has already answered the first, and your response is unconvincing. (You want to define “wealthiest of families” very narrowly. I’d say, you’re never going to get the revenue from billionaires, so get it where you can. The billionaires are too few to worry about. Regarding plutocratic accumulation of wealth, I’d be more worried about the millionaires, whose children exist in large enough numbers to be in real competition with those of the thousandaires.)
    Tax cuts for investment income might increase private saving, but they almost certainly decrease total saving, once you take into account government dissaving. (Tax cuts on labor income are even worse, but that’s beside the point, since they aren’t even on the table. And since the not-so-rich would receive most of the direct benefit of such tax cuts, it’s not clear that they would come out behind anyhow.)

    Reply

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