(See original post)

August 29, 2010

Letter to the editor by Pete Wilmoth, West Virginia Center on Budget & Policy

Recent media coverage of the Bush tax cuts has misrepresented Obama's policies.

Obama wants to renew tax cuts for all but the wealthiest 1 percent of West Virginians, those with incomes of more than $250,000. Eighty-nine percent of full-time workers in the state earn less than $75,000. The median household income is under $38,000.

According to Citizens for Tax Justice, if all of Bush's cuts are made permanent, the bottom 60 percent of West Virginians will pay $117 more, while the richest 1 percent pays $18,069 less than Obama's alternative.

Increasing taxes for most of West Virginia while trimming taxes for a select, wealthy few is ineffective economic policy, since the working class is likely to spend their tax cuts immediately, while the wealthiest 1 percent is more likely to save.

Renewing the Bush tax cuts for the rich will increase the national debt by $1 trillion over the next 10 years, according to the national Center on Budget and Policy Priorities. A temporary jobs credit that reduces payroll taxes for new hires, increased state fiscal assistance, and unemployment benefits all provide greater economic "bang" for the taxpayer "buck," according to the nonpartisan Congressional Budget Office.

Obama's plan would create nearly $90 billion in revenue over the next two years that, if invested in unemployment benefits, would yield five times the economic stimulus of renewing Bush's tax cuts for the wealthy.

West Virginia needs tax policies that promote economic growth by looking out for working class people.

Pete Wilmoth
Research Associate
West Virginia Center on Budget & Policy
Charleston , West Virginia

(See original post)

Arthur Delaney

08-19-10

The private equity industry is lobbying hard to convince members of Congress to lay off the tax scheme that allows investment fund managers to pay a lower tax rate than their secretaries.

The Private Equity Council, a lobbying group for private equity, is mobilizing fund managers to get members of Congress to come visit PE-owned companies in their districts to "showcase some of the industry's success stories," the New York Post reported Monday. (Private equity is arguably better known for buyouts and layoffs than creating jobs.)

At stake is the taxation of "carried interest," the 20 percent of a fund's investment profits that its managers take in on top of a fixed fee. Carried interest is currently taxed as capital gains at a top rate of 15 percent. House Democrats have long sought to tax carried interest like income, which has a top rate of 35 percent, only to see their proposals fail in the upper chamber.

But the Senate nearly closed the carried interest loophole this summer by attaching carried interest clampdowns to a series of bills reauthorizing extended unemployment benefits -- efforts that fell just short of overcoming a Republican filibuster. Senate Democrats have not signaled their plans but the carried interest piece is still out there, having been negotiated and tweaked several times, and theoretically they could pick it up to offset the cost of an upcoming spending bill.

"I think it will come back," said Nicole Tichon, a lobbyist for the U.S. Public Interest Research Group. "I found it interesting the [Private Equity Council] is allegedly having these grassroots meetings. It's one thing to make your case to the congressman, I think the harder sell is going to be to convince the rest of the taxpayers that fund managers deserve a tax break."

The Private Equity Council refuses to comment on its lobbying, but says "what has become clear is that more and more independent voices like KPMG and Ernst & Young are pointing out the unintended consequences of proposed carried interest and enterprise value taxation, which in turn are triggering broader opposition and concerns from small businesses, family partnerships, and corporations."

Experts say the attempt to point to small businesses is misdirected.

"Raising the tax rate on the fund managers won't impact the amount of activity in the sector in a meaningful way," said Victor Fleischer, a law professor at the University of Colorado who has written about the loophole. "The people who put up money -- the investors, the endowments, pension funds -- their tax rate will remain unchanged."

The group also launched a website earlier this year detailing the number of private equity-owned companies in every state and the number of workers employed.

"For every success story, there's a failure story which isn't being told," said Fleischer. "Private equity has done a reasonably good job with the companies they manage, but it's not like they're magical managers who do no wrong. Sometimes it's part of the strategy of the PE firm when they take over companies and want to improve efficiency, which is code for firing people."

