Download Tax Reform Promoting SHARED PROSPERITY Economic Growth

Tax Reform Promoting SHARED PROSPERITY Economic Growth
“Our new Constitution is now established, and has an appearance that promises
permanency; but in this world nothing can be said to be certain, except death and
taxes.” (Benjamin Franklin, in a letter to Jean-Baptiste Leroy, 1789)
Death and taxes—two subjects about which most humans have little enthusiasm.
Complaining about taxes comes as naturally to most as complaining about bad weather. The
United States finds itself at a time when there is mounting evidence our national economy is
not firing on all cylinders and our democratic form of government takes on more of what looks
like an endless food fight. The poor functioning of the economy and gridlock in the political
system call into question any confident defense of “American exceptionalism”.
When it comes to government, most Americans hold two contradictory views. They
expect government to provide an array of high quality public goods and services and they want
lower taxes. It is easy to find a large majority favoring cutting governmental spending in general
but majorities vanish when it comes to cutting specific programs. Political parties also say they
want to provide high quality public goods and reduce funding in certain programs but quibble
endlessly over which ones.
Other highly developed countries have been wrestling with similar economic and
political challenges. The lack of interest displayed by many political, business and cultural
leaders in what other successful democracies with market economies are doing is bewildering.
Would not a poorly performing NFL franchise wishing to improve look at what successful
franchises like Denver, Green Bay, New England, Seattle and San Francisco are doing?
In the nation’s recent long-winded and at times petulant discussion of health care and
concern about mounting health care costs, it is difficult to explain why no serious consideration
was given to a single-payer option. Most other developed countries have a single-payer option
and achieve health care outcomes matching or exceeding those in the U.S. and at much lower
per capita costs. You might think serious politicians and beleaguered taxpayers would at least
be interested in taking a closer look at what competing countries are doing to achieve such
results.
U.S. rankings have been falling in recent decades on health, education, economic and
other quality of life measures as countries once ranked below the U.S. have caught and passed
it. Once considered the wealthiest country, a number of countries have passed the U.S. in terms
of median individual and household wealth. This would suggest “American exceptionalism” is
tarnishing. As this discussion of tax reform reveals, other highly developed countries have
struck a different balance in providing public and private goods and reaching political
consensus. Since public goods and services rely on funds through taxation, these other
developed countries have taxed themselves at higher rates than the U.S. America seems to be
charting a different path but one which has led to a more economic and politically polarized
and less successful country. Tax reform will be an essential undertaking to return the nation to
John Patterson
Page 1
Tax Reform Promoting SHARED PROSPERITY Economic Growth
a path of shared prosperity. This report attempts to provide a rationale and offers directions
such tax reform should take to achieve this goal.
Before offering suggestions as to the kind of tax reform the United States should pursue,
it is important to consider salient post-World War II trends which provide useful background,
context and guidance for the nation’s deliberations.
Rich Get Richer
Shared Prosperity
Figure 1: Changes in Family Income Distribution, 1947-2011
Figure 2: Average After-Tax Income by Income Groups, 1979-2007
Tax reform which moves the nation back to the “shared prosperity track” the nation
enjoyed from 1947 to 1979 and away from the “rich get richer track” since 1979 should be a
major goal of tax reform and other public policies as well. Figure 1 and Figure 4 reveal that up
to 1979 family incomes rose by similar rates for all income categories; in other words all income
groups shared equitably in terms of rate of growth in income gains. Since the late 1970s things
changed dramatically and higher income groups, actually the very rich, benefitted much more
from economic growth and have enjoyed much higher rates of income gains than the bottom
80 percent of the population, as indicated in Figure 2, Figure 3 and Figure 4.
In considering tax reform, how
were tax rates and policies different in the
shared prosperity and rich get richer
periods? A more progressive tax system
prevailed during share prosperity. Figure 3
shows the tax system has become less
progressive, particularly so during the
Reagan and Bush I administrations,
becoming a bit more progressive under
Clinton and then turning less progressive
again under Bush II. From 1960 to 2004 tax
rates for the upper middle and middle
income categories remained relatively Figure 3: Tax Rates by Income Group, 1960-2004
constant while the rate for the lower 40 percent declined modestly. Clearly, the top 1 percent
enjoyed the largest reduction in tax rates since 1960. Even the top 10 percent experienced little
John Patterson
Page 2
Tax Reform Promoting SHARED PROSPERITY Economic Growth
change. For whatever reasons, the tax system in the U.S. has skewed overtime in favor of very
wealthy individuals and corporations.
