Re: how to compare living standards


"Jim Blair" <jeb@xxxxxxxx> wrote

My foundation for example (if I were a billionaire)
would be to promote economic education.
But you might think it was a supply side
propaganda mill.

Or my foundation for biomedical research
on human stem cells would be seen by some
as a factory to murder tiny single cell unborn children.

Either way, I might decide to offer my children and grandchildren
good paying jobs with my foundation.


Jim, you probably give money to various "charitable organizations" now. You
probably take a deduction on your income tax returns for such donations. So
the following is probably already obvious to you:

1) The IRS does not define _every_ donation-soliciting outfit as a
"charity". There are rules. If you want to set up your own charitable
foundation, and give money to _it_ instead of the United Way, that's fine.
All you have to do is design your foundation so that it conforms to those
rules. If Bob Jones can do it, so can you :-)

2) The tax code lets you "avoid" some income tax by giving to charity. If
you're in the top tax bracket, giving $100 to the United Way (or Jim Blair
U.) saves you $35 in taxes. But note that your contribution _decreases_
your net worth (which is what your estate is called, pre-mortem) by $65.
Your heirs get $65 _less_ of an inheritance than they would had you not
cleverly "avoided" $35 of income tax.

3) Jim Blair U. can no doubt give tenured professorships to your
grandchildren, and hire your children to sit on its board of trustees, and
so on. But if it tries to pay them each a few million bucks a year, the IRS
will want to know the reason why.

In simple words, Jim: the notion that you (billionaire or not) can "avoid
taxes" on your estate but still pass it on to your heirs is analogous to,
and as silly as, the notion that you can increase your net worth by taking a
big deduction for charitable contributions on your income tax.

If you're dishonest, of course, you can just plain cheat. If you think that
"the rich" _evade_ tax (by cheating) rather than _avoid_ tax (by more or
less giving their money to charity) then perhaps you can get your mind
around this proposition: the people they are cheating are those "near rich"
who do play by the rules.


Question: what do you consider to be a "regressive tax"?
If the actual collection rate is inversely correlated to income or wealth,
is the tax regressive even if that is an accidental or unintended
consequence?
For example, is the cigarette tax regressive? The gasoline tax?
The estate tax?


You're very determined in your point of view, Jim. You're pitching the
notion that the estate tax is "regressive" because, in practice, it is more
likely to collect $3 million from a $10 million estate than to collect $3
billion from a $10 billion estate. But suppose the reason for that is
simply that the millionaire's kids actually _get_ $7 million, whereas the
billionaire's kids have to make do with a measly $1 billion after daddy sets
up an $8 billion charitable foundation and the IRS takes 50% of the actual
inheritance. The near-rich heirs get a whopping 70% of their daddy's money,
the super-rich a paltry 10% of theirs. Which of them do you pity more?

-- TP


.

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