Class Warfare Blog

November 22, 2017

The Estate Tax: Who Needs It?

Our president’s tax proposal proposes to do away with the “Estate Tax,” known in the GOP as “The Death Tax.” Let me explain how it works:

Do you and your spouse have an estate worth $11,000,000? If so, if both of you were to die, then the estate tax would kick in. Do you know how much you would pay? A lot, right? No, it is $0.00. The eleven million is basically a deduction (actually it is currently 10.98 million dollars, but I rounded off because I know how little you like math).

So, who does the estate tax applied to?

The rich?

(You got it in one try. I am so proud of you!)

In other words I am guessing, just guessing now, that it doesn’t apply to you.

So why do we need such a tax?

I will tell you.

The Founding Fathers were very concerned about the power of wealth. They were worried that congressional representatives would be susceptible to bribery. They almost universally detested political parties because they created a win-lose dialog that encouraged people to win at all costs and have loyalty to their party rather than to the country as a whole. (Smart, weren’t they.)

The estate tax is to discourage great wealth being passed from generation to generation. But hey, the wealthy earned that money, right? True, but the kids inheriting it did not. And the State (meaning “us”) have an interest in avoiding  huge fortunes being amassed.

Consider the Walton family. Sam Walton created the Wal-Mart chain and when he died, he left $100,000,000,000 to his heirs. Today, his half a dozen or so kids and grand kids have fortunes ranging from just under $7 billion to just under $40 billion. It is pretty clear that Sam Walton made most of that money and the kids are living off of interest (primarily as owners of a 50+% share of all Wal-Mart stock).

Just so you will know, if you wanted to spend a billion dollars in a calendar year, you would have to spend $532,000 per hour for every working hour of every working day to pull that off. It is a great deal of money.

Had the estate tax of 40% have kicked in (it didn’t; Sam had lawyers—”Only morons pay estate tax,” at least according a WH official, something that needs attention under the heading a Tax Evasion), his heirs would have “only” received $60 billion rather than the full $100 billion. Would they have suffered? I hardly think so. And $40 billion dollars could fund the CHIP program or something equally worthy.

Need I remind you that being a billionaire involves having at least a thousand million dollars; you would be a millionaire one thousand time over? Oh, the Walton clan made $8.7 billion in 2016 off of their stock, that wasn’t have been taxed away as estate tax. So, I think one can say old Sam provided for his family.

So, what have the Walton heirs done with their money?

Well, they oppose a minimum wage increase. Can’t be having all of those Wal-Mart employees getting paid a living wage. Where would all of the money to pay them come from?

They have a track record of charitable giving, but not exactly in proportion to their income.

They are interested in education reform. Guess how? Too late—charters, charters, charters, vouchers, kill the teachers’ unions.

In a country in which money is power—in math terms that’s MONEY ≡ POWER, where means ≡ “is identical to”—it is dangerous to allow individuals to accumulate too much power over the rest of us.

If the rich complain that the government will just waste the money, we can apply those taxes directly to the military budget … if they want.

 

PS This is why I do not shop at Wal-mart. Wal-mart is a major oppressor of its employees, refusing a pay a small part of what they earn to the people who earn it for them. They would rather counsel them on government programs for the “needy” for which they qualify. Assholes.

11 Comments »

  1. To me, massive, unsolvable wealth inequality is one of the driving forces behind the explosion of “ruin porn” or :”apoca-porn” – essentially the romanticization of a dystopian future. And I’m a prime culprit in this: bring everybody down and then we’ll all be equal — at the bottom — which I’m OK with.

    Like

    Comment by Anony Mole — November 22, 2017 @ 2:50 pm | Reply

  2. What is that old saying? Hmmm. Let’s see. Uhhh …

    Oh yeah! Now I remember …

    “The rich get richer and the poor get poorer.”

    Like

    Comment by Nan — November 22, 2017 @ 3:11 pm | Reply

    • And this ends when we no longer have money to usurp? Yes, it is a long standing principal and so are the comments about torches and pitchforks. Capitalism cannot worjk without controls and the only one who can put those ocntrols on is us (aka the guvmint).

      On Wed, Nov 22, 2017 at 3:11 PM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — November 22, 2017 @ 9:46 pm | Reply

  3. Who needs the estate tax?Well, as the old song says; “it ain’t me babe. No, no, no, it ain’t me babe………”

    Like

    Comment by Walter Kronkat — November 23, 2017 @ 1:27 pm | Reply

    • But you do, unless you and your spouse have an estate worth well over $11 million dollars. You need it to keep the rich bastards oppressing us from getting even richer.

