May 19, 2006

WEEKEND SPECIAL: DENNY DIMWIT ON INHERITED WEALTH



Goat Rope is pleased to once again feature a learned commentary by bantam rooster and noted free market economist Dr. Denton "Denny" Dimwit. Dr. Dimwit is director of the Goat Rope Farm Entrepreneurship Center, which is still not directly affiliated with the WVU Entrepreneurship Center, much to Dr. Dimwit's chagrin.

It is our fondest hope that by providing space to the most intelligent and articulate writers representing opposing viewpoints we can contribute to a climate of civility, profound mutual respect, and deep listening.

THE DIMWIT DISPATCH

Crudzooki!!!! I didn't think it could be done but this blog has gotten even stupider this week. What do you guys eat for brain food anyway--goat pellets? I thought so.

Now listen to me. Inherited wealth is AWESOME! I can prove it using empricostatisticoscientific methodology. Here's my story. I'm an orphan, see? A weasel got my old man. You can bet I cash in on those sympathy points you-know-where.

Anyway, guess what I inherited? Check out the picture. I am the dark handsome guy in the background. And you know what's in front of me? It's my inheritance. That's right, folks, I'm talking one BIG hen. Yowza. Thanks, Pops! You want to tax that? Bring in on!

Inheriting things without working for them is just one of the beauties of the market.

That's the truth. You bet your cloaca.


GOAT ROPE ADVISORY LEVEL: STELLAR

May 18, 2006

MORE BACKWARD PRIORITIES



Caption: Like the peacock Ferdinand, Congressional leaders have it backwards again.

DECISIONS, DECISIONS. Before we get into the main event, let's talk about the tax "relief" most of us will be getting from our friends in Congress. As noted in the May 10 Goat Rope post, the $70 billion in tax cuts will mean around $20 for middle income people.

Question of the day: how are you going to spend that $20? A full tank of gas is out of the question for most cars, although smaller ones might get 3/4. For El Cabrero, the choice will be between 5 bales of hay for the goats and two 1.5 liter bottles of wine of drinkable but not stellar quality. For goatherders, both items are indispensable (the latter in particular makes it easier to put up with the goats).

On the other hand, millionaire cabreros, if there were any, could buy about 10,500 bales of really good hay (the kind with alfalfa), not to mention better wine, with their $42,000 in tax cuts.

DOING SOMETHING ABOUT ESTATE TAX REPEAL. For those so inclined, the Coalition on Human Needs is urging people to sign on to a letter to the Senate, which will consider repealing or dramatically slashing the estate tax (for background, see earlier posts this week).

This could potentially cost $1 trillion over the next 10 years. As CHN puts it, "The huge revenue loss will result in cuts in services and higher deficits--all to benefit the very wealthiest fraction of one percent of Americans."

The deadline for signing on is May 31st.

Individuals can write their senators by clicking here.

Organizations can sign on to a letter drafted by Americans for a Fair Estate Tax. You can view the letter here and sign on here.

And, for still more background on the subject, click: here.

GOAT ROPE ADVISORY LEVEL: ANDEAN

May 17, 2006

THE LATEST TARGET: PENSIONS



Caption: Militant goat union leader Arcadia S. Venus urges workers to walk off the job and "eat their maple trees" to defend pension benefits.

It’s bad enough when private corporations attack the benefits they have promised working people. It’s pretty outrageous when the federal government joins in the beat-down, yet that’s the latest move by the Bush administration.

Is anyone surprised? I didn’t think so. Presumably, this is the next best thing to destroying Social Security.

According to the Associated Press, “The Department of Energy has told contractors it will no longer pay for pensions for newly hired workers, following the lead of a growing number of private employers.”

To be specific, this move is directed against defined benefit programs which guarantee benefits to workers and favors “market-based” 401(k) type approaches. As the article put it, “The principle difference between the two types of benefit are that pensions offer a guaranteed retirement benefit in which all the risk is born by the employer. Defined contribution plans shift the risk to workers, requiring them to save part of their earnings and invest them widely. There is no guaranteed benefit.”

The AFL-CIO blog argues that this move will “encourage existing contractors to dump their traditional pensions in favor of 401(k)-type plans.”