Democrats have argued among themselves and extensively reworked their carried interest legislation. In Obama's first budget, raising taxes on carried interest was estimated to generate $23.89 billion in revenue over 10 years. When it landed in the Senate back in May, Democrats closed the loophole by only 75 percent, which would have raised $18.685 billion. In the next draft of the domestic aid bill, Democrats watered it down further by decreasing the amount of carried interest that would be taxed as income from 75 percent to 65 percent, and the bill raised $14.157 billion. Subsequent tweaks took it from there to $13.905 billion, and at last glance it raised $13.594 billion.

Steve Wamhoff, a lobbyist with Citizens for Tax Justice, is less optimistic that the carried interest change will happen. "The problem is these fund managers have such unbelievable power over senators, including Democratic senators," he said. The private equity, hedge fund, and venture capital industries solidly favor Democrats over Republicans with campaign contributions.

Instead of using the carried interest measure to offset the cost of a recent state aid bill, Democrats cut future funding for food stamps.

"I would also say there's not a lot of time left for this Congress to do anything," Wamhoff added.

Doing nothing would please the private equity crowd. Newsweek reported this week that Stephen Schwarzman, chairman of the Blackstone Group, said the proposal to tax investment fund managers like regular rich people is "like when Hitler invaded Poland in 1939."

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(See original post)

Wednesday, August 18, 2010


By Jijo Jacob

Energy Intelligence said in a report on Wednesday U.S. domestic oil output could fall as much as 10 percent over the next ten years if Obama administration’s proposals to roll back tax breaks for oil and gas companies get through.

President Obama had proposed tax increases to the tune of $31 billion on oil companies in his first budget, and he raised tax proposals to $37 billion in last year’s budget.

The issue of rolling back tax breaks resurfaced in the backdrop of the Gulf of Mexico oil spill which President Obama used as a window of opportunity to push his case against Big Oil.

In a speech made at Carnegie Mellon University in June Obama pitched for tax overhaul in the oil sector.

"The votes may not be there right now, but I intend to find them in the coming months," he said. "I will continue to make the case for a clean energy future wherever and whenever I can, and I will work with anyone to get this done. And we will get it done."

Congressional Joint Committee on Taxation for the 2011-2020 period has estimated that a proposal to bar Big Oil from using the deduction for domestic manufacturing will raise $14.8 billion over ten years.

Again, a plan to stop oil companies from immediately writing off intangible expenses related to oil exploration, such as wages, machinery and materials, will fetch $10.9 billion over a period of ten years.

Another proposal by President Obama will plug a loophole whereby oil companies save a lot of money by flatly deducting a certain percentage of gross revenue under the 'property depletion' head. This proposal, if accepted, will bring in another 9.6 billion to the exchequer.
There have been proposals also for modifying rules for 'dual capacity' taxpayers, and to reduce the break for amortization of geological and geophysical expenses.

Oil companies argue that rolling back of the tax breaks will hit profitability and thereby hurt exploration and investment, leading to output cuts and price rises.

However, there are analysts who think otherwise.

In an article published in Citizens for Tax Justice last month, Jeff Hooke and Steve Wamhoff contended that among the largest five oil companies, less than 10 percent of profit goes to exploration for new oil fields. "High profits do not encourage exploration," they say, suggesting that a clampdown on oil tax breaks doesn’t necessarily mean output reduction and price rise at least in the near term.

"In fact, in the top five oil companies, managers direct most of their excess cash to dividends and stock repurchases, both of which drive up the companies' share prices and the executives' stock option values," they argue, citing SEC filings made by the companies.

"The percentage of net profits directed towards dividends and stock repurchases for the top five oil companies was 58 percent in 2005, 73 percent in 2006, and 72 percent in 2007, 71 percent in 2008 and 89 percent in 2009.

These figures are high in comparison to other industries. To the extent that tax loopholes targeting the oil and gas industry boost their profits, there is no evidence that the additional profits lead the companies to explore for more oil so that they can increase the supply."

The Energy Intelligence report says oil firms are fast-tracking lobbying efforts to scuttle the President’s proposals. According to data from the Center for Responsive Politics, oil industry spent a whopping $44.5 million for lobbying in the first three months of the year, surpassing the previous year's record.

(See original post)

Letter to the Editor by Brian O’Donoghue

Tuesday, August 17, 2010


FORT LAUDERDALE

This article is in response to the July 28 column by Travis Rowley, “Patriots can save Rhode Island yet.”