Figure 4 displays vividly the radically different
results during the shared prosperity period from
1947 to 1979 and since 1979 with respect to average
annual income gains by quintile income groups and
the top 1%. Even though actual income gains (in
dollars) were larger for successively higher income
groups, the average yearly percentage gains were
slightly higher for the first four quintile income
groups from 1947-1979. This would tend to provide
some support for those claiming that in a growing Figure 4: Average Annual Income Gains by Quintile
economy benefits did trickle down to lower income groups, thus supporting the argument all
boats rose with the tide of economic growth. Clearly, a strong middle class was being created.
As Figure 5 shows, percentage increases from 1947-79 were 119, 100 and 72 percent
respectively for productivity, compensation and wages.
However, the trend in annual income gains since
1979 paints a very different and troubling picture. It is as
if some seismic shift occurred throwing the nation’s
economy off the shared prosperity track. A strong and
broad middle class and the avenues for upward mobility
created during the shared prosperity period seemingly
vanished. In the rich get richer period annual income
gains have risen slightly for successively higher income
quintiles but at puny rates when compared to the
shared prosperity period (Figure 4).
In an economy driven by consumption, that such
a wide swath of the nation’s households has not Figure 5: Productivity, Compensation and Wages since 1947
experienced notable economic gains in over thirty years has been damaging. Only the top 1%
experienced income gains at rates comparable to those achieved in the shared prosperity
period. Clearly, the economic benefits which had been trickling down to lower income groups
on the shared prosperity track have dried up and been replaced by a gushing up of the benefits
of economic growth in the economy to primarily the wealthy and bypassing the middle and
lower classes. All boats are no longer rising with the tide, only the yachts and luxury liners.
It is clear the income gains enjoyed by the highest income groups in a real sense were
gained at the expense of lower income groups for whom tax rates did not decline and real pretax income did not rise as for wealthier groups. During the shared prosperity period workers’
wages grew with productivity gains while during the rich get richer period productivity gains did
John Patterson
Page 3
Tax Reform Promoting SHARED PROSPERITY Economic Growth
not lead to increases in workers’ wages. Since 1980 a productivity gain of 80 percent has been
matched by puny gains of 8 percent in compensation and 7 percent in wages. Benefits from
productivity gains have gone increasingly to rich households and corporations.
Whereas all income groups did well during the shared
prosperity period, only the wealthiest income groups have
prospered in the rich get richer period. It is obvious a majority
of the American people would favor tax reform and other
policies aimed at returning our nation to the shared prosperity
track where the rich continue to do well but all income groups
prospered as well. The rich will and should get their just
rewards but not at the expense of most individuals and
households in the U.S. (Figure 4 and Figure 5).
Myths about Taxes and False Assumptions
There are several myths and false assumptions about
taxes and taxation which must be dispelled before any
productive discussion about tax reform is possible. They are:
Myth 1: Taxes in the United States are too high and
Americans are overtaxed. The effective tax rate (federal, state
and local) in the U.S. is considerably lower than in all other
highly developed Organization of Economic Cooperation and
Development (OECD) countries. Total taxes as a percent of Figure 6: Total 2009 Taxes as a % of GDP
Gross Domestic Product (GDP) in 2010 show the U.S. rate about 24.8% compared with an
average of 33.4% for all other OECD countries (Figure 6). If the U.S. wants to compare itself with
less developed countries like Mexico okay, but when compared with other highly developed
countries and democracies there is no evidence U.S. taxes are too high. They are actually lower.
Myth 2: Corporate taxes in the United States are too high and should be reduced. It is
true the statutory corporate tax in the U.S.
is the highest for OECD countries (39%
recently), but with tax breaks, allowed
deductions
and
other
preferences
extended by legislation few corporations
pay the statutory rate. The effective
corporate tax rate tells a different story.
Figure 7 reveals the effective corporate tax
rate in the U.S. (average of 13.4% from
2000-2005) is among the lowest for OECD
countries. When one also considers the Figure 7: Effective Corporate Tax Rate OECD Countries
corporate tax as a share of GDP was lower than all other OECD countries except Iceland in
John Patterson
Page 4
Tax Reform Promoting SHARED PROSPERITY Economic Growth
2009, has been declining and is less than two percent of GDP (Figure 8), one has to question
those continuing to claim vociferously that corporate taxes are too high.
