One of Bernie’s proposals involves an increase in the inheritance tax. By contrast, House Republicans recently voted to abolish the inheritance Tax completely. The inheritance tax they are fighting to abolish already only applies to 2 out of every 1000 estates. That’s a tiny fraction of the population to warrant an act of congress. In my opinion, this is a perfect illustration of Republican advocacy for a tiny number of ultra wealthy people. Note: Bernie’s proposal is actually very modest in that it would only increase that to 3 out of every thousand.
What is the Inheritance Tax?
Imagine your mother or father hired you to wash the family car once per week for a year, and paid you 6 million dollars. Sounds like a pretty great job, right? Now, imagine that, because you’re working for your parent, a special law let you only pay taxes on 0.57 million dollars of that income. How fucking awesome would that be? Now take away the part where you have to wash the car, and say you simply inherit the 6 million dollars, and only pay taxes on 0.57 million.
That is the inheritance tax, also known as the estate tax.
If you actually earn 6 million dollars by working, you will pay taxes on all 6 million dollars. But if you win the sperm lottery, you don’t start paying taxes until after the first 5.43 million dollars.
The Republicans in the US House apparently think that the 5.43 million dollars of unearned tax-free income is not enough. They want to allow unlimited unearned income, completely tax free.
How do they justify their opposition to this tax? One of the most frequent criticisms of the inheritance tax is that, because the assets of the parent were already taxed when the parent earned them, taxing them when they pass to the child constitutes double taxation. This is, of course, a ridiculous criticism for a couple of reasons:
First, it’s not really a double tax because the same person is not being taxed for the same asset.
Say Joe Taxpayer earns enough money to amass a billion dollars to leave to his son. Assume that Joe actually pays tax on every dime of that income. When Joe passes that billion dollars to Joe Jr., without the inheritance tax Joe Jr hasn’t paid a dime of tax on that income. Now let’s say Joe Jr. passes that money on to Joe the 3rd. Without the inheritance tax, neither Joe Jr. nor Joe the 3rd has paid a dime on that income. How many generations should get that free ride before we think about asking them to contribute to the system?
Second, you never see these same people make the same argument against sales taxes, or income taxes on earned income.
When you get paid for work, you pay an income tax. When you take some of the money left over after taxes and buy a toaster, you often pay a sales tax. When the toaster maker takes the money you gave them for that toaster, and pays the people who assembled the toaster, those people pay an income tax. This same set of money is taxed multiple times, yet you don’t hear anyone complaining that these taxes aren’t fair because they are double or triple taxation.
On the contrary, Republicans seem to love sales taxes and income taxes on workers. They fought against a continuation of a payroll tax cut back in late 2011 and several red states are raising sales taxes to pay for huge tax cuts to corporations and the ultra wealthy.
If these people really felt double taxation was so wrong, they woud be opposing these taxes on people who earn their income from work. Instead, they only use this argument to attack a tax on unearned income for the ultra wealthy.