“Patriots can save Rhode Island yet.” This is about the only truth in this whole article. But it begs the question: “How do you define a patriot?” Travis is apparently an angry young man. He managed to regurgitate just about every tired piece of Republican propaganda that one could think of in a single column. I’ll try to tell the truth in less space.

First, unions are not to blame. Think back to when they were strong; before Ronald Reagan ruined this country with his anti-worker, smaller-government mantra. Back when mothers did not have to work and when the American dream was attainable to a much greater portion of our working class than it is today.

Back in the ’70s I worked in Rhode Island in a non-union shop. Our salaries were comparable to union shops because my firm had to compete with the union shops for the best labor.

Yes, in those days unions helped everyone, even those who did not belong to a union. Over the last 30 years salaries (adjusted for inflation) of non-college educated workers have dropped. They have remained about the same for college-educated workers. This all occurred while the Republican Party ran amok with our economy and managed to weaken unions to the point that they could no longer help the wages of the rest of us because union workers became a smaller part of our work force — killing a major factor in allowing working folks to stay above water.

The Republicans often use Europe as an example of failed socialist policy. It only takes a trip to Europe to see how false that premise is. Yes, people may pay a higher percentage of their higher salaries in taxes, but a much higher proportion of those taxes go directly back to the people and not to unnecessary wars, military spending and tax breaks for the rich.

Have you noticed Europeans visiting this country for weeks on end? This is because they have laws that guarantee mandatory vacation time for all workers. Large portions of our work force do not receive any vacation — or sick leave, for that matter. What does that say about the greatest country in history?

Deficits: Republicans, during the “W” years would often say that deficits are not necessarily a bad thing. During periods of high deficits, entitlements are easier to eliminate. Over that last 30 years Republican presidents have increased our country’s deficit many times more than the few Democratic presidents. Reagan spent more than all previous presidents combined. Then Clinton came alone and balanced the budget and actually left office with a surplus. Then George W. Bush came along and spent more than Reagan did on two ridiculous unfunded wars, one of which was waged for fictitious reasons, and huge unfunded tax cuts for the wealthiest citizens.

Republicans do a masterful job in dividing the middle and lower class against each other. They have also done a great job in dividing the middle class between liberal and conservative. This is all a ploy to keep us weak against the real enemy — the corporate elite.

As long as they succeed with this strategy, they still have a chance to control us. Without this they go the way of the “Know Nothings.” They drive home the idea that the poor are driving us all to the poorhouse with all these entitlements.

That’s while the facts clearly show that it is the wealthy that benefited the most from our domestic economic policies of the last 30 years.

Bob McIntyre, an economist and director of the Washington-based Citizens for Tax Justice, found that in 2007 the bottom 60 percent of American households (with income of less than $50,000) benefited from government programs to a tune of $445 billion.

The top 20 percent (with income of over $85,000 per year) got a striking $539 billion in tax breaks. And the top 1 percent (with incomes above $450,000 a year) received $298 billion. This sheds new light on the welfare queens that they are always talking about.

Until the working class finally realizes what is really going on and unites against the real enemy, nothing will change.

The greatest redistribution of wealth in history took place over the last 30 years. When Ronald Reagan took office in 1981, the wealthiest 10 percent owned the same amount of wealth as the bottom 40 percent. As of 2008 the wealthiest 1 percent owned the same amount of wealth as the bottom 90 percent. What kind of conservative patriot would want to defend that kind of shift of wealth?

But they try.

Yes, this young man is no doubt dedicated to his ideology. And he does have an excellent grasp of right-wing talking points. It’s too bad that he hadn’t done his homework.

Brian O’Donoghue lives in Fort Lauderdale, Fla.

(See original post)

Mon, Aug 16, 2010
By Gene Nichol

CHAPEL HILL To the surprise of none, another fight looms in Washington. Having locked horns on health care, financial reform, economic stimulus, the Supreme Court and (almost) war, now it's time for taxes.

President George W. Bush's defining tax cuts are set to expire in 2011. President Barack Obama and most of the Democrats would retain the reduced rates for all but the top 2 percent - those making over $250,000 a year ($200,000 for single filers). Obama explains that, given our "fiscal situation," we "simply can't afford" cuts of this magnitude for the very wealthiest Americans. Reportedly over $710 billion in revenue would be lost in the next decade.

