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Click here to return to Bill Wood's Blog Pages.Why I Admire President BushAs a war time President who has led his nation in a fight against the greatest forces of evil ever to challenge our liberty and freedom, Mr. Bush will no doubt be remembered for calling for no sacrifice from the ordinary citizenry: no war tax, no gasoline tax, no draft, not even a credible call for energy conservation. But in the name of a cause that figures even more prominently on his political agenda than overcoming the forces of darkness in the Middle East, he has quietly and effectively called for a new sacrifice from over 98% of this country's citizens. A cynic might say that the President misled his people when he championed the call for the elimination of the death tax, something which is currently scheduled to occur in 2010. That same cynic might argue that the President blurred the fact that, historically, well under two percent of estates have been subject to the Federal estate tax. But the facts speak for themselves: The American people understand the need to reward the successful. Indeed, any one of us might stumble into great wealth sometime soon. And what better poster child for the benefits of protecting inherited wealth and privilege is there than the life and career of George W. Bush himself? What is truly extraordinary has been this President's ability to convince the ninety-eight percent of us who won't manage to accumulate sufficient wealth to create an estate which the old death tax would have touched that we should pay a new tax which will help to make the elimination of the current death tax possible. And to think that Mr. Bush has been accused of opposing the redistribution of wealth! Wait, you say-- the President has not proposed any new taxes in connection with the elimination of the death tax, has he? No, indeed he hasn't. He has, however, tied the elimination of the death tax to a change in the way the existing capital gains tax is computed. This critical change will have the effect of taxing a large proportion of the estates that would have historically been exempt from the old death tax. Previously, not only were over ninety-eight percent of all estates exempt, but all estates were subject to something called basis step up. What this meant, simply, was that capital assets were revalued to their market value at the time their owner died. For average Americans this meant that inheriting real estate or stock carried with it no hidden current or future tax liability (with respect to any gains that had occurred prior to the death of the original owner). All of this changes with the elimination of the death tax as currently planned in 2010. Imagine, for the sake of argument, that three children inherit $750,000 in real estate from their surviving parent. Assume also that this is the only asset of consequence. Under the old law, they could go and sell that real estate and each could put $250,000 in his pocket. Under the new law, assuming the original cost (or "basis") for that real estate is $150,000, they would have to pay capital gains tax on the $600,000 increase (or "step up") in value. Ignoring state capital gains taxes, this new tax would amount to $90,000 at today's current long term capital gains rate of fifteen percent. Each child would then end up with only $220,000, not the $250,000 they would get under current law. But you all knew that, right? Surely the President and his many allies in the GOP have mentioned this subtle but powerful change in the taxation of estates in their tireless call for the elimination of the death tax. It still seems unlikely to me that everyone in that vast bottom of ninety-eight percent feels the moral imperative for the government to redistribute their wealth to the richest two percent of America. But the standard criticism against the elimination of the death tax is simply that it is unprogressive and unfair. Few if any critics have pointed out that the change in law actually goes further: that is has been designed to shift the estate tax burden itself from the very rich to the middle classes. And therein lies the key to President Bush's greatness as a leader. He has convinced the American people to accept a radical shift in taxation away from the rich without every sparking an intellectual debate on the actual mechanics or consequences of the change itself. Our cynic might say that the media have abetted this change because, increasingly, the folks who give us our news are themselves among the rich and privileged: out of touch with what working families face on a day to day basis and happy to trade a dollop of truth for an additional measure of material well being. But I think there is another explanation: I believe that the ordinary people of America have accepted and that they applaud the wisdom of our President's decision to use every available power of government to reward the richest and most productive elements of our society at the expense of ordinary working Americans. If by some quirk I am wrong in my judgment of the national electorate, I challenge the voters of America to prove it by exercising their democratic franchise to let President Bush know what it is that they actually believe. |
