The New Year for the Rich and the Poor

Chuck Sheketoff

For the wealthiest of the wealthy . . .

Moneyed Oregon families have one more reason to pop open the champagne for the New Year, when a law cutting further the federal tax on inherited wealth takes effect.

Tomorrow, the federal estate tax exemption will jump from $4 million per couple to $7 million. This means that the heirs of a widow or widower who dies in 2009 with an estate valued at $7 million will pay no federal estate taxes.

If you go to six funerals of widows or widowers every week in 2009 (312 funerals), odds are you might attend one the entire year where the deceased’s estate would pay any federal tax.

Progressives need to make sure the incoming Congress doesn’t water down the estate tax – one of the fairest forms of taxation – even more when they consider how to address the expiring Bush tax cuts.

Learn more at New Year Kicks In Generous Federal Estate Tax Rules.

For the lowest-paid workers . . .

Oregon's lowest-paid workers will get some help in making ends meet starting on New Year's Day, when a 45-cent hike in the state's minimum wage takes effect.

Recently, the Oregon Restaurant Association announced (PDF) that one of the two “major” bills that they will have introduced in the 2009 legislative session will be “to remove the annual indexing from the minimum wage.” The ORA plans to claim that the annual adjustment is the cause of Oregon’s unemployment rate and is an impediment to job creation.

The Oregon restaurant industry was wrong in 2002 when they opposed Measure 25 that created the annual inflation adjustment, and is wrong today to push to repeal it. Oregon voters knew the ORA’s arguments were specious when voters approved the annual adjustments during the weak economic times of 2002. The cause of recent rising unemployment is the recession, not the minimum wage. The job growth we need and the jobs policy makers are promoting are not minimum wage jobs. Undermining the wage floor that prevents workers from falling deeper into poverty each year would only worsen our economic woes.

Read more at New Year Brings Wage Boost for Oregon's Lowest-Paid Workers.

Comments

  • Phil Philiben (unverified)
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    I know a quick and easy way we can help restaurant owners and workers. Eliminate the rule for estimating tip income. This would save restaurant owners some money and a whole lot of bureaucratic red tape - restaurant workers would receive some untaxed income - Oh my God! - you mean low income workers would get a way with not paying taxes on some of their income - like rich people never use tax loopholes and other means to avoid paying taxes - Yeah right!

  • Zarathustra (unverified)
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    I like Phil's proposal. ORA sounds like the ideal boycott target. They've had the intervening years to see that the predicted traumas never occurred, and are very sensitive to slight differences in the profit margin. It would be relatively easy to directly communicate to them that Oregonians aren't going to put up with their constant opposition to an indexed minimum wage.

    I totally empathize with what they go through, trying to make ends meet on razor thin margins. That's exactly what their minimum wage workers deal with, too. Saying that it's their problem, we've got a business to run is no more enlightened or likely to work than workers that say that the business is filthy rich, slap more taxes on them whenever you feel like it. Both positions are calloused and don't work.

    I guess I like Phil's point because it points up the double standard. Business is always allowed to expect growth, regardless of the economies growth. When the poor expect a legislated wage to do the same, it's a major perk. If ORA wants to free the minimum wage from the index, then implement rent controls. It is unworkable to allow landlords to expect double digit increases each year, banks to raise fees every time they introduce a new IT system, Tri-Met to directly and immediately pass the cost of fuel on to their ridership, yet say that the minimum wage doesn't have to be tied to the cost of doing business in the economy.

  • George Anonymuncule Seldes (unverified)
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    Say, Chuck, why don't we try this --- instead of hiking the general tax rate for the emergency, why doesn't Oregon pass a state tax on all income to Oregon taxpayers that is not subject to social security taxation ... i.e., a tax that only kicks in when someone has topped out on social security contribution for the year; make it the same rate as what they were paying up until then on the first $100,000 so they see no change in anything, and it makes them just like everyone else, paying the same rate on all their income. (So the rate would be 7.5% for w-2 earners, and 15% for the self-employed ... but, again, this would only kick in when social security/self-employment tax tops out.)

