What’s $12 million?

I agree with the idea mentioned below that public servants ought to be paid well enough to insulate them from the temptation to corruption that financial hardship can bring. Call it the Eddie Cicotte theory — after the great White Sox pitcher who helped to throw the 1919 World Series.

But there's a problem with the Eddie Cicotte theory. It only applies to one type of greed, and the least troubling sort. The greed that arises due to financial hardship is need-based. If we ensure that public servants' financial needs are met, we can eliminate the problems caused by this type of greed.

More pernicious, however, is the insatiable greed that has nothing to do with actual financial needs. This kind of greed cannot be avoided by ensuring that officials are paid enough because, by definition, those infected with this kind of greed can never have "enough." This is greed in its purest form, undiluted by the mitigating circumstances of need, despair and self defense that limit the former kind. It is acquisitive and it will not stop until it owns and controls everything.

We seem, perversely, more attuned to worrying about limited, need-based greed than to preventing greed in its unlimited form. If a lawmaker with personal financial struggles supports a bill that would, among other things, provide a $2,000 tax break for people like himself, his vote will be scrutinized as though he were caught taking a bribe. Yet when millionaire lawmakers pass tax breaks for all millionaires, no one bats an eye. President Bush personally reaped more than $40,000 a year from his 2001 tax cut, yet this windfall wasn't considered worthy of scrutiny because, after all, what's a mere $40,000 a year to a wealthy guy like George W. Bush?

Thus wealthy lawmakers have a blank check to keep writing themselves blank checks. And they do.

This is corruption. Blatant corruption far worse, and with far higher stakes, than anything the infamous Black Sox ever imagined.

For a current example, consider this fact sheet prepared by Rep. Henry Waxman, D-Calif., of the House Committee on Government Reform. It examines the personal benefits for the president and his cabinet if the estate tax is permanently repealed. Waxman notes that "it is impossible to know exactly how a person will structure his or her estate" or to know "exactly what assets a person will have at their death," so he provides a range of estimates. Here's a taste of what Waxman found:

George W. Bush: $787,193 – $6.2 million

Dick Cheney: $12.6 million – $60.7 million

Donald Rumsfeld: $31.8 million – $101.3 million

John Snow: $22.9 million – $69.8 million.

Let's just take the low end estimates there.

President Bush supports the abolition of the estate tax. This policy would cost the Treasury trillions of dollars over the coming years. It will cost the nonprofit sector billions of dollars a year, causing charities to shrink and cut back. President Bush offers no credible argument in support of this policy. If it becomes law, he will personally receive more than $787,000.

That's one hell of a bribe. $787,000 dollars. Yet we're supposed to believe that the prospect of reaping this huge sum of money has absolutely zero influence on George W. Bush's enthusiasm for this otherwise inexplicable piece of legislation.

Dick Cheney is also incapable of explaining why the estate tax should be repealed. But he's for it. Such a repeal would reap at least $12.6 million for him personally, but that, we're supposed to believe, has nothing to do with his position.

$12 million is enough of a bribe to tempt even the purest of saints. And Dick Cheney ain't no saint. Yet we're supposed to blithely accept that this $12 million windfall has utterly no effect on his decision-making.

I rounded down there, did you catch that? I rounded $12.6 million down to $12 million. That decimal point I knocked off there represents $600,000, or roughly what the average American family will earn over the next 10 years. If your bank account were to suddenly swell by this amount — $600,000 — you would have a very difficult time convincing a judge that it was meaningless, a trivial sum that had no influence on your actions and that you had done nothing questionable to acquire. But Dick Cheney will never have to stand before a judge to account for that $0.6 million, or for the $12 million before the decimal point.

George W. Bush and Dick Cheney aren't like Eddie Cicotte. Money does not, to them, represent an escape from financial hardship. It is not something they need, but it is something they love. Men like that won't sell out for a mere $10,000. But for $787,000? For $12.6 million?

  • Steve

    Dick Cheney is also incapable of explaining why the estate tax should be repealed.
    Its because its the morality of the holocaust…Grover Norquist said so.

  • J Mann

    That’s very well put, Fred, and I think you’re basically right. I have one quibble and one substantive comment.
    1) The quibble is that the $787,000 isn’t exactly the same as a bribe of the same amount because Bush will be dead when he gets the “bribe.” That isn’t to say that he wouldn’t like to have $3/4 million to pass on to Laura and the kids, but the estate tax itself is justified on the idea that taking money after people’s death doesn’t affect their incentives as much as taking it when they’re alive.
    2) The substantive point is that yes, you’re right, but what are we supposed to do about it? Cutting the estate tax is a good idea or a bad idea whether or not it benefits Bush. Does the fact that it benefits Bush (and, frankly, nearly every lawmaker who voted either for it or against it) necessarily condemn either Bush or the estate tax cut, and, if so, which?

