Tax reform is a worthy goal, but details and benefits matter.
IN BELOIT THIS WEEK Congressman Mark Pocan, the Madison Democrat who represents this area in the nation's capital, called proposed tax reform "the biggest lie" he's seen in Washington.
Meanwhile, President Trump and congressional Republicans have been touting that benefits of the bill are intended primarily to accrue to middle-class taxpayers. The administration even put a number to it, saying the average American household will see $4,000 more a year because of the bill's cuts in the corporate tax rate.
Can all of the above be right?
OF COURSE NOT. The devil is always in the details, and many of those details and their consequences are not fully known.
But this much is certain: Americans need to pay attention and be prepared to let their representatives know loud and clear what the people want.
Take that $4,000 figure, for example. The administration arrives there by assuming a corporate tax cut would be used to spark major investments thereby triggering rapid economic growth. It assumes the bulk of the benefits from growth would go to working families, rather than investors. In other words, it's a rosy scenario that may or may not have any basis in reality. No one really can predict with accuracy exactly how all the variables would shake out, which is why tax experts immediately pushed back at the administration's claim.
HERE'S ONE THAT is easier to quantify. For years Republican leaders have decried what they call "the death tax." Officially, that's the estate tax which can come into play when an individual passes away.
This is what advocates of abolishing the estate tax - which is a provision of the tax reform bill - do not say. The estate tax applies to only a select few every year. That's because estates that fall below (in 2017, according to the Tax Policy Center) $5.49 million are exempt. The center estimates only about 11,300 deaths will result in the necessity to file estate tax returns, and only about 5,500 will owe any money.
Now, put that into perspective. The Census Bureau expects somewhere around 2.7 million Americans will die in 2017. Of that 2.7 million, only about 11,300 may need to file an estate tax return, with just around 5,000 actually owing any money in taxes.
That's right - 5,000 out of 2.7 million.
Yet the "death tax" mantra is intended to make ordinary Americans worry that their life's work is in jeopardy from the government. Obviously, that is not true.
BUT FOR MANY of the well-heeled officials in the federal government, their fortunes could be taxed. President Trump has put his net worth at up to $10 billion, though more objective observers set it at just over $3 billion. Either way, it's a lot of money and abolishing the estate tax would be a windfall for his family.
Keep in mind politics in modern America runs on money, and both parties are deeply dependent on the biggest donors - those who easily can pony up enormous sums of cash to candidates, parties and even more to so-called independent political advocacy groups. Those donors, too, stand to experience huge benefits. The disappearance of estate taxes indeed would be a big return on political donation investments.
Now remember, in pushing forward the tax bill, President Trump said this: "The rich will not be gaining at all."
SOME SIGNIFICANT names - Warren Buffett, Bill Gates - actively have lobbied against abolishing the estate tax. Their point: America's Founders prohibited a ruling aristocracy by birthright, but concentrating enormous sums in the hands of a few could very well create a lasting aristocracy of wealth. The numbers are not in dispute; concentration of wealth already has been increasing rapidly. Abolishing the estate tax would accelerate that process and make it permanent.
That's not to say the exemption level necessarily should stay where it is, year after year, without adjustments. The law should encourage passing along small family businesses and farms without taxes forcing heirs to sell. Where should that figure be? $5.49 million? $10 million? $20 million? $100 million? We don't know, but there is value in setting the exemption at a reasonable figure.
Warren Buffett is worth, according to Forbes, about $65 billion. Bill Gates, $81 billion. We agree with them. That is not where the exemption should be set.
These are issues worthy of debate. Tax reform should be discussed, at least every generation, because times change. But details matter. Pay attention.