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October 01, 2017


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Deep State Special Legal Counsel

When Donald John Trump spoke of "carnage" during his inaugural address, I interpreted that meaning infrastructure decay, general decrepitude, litter, urban and rural brownfields, abandonments, and eye sores of filthy public places. Dirt. He is still in concrete operations. I don't think he meant that "We the People" are carnage, except for Hillary and the Mayor of San Juan. So, what is his solution to all of this "carnage?" Cut taxes. Makes sense to me.

Jennifer Hendricks

Also, the step-up of basis at death means vast accumulations of wealth are never taxed at all.


Jennifer, when the estate tax was repealed for a single year (2011?), the step up in basis went away. The wealthy who most benefit from basis step up are private real estate investors, such as Trump. I doubt estate tax repeal will occur but I personally know several extremely successful real estate types who would prefer an estate tax to elimination of step up.


"pay income tax on my salary, some of which I then use to pay my dentist (for example), who in turn pays income tax on his receipt of the money, some of which he then uses to pay office rent to his landlord, upon which another tax is collected."

Seriously, how could one be so unaware of the tax system as to not understand the difference between wages and rents and gifts?

" "people should pay taxes once and not twice" seems contradicted by the administration's proposal to eliminate the deductions for state and local taxes."

Again, a seriously bewildered writer wrote this post. There is not contradiction whatsoever. State and local taxes tax income, sales taxes tax sales, etc. If you think that state and local taxes are taxing after tax dollars, then I would submit you don't understand the concept in even a rudimentary way.

"Mnuchin would propose making Social Security taxes deductible to employees, as they already are to employers."

Employees should also be able to deduct their salaries as a business expense; is that what you are saying? After all, employers deduct their employees salaries, why shouldn't employees be able to do the same?

"As matters now stand, the first $127,200 of salary is subject to both the federal individual income tax and the social security tax, which constitutes double taxation"

Lubet, you are so confused! Taxation of after tax dollars is not at issue because income is subject to different taxes.

There are arguments that the estate tax is necessary, appropriate and should be imposed. Unfortunately, Lubet is just addressing a slogan.

Matthew Reid Krell

Lubet: "But note that the general virtue or desirability of the estate tax is different from the questions of double taxation."

anon: "There are arguments that the estate tax is necessary, appropriate and should be imposed. Unfortunately, Lubet is just addressing a slogan."

It's almost like they're saying the same thing and reaching opposite conclusions.

Anon, if you'd like people to engage the merits of your argument, it might be helpful to make it, instead of referring to it, which is all you've done so far.


Indeed, the "double tax" argument is silly. For their Thanksgiving argument purposes, readers might also note that heirs do not pay tax on inherited wealth, because of section 102 of the Tax Code. Thus, from the heirs' point of view, the estate tax is the only tax that will ever be imposed on inherited dollars. And, of course, it is imposed only on about .02% of estates.


The argument FOR the estate tax is to prevent huge estates from creating a royal class in this country: which of course, we nearly have now. Thus, BDG, the .02% stat, which you throw out as some sort of major point, is just a statement of the obvious. The vast majority of folks don't have estates to tax, and most people believe in the fairness of exempting what small estates are possible for most from additional tax.

Check on how many people in this country are living pay check to pay check. "Limo liberals" won't do a thing to change the power structure in this county. They live lives of relative ease and luxury, while lecturing and hectoring everyone else about "social justice" from their segregated, gated communities. They'll rant and rave about the estate tax, but it won't change a thing, one way or the other, and they know it.

What should change? "As matters now stand, [only] the first $127,200 of salary is subject to both the federal individual income tax and the social security tax ..." Does Lubet complain about that, or just use it (wrongly) in his never ending attempt to denigrate anything not proposed by a Democrat? When the Dems had control of Congress and the presidency, did they lift that cap?


I took tax law under Dan Halperin (and he was very very good.) One thing he explained - apologies if I get the semantics wrong was "the law of small bites." His essential point was that for practical reasons, it made sense to tax people at a large number of clear tax points in small amounts, rather than a small number of large taxes. The reason was simple practicality - high tax rates create a financial incentive to avoid and evade taxes. If you have a high sales tax, or a high excise tax, or a very high income tax, you get a lot of evasion and avoidance and a tremendous amount of resources needs to be devoted to stopping it. The result is that there are a lot of little taxes and relatively few big ones. He was also very good on the general fungibility of money, and how easy it was to convert capital gain and loss into income - I still remember the llama farm tax-shelter example he had us work - and his point that at the time, llamas were expensive (why doesn't everyone have a llama farm, first you have to buy your llama.)

In the debate over the estate tax, or consumption taxes, you rarely see the practical problem raised - if you eliminate say capital gains, or estate tax, etc. you are going to have to raise other tax rates to substitute for them - and that will require a complex tax infrastructure and engender a lot of tax evasion - try doing a VAT return every quarter, reclaiming VAT and paying it, and holding it - not to mention VAT fraud is epidemic in the EU (where VAT rates are between 15% and 25%.)

Matthew Reid Krell

Mack: "if you eliminate say capital gains, or estate tax, etc. you are going to have to raise other tax rates to substitute for them."

I mean, I agree, but the thing to remember is that for many tax-cut advocates, the reduction in revenue is a feature, not a bug.

Deep State Special Legal Counsel

Brackets at 2:49---

Great post. I once ate at a hot dog stand near Chicago and the owner told me he made more money when hot dogs were .59 cents than at today's prices based on volume. A good solo attorney manages a volume practice because large fees are few and far between... Same thing is true for our tax code... A little at a time adds up---the quarter meter plan...


Many really rich people own wealth that has never been taxed, because it represents unrealized appreciation (see, e.g., Zuckerberg with his penny basis FB stock). So this whole concern about double taxation is often misplaced.


It is double taxation because the person who has died (his or her estate) is paying the estate tax, not the recipient. The dead person has already paid taxes on any of that money that came to him or her as income. Mickey

Robert Patterson

If it is unrealized capital gains, then there is no double taxation? In other words, if I own 100 shares of Amazon, and it triples in value in my lifetime, and I bequeath it to X, then I haven't paid any capital gains in my lifetime, and neither does X if he/she sells it right away.

The estate tax is a rough justice version of capital gains, albeit only for large estates.

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