0 Responses to “You Can Dream, Can’t You?”

1. On the Right says:

   January 12, 2009 at 10:10 am

   “And it could have been better had Republicans been savvier deal makers in the last few years.”

   There is something to that, but it needs to be understood that the failure to “make a deal” on big, national issues like immigration or Social Security arose as much from the basic, core-disagreement — among Republicans, among conservatives, and Americans generally — on what public policy should actually *be*, as it did from any lack of political savvy.

   On more Beltway-type controversies, like the House-floor voting privileges for DC’s Delegate, a Democrat President/Congress were always going to do their own thing on that, regardless of whatever “deal” had been worked out by Republicans in (say) 2005.
2. Joe says:

   January 12, 2009 at 10:15 am

   Barack is wrong on the estate tax (it should be repealed) but his left would go absoultely nuts so taking the middle road is a safe thing to do. I would love it if Barack did everything like the perfect conservative, but we need to be realistic about this. It is about mitigating harm and getting the best deal possible. To those family farms, family businesses, and others who were the real victim of the “death tax” this is something they can live with.
3. Lawrence Kramer says:

   January 12, 2009 at 10:42 am

   Someone needs to explain why “conservatives” as opposed, say, to dynasts who happen to be conservative, favor repeal of the estate tax. Is it really good for society that billionaires get to leave their money to family members with no proven expertise in capital allocation?

   It hardly seems a “liberal” notion that personal wealth and the ability to pass it on are the rewards that society grants in exchange for value provided to the economy. It’s an imprecise system, as any cop or teacher knows, but that does not change the nature of the deal. History suggests, however, that the accumulation of concentrated wealth is a bad thing, as it translates into power in the hands of people who did not earn it. The estate tax with a high zero bracket ameliorates that phenomenon. At the appropriate level, the tax is simply a tax on dynasties, and I see no real risk that out best and brightest entrepreneurs and capital allocators will leave the field of play for fear that their grandchildren will not be zillionaires.
4. Steven says:

   January 12, 2009 at 10:44 am

   Both Obama and McCain ran promising to find accommodation with the other side, and yet Jennifer Rubin is continually shocked when Obama does exactly what he has said he would do.

   Obama will continue to find compromise, left leaning positions. The right will continue to say, “this isn’t as bad as it could have been” and “we can live with this.” What mental handicap keeps you from getting it? Only you are surprised. The rest of America is getting what it expected.
5. dxturner says:

   January 12, 2009 at 10:56 am

   “Is it really good for society that billionaires get to leave their money to family members with no proven expertise in capital allocation?”

   And the government has proven capital allocation expertise?

   ” … The right will continue to say, “this isn’t as bad as it could have been” and “we can live with this.” … ”

   I wouldn’t bet on that.
6. Lawrence Kramer says:

   January 12, 2009 at 11:12 am

   dxturner -

   You may have noticed that our national government is running something of a deficit. The small revenue raised by a dynasty tax would reduce that shortfall slightly. I submit that reducing the deficit is a better use of that money than bestowing it on kids who did not earn it, just to provide an incentive to their grandparents. The government’s skill at capital allocation is completely irrelevant.

   I recognize the libertarian notion that the money we make is “ours,” and so the government should have no say in what the best use of it may be. But I see private property as a social strategy, just one way in which a society chooses to use the government’s monopoly on the legitimate use of force. I mean, what good is private property without a police force? So, if we can say what status quo (possession of property) we are willing to use tax money to protect, we can also decide which property to put back in play through a dynasty tax.

   When we are running a surplus with no income tax, we can consider whether the estate tax puts dollars in the most competent hands. In the meantime, dynasty busting seems to me a good idea, and snarky comments about government ineptitude are completely beside the point.
7. el gordo says:

   January 12, 2009 at 11:28 am

   Lawrence,

   “…no proven expertise in capital allocation”, “power in the hands of people who did not earn it.”

