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Chuck Collins & Alison Goldberg

| Northeast | Under $1M | at least 50% |

Comments (3)

Posted on March 25th by Chuck Collins

Hi John,
Thanks for taking the time to post your thoughtful questions. Let me send a quick response now –and then follow-up as needed.
RE: Question 1
Since 2002, the estate tax law has largely addressed the closely held business/farm issue –by both raising the wealth exemption and valuing their assets at lower levels, flexible payment schedule.
If the estate tax returns in 2011 at its 2001 levels (which will happen if Congress doesn’t act), then there will be problems for illiquid family enterprises. But if it is reformed at the levels that most in Congress and the President support ($3.5 million/$7 million for a couple, 45 percent rate), these generous advantages to closely held businesses will remain. I’ve personally investigated a lot of these scenarios. With modest planning, closely held businesses will prosper under the reformed estate tax. They will not be “put out of business” as some of their lobby groups claim. They might be inconvenienced and wish they didn’t have to pay, but that is another matter entirely.
Two good reports from Center on Budget and Policy Priorities:
“Impact of Estate Tax and Small Farms,”;id=2663
“Impact of Repeal”
People will seek clever tax avoidance schemes for any meaningfully significant tax. While there should be high exemptions ($2-4 million), Congress should also eliminate some of the avoidance games involving life insurance and CRUMMY Trusts. Note: The “effective rate” in 2009 on the estate tax –meaning the actual percentage of an estate that households pay after taking all the exemptions – was about 17-25 percent. Hardly confiscatory as the rate (45%) sounds.
Q2 –It is interesting to think historically about “wealth dynasties” in the U.S. and whether tax policy matters. There are still visible remnants of the “Gilded Age” family dynasties, that were established prior to 1916 income/estate tax. But I find it hard to think of a wealth dynasty established between 1920 and 1970 that dominates politics/charity. Lisa A. Keister, argues in her book, Wealth in America: Trends in Wealth Inequality, and other research that the estate tax has reduced the concentration of wealth over time and within families (along with the natural dispersal that occurs).
With a large “wealth preservation” industry, people work hard to keep the wealth flowing past the third generation. The estate tax encourages dispersal, through charity and spreading family gifts around widely.
Pew Charitable Trust has collected the most recent research/data on economic mobility See: The latest research shows US mobility slowing and European mobility increasing.
Thanks again for your questions.

Posted on March 25th by Alison Goldberg

Thanks for your comments John. I know Chuck will respond to your questions about the estate tax.
In the meantime, I thought I'd post a short overview of the policy proposals we're focused on at Wealth for the Common Good to provide some background for today's call.
We're looking at a series of progressive tax reform proposals that together have the potential to generate over $500 billion per year in federal revenue while also rebalancing the tax code:
1) End the tax breaks for households with annual incomes over $235,000: $45 billion per year
2) Close overseas tax havens: $100 billion per year
3) Institute a financial speculation tax: $150 billion per year
4) Eliminate tax preference for capital gains and dividends: $80 billion per year
5) Levy a progressive estate tax on large fortunes: $40-60 billion per year
6) Create an additional top tax bracket for high incomes. $60-70 billion per year
For more information, join today's Bolder Giving call, and visit our website at
Alison Goldberg

Posted on March 23rd by John Mauriel

Sorry I cannot make the webcast, but I do have questions I would have like to raise at that session.
I agree with your position that the accident of birth should not give a person overwhelming financial advantages of capital, especially in a capitalistic society (which is now quickly becoming a plutocracy or maybe we are already there) Of course, there will always be people who are advantaged, if not by inherited wealth, by the circumstances of their parental influences and other early childhood experiences and their growing up early years.
Q. In terms of financial advantages, is there a practical way to impose a sizable estate tax again without making it so high that it encourages people finding clever ways to avoid it? How do you (or should you) make exceptions for family farms and certain small businesses without inviting another loophole to open up. Perhaps the answer is in your book, but I would like to know if there is an answer and hear the main point concerning the practicality of implementing such a tax. (not the political possibility of passing such tax legislation again.
Q2. My conservative friends say that estate taxes do not matter, since by the third generation inherited wealth is dissipated. I dont believe that assertion, but is there any hard evidence one way or the other on this point? I know that sociologists have done studies of upward mobility in the first half of the 20th century in the US and found that we still had an open upwardly mobile society and the child of a poor immigrant had almost as much chance to rise to the next levels of socio-economic status as anyone. I am not familiar with data on recent decades, but I suspect that upward mobility in our current environment is not as open to all as it was in the past. Do you cover that in your book? What does real economic data tell us on this point
John J. Mauriel
Ph: 952-920-8933