  • Greg D. (unverified)
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    The minimum wage conversation is frustrating because it takes attention away from the fact that middle class living wage jobs are disappearing at a horrifying rate. Every society since the dawn of creation has had people at the top (estate tax territory) and bottom (minimum wage territory) but the US has been the world's leader in sustaining a middle class which can afford not only to subsist but to enjoy educational, recreational and social opportunities that our grandparents and great-grandparents never could have imagined. Many of those middle class opportunities were created by the blood, sweat and tears of union organizers and union members. Those folks are disappearing at about the same rate as the middle class is disappearing.

    I just got back from a quick trip to City Market on NW 21st to buy some french bread. Judging by the long line of people buying $30.00/pound smoked salmon and $80.00/pound foie gras, there are a lot of people in Oregon doing just fine, thank you. The time is now to adopt tax fairness on a business and individual level. The federal government will not lead the way, as corporate money has bought and paid for federal politicians on both sides of the aisle. Perhaps the states can lead?

    Happy New Year!!!!

  • billy (unverified)
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    Lets tax ourselves in to prosperity!!

    How about 100% then Chuck & friends can dole out just enough to let us live and they can keep the rest for their grand schemes like the Pearl district, South Waterfront, converting food into fuel, energy that costs ten times current (solar panels), transit that is deadlier, more expensive and less fuel efficient than cars, re-attracting industries like Freightliner and Columbia Sportswear.

    Thanks JK

  • rf (unverified)
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    Estate taxes are the only effective prevention against hereditary aristocracy.

    Wealth is earned. Inheritance is nothing but unearned largesse.

  • Ted (unverified)
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    Well, for once I agree entirely with Chuck--on the estate tax issue--but I don't think Obama agrees. Our President elect whose promise of change seems to basically mean changing back to the moderate Republicanism of the Clinton Administration (especially in his second term) seems to think the $7M estate tax exemption is a great idea. In fact, he favors making it permanent and eliminating the 2011 sundown period in Bush's law that will cause the estate tax to reset to $1M.

    From CNN Money 8/6/08:

    Obama proposes freezing the estate tax at 2009 levels: a 45% tax rate on estates valued at more than $3.5 million. Married couples can combine their exemptions for a total of $7 million.

    "By exempting all estates under $7 million, Obama's plan will shield all but about 100 estates with small business income from any estate taxation," said Obama campaign spokesman Nick Shapiro, citing the Congressional Budget Office's 2005 study on the estate tax and further analysis by the Center on Budget and Policy Priorities. "Senator Obama's plan would completely exempt 99.7% of estates from taxation."

    Shapiro was bragging about Obama's plan being progressive compared to McCain's plan for a permanent $10M exemption.

    ...And that's change you can believe in folks.

    Sorry to spoil your Quadrophenia moments.

  • Zarathustra (unverified)
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    As I've mentioned before, we're set for the greatest transfer of assets in US history, when the baby boomers' parents die; this isn't small change.

  • Democrat speaks truth to (false) NW Democrats (unverified)
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    Chuck, I'd believe your sentiments were honest if you'd have named the DEMOCRATS in our state government like Ben Westlund and new House Speaker Dave Hunt, who also support significant reductions or total elimination of the the estate tax. And also those in our Federal delegation, starting with both just elected Jeff Merkley and Ron Wyden, whose wife has a rather condescending attitude (and apparently quite possibly limousine-liberal racist?) attitude towards the folks who work for her. The fact is, most of our prominent NW Democrat elected officials have become representatives of the socially-liberal but selfish wealthy and look down their nose at working people and their values every bit as cynically as Republicans do.

  • Leif Runenritzer (unverified)
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    What gives anyone the authority to take what's rightfully yours? If i own something, then i alone have authority over it, and nobody else has any say over it. If i want to give something away, then that's my business. In a free country, nobody has a right to an individual's property but it's owner, and American government's role was supposed to be protection of private property, not legalized theft of it.