  • D. Sidhe

    I’m not sure how much it matters that he’ll be dead when his estate gets the money. I’m not sure that if it were piled on his desk today he’d have any good ideas about what to do with it.
    It seems, and obviously from far, far outside the mentality, that it’s not even the money, it’s the concept. The sense that he is entitled to not pay taxes if he doesn’t want to, and he doesn’t want to pay an estate tax.
    Which is also why I would argue with your view, Fred, that they wouldn’t sell out for a mere ten thousand. I think they would, if it was something they wanted to do anyway: if repealing a tax they didn’t like saved them fifty bucks, I think they’d repeal it. I think they’d waste more than fifty bucks’ worth of time and paper doing it.
    Norquist is bent, but I think that he really does see taxes (or at least the ones he has to pay) as some huge, burning injustice that must be made right at all costs.
    It’s probably less about the money than the offensiveness of the concept: being told to pay taxes means that you owe someone something for what you have. It means you aren’t self-made. It means you’re benefiting at the expense of others. It means you have a responsibility to your community.
    It also means that there are people who are *getting* tax dollars, and that’s probably offensive to a certain type of mind because it says that people *do* fail, and maybe then you have to think about why they do, and why you don’t, and sometimes the answers you come up with (opportunity, luck, inherited wealth) aren’t so comfortable.
    And maybe the estate tax is so objectionable because it reminds people of just how very few “self-made” millionaires there are–where you end up in life has an awful lot to do with where you started. But nobody likes to be told that their achievements were handed to them, rather than the result of their own hard work and brilliance.

  • wintermute

    J Mann: Maybe it’s worth asking how much George Bush Sr will save in estate taxes, and therefore how much extra he can leave to Junior when his number gets called. That might be considered an incentive.
    Personally, though I don’t like the idea of death taxes, purely because I believe that an individual has the right to choose who they leave their money to; being force to hand over 47% to the government (In Britain, anyway; I don’t know what the American rate is) when you can no longer take advantage of public services strikes me as being wrong. Raising the base rate of income tax, or of sales tax, or of corporate tax, or of import duty would, to my mind, be a preferable method of raising money.

  • J Mann

    Wintermute: That’s a good point – I’m sure George W. will inherit plenty as a result of the estate tax repeal.
    IMHO, the most glaring conflict of interest WRT the estate tax is the Seattle Times – it’s one of the last family-owned major papers, and will probably have to be sold when the current owner dies, because no one would be able to pay the taxes on the paper if it were bequeathed to another member of the family. Although the editorial page is otherwise fairly liberal, the ed page is (1) strongly anti estate tax and (2) endorsed Bush in 2000.

  • Edward Liu

    The IRS page with lots of info on the estate tax. The instructions for the form show that the rate can go as high as 48% in the US if the taxable estate amount is over $2,000,000. At the “under $10,000″ level, the tax rate is 18%.
    But hold on a second…here’s a nice little clip from the instructions for filing for the estate tax in America:
    “For decedents dying in 2004, Form 706 must be filed by the executor for the estate of every U.S. citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $1,500,000.”
    So, that means that the 48% tax rate only applies if you have $3.5 million or more that you’re leaving behind, and even then you get $1.5 million to hand down to your heirs tax free.
    Ain’t it funny how Grover and the rest of the “Kill the Estate Tax” groupies fail to mention that last little bit, or the fact that the IRS itself states up front that less than 2% of America needs to pay the estate tax? Or is pointing this out “class warfare?”

  • paperwight

    Personally, though I don’t like the idea of death taxes, purely because I believe that an individual has the right to choose who they leave their money to; being force to hand over 47% to the government (In Britain, anyway; I don’t know what the American rate is) when you can no longer take advantage of public services strikes me as being wrong.
    It’s not a “death tax”. You’re dead. It’s an income tax on the person who receives the money as windfall income (on top of the vicarious use they likely got out of the wealth of their parents), just like any other tax on income. And in the US, at least, it’s also an in-lieu-of tax which allows a step-up in asset basis at the time of transfer, greatly simplifying future income tax calculation.
    Saying “an individual has the right to choose who they leave their money to” is meaningless unless you take the “no taxes at all ever” position. I as an individual have the right to choose how I spend my money, so I shouldn’t pay a sales tax or VAT. I as an individual have the right to choose how I spend my money, so I shouldn’t have to pay any income tax, because that’s money that is included in my salary, but which the government is unfairly confiscating to spend on the colonial adventure in Iraq.
    In particular, the estate tax is the *least* objectionable tax I can imagine, because the person being taxed (the recipient) has done *nothing* to earn it. They’re just like a lotter winner, except they didn’t even make the token effort of buying a ticket. They just happened to be a member of the lucky gamete club.