Republicans, of course, disagree. But their rationale has been murky. They fought mightily against recent efforts to extend unemployment compensation, to aid cash-strapped state governments and to further boost an anemic recovery because the proposals would add to a daunting federal deficit. But tax cuts for the richest among us are apparently copacetic; even if we have to borrow boatloads to pay for them.

When pressed, recently, to explain the contradiction, House Minority Leader John Boehner stumbled. He refused, repeatedly, to answer whether the proposed cuts would "be paid for" or would "pay for themselves." He offered only that the lowered rates were necessary "for job creation" and "getting the economy moving again."

Those claims were rendered less compelling, though, by a recent study from the nonpartisan Congressional Budget Office. It examined 11 options to stimulate growth and job creation. The report found not only that that making the tax cuts permanent would dramatically increase the long-term deficit; it was the worst proffered option to nudge the economy forward. Extending unemployment benefits, staunching state budget cuts and providing job-creating tax credits would generate at least three times as much additional economic activity as retaining the top tax rates.

Alan Blinder, former Federal Reserve vice-chair, put it this way in The Wall Street Journal: "Paying more in unemployment benefits offers the most spending 'bang' for the budgetary 'buck'. Extending the Bush tax cuts for the wealthy offers the least."

The poor and near-poor will spend every cent they can get hold of. Those making over $250,000 will be far more apt to save the proceeds. If the rationale is job creation, the Republicans seem to have it backwards.

Of course it's not implausible to surmise that something else is going on.

Why ditch, completely and enthusiastically, the central tenets of deficit reduction? Why opt for the most demonstrably inefficient means of stimulating recovery, while rejecting, under potent party discipline, long-proven, more effective measures? And when pressed to explain the tortured path, why the studied non-responses?

My own sense of it is the national Republicans are now saying, clearly, even if by indirection, "We're the party of the 2 percent." We're willing to further bust the budget, to countenance massive teacher and first-responder layoffs, to leave millions out of work, to permit our beyond-frayed social safety net to crumble, to increase what is already the steepest income inequality in the Western industrial world and to flatly discard the concerns of "the least of these" in order to bolster the economic prospects of a relative handful of the wealthiest people in the United States. Some mission that.

It's worth wondering how, in a majoritarian democracy, this happens to a political party - especially one poised to make large gains in the upcoming congressional elections. The impact of money on our politics is part of it, to be sure. But not all. Americans, after three decades, undoubtedly know what they're getting. A complex cauldron of distaste for government and the public sector; derision for those needing a helping hand; obsession with guns, gays and abortion; and, perhaps, a yearning for forgone privilege seems to leave large numbers of us willing to opt, against all odds, for government by and for the wealthy.

And it shows in the North Carolina numbers. Citizens For Tax Justice reports that the bottom 60 percent of Tar Heels would pay, on average, $167 less under the Obama plan than the Republican alternative (because of changes to the Earned Income and child tax credits). Under the Republican version, though, the richest 1 percent would pay $33,644 less annually. And that fortunate 1 percent would receive 30 percent of the entire relief package benefits. Here's to government for the common man.

Gene Nichol, a professor of law at the UNC School of Law, is director of UNC-Chapel Hill's Center on Poverty, Work & Opportunity.

(See original post)

Thursday, August 12, 2010
Last updated: Thursday August 12, 2010, 1:21 AM
Bloomfield Life

Bloomfield and towns across America are starving for funds. In previous articles in this column, we have shown how the wars in Iraq and Afghanistan and paying for the upkeep of over 700 military bases around the world have drained our communities of over $1 trillion.

What I wanted to learn more about this time was how the tax system that funds our national, state and local governments operates and whom it benefits the most. This led me to research what percentage of our tax dollars comes from corporations, wealthy families, the middle class and the poor. Most news programs and newspapers never talk about this, but I was determined to find out.

I searched the Internet, read articles and a book. Although I had some idea that our tax laws favored the wealthy, I was very surprised at the glaring statistics showing the huge tax breaks given to corporations and the rich and not to the middle class or to the poor. Here is some information that I found:

• Most large corporations, including the vast majority of foreign companies doing business in the U.S., pay no income taxes, according to a Government Accountability Office report release in August 2008.