      I understand you do not need a tax on your estate when you die, but nothin’ from nothin’ leaves nuthin’ is I think how the song goes.

      On Thu, Nov 23, 2017 at 1:27 PM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — November 25, 2017 @ 12:22 pm | Reply

  4. Walmart employs over 2.3 million people worldwide (1.4 million U.S.) and is considered the third largest employer in the world behind the US Department of Defense and the People’s Liberation Army of China.

    Acccording to their corporate website and 2016 financial statements, Walmart:

    – increased U.S. employee benefits by $2.7 billion over 2 years
    – pays a minimum wage of $10/hr (that’s 38% more than the federal rate of $7.25)
    – pays an average $13/hr average
    – pays store management teams $50,000 to $150,000 per year
    – pays quarterly bonuses
    – hires immigrants and veterans
    – offers training programs and scholarship grants
    – offers company-paid life insurance
    – offers health, dental and vision insurance
    – offers 401k plans
    – offers employee discounts
    – paid $6.1 billion in federal, state and local taxes (Fscal Year Ended 1/31/2016)

    How much more do you want them to contribute to the U.S. economy?

    Like

    Comment by Ron — November 24, 2017 @ 10:32 am | Reply

    • Oh, where to start? If the minimum wage from when it was set in 1968 (at $1.60 an hour) were to be corrected just for inflation, it would be in excess of $10 per hour. If that minimum wage were kept proportional to changes in productivity, it would be over $20 per hour, so using the federal minimum wage as any guide is misleading. Walmart workers are being paid less in real dollars than they would had they been working in the 1960’s.

      Anybody who has hired 2.3 million employees has to have hired immigrants and veterans … and Jehovah’s Witnesses, atheists, right-wing nut jobs, crazy people, etc. I would be interested if the percent of veteran’s hired was in excess of the % of veteran hires in other comparable industries, but they do not make that claim.

      Walmarts claim that they paid $6.1 billion in taxes is hardly credible. I suspect they included sales taxes (a state tax) which are pass throughs to their customers. The retailer collects the tax from the customer and then pays that tax to the state. I do not know that, but in any case their gross income in 2016 was $121.15 billion dollars, on which they paid exactly (using their numbers) 5.0% of their income in taxes, five percent! In 2016, I paid 14.7% of my income in federal taxes alone (if I added up all of the others (payroll, sales, property, etc.) it would be much much higher.

      My basic claim is that the people at the bottom of the Walmart pyramid make billions of dollars for the people at the top. Walmart has almost become the poster child for wage suppression efforts (controlling workers hours, keeping people on PT rather than hiring FT workers, collecting food donations for their employees around holidays, etc.). If they were to share a bit more of that wealth their worker’s created for them, they would be looked on a bit more kindly.

      Like

      Comment by Steve Ruis — November 24, 2017 @ 11:47 am | Reply

  5. Where to start?

    Well, first off is to recognize that Walmart doesn’t operate as a public charity; its sole function is to generate investment returns for its shareholders.

    Second, income taxes are levied on net income, not gross. Their audited financial statements report an operating income of $24.1 billion and an income tax liability of $7.6 billion (at an effective tax rate of 30.3%), less $1 billion in deferred payments; so this would be in addition to any sales, business, property and payroll taxes already paid.

    Third, employment contracts are voluntary. No one is forced to work for Walmart. Don’t like their benefits and wages? Then seek out an employer who offers better ones. Or better yet, start a competing chain that provide the employee perks you desire.

    Like

    Comment by Ron — November 24, 2017 @ 2:09 pm | Reply

    • This is all well and good but nobody said Walmart was operating as a public charity or should. And to say that its sole function is to generate investment returns for its shareholders is to buy relatively recent nonsense. The idea of shareholder value being the only reason for a corporation to exist is a fiction created less than 20 years ago. I wonder what corporations did before they learned that this was their reason to exist.