Myth 3: Lower taxes will promote economic
growth and higher taxes will stifle growth. Since
this myth is promoted most ardently by
Republicans, one might suspect economic growth
as measured by job creation would be more
impressive when Republicans control the White
House. Figure 9, compiled from tabular data on a
Wall Street Journal blog, reveals from Truman
through Bush II the economy created more jobs,
about a million jobs a year more when Democrats
Figure 8: Corporate Income Tax as a Share of GDP, 1946-2009
occupied the White House.
As shown in Figure 10, virtually all
marginal tax rates were higher in the shared
prosperity than in the rich get richer period.
Claims that lower tax rates lead to higher
economic growth benefitting all income groups is
a faith-based conclusion which is not supported
by evidence.
Myth 4: Federal taxes are too high and
cutting taxes is the best way to curb yearly
Figure 9: Number of Jobs Created per Year by Administration
deficits and a mounting national debt.
False Assumption: The Republican Party
today behaves in any way comparable with the
Republican Party of twenty or more years ago
and thus the “both sides do it” argument often
cited by the media is correct. It takes little
courage for politicians to favor reducing taxes
and cutting spending. This is music to the ears of
taxpayers who always see themselves as
beleaguered and over taxed, even if evidence for
such is lacking. This probably explains more than
anything why federal tax revenues have fallen
short of federal expenditures as a percentage of
GDP fifty-eight of sixty-nine years since 1946 or Figure 10: Top Marginal Tax Rates, 1916-2010
84% of the time. Since federal spending which occurs is based on legislation passed by Congress
John Patterson
Page 5
Tax Reform Promoting SHARED PROSPERITY Economic Growth
and approved by the president, it is more accurate to say government programs are
systematically underfunded and thus yearly deficits and mounting national debt are the norm.
Figure 11 provides average federal revenues, expenditures and deficits for the Truman
through Obama first-term presidency. No post-war president inherited the size and scope of
economic problems Obama faced on entering office. Obama’s first-term called for responding
to the deepest recession since the Great Depression and federal expenditures rose and federal
revenues fell to post WWII lows as a percentage of GDP. Thus the higher deficits under Obama
were explained by both expenditures increasing and revenues decreasing.
Prior to Obama the Reagan administration presided over the highest expenditure as
percentage of GDP, averaging 22.4% for his eight years in office. Reagan ran the highest yearly
deficits as a percentage of GDP until Obama’s first-term. Obama’s deficits as a percentage of
GDP are falling to Reagan levels; the budget deficit was 4% of GDP in 2013 which is below the
average yearly budget deficit under Reagan of 4.22%. The Congressional Budget Office
estimates the deficit for 2014 will fall below 3% of GDP. So Ronald Reagan’s presidency
sustained the largest post-World War II deficits as a percentage of GDP.
Figure 11: Average Federal Revenues, Expenditures and Deficits
as a Percentage of GDP by Presidential Administration
Administration
Truman (4 years)
Eisenhower (8 years)
Kennedy-Johnson (8 years)
Nixon-Ford (8 years)
Carter (4 years)
Reagan (8 years)
Bush I (4 years)
Clinton (8 years)
Bush II (8 years)
Obama (4 years)
REPUBLICANS
DEMOCRATS (including Obama)
(excluding Obama)
Revenues
16.00%
17.53%
17.64%
18.10%
18.40%
18.18%
17.93%
19.03%
17.61%
15.35%
17.87%
17.28%*
17.76%*
Expenditures
15.90%
18.10%
18.65%
19.74%
20.80%
22.40%
21.88%
19.82%
19.51%
24.05%
20.33%
19.84%*
18.79%*
Deficits
+0.10%
-0.57%
-1.01%
-1.64%
-2.40%
-4.22%
- 3.95%
- 0 .79%
-1.90%
-8.70%
-2.46%
-2.76%*
-1.03%*
*Averages not weighted by number of years in office.
Since Republicans are forever harkening
back to the “morning in America” under Reagan,
the initial federal target for taxes to raise
sufficient revenues should be 22.4% of GDP, the
expenditure rate under Reagan rather than his
18.18% average level which led to large deficits
and mounting federal debt.