   What is it to you? It´s private property. The money has been earned and taxed at one point. Who gets that power, the government? They didn´t earn it either. Their first job is to protect private property. They already failed at that, as far as I am concerned.

   But I also have to admit the estate tax is not important to me. You give some reasonable arguments in favor. Under different circumstances I might agree with you. I am far more worried about cap-and-tax (sic), Obamacare and the EPA regulating our economy to heck. Oh, and the end of federalism. But it´s not that we get to do a tradeoff – it´s coming and businesses and the middle class will get robbed anyway – so why should anyone argue for any higher tax at all?
8. On the Right says:

   January 12, 2009 at 11:29 am

   “The government’s skill at capital allocation is completely irrelevant.”

   No more so than that of the generic “family members” mentioned in post #3.
9. Margo says:

   January 12, 2009 at 11:39 am

   Lawrence Kramer, being able to leave money ot those they love is a powerful incentive for many effective capital managers and accumulators. I don’t see why society would benefit from their deciding to squander their capital on wine, women and song when they turn 70 rather than leaving it to their heirs. Theiri heirs, in turn, may be either effective managers or not. Those who are continue to produce, those who don’t solve the problem of wealth concentration by gradually dispersing it–either to purveyors of consumer goods, or to social and cultural causes. In short, this wealth continues “in play” in a variety of ways.

   On the larger point, how do we think that anyone, let alone government, is going to be able to judge who has the “most competent hands” to manage wealth? Who can know this? And why can they know it only about the already wealthy? After all, most of the capital in the nation is in the hands of the middle class. Perhaps everyone should take a test to see if he or she can be trusted to manage their assets?

   The “libertarian notion that the money we make is ‘ours’” is in fact the idea written into the Declaration of Independence that everyone has the right to life, liberty and the pursuit of happiness, and government is created to protect these rights. Our property is for most of us the chief means with which to defend life and liberty and to pursue happiness. Your suggestion of somehow moving wealth to the most competent hands in fact entrusts everything to government. At least, I guess, until we cease running government budget deficits? And if government has the power to command wealth until that happens, when do you think we will be in the black?
10. el gordo says:

    January 12, 2009 at 12:04 pm

    Lawrence, you make a coherent argument. Yes, the estate tax is not the worst tax to have if we got to make rational choices. My argument is less sophisticated, and admittedly born of despair. The people in government worry more about increasing revenues and their direct influence on the private sector than shrinking the deficit. They are quite open about that. When they use their irresponsible spending to justify higher taxes it reminds me of the sheriff in Blazing Saddles putting a gun to his own head. I do not see any evidence that they recognize a limit to their claim on an ever bigger slice of the private sector.
11. Lawrence Kramer says:

    January 12, 2009 at 12:54 pm

    Margo -

    I’m just advocating the status quo. We have an estate tax and we have lots of competent entrepreneurs and capital allocators. That we might lose those folks’ efforts if we don’t repeal the tax just doesn’t make sense. I’m not arguing for a higher tax that would force anyone to squander their money, although egos being what they are, the charitable foundation appears to be the tax-avoidance tool of choice, and that’s cool, no?

    As for who is to judge who has the most competent hands, that’s wholly beside the point. I am not saying that the government will do a better job of managing the money, just that the concentration of wealth is a bad idea, and the arguments in favor of permitting it – the incentive to grandparents and the possible talents of the recipients to use it well – are not persuasive. If they persuade you, then so be it, but since it is you and not I who is advocating a change in the current tax structure, the burden should be on you to demonstrate that things would be better – i.e., the entrepreneurship is suffering under the current estate tax burden – if the tax were wholly repealed.

    If you are suggesting that the estate tax violates the fifth amendment, I’m afraid that boat’s sailed. I think private property is essential to a capitalist economy, and I’m all for it. But it’s not a magical thing. “Private property” is just a bundle of rights with respect to particular resources. Those rights should be extensive if capitalism is to prosper. But extensive is not unlimited, so limitations on dynastic accumulations do not prevent property from being “private.”

