Re: how to compare living standards

On Mon, 24 Apr 2006 17:30:24 -0400, "tonyp" <tonyp@xxxxxxxxxxxxx>
wrote:


But yes, it is regressive if it collects more from "small" estates
than from "large" ones.


Yes, _if_. Two things you'd better clarify, Jim:

1) Are you talking in the aggregate? Are you saying that more total money
is collected from all small estates than from all large ones?

IRS Statistics of Income show that the largest estates pay a lower
effective tax rate than smaller estates. Easy enough to see at
www.irs.gov

2) You are on your deathbed with a net worth of $10 billion. You give $9
billion of that to a foundation dedicated to providing clean water to
African villages. What is the size of your "estate", as you define
"estate"?

Daddy owns a billion dollars of stock in a company he founded, lets
call it something fictional like "Hewlett-Packard"

Daddy is actually quite Scrooge-like and keeps that money productively
invested in business, taking relatively little out to consume -- after
all, that's how he became a self-made billionaire!

When Daddy dies his taxable estate is worth a billion dollars. But he
can easily enough avoid estate tax on it by leaving his stock in the
busisiness to his own charitable foundation, created to promote
environmentalism and fight population growth.

As it happens, Daddy names Junior as manager of the foundation, and
other family members join in running it.

The tax law allows Junior & Relatives to charge the foundation the
going market rate for managing its billion dollar portfolio and making
all those important related decisions -- and low and behold, by doing
so they take more money out of their stock holdings than Daddy ever
did.

Moreover, as the foundation continues to hold all that HP stock,
rather than diversify into a much safter index fund, Junior and
Relatives remain as directors of H-P the business, getting paid amply
for that, and having real influence in operating the business.

Also, since those who distribute the income on a billion dollars
naturally enough get many gifts and considerations from those who seek
to receive it, Junior and relatives get a lot of, um, Holiday turkeys
and tickets to the opera, and invites to all the best society parties.
Junior in fact gets quite the repuation for being a jet-setting
playboy (and also as a "no show" director of the business -- until
someone proposes a merger for it that would dilute his managerial
influence!)

Also, as the foundation and the operating company both develop related
organizations (profit and non-profit) and have relations with many
others, and all these organizations must hire people, there are other
well-paying jobs aplenty for Junior and Relatives and the other
younger relations across the family, without particularly strenuous
work requirements.

And as the Tax Code requires that the foundation distribute only 5%
nominal of its assets to actual charity each year (and many of its
costs paid to family members are included in this 5%!) not much of the
environment need by saved by it, and the population can fall pretty
much on its own -- as the principal of the foundation accumulates
indefinitely.

Which enables the whole family to live like a billionaire family, not
being able to actually sell the foundation's stock for their own
account itss true -- but in all other ways taking a heck of lot more
income out of the stock, and receiving a whole lot more billionaires's
perks, than if Daddy was still alive, * or* if the billion had been
left taxably and been cut by 50% each generation.

Did you ever wonder how all those Kennedys who flunk the bar exam and
have otherwise poor academic records always seem to be employed by
conservation groups and non-profits that leave them with plenty of
time and income to enjoy politics and playboying, generation after
generation after generation?

And as to Warren Buffett's well known claim that his children will
have to "work for a living", they are already working for the family
foundation he's set up to inherit his stock.

I don't object to the estate tax because it is regressive.
I object because it is a jobs program for lawyers

Jim, this is a truly warped conception. If you're a billionaire, it's not
the estate tax that makes you hire lawyers. It is your intense, passionate
desire to _avoid_ the tax which makes you hire them.

Gee, you make it sound unseemly, a failure of character even, to take
steps not to pay more tax than you legally owe.

If you are a mere thousandaire, is it your intense, passionate desire
to _avoid_ tax that causes you to hire a CPA, or pay for Turbotax, to
assure you don't pay more than you legally owe?


-- TP

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