The recent track record of Republican
administrations in curbing deficits and the
national debt when they occupy the White
House is very poor as Figure 12 reveals. One Figure 12: Percentage Increase in National Debt
would think their criticism of Obama when it
comes to deficits and debt might have some compelling evidence to back them up. But much of
John Patterson
Page 6
Tax Reform Promoting SHARED PROSPERITY Economic Growth
today’s Republican Party operates in an evidence-free zone. When in office Republicans have
employed “borrow and spend” practices driving up deficits and debt while having the temerity
to chastise Democrats as “tax and spenders.” Setting taxes at rates which cover spending
authorized by Congress is fiscally prudent and more responsible than having to borrow to cover
spending. Today’s Republican Party talks fiscal discipline when not occupying the White House
but shows little fiscal discipline when they are in charge. This Jekyll and Hyde approach to
governing is a large impediment to reaching consensus and compromise on so many issues in
Washington.
The often heard Republican complaint that forty percent of federal government
spending relies on borrowing from other countries might be taken seriously if the party’s
“never raise taxes to pay for the bills the nation has incurred” and “threats to renege on the
nation’s debt by refusing to raise the debt limit” stances were not contributing to more
borrowing and more debt.
“The GOP has become an insurgent outlier in American politics. It is ideologically
extreme; scornful of compromise; unmoved by conventional understanding of facts, evidence
and science; and dismissive of the legitimacy of its political opposition.” This is a conclusion in a
recent book authored by Thomas E. Mann and Norman J. Ornstein who have observed and
commented on Washington politics for over forty years. They further conclude the ““Both sides
do it” or “There is plenty of blame to go around” are the traditional refuges for an American
news media intent on proving its lack of bias, while political scientists prefer generality and
neutrality when discussing partisan polarization. Many self-styled bipartisan groups, in their
search for common ground, propose solutions that move both sides to the center, a strategy
that is simply untenable when one side is so far out of reach.”
Mitch McConnell’s candid statement, “……my number one priority is making sure
president Obama’s a one-term president,” conveys a level of brazenness in the party’s partisan
goals unheard of in past decades. Even the insurgency led by New Gingrich which was highly
critical of Bill Clinton found ways of cooperating with the president and passing meaningful
legislation on a bipartisan basis. Even though it is often said “politics is the art of compromise,”
Republicans calling for compromise with Obama have been cast into the political wilderness
and castigated as RINOs (Republicans in Name Only).
The need to stimulate the economy via government spending to recover from
recessions has been accepted gospel until today’s Republican Party’s lurch to the right. A large
number of Republicans in Congress had no difficulty voting for stimulus plans when Reagan and
Bush II occupied the White House but only three Republicans in the Senate voted for Obama’s
stimulus package to address the nation’s most significant economic challenge since the Great
Depression, even though it included the party’s magic elixir—tax cuts (Figure 13).
John Patterson
Page 7
Tax Reform Promoting SHARED PROSPERITY Economic Growth
Figure 13: Congressional Support for Stimulus Plans Offered by Four Presidents
Amount ($ billions)
SENATE
Democrats
Republicans
HOUSE of REPS
Democrats
Republicans
Reagan (1981)
$1,768*
89
37
52
323
133
190
Clinton (1993)
$736*
51
51
0
218
218
0
Bush (2001)
$1,635*
58
12
46
240
28
212
*Amount expressed in billions of 2009 dollars for comparison purposes.
Obama (2009)
$787*
60
57
3
246
246
0
A total of 3 of out of over 280 Republican members of Congress voted for Obama’s
stimulus package and no Republicans voted for Clinton’s package. Conversely, neither of the
Reagan or Bush II stimulus packages would have passed without significant support by
Democrats in Congress. Note, also the Reagan and Bush II packages were over twice the size in
2009 dollars as either the Clinton or Obama packages. And yet Republicans contended the
Obama package was extravagant and much too big even though the recession was the deepest
since the Great Depression. Today’s Republican Party pans stimulus spending. The Republican
Party of decades ago, as most economists, accepted the role played by government “pump
priming” spending to retard further deterioration in the economy and promote growth.
The media pretense that “both sides do it” may have been accurate when the
Republican Party had firm principles on which some of its policies were based, policies that did
not change because the party happened to occupy the White House. We have moved into a
“one side does it more than the other side” era and the fact so much of the media does not
comprehend this reality has only emboldened the Republican Party in becoming more
intemperate in its rhetoric and more extreme in its policies.
