Budgets Follow Election Results

By SAM URETSKY

Voting in the presidential election should be really simple. By any rational standards the whole thing should have been settled on March 24. That was the day our all-Republican Congress revealed its budget plans for the next ten years, and both the House and Senate plans call for cuts of $3 trillion over the next decade. Both plans make 69% of their cuts in programs that serve low- and moderate-income families. Of course Obamacare will be eliminated, although it will probably be replaced by a voucher system. Food stamps. which have already been reduced severely, will be cut further, and there will be cuts to education and other social programs. Even Social Security, once the third rail of American politics, is up for privatization. While the House and Senate plans are different, they have so much in common that concurrence seems inevitable.

Beyond that, on March 18, the House Ways and Means Committee proposed the end of the inheritance tax. According to the committee’s blog, “As Rep. Kevin Brady (R-Texas) recently said, the death tax “hurts the wrong people”: the small business and the family farm. That’s why the Ways and Means Select Revenue Measures Subcommittee is holding a hearing today on this unfair, unnecessary tax.”

They continue to use the term “Death Tax”, which probably does well in focus groups. Actually, the Inheritance Tax is the fairest tax there is; the person who earned the money doesn’t have to pay it, and the person who pays it never worked for it.

The vision the Republicans are trying to conjure up is the family farm or the little dry goods store being taken away by the rapacious government to pay taxes. It doesn’t work that way. Under current law, the government only taxes estates worth $5.43 million for a single individual, twice that for a married couple. According to the Center on Budget and Policy Priorities, “Today, 99.8% of estates owe no estate tax at all ...Only the estates of the wealthiest 0.2% of Americans — roughly 2 out of every 1,000 people who die — owe any estate tax. This is because of the tax’s high exemption amount, which has jumped from $650,000 per person in 2001 to $5.43 million per person in 2015.” Newsweek reported that there are 1.24 million households (out of 115,938,468 total households reported by the Census Bureau in 2014) with assets over $5 million. If you’ve heard the term “hanging around with the wrong people” — well, that’s who they are.

The Center also notes that “The Largest Estates Consist Mostly of ‘Unrealized’ Capital Gains That Have Never Been Taxed.” Granted, dying isn’t high on the list of tax planning strategies, but it works pretty well, at least for those on the receiving end. If you buy stock that skyrockets, or a farm that jumps in value, and sell it after a year, you might have to pay taxes on the profits. The tax rate depends on your magical tax rate, but for most people that would be 15%. If you make $413,200 in salary, your capital gains tax is still 15%. The money that comes from having money is taxed at a much lower rate than the money that people actually work for. But, if you die without selling the stock or other property, your heirs get it tax free up to $5 million, and at the reduced rate after that. In 99.8% of cases there are no taxes on the profits. It pays to be rich.

The Republican budget has some other interesting things. When they repeal the Affordable Care Act, they also repeal the tax increases that fund the health care law – but they don’t subtract the revenues that would come from these tax increases. Since Republicans don’t raise taxes, they simply assume that Republican policies will spur economic growth, and by 2024 their plan would produce a surplus of $13 billion, and a $33 billion surplus by 2025. This is the same economic absurdity we’ve been living with since Ronald Reagan gave us the self-financing tax cut. It won’t work simply because more people will have less disposable income, which cuts back on the demand side of the supply and demand equation. People who are still paying off their student loans don’t buy new cars, or much of anything else.

These budget proposals, a repeat of the Paul Ryan budgets that have been rolled out every year since Republicans gained control of the House, should tell us everything we need to know about the 2016 election. This budget isn’t proposed by a single individual, it’s based on party priorities. Elect a Republican and you’ll get more cuts in food stamps, the Affordable Care Act replaced by a voucher system, privatization of Social Security and higher tuition at state colleges. You’ll get Kansas. But then the people of Kansas reelected Sam Brownback, who is still waiting for his policies to bring in huge surpluses and calling for more cuts in education. This might be a good time to start worrying.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y. Email sdu01@outlook.com.

From The Progressive Populist, May 15, 2015

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