If I go to the corner market (which on the Schoodic Peninsula is about 2 miles away) and buy a $1 lottery ticket whose jackpot is $5.5 million and then win, I know that I will be required under current laws to pay taxes on the full $5.5 million. This is not money I actually earned. But I got lucky so I will not complain about paying the taxes because I will have still cleared about $4 million dollars.
The Republicans’ “tax reform” proposal creates a new sort of lottery, call it the “accident of birth lottery.” It works this way:
Currently children who inherit their parents’ estate are not required to pay a dime of federal taxes on the first $5.5 million they inherit from one parent, or about $11 million from two parents. Children of affluent families who leave estates of $5.5 or $11 million have won the “accident of birth lottery.” Even in families having five children, each heir will walk off, tax-free, with as much as $1 or $2 million. Will they feel cheated the amount is not more? Will they regret having so many siblings? And this under current law.
GOP “tax reform” proposes placing no upward limit on the nontaxable amount of an estate left by parents to their children. So-called “death taxes” will be eliminated. It has been estimated that one-tenth of one percent of Mainers will benefit from this change, if enacted. The GOP’s contention that owners of small farms and businesses will benefit from the elimination of the estate tax is a canard: Only 50 small farmers and business owners nationwide will in fact reap the benefits. In fact, the vast majority of the real beneficiaries of the proposed change in the estate tax are the already very rich.
If enacted, will the heirs appreciate that the GOP rigged the birth lottery in favor of the very rich? Will corner-store lottery winners begin demanding the same deal — no taxes on winnings of unearned income? Pure luck is the godsend in either instance: Neither the person who bought the lottery ticket or the person who inherits millions of dollars actually earned their fortunes.
Giving such tax benefits to the already very rich will only exacerbate income and wealth inequality in our nation. As the situation now stands, Jeff Bezos, Bill Gates, and Warren Buffett between them have more wealth than the poorest 50 percent of the American population. The Brookings Institute has reported that between 1992 and 2013, the share of the nation’s wealth held by the top 1 percent of the richest has climbed from 27 percent to 32 percent. GOP “tax reform” will only accelerate the rapidity of wealth accumulation by the nation’s richest people.
Bottom line: Being born into a poor family in America is an accident. Being born into a super wealthy family is also an accident. In either case, it is the luck of the draw. If conditions of equal opportunity actually existed, all children would start out in equally felicitous conditions. But as it has happened, and will happen to an even greater extent if the GOP “tax reform” becomes law, children who inherit a fortune are more likely to prosper and children who inherit little or nothing are more likely to live a life on the edge.
Tax policy is, as so many have pointed out, actually about values. Should the rich pay their “fair share” and, if so, what do we mean by “fair share”? And what empowers government to transfer wealth from one family to another? Since the institution of the progressive income tax about 100 years ago, the federal government has placed some limitations on the accumulation of individual wealth in order to create conditions for all Americans to enjoy equal opportunity.
In fact, government has long redistributed wealth in order to make the system fairer for the majority. Today South Carolina taxpayers, for example, get $7.87 from the federal government for every $1 they pay in federal taxes. Mainers get about $1.75 from the feds for every $1 that our residents pay in taxes. Residents of Delaware, who get considerably less from the federal government than they pay in taxes are in fact transferring wealth to the residents of South Carolina and Maine via the federal government. Redistribution of wealth in this nation by government (or by private philanthropy, a different but related issue) is a means to make birthright count for less and equal opportunity to count for more in determining life’s chances.
The GOP plan to transfer more wealth to the already rich by changing the estate tax laws will only perpetuate existing economic inequalities. Mr. Trump and his GOP-controlled Congress should, at the very least, keep in place existing estate tax breaks on the unearned income of the privileged rich.
Roger Bowen is author of “Japan’s Dysfunctional Democracy.” He lives in Prospect Harbor.