The extent to which the Republican Party has unhinged from its traditional conservative
moorings is captured in a quote from a St. Louis Post Dispatch editorial of June 26, 2011. “Today
we have the spectacle of smart, patriotic men and women putting their brains and integrity on
ice to please a party dominated by anti-intellectual social Darwinists and the plutocrats who
finance and mislead them.” To dismiss this admittedly harsh sounding conclusion, one needs to
explain the drift, actually the lurch, of the Republican Party to the right as a normal occurrence
for a political party in a country where only two parties dominate. The lurch is not normal and
the Republican Party is not behaving normally. Any political party that can celebrate over fifty
attempts to repeal the Affordable Care Act and at no time provide a thoughtful alternative
speaks to the trouble our two-party political system is in. To pretend otherwise is to preclude
developing any bipartisan consensus required to deal effectively with significant problems
facing the nation.
John Patterson
Page 8
Tax Reform Promoting SHARED PROSPERITY Economic Growth
Top Priorities for Tax Reform with Shared Prosperity as the Goal
The priorities listed below are not discussed in detail but are intended to be suggestive
of the types of reform and modifications which should be considered to return to the postWorld War II shared prosperity path from which the national economy was diverted in the late
1970s. The rich get richer path since 1980 is moving the country backward and eroding the
once solid base on which a broad and prosperous middle class was established and those not
yet in the middle class saw within reach and shedding public policies assisting many lower
income Americans in reaching the middle class.
1. Simplify the tax code.
The only downside of simplifying the tax code is finding other jobs for all the people
employed in assisting individuals and companies to sift through the endless morass our
tax code has become. If some civilization in the distant future should dig through ruins
and find the U.S. tax code, it will likely wish this once vibrant civilization had never
invented writing.
2. Return to a more progressive tax system like the one that existed for thirty years after
World War II during the shared prosperity period when income, corporate and capital
gains taxes were higher and displayed greater progressivity than today.
3. The less and less progressive shift in the nation’s tax system, as revealed in Figure 3,
should be arrested and reform should move toward the higher rates in the 1950s, 1960s
and 1970s when all economic groups benefitted from economic growth as revealed in
Figures 1 & 4.
4. A priority has to be assigned to government programs, policies and spending likely to
advance democratic capitalism principles, reduce income inequality and return the
U.S. to the shared prosperity path it achieved from the late 1940s to late 1970s.
“Democratic capitalism, also known as capitalist democracy, is a political,
economic, and social system and ideology based on a tripartite arrangement of
a market-based economy based predominantly on a democratic policy,
economic incentives through free markets, fiscal responsibility and a liberal
moral-cultural system which encourages pluralism. This economic system
supports a capitalist free market economy subject to control by a democratic
political system that is supported by the majority. It stands in contrast to
authoritarian capitalism by limiting the influence of special interest groups,
including corporate lobbyists, on politics.”(Wikipedia)
Though not a taxing policy per se, raising the minimum wage is consistent with
democratic capitalism. Refusing to increase the minimum wage has especially adverse
consequences on lower income individuals and households and retards an economy
very dependent on consumption.
John Patterson
Page 9
Tax Reform Promoting SHARED PROSPERITY Economic Growth
5. The total effective tax rate in the United States should move higher in the direction of
all other highly developed OECD countries.
The total effective tax rate in the U.S. is lower than for all but two of the other OECD
countries (Figure 5). Whereas the U.S. had the 16th highest total effective tax rate for
OECD countries in 1979, it had dropped to 32nd in 2010. This indicates overall tax rates
in other OECD countries have gone up while those in the U.S. have declined.
6. To guard against deficits and debt and balance the budget, it is desirable to raise
federal revenues as a percentage of GDP to or slightly above anticipated federal
spending as a percentage of GDP.
The fact politicians find it easy to reduce taxes but difficult to cut spending to balance
the federal budget is why the nation has run deficits in most years since World War II.
Interest payments on the national debt have ranged between 1.5 and 3.5 percent of
GDP over the last forty years.
7. Federal revenues should initially move to 22.4% percent of GDP which was the
average yearly spending level during Ronald Reagan’s eight years in office.
Given the canonization for sainthood Republicans wish to grant Reagan, the average
22.4% of GDP spending level should be set as the federal revenue target. This is slightly
higher than the revenue percentage target suggested by the Simpson-Bowls
Commission. This may not be an adequate revenue percentage of GDP in the long term
because it is considerably lower than other developed countries. It should be noted that
had the country been collecting revenues at 22.4% of GDP since 1980 and all spending
as % of GDP had remained unchanged, all the nation’s deficits and debt in the
intervening period would have been erased and the nation would be running a generous
surplus. Assuming state and local taxes remain the same or increase slightly, this 22.4%
target should close the gap modestly between the U.S. and other OECD countries in
terms of total taxes as a percentage of GDP.