    Don't worry, Mr. Sheketoff, the 3rd plank of the communist manifesto is still alive and well. Just consider this cut a balance against the coming inflation.

  • Democrat speaks truth to (false) NW Democrats (unverified)
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    Leif, whether you care to accept it or not, America is founded on the principle of taxation WITH representation. We the people acting collectively as the American government most certainly do have the right to tax you for the privileges you enjoy living in this country like roads, clean water, safe food, defense, etc., and that includes taxing inheritance. Your only rightful claim with regard to a duly and properly enacted tax is whether you'll pay it willing or unwillingly. That moral truth just galls you to no end, doesn't it?

  • Mongo_cut_liberals (unverified)
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    If I create wealth, why shouldn't I pass that legacy on to my kids without government interference?

    Virtually all of the wealth impacted by the "Estate Tax" has already been taxed at least once: much of it has been taxed twice (capital gains, property, or income tax, plus ongoing taxes on investments). Why tax it for a third time simply because a rich person dies?

    To argue otherwise is to favor socialism: private property rights will be suspended to promote the benefit of the many. That is a very slippery slope indeed, unless you plan on remaining impoverished forever: then you have nothing to lose.

    In fact, even most lower middle class Americans aspire to a higher standard of living: aspirational wealth is impossible without private property rights and capitalism. If you incentivize something, you get more of it; if you tax it, you get less of it.

  • Zarathustra (unverified)
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    my kids without government interference?

    When you die you don't exist anymore and they're just other Americans, not your kids. The "your" bit don't enter into it anymore. If they have special privs, it's because of who there parents were, which is the point about it being used to prevent an aristocracy.

    Look at the notable families in American history. How many 2nd and third generations can be compared with the one that made the wealth? Morgan? Rockefeller? Bush? Hearst? Ford? Hilton? How much grief has that 2nd and third generation caused, us though! I always say that character skips a generation and when wealth is involved it takes a few off. How different would the Bush crime family be if Nixon hadn't owed Prescott Bush anything and baby Bush had to go to Viet Nam? At least you wouldn't have had a sitting RNC chairman, also working at the CIA. (Sr. is a liar when he says he wasn't an asset, or did Hoover fabricate this ?) Interesting that someone pulled the file copy, four years later, a week before Harold Holt disappeared, with the Pueblo incident coming soon after. Wonder what would have happened it Tet hadn't refocused attention.

    Seriously, it would be interesting to have zones where not one dime of Federal or state money subsidizes anything and it's pretty much anything goes. Let the jks vote with their feet. Like their ideas, probably only the hard core would go, which solves at least two problems- and at no cost!

    Conservative ire at socialism would at least sound a bit credible if you were to include that new convert and highest spending socialist of all time, the current sitting President. So, is he really a socialist, or did he just resort to those means to save the hour? If the latter, that's pretty much admitting that conservative economics is a dog and pony show and when it really hits the fan you cut to what really works, which you know to be socialism, isn't it? Or do we need to add "socialist" to "war criminal and self-confessed dry drunk"?

  • Democrat speaks truth to (false) NW Democrats (unverified)
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    There is not a single accurate credible point in MCL's comments although they are quite on the level of the uninformed discourse on both sides:

    If I create wealth, why shouldn't I pass that legacy on to my kids without government interference?

    BECAUSE we the people acting collectively as the government have provided you with essential and invaluable support in accumulating that wealth, support without which you couldn't have accumulated that wealth. First and foremost that includes the legal framework for you to exercise ownership of property and to enjoy its privileges without resorting to force to keep whatever you can physically hold on to. We therefore have the right to tax your wealth at an amount we have collectively agreed to is the reasonable cost of providing that invaluable service to you. That's a type of market that actually underlies our system of governance. Otherwise, you're on your own to defend what you can by force, and we have no interest or moral responsibility to stop others who have more force to take it from you (and no overriding interest in selling you the weapons or materials to make them that you might need to do that, so I hope you're really good at flint knapping). We'd much rather spend our time working together so we don't have to defend the wealth we accumulate by force and instead pay taxes so we can spend our time and energy productively to accumulate more. And by the way, under those circumstances we have every moral right to pick up at a bargain price wealth taken from you by force by others who use force because of you haven chosen to place yourself outside of our social contract and we are economically and socially better off if you disappear.