• I looked for some specifics. I learned that Microsoft paid no taxes at all in 1999, despite $12.3 billion in reported U.S. profits. In 2009, Bank of America took in $4.4 billion in income and paid no taxes.

Would you and I get away with not paying any taxes?

• Oil and gas companies have for years received a bonanza of unjustified tax breaks that serve only to add to profits for their shareholders – not to lower prices to consumers. Neither do these tax breaks result in meaningful investment into clean energy sources such as solar and wind, nor for environmental clean-ups for their oil and gas disasters.

Here is an example of such a tax break: U.S. manufacturing industries have been allowed to take a deduction called the Section 199 Deduction. The oil and gas companies lobbied Congress to have this benefit apply to oil and gas production even though they manufacture nothing. If this loophole were closed, the U.S. could collect an additional $14.8 billion over 10 years.

• The share of federal taxes paid by corporations declined from 40 percent in the 1940s to 9.2 percent in 2001. State and local taxes paid by corporations have also declined. In 1957, they provided 45 percent of local property tax revenues in the states, but by 2002, they paid only 2.9 percent.

• During the 1950s, the richest one percent of families paid 85.5 percent of the top slice of their income in taxes, which still left them with millions, and in some cases, billions. Today the tax rate on the top dollar of the richest one percent who make an average of $1.5 million is only 30.9 percent.

• In contrast, during the 1980s the effective tax rate on middle class families steadily increased from 5.3 percent in 1948 to 24.63 percent in 1990. Their payroll taxes also rose dramatically from 6.9 percent in 1950 to 31 percent in 2000, as money collected from wealthy companies and the rich dwindled drastically.

• The working poor pay a greater percentage of their income in taxes than the rich. According to one researcher, about three-fourths of all working poor and middle class American households pay more in payroll taxes, which go toward Medicare and Social Security, than in income taxes!

• The most unfair of all taxes is the sales tax, which everyone pays. Because it is a flat rate based on the item you are buying and not your income level, this tax hits the poor the hardest. The rich, unlike the poor and much of the middle class, can invest much of their money in stocks and bonds, and thus are able to make more money to make up the small percentage they pay in taxes.

So as life has gotten harder for town governments, middle class and poor families to balance their budgets, it has gotten better for the tiny class of rich people and large corporations who are reaping billions from the benefits of a tax code skewed in their favor. We see the result of this flawed policy as U.S., state and local governments cut back spending on services that we depend on such as mass transportation, schools, libraries, repairing roads and bridges and cleaning up toxic waste sites.

We see this sad state of affairs reflected in New Jersey newspaper headlines such as "$10.5 billion budget shortfall looms for state" and "NJ Millionaire's Tax Plan Fails" (Governor Christie's veto of a two percent added tax for one year on the 16,000 wealthiest, which would have netted $600 million).

Bloomfield is facing a $3.8 million budget gap. We could have used some of that Millionaire's Tax to cover our town's expenses.

A solution to our country's budget crisis is to pressure our local, state and federal representatives to speak out against the many tax loopholes for the wealthy and for companies and to advocate for a more just tax system. We don't need a set of laws and regulations that provide welfare for the rich while the rest of us faithfully pay our taxes and reap few benefits.

How would you propose to change the current unfair system?

(Sources used for this article: Citizens for Tax Justice; Radical Possibilities, Public Policy, Urban Education and a New Social Movement by Jean Anyon, Routledge Press, 2005; "Most Corporations Don't Pay Income Taxes" by Richard Rubin, Aug. 12, 2008, Congressional Quarterly; "Do the Poor Really Pay No Taxes?" by Ezra Klein, Washington Post, April 14, 2010; "Yes, 47% of Households Owe No Taxes. Look Closer" by David Leonhardt, The NY Times, April 13, 2010; "NJ Millionaires Tax Plan Fails," MYFOXNY.COM/AP; "The Working Poor Do Pay Taxes," www.999ideas.com.)

— The writer, Jane Califf, is a member of the Essex/Passaic Green Party and secretary to the Township of Bloomfield Recycling Committee.

Bloomfield and towns across America are starving for funds. In previous articles in this column, we have shown how the wars in Iraq and Afghanistan and paying for the upkeep of over 700 military bases around the world have drained our communities of over $1 trillion.