    El gordo -

    I think you’d like to support the estate tax if it weren’t a tax. That’s how I felt when I moved to Philadelphia from New York – I wanted to root for the Eagles, but couldn’t when they played the Giants. It gets in your blood. You have my sympathy.
12. mike davidson says:

    January 12, 2009 at 1:10 pm

    Once upon a time, before I immigrated, I told my (American) boss that, if I was King for a day the one law I’d pass would be 100% estate taxes. He told me I was a communist! But, in fact, my reasoning was entirely conservative (i.e. classical liberal): to remove the inherited power that goes with wealth, which I had seen was such a block on economic dynamism and class movement in the UK.

    Many years later, now an American by Choice, I observed the huge damage that the philanthropries and individual trust funds, set up to avoid estate taxes, do to our country; the former by creating generations of unproductive, guilt-ridden, limousine liberals and the latter by funding essentially socialist causes inimical to the beliefs of the entrepreneurial creators of their endowments. I also learned one, vital, new fact: fortunes passed on wholly to children get dissipated within two generations. So, now I say let them (the kids and grandkids) have their short, undeserved boondoggle and squander thier inheritances. Both our economic and political spheres will be much healthier!
13. Lawrence Kramer says:

    January 12, 2009 at 1:30 pm

    Margo -

    I don’t see a shortage of entrepreneurs and capital allocators under the current regime, which is all I advocate. Are you saying we’d have more and better without an estate tax?

    “Eventually” is a long time in the fortune-dissipation business. I see no strong argument to wait.

    I was not arguing that the money would be best spent by the government. Tax dollars are fungible. There’s no reason to believe that the government will take in any more money with an estate tax than without it, unless the object, independent of dynasty-busting, is in fact to raise revenue (to reduce the deficit, for example). Otherwise, given the ebb and flow of political debate, money coming in through the estate tax may reduce pressure for an income tax increase on high earners, or fund a payroll tax reduction (boo) or fill any other hole in the financial agenda. The point of the estate tax is to fragment the concentrated wealth, not to give it in its concentrated form to someone deemed better able to manage it.

    The constitutional point seems to me overwrought. I like private property just fine, and I am glad the constitution forbids its confiscation. But I don’t treat “private property” as some inherently absolute thing. Private property is a set of rights and privileges with respect to resources that We, the People, have decided to sanction and protect as an incentive to and facilitator of the creation of wealth. There is no inherent reason why those rights should be limitless. With the current estate tax, the privileges of private property appear adequate to the institution’s purpose.

    El gordo -

    You seem to want to like the estate tax but can’t get there because it is, well, a tax, and taxes are bad. I moved from New York to Philadelphia in 1963 and, although, I though the “right’ thing to do was root for the Eagles, my heart belonged Big Blue. I feel your pain.
14. Lawrence Kramer says:

    January 12, 2009 at 1:31 pm

    To the moderator. Please pull this comment and #13, which was posted in error.

    LJK
15. Margo says:

    January 12, 2009 at 1:48 pm

    Lawrence Kramer, I’m objecting to your line of argument, not just to the tax itself. The argument that taxes should be based on ideas about who makes better or worse use of wealth is bound to lead to use of the taxing power not just to fund government but to “guide” (read: destroy in part) economic actors.

    You don’t see any shortage of entrepreneurs, but when you compare our economy with its past performance and with the performance of others with lower taxes on capital you do see a slower rate.

    I think Mike Davidson makes a very valid point about the distortion to economic and social behavior caused by taxes like the estate tax that are major enough that it’s worthwhile for people to resort to various loopholes. As Mike points out, the heirs to personal fortunes soon lose it, but the Ford Foundation etc. will be around forever.
16. Lawrence Kramer says:

    January 12, 2009 at 3:10 pm

    Margo -

    I made no argument about who makes better or worse use of wealth, just that concentrated wealth is a bad thing because of the power it bestows and so should be tolerated only if there is a compelling purpose to do so There is a basis for tolerating vast wealth in the hands of the guy who made it, both as an incentive to him and because he has demonstrated an ability to make capital work. His grandchildren’s wealth being a less powerful incentive, and they having shown no particular aptitude, I see no compelling argument for tolerating dynastic wealth.