According to the Economic Policy Institute

the new policy not only limits retirement benefit costs, but it also restricts new employees and new union contracts to “market-based” retirement plans—specifically 401(k)-style defined-contribution plans rather than traditional defined-benefit pensions. No matter that traditional pensions are more cost effective and that, unlike 401(k)s, they provide a guaranteed retirement income for life. What matters to Bush Administration is that it is cheaper to make workers pay for their retirement plans with the added benefit of allowing the finance industry to make more money off of the individual 401(k) accounts.

This all sounds suspiciously like the Medicare Part D fiasco, in which seniors are being forced to choose among an array of competing plans, but the government is specifically barred from negotiating lower drug prices. In the administration’s “market-based” society, people are left to fend for themselves in a supposedly free market, while insurers, drug companies, and financial firms are sheltered from competition.


Bills have been introduced in the Senate and House to block the pension raid with at least some bipartisan support. As Washington Post syndicated columnist Marie Cocco put it, “The common theme is that there is no common good. It is a riff so worn from overplaying that not even the Republican Congress automatically joins in the singing.”

GOAT ROPE ADVISORY LEVEL: ELEVATED

May 16, 2006

THE ESTATE TAX: Q & A



Caption: Speckled chickens deliberate fair taxation.


There was a good comment from yesterday’s Goat Rope post on the estate tax with questions I’d like to take a respectful stab at answering.

I don’t want to be repetitive and some of the basic background about the tax was covered in an April post titled “No Millionaire Left Behind” in the Goat Rope archives.

Here are some basic questions:

*Is the estate tax constitutional?

I’m no lawyer, but it hasn’t faced a serious legal challenge since it was enacted in 1916. In other postings, I've quoted Supreme Court Justice Louis Brandeis, who said "We can have democracy in this country or we can have great wealth concentrated in the hands of a few but we can't have both."

*Why should the government penalize the estates of the deceased?

It doesn’t. The estate tax does not apply to the majority of the estates of the deceased. It only affects those who inherit large amounts of wealth. Surviving spouses are exempt from the tax, as are contributions to charity. Estate planning can further reduce the tax.

Today, only about one out of every 200 people who die leave estates large enough to be taxed. The first $2 million of an estate is exempt from the tax. For a couple, the figure is $4 million. By 2009, the level at which the tax is applied is scheduled to rise to $3.5 million or $7 million for a couple, which would only impact about 1 out of 1000 estates.

For a good summary of facts about the estate tax, see The Estate Tax: Myths and Realities from the Center on Budget and Policy Priorities.

*Does the estate tax confiscate the assets of the wealthy so that their children cannot enjoy their prosperity?

Hardly. Of the few estates covered by the tax, most pay less than 20% of the value of the inherited wealth, which hardly amounts to confiscation.

On the other hand, people are only able to amass and keep large amounts of wealth long enough to bestow them on others due to public investments, such as the legal and court system; regulations regarding banks, commerce, and the stock exchange; public education; infrastructure; law enforcement, the fire service and other forms of protection; legal protection of patents, copyrights, and intellectual property; publicly supported scientific and technological research; etc. The list could go on and on.

It’s for reasons like these that Republican President Theodore Roosevelt said in 1906 "The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government."

For similar reasons, a number of wealthy Americans have formed a group called Responsible Wealth which opposes estate tax repeal. The title of one of their publications is “I Didn’t Do It Alone: Society’s Contribution to Individual Wealth and Success.”

Warren Buffet, who is no slouch in the wealth department, has said “I personally think that society is responsible for a very significant percentage of what I’ve earned.”

The other side of the coin is that many hard working Americans literally have their estates confiscated (usually a house) when they die if they’ve had to turn to the Medicaid system for long term care. Likewise, many hard working Americans have lost promised pension and retiree health care benefits. For many, the last years of life mean the exhaustion of all material reserves.

*Is it fair to tax people who inherit wealth?

It’s arguably fairer to tax wealth that is inherited than wages for which people work (which is why some people have called estate tax repeal “the Paris Hilton tax cut”). In El Cabrero's beloved state of West Virginia, working people begin paying state taxes at incomes of $10,000. A six percent sales tax on consumer goods and a five percent food tax is collected. Working people generally pay more in property taxes for their homes and vehicles than do many corporate owners of mineral wealth.