    Virtually all of the wealth impacted by the "Estate Tax" has already been taxed at least once: much of it has been taxed twice (capital gains, property, or income tax, plus ongoing taxes on investments). Why tax it for a third time simply because a rich person dies?

    SIMPLY false on every point. You reflect the common ignorance (dictionary usage of that term) of taxation that is the key characteristic of anti-tax ideologues.

    Capital gains taxes only apply if YOU realize the financial gain over your purchase price through a transfer of real or equity property, not the financial gains your heirs receive through inheritance by the transfer of your property to them.

    Property taxes are the cost for society to provide YOU services and benefits that make it possible for you to realize the greatest contemporaneous enjoyment of your property while you are alive, not the transfer income benefits of your heirs.

    Income taxes are levied on certain types income you've received to pay of the costs of making it possible for you to generate that income, not on the real income your heirs receive through inheritance of your property.

    Depending on how you want to continue to pursue your uninformed, nonsensical argument, inheritance tax can be argued to be morally equivalent to a capital gains tax on the capital gains your estate pays on property transferred to your heirs, or as income tax on property of value they have received.

    I personally prefer the latter argument and believe we should have a progressive income tax which reaches levels of 50% or more as incomes reach the million dollar mark and leave it to those in those brackets who can afford it to spend their money trying to lobby for tax breaks. (Taxation WITH representation and all that.) Looking at the economic challenges we face, I think we will do quite well expressing our collective will in limiting those tax breaks. Anyone who has the work ethic to actually do the honest work necessary to earn that kind of income will continue to do so. I see nothing but benefit to our society morally and economically if those who don't really demonstrate that work ethic are no longer rewarded inequitably.

    To argue otherwise is to favor socialism: private property rights will be suspended to promote the benefit of the many. That is a very slippery slope indeed, unless you plan on remaining impoverished forever: then you have nothing to lose.

    YOU clearly have no understanding of socialism, are unfamiliar with the notion of the "commonwealth" and "common good" that is a central principle of our representative government, the resulting concept of "taxation WITH representation" enshrined as the very core of our Constitution, and virtually all of the political philosophy and writings of our founders. You might want to start with how the founders levied taxes to finance the Revolutionary war and the strict limits they put on inheritance because of the threat they explicitly identified that a landed gentry based on unearned inheritance posed to our system of taxation WITH representation they were fighting and dying to establish.

    In fact, even most lower middle class Americans aspire to a higher standard of living: aspirational wealth is impossible without private property rights and capitalism. If you incentivize something, you get more of it; if you tax it, you get less of it.

    WE are talking hear about the inheritance tax as a type of taxation WITH representation that our Founders explicitly enshrined in our constitution as the very foundation of our system for protecting "private property rights and capitalism". You are spouting empty propaganda that has no meaning.

    Now, and I'm betting this might surprise you, I do believe as you seem you might that Oregon Democrats of the type who hang out here and that we have elected demonstrate unequivocally they have little or no understanding of the actual values we as Democrats stand for as defenders of the aspirations working people have for a better life honestly earned.

    The most unattractive quality by far of those type of Democrats is how truly arrogant they are out of their lack of knowledge just how inadequate they are. That and their utter lack of respect for the actual meaning of "taxation WITH representation" and the responsibility that carries because they are actually quite selfish people even as they mouth propaganda otherwise. Ron Wyden and Jeff Merkley are prime examples of that, just look into their personal financial lives and the lack of political integrity their legislative records unquestionably document.