      The idea is bankrupt because it doesn’t connect with reality. Most holders of Walmart stock, save the Walmart clan, didn’t provide anything to the corporation: no capital, no services, no ideas, really no nothing. The purchasers of Walmart stock when they first went public did supply some capital, but I suspect all of that has been repaid with a healthy amount of interest at this point. Current shareholders bought their shares when someone decided to sell theirs, and Walmart got nothing from that transaction (except maybe an inflated value for their own shares). What those shares represent now is a call on a share of Walmart’s profits for as long as the company exists. These payments do not make the company better, but they do make the shareholders more well off.

      Now, who do you think might advance an idea that a corporation exists sole to serve its shareholders? If you “follow the money” as we are advised, this is something promoted by … shareholders. Does anyone else promote this idea as being a “good idea?” (Remember that the idea is to maximize payouts to people who do not help the corporation function or make profits.) Only economists on the payrolls of shareholders. (I am referring here to all shareholders, not just Walmarts.) It turns out that the vast majority of common stock is held by wealthy people who are renowned worldwide for just one thing: greed. So, I am not surprised at this move.

      That you have bought in on such a ridiculous idea shows how effective their propaganda campaign is.

      Go back 50 years and look at corporate statements of their reasons for their existence and frequently you would find statements about being a supportive member of their community, about providing good jobs in the communities in which they worked, etc. Much of that is gone now, because of the insistence on shareholder value being the only goal of a corporation. By the way, the largest contingent of newly rich people over they past twenty years has been corporation executives. These executives took advantage of a Clinton-era regulation designed to restrict CEO pay to get paid in stock options. So, these CEOs were singularly focused on raising the share price of their corporations stocks, whether that was good for the company or not. Because of this approach, CEO pay skyrocketed after the passage of a regulation designed to restrict it. Playing the system is a time-honored endeavor. Reducing the system to a single goal serves no one except a few and they are invariable rich and getting richer.

      With regard to your point that no one is holding a gun to the heads of Walmart workers, it is well know that business-types prefer high unemployment. When unemployment is high, workers are hesitant to risk going after another job, especially when those other jobs are few and far between. Wages and benefits get squeezed during such times and labor unrest goes away (hence the love of pro business-types for this situation). These people are very “pro competition”, except when it affects their bottom line and then they are pro-protectionism, pro-regulation, etc.

      On Fri, Nov 24, 2017 at 2:09 PM, Class Warfare Blog wrote:

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      Comment by Steve Ruis — November 25, 2017 @ 11:37 am | Reply

      • Perhaps some people run their business as a hobby, but I think it’s safe to say that the majority are motivated by an expectation of profit–especially when they’re the shareholders of a public corporation.

        I fail to see what difference it makes how many times the shares change hands, because a sale of shares represents a transfer of ownership. So it only makes sense that the current shareholders (i.e. owners) on record receive the benefits promised. It’s the same as buying sports, theatre, or concert tickets and selling them to someone else, who sells them to someone else, who sells them to someone else; even though the venue gains no additional revenue from the subsequent transactions, it remains obligated to admit entrance to whoever presents the tickets.

        Walmart devotes several webpages to outlining its community commitments; so that argument is a non-starter.

        As is blaming the business sector for government policy failures. If anything, your example presents a strong argument against government interference and regulation in the affairs of men. As Thomas Jefferson wisely noted in his first inaugural address:

        “…what more is necessary to make us a happy and a prosperous people? Still one thing more, fellow-citizens — a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.”

        Unfortunately, many administrations have ignored that sage advice and now we’re left with the bloody aftermath of their failed interventions.

        To the final point: when there’s a job surplus or a worker shortage, or both, workers hold out for better wages or migrate to better paying jobs. Blaming either side for acting in its own self-interest seems like a pointless exercise.

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        Comment by Ron — November 25, 2017 @ 8:22 pm | Reply

        • You seem to only be seeing the failed interventions. There were and are good ones. After myriad mine disasters, the federal government passed regulations requiring miners to be provided with safety equipment. Instead of thousands dying every year in mine accidents it dropped to only hundreds. Child labor laws, food adulteration prevention laws, there are myriad examples of good government regulations. One can argue that capitalism in this country wouldn’t have survived were it not for government regulations.

          I agree that bad regulation needs to go. But tossing the good with the bad will not yield a good result. But that takes hard work, careful analysis, and is definitely not sexy, so our current crop of politicians won’t touch it with a ten foot pole. It is a definite quandary.

          On Sat, Nov 25, 2017 at 8:22 PM, Class Warfare Blog wrote:

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          Comment by Steve Ruis — November 25, 2017 @ 9:12 pm | Reply


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