Stephen Kent joined Fox 5 DC last night to discuss political scandals and tax reform. Takeaway on the GOP tax bill…a little reform is better than no reform at all…but their efforts are neither popular nor innovative.
With the House Ways and Means Committee voting on repeal of the death tax next week, there is renewed hope that this inappropriate tax will soon kick the bucket. Although descendants of the deceased are most directly hurt by the death tax, everyone else gets hurt economically as well.
Repeal of the death tax would create a small, but significant, economic boost, according to Alan Cole of the Tax Foundation. “Repealing the estate tax in the United States would increase investment, add jobs, and expand the economy,” Cole says. Over the course of a decade, repealing the death tax would create 139,000 jobs. It would also boost the economy by 0.8 percent, or by over $100 billion dollars. Wages would rise by 0.7 percent.
The boost comes from lifting the tax burden on accumulated wealth, which Cole says improves the economy. When accumulated wealth is taxed, the government redistributes it in inefficient ways, and those hit by the tax try to shift their assets into less productive endeavors. As a result, money flows into life insurance policies and government coffers instead of into job-creating capital.
Just because the rich can afford to pay more in taxes doesn’t mean they aren’t paying their fair share.
While some call for a more progressive tax code in which the rich “pay their fair share” in taxes, it is almost always left unclear exactly what is meant by “fair share.” Is it fair to ask the top one percent of income earners, who earned 15 percent of wealth in 2011, to pay at least 15 percent of the taxes? They actually paid 24 percent of all federal taxes, with an average federal tax rate of 29 percent.
In contrast, the average federal tax rate for the bottom fifth of income earners is only two percent and they paid less than one percent of federal taxes in 2011, the last year for which data is available from the Congressional Budget Office.
Liberals say that rising inequality is reason enough to raise taxes on the rich. They typically neglect to mention that more income for the wealthy means they carry a greater burden of federal taxation.