    Your other arguments are fact-based, and we’ll jsut have to disagree on what the facts are. I would need more evidence than mere assertion to conclude that we are suffering an entrepreneurial shortfall or that the estate tax is in fact significantly distorting behavior. Other taxes on capital are, well, other taxes.
17. From Inwood says:

    January 12, 2009 at 4:23 pm

    Like OTR #1, I disagree with this blog thread if Ms R. thinks that, without what she sees as unreasonable Republican in-fighting during 2000-2006, the issue of To Tax or Not To Tax regarding Estates would’ve been settled during that period once & for all.

    The Dems are gonna do what they want now that they’re in power. As would the GOP. Nothing is forever in taxation, except that it’s certain. (Did I say that? Sounds lapidary!)

    It’s what-if, but if the GOP had put in, say, a 10MM exemption & a 33⅓ tax rate over that amount, the far-Left would now go for Clinton’s $1MM & 55% tax rate anyway & we’d be lucky to get the current exemption & rate. IMHO, we’ll still be lucky to get them. Elections have consequences (Did I say that, also? More lapidary phrasing!)

    Die in 2010 for the sake of your kids. Me? I’m hoping to live long enough to die broke. (Egad, yet once more, lapidary phrasing, a/k/a clichés.)
18. J.E. Dyer says:

    January 12, 2009 at 9:38 pm

    I very much agree with On the Right’s initial point that Republicans’ failure to achieve policy victories on the estate tax, as well as on Social Security, are as much about intra-party disagreement as about parliamentary incompetence.

    My sense is that most Republicans think it’s all too bad, and needs correcting, but still consider the measures necessary to actually change our course on these things too alarming. There are conservatives who advocate definite and feasible measures, but others who will countenance no measures that are not absolutist in nature (Repeal the 16th Amendment!), and still others who think surely some smart guy can figure out how to tinker on the margins and make the bleeding stop.

    Meanwhile, I have to hand it to Margo for making good points in the interchange with Lawrence Kramer. Like Margo, I don’t accept the premise that it is appropriate for government to be having opinions on “concentrations of wealth,” as Lawrence Kramer refers to them, or seeking to break them up.

    Any economic arguments in favor of the death tax are, however, merely a theoretical cloak for a very pragmatic — even cynical — reality: the deceased are, politically, the easiest constituency to tax. Their votes will, in most electoral districts, not be a factor again, nor will they make phone calls to the Rayburn House Office Building complaining about their tax rate. No one who complains on their behalf makes a photogenic victim. There is no naturally sympathetic constituency for repeal of the death tax: no one whose tears on the 5 o’clock news will tug at the heartstrings.

    Government’s propensity is always to tax, and to tax more over time. It takes enormous effort just to cut taxes, much less eliminate a whole category of tax revenue. As weak as the economic and political arguments are for confiscation of property on death, the cohesion and motivation of the counter-constituency are even weaker. I predict that that will continue to be the decisive factor.
19. Lawrence Kramer says:

    January 12, 2009 at 10:40 pm

    J.E. -

    “Government” has no opinions on the (dynastic) concentration of wealth, nor does “government” seek to break them up. I have such opinions and seek that result. So do Warren Buffet, Bill Gates, George Soros, and others too numerous to mention. We support politicians who would implement our opinions, but that’s not the same thing as arguing that government should be acting on its own, having “opinions” or “seeking” to break up dynasties.

