In a move that reveals more than most what her true feelings are, Hillary Clinton has come out in favor of raising the estate tax to 65%. That actually amounts to near total confiscation of wealth. About a third of the states (which hold about 40% of the nation's people) also have estate or inheritance taxes. These run, on average, about 10%. That would make the tax burden for estates in that part of the country 75%. Think about that. Suppose a couple start a business and are quite successful. They grow the business after years and years of work to the point where it employs 250 people and is worth $100 million. The couple's children work in the business and take over the management when their parents decide to retire. When the parents die, the estate has to pay $75 million just for the business. Simply put, that means that this family will have to sell the business. Because of its size, the only potential buyers will fit into one of two categories: a) a large competitor with the resources to buy, or b) some private equity group from Wall Street that will be looking to sell the company in pieces or flip it later to some larger purchaser. In either case, there will most likely be job losses for the company's employee, further concentration of the economy into the hands of large corporations or a profit opportunity for Wall Street speculators. But for Hillary, the key is that it will punish rich people.
The problem with Hillary's view is that she's just wrong. If the state and federal government get 75 million dollars and leave the heirs with $25 million, it will reduce the wealth left to those heirs, but they will get by nicely with their $25 million. The losers will be the employees of the business some of whom will surely lose their jobs, the community where the business has its headquarters and the economy which will just become that much more concentrated into the hands of a few big businesses. The winners will be the speculators and the big businesses. For the government, the difference in tax revenues will be slight; it won't even raise federal tax revenues by 1%. Indeed, it won't raise federal tax revenues by one half of one percent. It's more like a rounding error, but it's a rounding error that will inflict damage on a great many people and communities.
The current estate tax law was passed after years of debate as the result of a compromise between president Obama and the Republicans in Congress. It taxes large estates at 35%. This reduces the problem of wealth concentration that arises from inherited wealth, but it is low enough that for the most part businesses need not be sold just to pay the tax. In our example used above, the tax would be roughly 35 million dollars instead of 75 million.
Hillary has let her left wing antipathy for "the rich" overcome the common sense that doing what is best for the economy is actually more important than punishing the wealthy. She just has poor judgment.
The problem with Hillary's view is that she's just wrong. If the state and federal government get 75 million dollars and leave the heirs with $25 million, it will reduce the wealth left to those heirs, but they will get by nicely with their $25 million. The losers will be the employees of the business some of whom will surely lose their jobs, the community where the business has its headquarters and the economy which will just become that much more concentrated into the hands of a few big businesses. The winners will be the speculators and the big businesses. For the government, the difference in tax revenues will be slight; it won't even raise federal tax revenues by 1%. Indeed, it won't raise federal tax revenues by one half of one percent. It's more like a rounding error, but it's a rounding error that will inflict damage on a great many people and communities.
The current estate tax law was passed after years of debate as the result of a compromise between president Obama and the Republicans in Congress. It taxes large estates at 35%. This reduces the problem of wealth concentration that arises from inherited wealth, but it is low enough that for the most part businesses need not be sold just to pay the tax. In our example used above, the tax would be roughly 35 million dollars instead of 75 million.
Hillary has let her left wing antipathy for "the rich" overcome the common sense that doing what is best for the economy is actually more important than punishing the wealthy. She just has poor judgment.
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