8. If federal surpluses should exceed 2% of GDP two years in a row with federal spending
targeted at 22.4% of GDP, triggers adopted by Congress and with presidential approval
should be established.
Running surpluses makes more fiscal sense and saves more dollars and cents than
running deficits since both the principal and interest on borrowed money must be paid
back when deficits are the norm. Such a trigger will require Congress to be more fiscally
responsible and reduce taxes should surpluses rise to a certain level above the 22.4%
revenue target.
9. If federal deficits should exceed 2% of GDP two years in a row by falling below the
22.4% revenue target, triggers adopted by Congress and with presidential approval
should be established.
John Patterson
Page 10
Tax Reform Promoting SHARED PROSPERITY Economic Growth
Running deficits is less fiscally responsible than running surpluses. Such a trigger will
require Congress to be more fiscally responsible and increase taxes should deficits rise
to a certain percentage of GDP.
10. Should federal revenues exceed federal spending, the Congress with presidential
approval should designate how any excess revenues might be employed.
Tax cuts and/or specified expenditures could be designated when surpluses are accrued.
The simplest way could be to establish a federal rainy day fund similar to those existing
in most states to handle emergencies and other unanticipated expenditures. In 2008
twenty-two states had rainy day funds in excess of 5% of anticipated annual
expenditures.
11. Capital gains should be taxed at rates equivalent to earned income.
12. Effective corporate taxes should be higher and every corporation should pay some
minimum percent on its profits.
(000,000)
Figure 14: High Profits, Law Tax Bills for Selected Corporations
Figure 15: Tax Subsidies for 25 Companies
Twenty-five companies while often championing the virtues of the free market received
$173.7 billion in subsidies from 2008-2012 (Figures 14 & 15). Should a company like Wal-Mart
receive subsidies and pay such low wages so that many of the company’s employees qualify for
food stamps and other assistance which places a further burden on taxpayers? Taxpayers are
subsidizing low-paying employers.
John Patterson
Page 11
Tax Reform Promoting SHARED PROSPERITY Economic Growth
13. Establish a small Thank You Taxpayers Tax (TYTT) on all stock transactions on Wall
Street and a Bank Bailout Tax (BBT) on all bank transactions in the U.S. over a certain
amount.
This tax would assist in moving toward the revenue target of 22.4% of GDP. This
would also be a way for Wall Street and banks to pay back for the generous bailout
provided by taxpayers. Various estimates of the magnitude of the bailout range from a
low of $700 billion (TARP funding) to highs in excess of $10 trillion. Figure 16 provides
the yearly revenue such a tax on Wall Street trades ranging from one-tenth of one
percent and one half of one percent would generate.
Figure 16: Revenues Generated by Small Tax on All Stock Market Transactions
Size of Tax (%)
Amount Raised in 2013
.001
$31.2 billion
.002
$62.4 billion
.003
$93.6 billion
.004
$124.8 billion
.005
$156 billion
Although the revenues generated by this tax would be substantial, it would take
many years, even decades, depending on which study one favors in assessing the overall
cost for the bailout. Politicians and the public are more likely to support such a tax if the
revenues from it are directed at specific programs strongly supported in public opinion
surveys regardless of political affiliation.
14. Reestablish a higher estate tax for estates in excess of some agreed upon amount.
Lower taxes on inherited wealth in a democracy perpetuate the closest thing in
returning modern societies to feudal days when a perpetual elite class dominated the
economy and affairs of state.
There is a meritocracy argument to be made that an individual who accumulates
a large fortune has done so through his or her diligence, entrepreneurship and hard
work. There is little evidence those inheriting large fortunes have earned these fortunes
via hard work of meritorious achievement. Those who do inherit what remains of highly
taxed estates will, in fact, have the incentive to apply their diligence, entrepreneurship
and hard work to make up for whatever inheritance is denied because of higher estate
taxes. Any political party that contends programs assisting lower income households will
make them lazy and unwilling to work hard should certainly understand why those
inheriting wealth will have more incentive to work hard to regain whatever portion of
wealth that might be lost due to a higher estate tax.
John Patterson
Page 12