Of all the insulting lies we’ve heard about Democratic proposals to tax the rich, perhaps the worst is the idea that they would devastate owners and operators of family farms.
Now a new version of this line is back. Only this time, it’s being pushed by a Democrat who’s advocating against a key tax provision in President Biden’s $3.5 trillion “human infrastructure” plan
A swarm of lobbyists is gearing up against Democratic efforts to tax corporations and the wealthy to fund major investments in our people and in preserving the future home of human civilization. One thing the lobbyists want to protect is a loophole allowing untold inherited wealth to escape taxation.
When people say the economy is “rigged," this is what they’re talking about. As it is, wealth and investment income are not taxed as labor income is, so those amassing large fortunes often already receive privileged tax treatment.
But in addition, when estates are passed down to heirs, for tax purposes, assets are assigned the value they have at that point of transfer. If assets are then sold later, they’re taxed based on their appreciation in value from that point, effectively allowing all the appreciation before then to permanently escape taxation.
This is one way billionaires can get away with paying so little in income taxes relative to their wealth, whereas most Americans have income taxes taken from each paycheck.
Biden’s plan would combat this. It would tax those assets based on their appreciation from the original point of acquisition, thus taxing all that unrealized value. That’s what lobbyists want to prevent.
One of them is Heidi Heitkamp, the former Democratic senator from North Dakota. The New York Times reports that her effort is “well-financed,” though details are lacking, and that she’s pushing the argument that taxation at death is bad politics:
Ms. Heitkamp said she was finding a receptive audience among potential swing voters in rural areas, especially owners of family farms, even though Democrats say such voters would never be affected by the changes under consideration. Lobbyists already expect this piece of the estate tax changes to wash out in the lobbying deluge.“This is very consistent with my concern about revitalizing the Democratic Party in rural America,” Ms. Heitkamp said. “You may want to do this,” she said she had counseled her former colleagues, “but understand there will be risk, and risk is the entire agenda.”
If Democrats don’t preserve the loophole that allows fabulous amounts of wealth to escape taxation when passed down to wealthy heirs, they might alienate hardscrabble rural voters!
Funny, we keep hearing Democrats are losing rural voters because they’re no longer the party of the working class (by which critics mean the White working class) and have become the party of cosmopolitan elites, tech billionaires and woke corporate investors.
Now they risk losing more of those voters if they put a tiny crimp in those elites’ efforts to maintain entrenched and inherited privileges across generations? Whatever happened to the narrative that non-cosmopolitan Real Americans went for Trump to protest this rigged political economy?
In the old iteration of the story, the estate tax (despite being levied only on enormous fortunes) would target family farms. In the new one, taxing the appreciation in value of the assets of the jet-setting children of the super-rich will target them.
“The argument is a new version of an old scam,” Steven Rosenthal, a senior fellow at the Tax Policy Center, told me. “It is repugnant.”
The argument fails, Rosenthal notes, because Biden’s plan taxes such capital gains only at over $1 million per person, which means it would target a very small slice of the ultrawealthy.
What’s more, the plan would allow owners of family businesses to indefinitely defer such taxes as long as the business remains in the family. “Biden structured his proposal to avoid taxing family farmers,” Rosenthal told me.
A Center for American Progress analysis reached the same conclusion, noting that the plan “taxes billionaires and protects family farms and businesses.”
Besides, if a farmer who grows very wealthy via investments does bequeath a large estate to an heir, those assets should be taxed even if they belonged to a farmer, no? “Targeting such assets will not cost a family the family farm,” Rosenthal says.
Heitkamp’s answer to all this: No one thinks such exemptions will work. As she told the Times: “People don’t believe that, because they believe that rich people always have the lane to get into Congress.”
That’s strikingly circular logic: Because people correctly believe the tax code has been rigged for the wealthy, they will never actually accept that it’s truly being unrigged, so Democrats shouldn’t dare try!
One has to be distressed at how quickly things are snapping back to an old, ugly normal. As Adam Tooze’s new book on the covid-19 crisis powerfully demonstrates, that crisis laid bare some deep injustices, revealing a “society with a patchy and minimalist” safety net, in which “millions live paycheck to paycheck.”
That seemed to open space for a new understanding of the vast inequalities that have resulted as the rules of our tax code and political economy have been restructured to channel wealth, income and rents upward for decades.
It seemed as if a confluence of circumstances might allow for a correction of these deep imbalances, which taxing corporations and the wealthy to fund all this human infrastructure might begin to accomplish. Yet the same old swarm of lobbyists has descended to kill as much of it as possible, using the same old arguments, as if none of that ever happened.
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