    Chuck seemingly means well, he's just way out of his depth. Chuck, as a first step in gaining that depth, you might do well to spend a lot of time reflecting on what it means to distinguish the personal characteristics of the people we elect from what it actually means to be a Democrat or a Progressive. Unlike a lot of terribly misguided folks here and in the hip and trendy "left" commentaria as typified by this blog and talk radio. Of course, I may be giving you too much respect and misreading how much your personal career goals might depend on not doing that.

  • Pauline (Ada) Lol (unverified)
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    Chuck seemingly means well, he's just way out of his depth.

    Kind of doubt it. That would have been a decent reply (for a private sub-conversation) without the self-righteous cheeky monkey bit at the end, imo.

  • Kurt Chapman (unverified)
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    Mr or Ms Democrat speaks truth is quite interesting in his mental meanderings. Nobody has made any statements concerning tacation and representation. The real issue is how much and at what rate should the representative government take from the dead in the form of a death tax?

    Actually, many estates do consits of tangible assets that have been taxed all along. Those taxes are in the form of property taxes on real estate (home prices having risen several hyundred percent in the past 30 years); diviend taxes each year; corporate and personal income tax. the logical discussion really should be how much should be levied a death tax and at what rate? If the exemption goes backwards would the government also remove the automatic step up in value at death?

    Our government is hungrily eyeing the huge untaxed amounts of gains piled up in the boomers' tax advabtaged retirement accounts. They already have an insidious plan ready to hatch and force succeeding generations to cash out those tax advantaged accounts and be subjected to BOTH death and capital gains taxes.

    Chuck has previously written about the death tax and the current exemption amounts ($4MM going to $7MM). In those previous posts, Chuck at least suggested that there was some form of reasonable middle ground regarding the level at which the death tax could begin. Would that be the current status quo, more or less? I believe that is where the discussion lies rather than the moral imperative to tax assets merely because of death.

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    Posted by: Democrat speaks truth to (false) NW Democrats | Jan 1, 2009 11:20:18 AM

    Damn that was good...thank you.:)

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    "Socialism!!!1!!1!!!"

    Yeah, right. Uh huh.

    As long as we're going there, is it fair to note that "Socialism!!!" was the sum total of the Republican message in 2008? And that the American people voted overwhelmingly for the guys that the GOP was screaming about?

    It might even be fair to argue that the American people actually voted for a mandate for socialism...

    OK, that may be going a smidge too far, but I'm pretty sure that crying "Socialism!!1!!1!!!" just doesn't cut it anymore...

  • mp97303 (unverified)
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    @Democrat:America is founded on the principle of taxation WITH representation

    Do you believe in representation WITHOUT taxation as well?

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    As long as we're going there, is it fair to note that "Socialism!!!" was the sum total of the Republican message in 2008?

    Republican message? You hear the same squealing about reds under the beds from some of the organs of the Democratic Party right here at Blue Oregon.

  • Leif Runenritzer (unverified)
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    DemocratSTFNWD,

    The MORAL truth? Did you just say it's moral to coerce someone against their will with threats of violence to do what the mob decides for them? I am galled; you got that right at least. There is NOTHING virtuous in doing something you have no choice in.

    We are a country founded on the rule of law and individual rights, not the whims of majoritarianism. If you can't control what happens to your belongings, then you don't really own them. I don't think you want that. There are other ways to fund government without laying claim to someone's personal belongings or paycheck (not that income tax funds government services), not to mention that folks are willing to work and give for the good of all without the force of government, believe it or not.

  • Mongo_cut_intelligentsia (unverified)
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    Notably, when the 2001 Bush Tax cuts expire in 2011, the Estate Tax exemption will drop back to $1 million. At that level, the estate tax will impact many BlueOregon professionals who own a house, a 401(k), and choose to live within their means.

    Just tell your kids that Chuck has a better idea how to spend their inheritance, and quit their complaining. They'll get nothing and like it.

    <h2>Better yet: Enjoy life, eat out more often. The government hasn't figured out a way to tax what's in your tummy.</h2>

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