  • Jason

    Personally, though I don’t like the idea of [estate] taxes, purely because I believe that an individual has the right to choose who they leave their money to . . . . Raising the base rate of income tax, or of sales tax, or of corporate tax, or of import duty would, to my mind, be a preferable method of raising money.
    wintermute, the problem with that solution is that much of estate that is taxed is accumulated capital gains, which has never been taxed and never can be taxed as long is it is not converted to cash.
    For example, if I invest $100,000 in a stock portfolio that appreciates to $10M over the years (we can all hope, right?), and I leave that to my son when I die, that’s $9.9 million of wealth that has never been taxed. And if my heir never sells the portfolio, it never will be taxed, although it will continue to generate subtaintial revenue for him in the form of dividends and it can serve as collateral against which he can borrow cash tax free.
    Say the portfolio appreciates to $200M by the time my heir dies; his heirs get $199.9 million, none of which has ever been taxed. Raising base rates won’t do anything to solve this problem (and regressive sales taxes won’t even begin to compensate for the lost revenue).

  • Ray

    Edward, I think you’re reading that page wrong. There is no estate tax payable on estates of less than a million dollars (as of 2002). Gifts are tax-free up to 11k.

  • wintermute

    It’s an income tax on the person who receives the money as windfall income
    Estate taxes are not based on what people inherit, but on what your estate is worth when you die. If it was an income tax levyed on the beneficiaries, this would not be the case. For example, if you choose to leave your entire fortune of fixty hojillion dollars to a church, charity or other tax-exempt organisation, *your estate* will still be assessed and tax removed before the beneficiary sees a penny of it. If your estate is split up between a thousand beneficiaries, it is still assessed as a single lump, and taxed as such.
    It’s a tax on the estate, not on its recipients.

  • wintermute

    Jason: Aren’t you paying capital gains tax on the increase in value of your portfolio? As I say, I’m not terribly au fait with American tax law, but I’d expect that to be the case…

  • Ray

    Whatever about normal income tax, I have a hard time feeling any outrage about a tax that only applies to the dead (who aren’t in a position to care) and on estates worth more than a million.

  • coriolis

    wintermute: The money left to charity is not taxed. This is why foundations are set up. Ford, Olin, Rockefeller, etc. This is why Fred wrote “[Gettin rid of the tax] will cost the nonprofit sector billions of dollars a year, causing charities to shrink and cut back.”
    To repeat for Jason: We do not pay taxes on an increase in the value of a portfolio until it is converted.
    I’m not trying to be mean hear, but why do you speak authoritively of something that you know so little about?

  • Jeff

    Jason: Aren’t you paying capital gains tax on the increase in value of your portfolio? As I say, I’m not terribly au fait with American tax law, but I’d expect that to be the case…
    Jason’s illustration of the asset basis step up is correct. When a person dies, the cost basis of their assets is reset to the fair market value on the date of death. So, in his example, if he bought an investment for $100,000 and was worth $10M on his date of death, his heirs wouold only pay capital gains taxes on gains over $10M (or even get a capital loss, if the value went down). If he had sold the investment the day before he died, his estate would have to pay capital gains tax on $9.9M. Or, if he gave the investment to his son before his own death, the basis would still be $100,000.

  • wintermute

    why do you speak authoritively of something that you know so little about?
    I’ve repeatedly said that I know little about American tax law, and am basing my comments on the British model. I’m sorry if you interpert that position as “speaking authoritively”, but I thought I’d made it as clear as I could that I was doing pretty much the opposite…
    Paperwight’s mention of VAT made me think that he was also speaking of British taxation (though I have no other evidence to back up that assertion), and I responded to him in that mode.

