Becks wants to know how we can keep rich people from giving their money to dogs. I'm not sure I get this--rich people donate money to the ASPCA all the time, and I, for one, tend to think this is laudable. Protecting animals from suffering--the intent of Ms. Helmsley's trust--seems like the kind of thing a decent and prosperous society does, although of course, I would say that, wouldn't I?
The op-ed she links is written by a law professor who seems to regard Ms. Helmsley's money as belonging to said law professor, with sort of a lifetime tenancy agreement. If Ms. Helmsley declines to disburse this money as Professor Madoff sees fit, we're supposed to be outraged at the injustice of it all.
I can make all sorts of arguments for what shouldn't get charitable deductions, like museums--but then people like Tyler Cowen and Kriston Capps put forth very emotional arguments against me. The very idea of a liberal, pluralistic society is that we all have a lot of divergent ideas about what constitutes the public good, and therefore need a lot of room to pursue those notions without government interference. Using government fiat to declare that some purposes are valid, others not, is the antithesis of the American idea. Instead, we basically say that as long as you aren't using the money to benefit yourself or your descendants, it counts as charity.
Moreover, the law professor's complaints are, in this case, silly. The charitable estate tax deduction matters a lot to people who have heirs whose inheritance they would like to maximize--but given that the appalling Ms. Helmsley sued the family of her single dead son into penury after he died, it's hard to see how this would have made a difference to her bequest. Had we taxed her estate fully, the dogs would have ended up with less money, but needy children would have gotten no more.
You could argue, I suppose, that the government could have taken the money and given it to needy children. But looking at the budget shows that most of it would have gone somewhere else: affluent old people, wealthy farmers, defense contractors, holders of US debt, road builders, government employees, and so forth. Indeed, the law professor's favorite target, Head Start, isn't exactly a shining star in terms of poverty reduction.
My preference would be to eliminate the estate tax and tax the cash as it hits a person or entity. That wouldn't fix this 'problem', but then, I don't think anything will. On the other hand, it would make it harder to structure estates to avoid taxation (personal income of that sort is hard to structure), and it would allow us to be much more granular in achieving our goal, which is to avoid plutocratic accumulations of wealth, not punish people for getting rich and dying.
While I completely agree with your sentiments, Megan, I wonder if the comment at Unfogged is meant not so much to question the tax code, but to wonder at the stunning, soul-crushing awfulness of Ms. Helmsley.
I defer to Billy Beck's take on this:
http://www.two--four.net/weblog.php?id=P3846
Just to add, how far have educational standards fallen that a professor can espouse such concepts? It's like claiming that cutting down on driving is stealing from your neighbors (since they lose out on that gas tax, and government spending being what it is, has to be made up somewhere else).
Why is it the purpose of taxation to do anything other than fund the constitutionally enumerated legitimate functions of government?
While disagreeing with Ms. Madoff's policy solutions, I just don't see what's so bad about her article. Ms. Madoff comes from the perspective that:
1. The estate tax exists and shall persist;
2. The charitable exemption amounts to a taxpayer subsidy since the money would otherwise be taxed;
3. The charitable exemption is too broad;
4. ...and here's an example of what I mean.
Personally, I'm not particularly fond of the estate tax, but I don't think we could implement a system that would make things better while the estate tax persists, since an attempt to define the late Ms. Helmsley's trust fund out of exemption would have other and broader undesirable effects.
I want to second Ed's question... why is taxation being used for anything other than funding the government? Is preventing "the creation of plutocratic accumulations of wealth" really something that we need or want the government to do?
That reminds me of the song that says we should tax the rich until there are no rich anymore... shouldn't we be trying to eliminate poverty not wealthiness? Or is quality more important than quality of life?
Or is forming rich dynasties only something we want political families to be able to do?
Why is preventing the accumulation of wealth seen as a legitimate goal? I just don't understand how anyone who favors any kind of personal freedom whatsoever can support that.
The core of liberty is property rights. There is no conceivable moral justification for seizing estates, in whole or in part, that is consistent with that.
How is Helmsley's giving her money to help support animal shelters a "waste of money"? Are they saying the ASPCA should loose it's tax exempt status?
Should only charities that directly contribute to the basic welfare of humans be allowed. If I want to give money to Save the Whales, or to build an observatory, or if I'm David Mugar and I want to pay for the 4th of July fireworks in Boston, should that not be allowed?
I really don't understand the logic....
Don't worry, in a few decades her estate will be run by a bunch of hyper-liberal "estate managers" who will find dubious ways to have her money support a bunch of lefty causes, just like Ford, Carnegie etc.
That is the premise that is upsetting. I have money, no percentage of it is presumed to be the governments. Minimizing my tax burden isn't a moral bad, and to paint it as such is a dangerous place to go.
