"The man of great wealth owes a peculiar obligation to the state because he derives special advantages from the mere existence of government." - Teddy Roosevelt 1906
You and I pay income tax on our income. But what if you get a huge chunk of income by inheriting vast wealth? Think Paris Hilton, the Waltons, the Trumps and the Koch brothers, for example.
Our country was established by people escaping from places where a few people owned and controlled everything, and the rest of the people served their interests. We established a country where it is supposed to be a self-evident truth that all men people are created equal. "We the People" established a country "of the people, by the people and for the people."
How do we keep it that way as inequality rises to the levels we were supposed to be escaping? The Walton family, for example, has more wealth (and resulting influence on government) than a third of all of us put together.
The estate tax – a tax on the wealth passed down in extremely wealthy families – was established in 1916 to help our country avoid becoming a place where a few families owned and controlled everything. It currently only affects inheritances of more than $5.25 million, at a maximum rate of 40%. (This means if you inherit $5.45 million you don't pay a penny. The tax only applies to amounts above that.)
So if you inherit $500 million the tax is $200 million, you "only" get $300 million. Poor you. "Poor" might be the wrong choice of word, though.
The estate tax only affects 0.2% – two-tenths on one percent -– of those who die each year. In other words: not you.
But wealthy families have had their captured members of Congress write loopholes into the tax law. One big one is the "valuation discount loophole." The loophole is, of course, complicated. It lets families with "closely held" businesses and land transfer assets without tax. The rule is supposed to be about situations where it is hard to sell the assets so of course the wealthy set up exactly the excluded situation to use to transfer assets. Complicated, and written with great sympathy for the plight of the wealthy who are minority owners of high-value businesses and land...
This loophole basically says that we will tax the wealth of the rich except for the kind of wealth that the rich have. So in other words: not them, either.
The Obama Treasury Department is writing new rules to crack down in this loophole. The new rules make it harder to claim "valuation discounts" on these assets. The rule change would raise up to $18 billion over 10 years.
Of course these new rules are under attack. The Treasury Department is taking comments on these new rules. We the People have until this Thursday, November 3, to submit a comment in support of a stronger Estate Tax. Americans for Tax Fairness (ATF) is a coalition "of national, state and local organizations united in support of a tax system that works for all Americans."
ATF has a petition that you should join, "Tell U.S. Treasury: curb extreme family wealth." And if you click the link it enables you to leave a comment supporting this proposed rule.
Here is some of the letter ATF is sending out:
Strengthen the Estate Tax
As the Obama Administration nears the end, the President is using his executive authority to finalize one more rule that will close a tax loophole – this time to strengthen the Estate Tax.
We really need your help to get this past the finish line as virtually all conservatives in Congress, the Chamber of Commerce and other wealthy interests are trying to block it.