  • Dave Lartigue

    Whatever about normal income tax, I have a hard time feeling any outrage about a tax that only applies to the dead (who aren’t in a position to care) and on estates worth more than a million.
    This is the crux of the argument that it’s “class warfare”. The idea that it’s fiar because it only applies to the rich has been deemed “classist” (which, to be honest, it sort of is.) It’s remarks like this that prompted Grover Norquist to compare the tax to the Holocaust. In his mind, the comparison was valid because in both instances something horrible (a tax, genocide) was justified because it was “only” happening to a certain, disliked group of people anyway. I’m not agreeing or disagreeing with this, just pointing it out.
    Which, maybe there’s a definite case to be made for it being “class warfare”, doesn’t explain why those so concerned about such things when discussing the estate tax don’t seem concerned about it for any other tax that might put an unfair burden on the other end of the economical spectrum.
    The core of Fred’s argument, hasn’t really been addressed in the comments. What do we do about big greed, raw, naked, greed? The greed in which being comfortable isn’t enough, because maybe you could be more comfortable somehow? Although I’d never play the lottery myself, I find it interesting that more people play when the jackpot hits amazing amounts, as though getting a “mere” $15 million isn’t worth it, but $400 million would be. Or, when you’re sitting with your co-workers talking about how great it would be to win that $400 million, there’s always some moron who HAS to say, “Yeah, but after taxes you’ll only get half of that” as though knocking that figure down to $200 million turns it into chump change. The implication there is that there’s some kind of outrage expected because you’re only getting HALF of the enormous amount you were “entitled” to.
    The thing is, this kind of naked greed is rewarded in America. Hell, what is Hollywood except a device for turning $100 million into $150 million, as though $100 million somehow isn’t enough? None of the Ken Lays or Bernie Ebberses were panhandling when they committed their deeds, they wer ealready fabulously rich and sought to be fabulously richer. What can we do about this? Or should we do anything? I mean this, in a nutshell, is the American Dream. Should Americans complain about it?

  • Pat Vogel

    RE: the Seattle Times (to comment on a much-earlier comment) – Savvy business owners will buy insurance to cover the estate tax after their death. So with a little planning, an established business should never have to be sold to pay estate taxes.

  • Emma Goldman

    I think there’s a third kind of greed–”screw you” greed. You see this in situations where people are being paid a chunk of change, i.e., they’re not starving by any means, but some part of their situation is unfair: people at higher levels are paid disproportionately well, or coworkers/peers are paid disproportionately well, or the people in power have treated the workforce very badly in some way, even if the workforce has been compensated at well more than a living wage. In those situations, I think people who aren’t really all that naked-greedy become resentful and willing to grab whatever they can get, whereas in a more fair situation, they’d probably be reasonably content with what they have.

  • paperwight

    Paperwight’s mention of VAT made me think that he was also speaking of British taxation (though I have no other evidence to back up that assertion), and I responded to him in that mode.
    I only mentioned that because you said you were using British tax law as an example, so I thought you might be less familiar with sales tax vs. VAT. The rest of my post was pretty clearly directed toward US tax law, I thought.

  • paperwight

    So with a little planning, an established business should never have to be sold to pay estate taxes.
    Also, it’s possible to get VERY generous installment payment terms on estate taxes if they cover a business one inherits as opposed to liquid assets. Nobody should EVER have to sell a business to pay the estate taxes. If people are selling the business, it’s likely for other reasons, and they just complain about the estate taxes.

  • Ray

    The argument that the estate tax is ‘class warfare’ applies equally well to any sort of progressive taxation. (And, of course, the US has its ‘flat tax’ advocates too) But I’m a conscious advocate of class warfare, so I don’t really feel the criticism there.

  • John Wilkins

    The rich are better people than we are, and thus, should be able to create little monarchies.

  • Beth

    maybe there’s a definite case to be made for it being “class warfare”
    I don’t think there’s any question that it’s class warfare, and it’s the very wealthy who are waging it.
    What do we do about big greed, raw, naked, greed? The greed in which being comfortable isn’t enough, because maybe you could be more comfortable somehow?
    After a certain level, it’s no longer about comfort; it’s about power. There’s no conceiveable comfort that Bill Gates’ billions can buy that he couldn’t easily afford if he were reduced to a few paltry hundreds of millions. Such a loss wouldn’t affect him materially, but it would make him significantly less powerful.
    The Right has tried to turn tax cuts into a moral issue, while the Left has, for the most part, derided or ignored that framing. I guess that’s understandable. On a purely material level, the Left is the clear winner on this issue. You don’t need a PhD from Harvard to recognize that a massive tax cut during a period of record deficits (not to mention, during “wartime”) is almost certainly a bad idea. Still, I wonder if it isn’t a mistake not to fight this on moral grounds as well. I think that the estate tax really is a moral issue, one that hearkens back to the moral foundations of our nation.
    The founders rejected the creation of a titled American nobility. It ran counter to the ‘self-evident truth’ that all men are created equal and to the egalitarianism which democracy requires. They weren’t pure egalitarians, of course. They reserved voting for male landowners like themselves, and there was that whole pesky issue of slavery. Still, the new nation marked a clear shift away from a ruling class and toward the ideal of equality for all.
    The estate tax, besides being an important source of tax revenue, is a bullwark against the growth of economic dynasties. Obviously it hasn’t prevented them altogether, but it has acted as a counterweight It has been a sort of lesser Jubilee Year triggered not by the calendar, but by the passing of a generation, when some portion of the family’s accumulated wealth returns to the common treasury. Unfortunately, the evolution of our economic system has pulled things in the other direction. Wealth attracts wealth today to a degree that would have been unthinkable 200 years ago. The power of the titled class that the founders rejected has resurfaced as the power of the hyper-rich. Our fascination with the the Hiltons and their peers is rooted in the same glamour that kept commoners so long enthralled by royalty. We may mock their shallowness, but we rarely question their entitlement to the enormous privelege they enjoy.
    If we have a moral obligation to at least preserve what liberty, equality, and democracy we have inherited for future generations, then the estate tax is a moral issue. I’m not sure they can survive at even the current levels of accumulated power. If the estate tax is eliminated altogether, we might as well put our heads between our legs and kiss our democratic aspirations goodbye.