There are a number of ways to handle your money that don't end up in 45% taxes being paid. Unless we eliminate all of them, including NOT spending money, this is a specious argument.
From the article:
Are 'private' and 'good' mutually exclusive? Apparently we all labor to feed the government: the only source of good in the world. Why allow us to keep any of our money?
This kind of presumptive, 'you get to keep what we say you can' attitude is terribly offensive to me and the American ideal of fairness.
I appreciate the gratuitous cuteness of this post.
Skullberg,
"Apparently we all labor to feed the government: the only source of good in the world. Why allow us to keep any of our money?"
I fear you may be a seer! However, I also fear that the government we will be feeding is a world government (UN), which already sees itself as the "only source of good in the world".
That is the premise that is upsetting. I have money, no percentage of it is presumed to be the governments. Minimizing my tax burden isn't a moral bad, and to paint it as such is a dangerous place to go.
Okay, but can we maybe seperate "what is" from "what we would like it to be" for purposes of analyzing the argument?
There are a number of ways to handle your money that don't end up in 45% taxes being paid. Unless we eliminate all of them, including NOT spending money, this is a specious argument.
No, it isn't. Point 2 follows naturally and logically from Point 1. As already stated, I'm not a fan of the estate tax, but for better or worse, it IS there until somebody changes it.
I quite like your idea of eliminating the whole "tax avoidance" farce by simply taxing inheritance as any other income. And while we are at it, why not achieve further simplification and eliminating "tax avoidance" by taxing capital gains simply as income as well?
No doubt there will be cries about "encouraging investment" and such. But really, if you have money sitting around, what are you going to do with it? Spend it, save it, invest it, give it away. The only place the capital gains tax makes a difference is in deciding between "save" and "invest." Which isn't all that important IMHO -- it's going to get invested by someone, whether by you or by whomever you are saving with.
wj,
Wouldn't it be simpler to just have the government take everything, then give each of us a stipend. That would position the government to invest funds not distributed as stipends in the best interests of everyone.
Without purporting to speak for Megan or anyone else, I think the point is not hostility to wealth but hostility to plutocracy, that is, to the creation of of an enduring class of wealthy people. Arguably, at least, the accumulation of big wealth by people who earned it doesn't tend toward plutocracy nearly as much as the intergenerational passing of big wealth down family bloodlines.
Also, there's the issue of tax preference. I think the government should be a lot smaller than it is, sure, but I don't think I want it to be so small that there would be no need to tax anything at all. So the question arises, what should we (reluctantly, perhaps) tax first, and what should we tax last? When you look at it that way, I think a case can be made that we should tax inheritance income at a significant rate before we start taxing ordinary wage income. That's not to say there's nothing I'd rather tax than inheritances; I'm just comparing those two options and concluding that the wage-earner has a clearer right to retain the direct fruit of his/her own labor than the inheritance-receiver has to retain the fruit of someone else's labor, even if "someone else" is his/her parent.
I'm astonished at the article's glib assumption that, obviously, this is a terrible use of Helmsley's money. In fact, it has the potential to make an enormous difference.
My wife works in animal welfare, specifically in shelters, as an educator and dog behavior specialist. Most of the shelters nationwide are in terrible condition (financially and otherwise), though a dozen or so are already awash in money. If the $5 - $8 billion at issue is used wisely -- a very big if -- it can revolutionize animal welfare. Currently more than 50% of dogs entering shelters are killed, principally for lack of space. (The rate for cats is more like 90%.) This kind of money could create radical improvements.
Certainly there are all kinds of fabulous ways to use $8 billion. The one Helmsley picked is not a bad one at all.
In case anybody is interested in whether animal welfare is a legitimate object of charity, rather than the legitimacy of taxation generally -- of course it is.
But from what I know about Helmsley, I can't believe she really cared particularly about dogs; this was her way of giving the finger to all the humans she knew and the human race in general.
"I can make all sorts of arguments for what shouldn't get charitable deductions, like museums"
OK...I'll bite. Why shouldn't museums get charitable deductions?
I like museums. Museums are great. There's nothing better than a great museum. Except maybe a chocolate chip cookie. Or a pizza.
When I die I plan to leave my billions (of Zimbabwean dollars)to museums.
So...can somebody clue me in to Ms. McArdles anti-charity for museums philosophy?
Point 2 only follows if EVERY POSSIBLE method of handling your money in a way that doesn't result in the maximum tax revenue is in the same category. Here are some examples of activities that amount "to a taxpayer subsidy"
-Withdrawing money from savings and burning it.
-Buying anything, especially depreciating assets (the tax differential is the subsidy)
-Gifting the money away
-All other estate planning
-All tax exemptions
-Shopping avoid sales tax
-Not taxing wealth
Unless and until all money belongs to the government, not maximizing tax revenue does not imply a "taxpayer subsidy".