Working people have to keep paying these taxes even if they are financially responsible for a death in the family, including sales tax on the price of a coffin. What makes millionaires who inherit without working merit better treatment?

*What do you want your children to inherit?

As a parent of two (legally) grown children and a grandparent of a toddler, I mostly want them to inherit a functional democracy with a decent social contract where workers earn a living wage, health care is accessible and affordable, and there are protections for children, the aged, people with disabilities, and others who are unable to work.

From me, I hope they inherit some values, shared experiences, stories, laughs, memories, and an education which will enable them to work and support themselves to the extent that they can live a full life. They can help themselves to any money or material items that are left, but they are going to have to follow the biblical injunction and earn their bread with the sweat of their brows, which is as it should be as long as they do so under decent conditions.

GOAT ROPE ADVISORY LEVEL: ABOVE THE FOLD

FOR THEIR NEXT TRICK: ESTATE TAX REPEAL



Caption: If you’ve got it, flaunt it!

Just after passing $70 billion worth of tax cuts stacked overwhelmingly in favor of millionaires, Congress is getting ready for…more tax cuts for millionaires. Holy one trick pony, Batman!

In the last round, (check the May 10 post for links), millionaires came out around $42,000 ahead, compared with about $20 for average folks.

In the next round, forget about the $20. A likely goal will be the complete repeal of the estate tax which applies only to those who inherit vast sums of wealth. (For historical background on the estate tax, click on the Goat Rope April archives and scroll down to the April 27 “No Millionaire Left Behind” post.)

According Citizens for Tax Justice, new data from the Federal Reserve shows growing inequality “reminds us of the critical role the estate tax plays in reducing the concentration of wealth in a few hands.”

The report for the Federal Reserve, Currents and Undercurrents: Changes in the Distribution of Wealth, 1989-2004, found that the wealthiest one percent of Americans owned 33.4 percent of wealth in 2004, up from 30.1 percent in 1989 and more than the bottom 90 percent of the population. They also owned 62.3 percent of business assets in 2004. Other sources suggest an even greater concentration of wealth in this group.

The wealthiest five percent owned 55.5 percent of the wealth in 2004, including 88.7 percent of business assets, 93.7 percent of the value of bonds, 71.7 percent of nonresidential real estate, and 79.1 percent of the value of stocks.

By contrast, the poorest 50 percent of Americans owned only 2.5 percent of the wealth, down from 3 percent in 1989.

The estate tax affects less than 2 percent of tax payers and has been in effect since 1916 under both Democratic and Republican administrations and majorities in Congress. Progressive Republicans such as Theodore Roosevelt supported it, arguing that the wealthy benefit most from society and have special obligations to it.

Repealing it would be another short-sighted step towards oligarchy.

GOAT ROPE ADVISORY LEVEL: ELEVATED

May 15, 2006

GOAT ROPE OF THE WEEK: KEEPING US SAFE FROM OURSELVES


Caption: These shady characters merit surveillance.

There's been quite a flap recently about the Bush administration's decision to collect the phone and email records of millions of Americans. This comes on top of many other instances of questionable uses of power, including warrantless wiretaps and detentions, and official justifications of torture.

Here are a couple of others in case you missed them:

*First, it is completely untrue that the administration has chose to ignore a few laws. In fact, according to the Boston Globe, the actual number is more like 750. According to the Globe,

Far more than any predecessor, Bush has been aggressive about declaring his right to ignore vast swaths of laws -- many of which he says infringe on power he believes the Constitution assigns to him alone as the head of the executive branch or the commander in chief of the military.

Many legal scholars say they believe that Bush's theory about his own powers goes too far and that he is seizing for himself some of the law-making role of Congress and the Constitution-interpreting role of the courts.


In what one would hope to be an unrelated story, our friends at Halliburton received a $385 million contract to build emergency detention centers. I feel safer already.

Those Halliburton guys have all the luck. I wonder how they do it. Must just be hard work.

GOAT ROPE ADVISORY LEVEL: ELEVATED