  • KCinDC

    Contrary to Republican propaganda, it’s not a death tax. A death tax would be paid by everyone who dies. Only the richest 2 percent of people who die pay any estate tax.

  • Jason

    wintermute, under American federal income tax law, tax is only due when income is “recognized,” i.e., you turn an investment’s appreciation into hard cash. As long as your gains are unrecognized, there is no tax under the federal system. Some states, though, have “intangibles” taxes that tax the appreciated value of investments regardless of whether you’ve recognized the income.

  • paperwight

    A death tax would be paid by everyone who dies. Only the richest 2 percent of people who die pay any estate tax.
    Let’s try to have a teeny bit of message discipline, and incidentally accuracy of language. The dead person does not pay the estate tax; the dead person is dead, and has paid all of the taxes they will ever pay. The estate tax is imposed on the transfer of assets to the heirs, just as any transfer of assets (sales, salary, gift) is a potentially taxable event.

  • Billy the Squid

    The most obvious means of portraying this is with a bit of political judo. The point to make is that estate inheritance is a hand out to idle slouchers who haven’t worked a day in their life, earned their own way or picked themselves up by their bootstraps with good old American gumption. Bam! All the right’s braying about individualism is turned argainst them, and they are on the defensive about hand-outs to layabouts.

  • Mabus

    It still seems strange to me hearing the Right talking about repealing the estate tax when I (a fairly committed rightest) had come to the conclusion that estate taxes were the most acceptable form of tax, since the only people they “take money from” are those who have clearly not earned it, the heirs.
    It occurs to me, though, that that’s part of the reason Republicans are able to paint themselves as friends to the little guy, which they clearly aren’t. People like me work hard for our money. On some level it’s true that we depend on society as a whole for security, but it’s hard for us to see because the sources have long since become invisible; we don’t have to think about them any more. When Democrats begin talking about taxes in terms of an obligation to society, we (those of us, at least, who have any other inclination to be right-wing) get riled, because we’ve struggled to make every penny and we want to keep it. You might think of it as the flip side of the social gospel: “The worker deserves his pay.”
    It’s a misguided impulse, yes, because Democrats are mostly not talking about us. They’re talking about people who (generally speaking) have earned very little of their wealth, and arguably don’t deserve it. Trouble is, we’re so used to working for a living that we forget not everyone does. And I wonder how telling it is that most Democrats don’t seem to realize they could turn the situation to their advantage by talking about lower taxes (at least relatively speaking) on the poor more than they talk about higher taxes on the rich.

  • Mabus

    Argh. I hate typos.

  • Davis X. Machina

    It is customary to tax behaviors that are both widely practiced, and undesireable. That way, the state makes out coming or going — it receives the cash if the behavior is persisted in, or the behavior is dropped, which leads to another kind of social win. The cigarette tax is perhaps the best known example of the sort.
    How high a death tax is needed to persuade people to stop dying altogether? Clearly the present rates aren’t high enough, and lowering them seems just calculated to give people who wouldn’t die a positive reason to die, or at least no incentive to stop.

  • Beth

    Davis, you’re right. If Republicans were really as pro-life as they claim, they’d be raising the death tax instead of trying to eliminate it.
    There’s terrific article about how conservatives pulled off the demonization of the “death tax”. It also sort of relates to the issues Mabus raised. Maybe the Dems should start a campaign explaining why we need taxes at all. It seems absurd that such an explanation might be necessary, but a decade ago, it seemed absurd to think that eliminating taxes on massive inheritances could become a populist movement. Maybe it’s not too soon to start painting tax eliminationists as anti-military, pro-crime, anti-commerce, etc.


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