Look, let's just get to the root of the issue: You're stupid. If the government let you keep your money, you'd spend it on frivolous things. You have absolutely no idea what is best for you. The money you make is better off in the government's hands than in yours.
...At least, that's the leftist/liberal view of the world.
Because a portion of our populace discovered the horrible truth about democracy: Get enough people to agree, and you can force the rest to pay gratuity to you via force of taxes. You can vote yourself gifts from the government treasury.
Depends. If we want to send a loud and clear signal of "hey, if you think you can make it big, make it OUTSIDE of this country!!" then it's something we want. If we want people within this country to aspire to greatness, then it's a bad thing.
Cause -> Effect. So many people just can't connect the dots.
One might argue that the most effective approach to preventing "the creation of plutocratic accumulations of wealth" would be term limits.
I hate to interrupt all of this oh-so-intelligent discussion (really), but who is that adorably bully (i.e., bullmastiff) in the picture? (I have a mastiff, the latest in a series, and would leave a portion of my fortune, if I had one, to make sure that he is cared for in the event a car mows me down during my daily cycle commute.)
Why shouldn't she be able to help dogs. Dogs probabbly treated her better in life than people did. Dogs are loyal. People are selfish and disloyal and mean. Something Helmsley knows quite well from the way she was treated by others jealous of her wealth.
That would be my adorable 8 month old bully, Bartleby, in his slightly younger days.
What have you anti-plutocrats got against working people? If the Waltons, Rockefellers and Kennedys didn't have their trusts they'd have to get a job like the rest of us. This would increase unemployment and decrease remittances to Mexico.
More to the point, there seems little anecdotal evidence that major fortunes survive more than two or three generations. Otherwise the Astors would still own New York City.
Based upon the recent accomplishments of Ford and Hilton heirs, it would seem that the old cliche of making a small fortune by starting with a large one still holds.
My own take is that while Helmsley was probably a PITA to work for, she got treated much more harshly than she deserved---in her shoes, I'd leave the money for a fund to fund mandatory sterilization for poor people.
Skullberg, that merely highlights the complexity of the tax code -- "You are obligated to pay 'X', except for [insert 10 million exceptions]." Which IMO is a different thread of argument.
Look, if you don't like the idea of taxing inheritances, just say so. I don't, and I already said so. But given that inheritances presently are taxable, this sure is an odd way of avoiding a $3.6B payment.
This may come across as condescending, which I don't intend, but does Megan McArdle, the vegan, own a *leather* loveseat? I'm confused...
Bartleby is indeed adorable. And a terrific name as well, particularly for bullmastiffs, who often simply prefer not to do things we ask them to.
Re: Otherwise the Astors would still own New York City.
The Astors may not own New York, but they are still rather well-provided for. Ditto for the Vanderbilts, the Rockefellers and a number of other-money families.
Purchased in my pre-vegan days; I still own the leather shoes bought then as well.
Then there are people like me who like most dogs way better than they like most people.
This isn't about the estate tax, implying that tax exemptions or actions that don't maximize tax liability are essentially tax subsidies is a ludicrous position.
She made the 3.6B payment -- just not to the government. The government had no more claim on that money than I did, and that's my point. I think we should be outraged that her donation is basically a 4.4B subsidy from ME, since one result of her actions could have been to simply name me as her inheritor.
She could do X that resulted in 4.4B going to something and 3.6B going to the Feds, or she could have done any number of things that resulted in less than 3.6B going to the feds, none of those things are subsidized by the federal government.
Skullberg,
Although I agree with your conclusion about the tax status of charitable contributions, the argument by which you got there seems a little oversimplified. Consider the following scenario:
Suppose I have grown a bunch of corn, and suppose the government comes along and says they will give me a big tax break if only I will put the corn to a certain use, say making fuel ethanol, perhaps. By your argument, this would not constitute a subsidy; yet, it has all of the effects of a subsidy. Specifically, it puts more money in my pocket and less in the government's in exchange for a specific action. The only difference is that the whole business is less transparent than it would be if the government simply cut me a check.
The government does this sort of thing all the time. In fact, I daresay that manipulating the tax code is the preferred method of handing out subsidies. Taking the position that it is not a subsidy unless the treasury cuts a check gives politicians far too much latitude for shenanigans.
I think the argument in favor of charitable contribution deductions centers more around the idea that if we are going to set a tax based on income, and if you choose to forgo some of that income (by giving it to someone who is not going to use it on your behalf), then you shouldn't be taxed on the income that you didn't keep. I would even go a step further and say that income given to charity shouldn't be counted when arguing about effective tax rates, but that's another debate.