What I wanted to learn more about this time was how the tax system that funds our national, state and local governments operates and whom it benefits the most. This led me to research what percentage of our tax dollars comes from corporations, wealthy families, the middle class and the poor. Most news programs and newspapers never talk about this, but I was determined to find out.

I searched the Internet, read articles and a book. Although I had some idea that our tax laws favored the wealthy, I was very surprised at the glaring statistics showing the huge tax breaks given to corporations and the rich and not to the middle class or to the poor. Here is some information that I found:

• Most large corporations, including the vast majority of foreign companies doing business in the U.S., pay no income taxes, according to a Government Accountability Office report release in August 2008.

• I looked for some specifics. I learned that Microsoft paid no taxes at all in 1999, despite $12.3 billion in reported U.S. profits. In 2009, Bank of America took in $4.4 billion in income and paid no taxes.

Would you and I get away with not paying any taxes?

• Oil and gas companies have for years received a bonanza of unjustified tax breaks that serve only to add to profits for their shareholders – not to lower prices to consumers. Neither do these tax breaks result in meaningful investment into clean energy sources such as solar and wind, nor for environmental clean-ups for their oil and gas disasters.

Here is an example of such a tax break: U.S. manufacturing industries have been allowed to take a deduction called the Section 199 Deduction. The oil and gas companies lobbied Congress to have this benefit apply to oil and gas production even though they manufacture nothing. If this loophole were closed, the U.S. could collect an additional $14.8 billion over 10 years.

• The share of federal taxes paid by corporations declined from 40 percent in the 1940s to 9.2 percent in 2001. State and local taxes paid by corporations have also declined. In 1957, they provided 45 percent of local property tax revenues in the states, but by 2002, they paid only 2.9 percent.

• During the 1950s, the richest one percent of families paid 85.5 percent of the top slice of their income in taxes, which still left them with millions, and in some cases, billions. Today the tax rate on the top dollar of the richest one percent who make an average of $1.5 million is only 30.9 percent.

• In contrast, during the 1980s the effective tax rate on middle class families steadily increased from 5.3 percent in 1948 to 24.63 percent in 1990. Their payroll taxes also rose dramatically from 6.9 percent in 1950 to 31 percent in 2000, as money collected from wealthy companies and the rich dwindled drastically.

• The working poor pay a greater percentage of their income in taxes than the rich. According to one researcher, about three-fourths of all working poor and middle class American households pay more in payroll taxes, which go toward Medicare and Social Security, than in income taxes!

• The most unfair of all taxes is the sales tax, which everyone pays. Because it is a flat rate based on the item you are buying and not your income level, this tax hits the poor the hardest. The rich, unlike the poor and much of the middle class, can invest much of their money in stocks and bonds, and thus are able to make more money to make up the small percentage they pay in taxes.

So as life has gotten harder for town governments, middle class and poor families to balance their budgets, it has gotten better for the tiny class of rich people and large corporations who are reaping billions from the benefits of a tax code skewed in their favor. We see the result of this flawed policy as U.S., state and local governments cut back spending on services that we depend on such as mass transportation, schools, libraries, repairing roads and bridges and cleaning up toxic waste sites.

We see this sad state of affairs reflected in New Jersey newspaper headlines such as "$10.5 billion budget shortfall looms for state" and "NJ Millionaire's Tax Plan Fails" (Governor Christie's veto of a two percent added tax for one year on the 16,000 wealthiest, which would have netted $600 million).

Bloomfield is facing a $3.8 million budget gap. We could have used some of that Millionaire's Tax to cover our town's expenses.

A solution to our country's budget crisis is to pressure our local, state and federal representatives to speak out against the many tax loopholes for the wealthy and for companies and to advocate for a more just tax system. We don't need a set of laws and regulations that provide welfare for the rich while the rest of us faithfully pay our taxes and reap few benefits.

How would you propose to change the current unfair system?

