Saturday, May 9, 2009

A Death Tax or a Birth Tax

Republicans often rail against the estate tax, which they refer to as a "death tax". The Republicans, however, fail to point out that it is a tax that applies to those that have millions of dollars left when they die. They claim that the tax causes families to have to sell farms and small businesses, but specific examples and statistics are never provided - just anecdotes.

In fact, the wealthy manage to transfer significant wealth to their offspring tax free, by paying for education, gifts, trusts, and a variety of other tactics. Furthermore, there was a $1,000,000 estate tax exemption before Bush schedule a series of reductions that included a complete repeal in 2010. In 2011, estate taxes revert to what they were before the Bush reductions. Paris Hilton has to worry about being disowned more than being taxed into starvation.

The wealthy have been given immense opportunities, thanks to our society. All the estate tax does is let them give back to the society that made them so successful.

The most pernicious part of the argument against the estate tax, however, is the part that the radical right never addresses. Absent an estate tax we either need to tax the living by increasing taxes today or our children by passing on larger deficits for them to repay.

When my third child was born I calculated his "birth tax". To do so, I took
I then used Microsoft Excel's PMT function to calculate his monthly payment if he started paying the day he was born and if he waited until his 18th birthday. My poor baby was on the hook for payments totaling $99,189.61 the day he was born. In reality it is even worse, since he's not repaying his birth tax now and is unlikely to be able to start any time soon: Assuming a balanced budget from his date of birth until his 18th birthday (an assumption that now that he's almost 4 seems ludicrously optimistic) he'll need to repay $180,611.27 over his lifetime!

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