Page 7 - Sonoma County Gazette April 2019

OPINION: A FAIR & SIMPLE Tax
By Philip Tymon
Recently Donald Trump and the Republicans called for eliminating the
“Death Tax”, the estate tax on the extremely rich after they die. I don’t understand their logic at all. When better to tax someone than when they’re dead?
I would propose an entirely new tax concept that is fair and simple based on that very idea - that we eliminate ALL taxes EXCEPT for estate taxes on the wealthy, living and dead, but primarily dead.
This may seem radical at first, but it really makes a lot of sense.
First, if there are NO OTHER TAXES then many people will be able to build up large estates and become wealthy.
Imagine NO OTHER TAXES--- no sales, property, payroll, income, corporate tax, nothing, nada, zilch, zero. How much money and time would you save each year? How much money and time would businesses save not having to collect sales or payroll taxes?
Instead, we have one tax, an estate tax. A tax on the total net worth of the estate of each individual or couple. And it only applies to those whose total net worth is over a certain amount, say $5 million dollars. But because of that, there would be a lot more people who have a total estate of over $5 million.
This estate tax could be in two parts: a tax on the living and on the deceased.
Those living with an estate worth over $5 million would pay a certain annual tax at a graduated rate. (Perhaps this should also apply to businesses?) Say any value between $5 - $10 million is taxed at 1 percent. Any value between $10 - $15 million dollars is taxed at 2%, etc.
So, an estate worth $15 million would pay $150,000.
Once a wealthy person dies, their estate would then be taxed at a high rate. So, for example, any amount between $20 - $50 million gets taxed 25%. Any amount between $50 - $100 million gets taxed 30%, and so on. Perhaps amounts over $1 billion get taxed at 60 or 70%.
So a decedent’s estate of $100 million gets taxed $22.5 million, leaving $76.5 million for the heirs.
If the rates are high enough, perhaps we can even get rid of the tax on the living and only have a “Death Tax”.
Here are some answers to questions I can anticipate.
What about a family business or farm, etc.? Would they have to sell the business to pay the taxes?
No. We need to prevent that from happening. There are a number of methods to do so. One would be to allow them to pay the taxes in installments or to provide low-interest loans.
Couldn’t a wealthy person avoid the tax by giving money to their children or a foundation?
No. There are now rules that prevent anyone from giving more than a small amount to another person tax-free. Similar rules should be put in place regarding transfers to foundations.
Why tax only the wealthy? And why have a progressive tax rate that goes up with the estate value? Isn’t a flat tax on everyone fairer?
No, quite the opposite. For two reasons.
First, while we encourage the industry of those who become wealthy,
they do not do so in isolation. Our entire physical, social and cultural infrastructure supports their success. It is only fair that the wealthy give back more to support the very infrastructure that supported them and will support others.
And, the wealthy can afford to pay more. If there is a flat tax of 1%, someone who has $100,000 pays $1,000. That really impacts their ability to get by. But if someone who has $10 million pays $100,000, they still have $9.9 million dollars --- they can still go into any store and buy the most expensive cheese and wine.
I am not a tax expert. I put this proposal out simply to stimulate discussion. Certainly there are flaws with this proposal, but they are likely all fixable. After all, isn’t this better than our current tax code, of many thousands
of pages, with thousands of loopholes and only understood by a small priesthood?
It’s a fair and simple tax. What’s not to like?
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