    I reject your implied premise that the government is always acting in some capacity other than as implementer of public opinion. Certainly, some governments sometimes do what the few in power want with little regard for the public interest – I live in New York, home of as dysfunctional a legislature as was ever created – but sometimes, some elected governments do what they were elected to do, and I believe the Federal estate tax is such a thing.

    I get Margo’s arguments about incentives and freedom. I don’t find them persuasive, but I do not challenge their rightful place in the other side of the scale from dynasty-busting. Your argument, however, about government having opinions and seeking to do things with respect to the estate tax issue, as if it were acting separately from the voters’ opinion and desires in the matter, makes no sense to me. It is, as one wag said about string theory, not even wrong.

    If you want to put something in my scale, you’ll have to argue that, in a democracy, the People have no right to put any limits on how much wealth a family can acquire and pass down indefinitely. The People, not some impersonal bureaucrat. Is that your position?
20. Margo says:

    January 12, 2009 at 11:57 pm

    Lawrence, yes, that’s right. The people have no right to put any limits on how much wealth a family can acquire and pass down indefinitely. That is to say, the right to property does not expire once you make your first million, or billion, or whatever. The rules for the actions by which you acquire property are enforced, and taxes are taken at a fair level for everyone. But if for instance you have Leontyne Price’s voice, and your four hundredth appearance in Tosca puts you over the line for wealth, right before you die and leave it to your heirs, your heirs should get the money. There might be a tax based on something, some percentage, but the idea that government should “put any limits on how much wealth a family can acquire and pass down indefinitely” is not in accord with our constitutional system.

    Of course government always acts in response to public opinion, that is, some part of the public. But we have a consitution that puts limits on what kinds of decisions government (and hence the current public) may make.
21. Lawrence Kramer says:

    January 13, 2009 at 7:54 am

    Margo -

    “…there might be a tax based on something, some percentage…”

    Sounds like an estate tax, which is what I am for. I did not propose, and would not support, a 100% tax at any level or on any generation. I am more interested in the “indefinitely” part than the amount part. Your counterexample only deals with the amount part, and you seem ok with with “a tax based on something, some percentage…” So how far apart are we?
22. J.E. Dyer says:

    January 13, 2009 at 10:53 am

    Lawrence Kramer — one thing I reject, since it apparently was not clear, is public opinion that death is a pretext for confiscating wealth. Of course government sometimes acts as an agent of public opinion — although, equally of course, public opinion is not monolithic, on this or any other topic.

    I also reject the premise, however, that public opinion should be implemented by government merely because it it public opinion. I concur with our Founders that constitutional, republican government is intended to be a firewall AGAINST the automatic government implementation of everything people have an opinion on.

    I do not agree with your opinion that it is a bad thing for wealth to be passed down through families; and there is no absolute or even very objective measure of which of us represents the majority on that question. Nor should it necessarily matter. The fact that people have opinions on issues does not, ipso facto, make it appropriate for government to act on them.

    You may agree with that principle, in the abstract, but believe that inherited wealth is indeed something government should act on. That’s fine. I don’t believe it is. Unlike Margo, I am willing to state without caveat that I do not regard death as a valid pretext for the taxation of wealth, regardless of the percentage of the tax imposed. I further consider the inheritance of wealth to be no public issue, other than as a category of lawful disposal of property, which government is properly constituted to respect and protect. I disagree with the proposition that there is a public “good” to be sought in restricting the inheritance of wealth.
23. Lawrence Kramer says:

    January 13, 2009 at 12:10 pm

    J.E. -

    “I further consider the inheritance of wealth to be no public issue, other than as a category of lawful disposal of property, which government is properly constituted to respect and protect. I disagree with the proposition that there is a public ‘good’ to be sought in restricting the inheritance of wealth.”

    Can you put some philosophical gloss on this? Why do you believe this? Is it a first principle? Or is it a prudent policy that conduces to the goals of a just society?
24. Jerry Ryan says:

    June 16, 2009 at 4:23 pm

    Nice blog design, just wondering where you got it, I’m jealous.