Tax policy

This is Joseph

There are two pieces of journalism by Kevin Drum that are worth not missing.

One, is his noting that some of the current tax reform plans are absurdly generous to inherited wealth:

If you’re not following what this means, here’s an example. Suppose you’re uber-rich and you buy $1 billion in Apple Stock. By the time you die it’s worth $3 billion. Your heirs, lucky ducks that they are, don’t have to pay estate tax on that $3 billion. But they do have to pay normal capital gains on the $2 billion appreciation in the Apple stock. At 20 percent that comes to $400 million.

However, the Republican bill eliminates that too. Not only does it eliminate the estate tax completely, but it allows you to “step up” the value of the estate and avoid capital gains taxes entirely. In our example, you literally get $3 billion free and clear, and you owe taxes in the future only on the appreciation above $3 billion.

Now it is possible to decide that there should not be capital gains taxes.  This is actually an area of policy discussion as Canada has had a lifetime capital gains exemption.  But if this is what you would like to see happen then you should do it for all capital gains and not focus all of the benefit on the wealthy.  And if you don't exempt these assets from capital gains then the paperwork can get messy.  So, in a sense, the estate tax is a nice way to give the gift of less paperwork to recently bereaved families (not a bad thing).

But turning tax policy into a way to maximize the benefits of inherited wealth seems to an unnecessary enhancement, above and beyond the paperwork simplification.  There should be one or the other. 

Two, is his piece on how tax havens actually make income taxes regressive in Scandinavia.  It's a good item for considering how much real tax burden there is among the elite (the one's who are getting a large tax cut, or potentially getting a large tax cut at least).  You can make moral arguments about what is the right level of obligation that people have to support the nations and laws that make their wealth possible.  It's a complicated area.  But this does somewhat undermine the narrative that taxes at the topic are actually crushing.