The American Spectator

Matthew Vadum| 4.8.09 @ 10:29AM

Very good point.

BD57| 4.8.09 @ 10:42AM

What's more aggravating is this:

#1, there's nothing controversial about that mindset in Washington. With few exceptions, Democrats and Republicans alike look on tax cuts of any kind as depriving government of money which is rightfully its own.

#2, pointing out that it's the taxpayer's money, not government's, doesn't seem to get any traction at all. It seems taxpayers accept the notion that government has whatever claim on their earnings, etc. it wishes to assert.

Bob| 4.8.09 @ 10:47AM

Philip -- this is not specifically about death taxes because as you have correctly pointed out, there is no logical reason to take money from people who have earned it. Instead, it is about wealth distribution and taxation. There is a war against the wealthy here because recently the wealth has come at the expense of the middle class, i.e., "trickle-down" has not worked. The data is now clear on this. This has been exaggerated by all of the tax subsidies given the wealthy including lower capital gains rates, being able to get tax havens, getting farm subsidies, and being able to locate their companies and funds off shore. It is further being supported by what Wall Street has done to our economic cycle. The fact that hedge funds made much of their money by betting against the rise of U.S. companies also does not help. In addition to this, payroll taxes are significantly regressive and are not offset by the progressivity of income taxes.

From an historical perspective, this type of extreme wealth distribution can lead to anarchy. We are seeing some of that right now in this war against wealth.

You don't solve this issue by eliminating death taxes even though it should be done. You solve this by addressing the underlying issues. First, as I've continually said on this board, we need to move to a flat tax that includes social security and medicare and get rid of any class warfare. We need to change capital gains to this flat rate for this same reasons. Deductions only available to the wealthy should be abolished. Government should get out of the incentives business altogether including things like ethanol subsidies. Now only will this reduce lobbying, but it will take away the arguments for the war against wealth by making the system fair to all.

OK, I'm getting off the soapbox now....

Matthew Vadum| 4.8.09 @ 11:50AM

"This has been exaggerated by all of the tax subsidies given the wealthy including lower capital gains rates..."

A reduction is capital gains rates is NOT a subsidy. Keep on trolling, Bob.

Bob| 4.8.09 @ 12:57PM

Matthew, so now you have an advanced degree in business like me? Of course capital gains is a subsidy to promote investment. This is part of government intervention which I dislike. Capital gains, which advantages primarily the affluent, is just another tax incentive for the government to say where you should put your money. I believe in limited government. That means that Washington should get out of the incentive business, and that includes capital gains. Let the market determine where money goes -- it is more efficient in the longer run if we have enough regulation to keep that market fair. Limited government also means limiting governmental interventions. If you are for capital gains, then you are not for limited government. Think about it.

Matthew, do you even know what a "troll" is? When you are after logic and the truth, you cannot be a troll. When you are a partisan hack, you use ad hominem attacks like calling people "trolls" instead of arguing on the merits. I thought you didn't like ad hominem attacks!!!!

You probably don't even understand the argument about limited government and how it relates to capital gains, do you?

Matthew Vadum| 4.8.09 @ 1:29PM

Ah, the cult of the expert.
Yes, Bob, actually I do get it and in the abstract I might even agree with you, but the problem is I don't believe in progressive income tax. If we didn't have a progressive income tax then the capital gains tax issue might very well be irrelevant (as would the lingering low-intensity controversy over tax-exempt municipal bonds which marry bondholders' desire for profit to state and local governments' eternally insatiable hunger for deficit spending). Ideally we shouldn't have income tax at all, but it appears that ship sailed long ago. To mitigate the sheer oppressiveness of the income tax, a capital gains tax break is, from a limited government perspective, a necessary and comparatively minor evil.
I believe in limited government. That means that Washington should get out of taxing income, and then and only then can we talk about capital gains.

Bob| 4.8.09 @ 1:49PM

So, Matthew, we then agree that we shouldn't have a progressive income tax -- nor should we have a regressive tax for social security and medicare. That's why I strongly believe in a flat tax. Furthermore, most world economic studies actually support your contention that we should have no income taxes -- only consumption taxes. In fact, if you've read my posts, I support getting rid of corporate income taxes completely and moving to a consumption tax instead which has many advantages and will help job growth. So we are not far apart on those issues.

However, after spending my life in big business, I don't see the benefit of a lower capital gains tax in this world economy. Most of my career in big business was on the business development side. We looked at markets and demand to determine how our capital should be spent. Rarely was capital limited for good projects. In fact, a lower cap gains tax was actually a problem with this last housing bubble as capital chased financial instruments rather than manufacturing instruments. I've come to the conclusion that lower cap gains taxes is simply a reward for wealthy donations to political campaigns.

I've looked for economic studies supporting the contention that people will make different decisions with a change in cap gains rates and have found nothing but generic "low tax" arguments by the usual suspects. In fact, Bloomberg did a study that said investment choices would not change among wealth investors:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRRZojfv5DQc&refer=home

So, yes, Matthew, this is an area where I do have some expertise. By the way, thank you for a rational response. We actually might agree rather than disagree. The reason I respond so negatively to your posts are the ad hominem attacks and clear overstatements. Even though I disagree strongly as a fiscal conservative to many of the left's positions, I am really turned off by the partisan attacks rather than principled responses. By the way, this is just as true for many of the posts make in the Huffington Post.

Tim| 4.8.09 @ 7:51PM

"The reason I respond so negatively to your posts are the ad hominem attacks and clear overstatements."

That's because you are adhominophobic.