(Sources used for this article: Citizens for Tax Justice; Radical Possibilities, Public Policy, Urban Education and a New Social Movement by Jean Anyon, Routledge Press, 2005; "Most Corporations Don't Pay Income Taxes" by Richard Rubin, Aug. 12, 2008, Congressional Quarterly; "Do the Poor Really Pay No Taxes?" by Ezra Klein, Washington Post, April 14, 2010; "Yes, 47% of Households Owe No Taxes. Look Closer" by David Leonhardt, The NY Times, April 13, 2010; "NJ Millionaires Tax Plan Fails," MYFOXNY.COM/AP; "The Working Poor Do Pay Taxes," www.999ideas.com.)

— The writer, Jane Califf, is a member of the Essex/Passaic Green Party and secretary to the Township of Bloomfield Recycling Committee.

(See original post)

Posted Wednesday, August 11, 2010 ; 10:15 AM | View Comments | Post Comment
Updated Wednesday, August 11, 2010; 02:55 PM

The federal policy will apply to estates valued at $1 million or more.

By Walt Williams
Email | Other Stories by Walt Williams

If you’re very wealthy and want your children to inherit your belongings without paying taxes, here’s a tip: Die now.

The federal estate tax – more infamously known as the “death tax” – was suspended at the beginning of the year and is currently on hiatus.

That means any transfer of property through inheritance currently isn’t taxed, but it won’t stay that way. The tax will come back next year at a higher rate than it was before the temporary repeal went into effect.

President Barack Obama has instead proposed freezing the tax at its 2009 level, when estates were taxed at 45 percent of their value. However, many liberal groups want a tiered system where the richer you are, the more you’re taxed.

They argue the rich couldn’t have enjoyed their wealth if it weren’t for the services that government provides, from the security of a strong military to a robust infrastructure that allowed them to do business.

“We firmly believe the people who have these enormous estates are the people who benefit the most,” said Steve Wamhoff, legislative director for Citizens for Tax Justice.

The estate tax generates a lot of anger for a tax that few people actually pay. When it was suspended at the end of 2009, only estates valued at $3.5 million or more were taxed.

It has slowly phased out since 2001 thanks to tax cuts pushed through Congress by President George W. Bush. The year before he took office, individuals had to pay a maximum 55 percent tax rate on the value of their estates above $675,000.

Bush’s tax cut gradually increased the exemption while lowering the maximum tax rate. The exemption jumped to $1 million and then to $2 million. At the same time, the tax rate dropped below 50 percent.

The tax will come back in 2011 at the 55 percent rate if Congress does nothing, but it will apply to estates with a value of at least $1 million per individual.

A report by Congressional Budget Office found that 108,000 estates nationwide filed to pay the tax in 2000, but only 9,800 of them would have had to pay under the 2009 level. In West Virginia, the number of estates pay the tax has shrunk from 245 in 2000 to 60 in 2008, according to Citizens for Justice.

The suspension of the tax means the federal government has missed out on some potential windfalls. One of the more famous examples is George Steinbrenner, owner of the New York Yankees, who died earlier this year. Another is Dan L. Duncan, a Texas businessman whose personal wealth was valued at $9 billion at the time he died, according to The New York Times.

Critics of the tax see little reason Congress should keep it. The Tax Foundation, a nonprofit organization that generally advocates against tax increases, noted in a recent report that the tax generates about $25 billion a year, which is distributed widely among federal government coffers and therefore has a small impact on the overall budget.

The authors also said the tax was absurdly complex, making it difficult for individuals to plan their estates.

The conservative Heritage Foundation argues that the tax discourages savings and investment and therefore undermines job creation.

“Because it is a tax on capital, it is destroying some 1.5 million jobs that the economy desperately needs as it struggles to recover,” Curtis Dubay, a senior tax policy analyst for the foundation, wrote in a July 20 report.

Many federal lawmakers note government needs the money given the looming budget deficit. Obama has proposed letting many of Bush’s tax cuts for the wealthy expire while retaining those aimed at the middle class.

Still, the compromise touted by Obama isn’t satisfactory for Citizens for Tax Justice and more than 70 other organizations that think lawmakers could do better. They want a “responsible estate tax” that bases the percentage of the tax on the value of an estate.

Their proposal would tax estates above $3.5 million but less than $10 million at 45 percent; between $10 million and $50 million at 50 percent; and estates above $50 million at 55 percent.

There also would be a surtax of 10 percent on taxable estates worth more than $500 million.

Citizens for Tax Justice noted the estate tax they back wouldn’t tax 99.75 percent of estates.