Beat the Press

Dean Baker's commentary on economic reporting

7/29/2006

House Moves to Boost Defenses Against Martians


The House came up with the brilliant idea of linking the partial repeal of the estate tax with raising the minimum wage. In the words of West Virginia Representative Shelley Moore Capito, this linkage made sense because, “the sustaining of small businesses by keeping their vital assets will allow those making the minimum wage to continue working. This is a jobs bill.”

I’m sorry, this is nuts. Only a tiny percentage of small businesses will ever be liable for the estate tax and it is paid out after they are dead. It has no obvious effect on how they would operate their business. It is hard to see how cutting the estate tax will save even a single minimum wage job.

How could a reporter just put these words in print and not talk to an economist to get a comment on this statement? Surely any economist, regardless of their political leanings, would explain that a district in West Virginia is represented in Congress by a crazy person.

18 Comments:

  • At 5:28 PM, Anonymous dale said…

    This statement jumped out at me: "They said the estate tax plan, which would set the individual estate tax exemption at $5 million in 2015, would offset the economic cost to small businesses of paying higher minimum wages."

    That seems pretty silly indeed.
    But this is a smart move- in an underhanded, immoral, cynical, unethical, destructive sort of way.
    Repubs have been trying to kill the estate tax for years. This just might do it.

    I hope Dems hold fast and oppose it. After this falls Congressional elections they might be able to pass a minimum wage bill without the poison pills.

     
  • At 11:06 AM, Anonymous Ted B said…

    Just be glad you don't have this crazy person representing you in DC.

    She couldn't find her way around basic econ with a map. I bet she can't name one small business in wv that's been harmed by the estate tax.

     
  • At 11:51 AM, Anonymous Anonymous said…

    >I hope Dems hold fast and oppose it.

    Note: I despise, absolutely despise the whole anti-Americanism of "death tax repeal". Of all the Rethug tax so-called policies, it is by far the most abhorrent as it fails economic, moral, and societal tests.

    Having said that-

    I don't know. Remember the comical thing about Bush's statements about "making (whatever tax idiocy he's talking about) permanent" is that there's no way to do it. I'm not a civics expert, but I think there is virtually nothing that the US government does today that a given Congress doesn't have the power to change.

    So what's gonna be harder to undo in this bill? The higher minimum wage or the estate tax repeal?

    It's like giving up a pawn for a bishop.

    Maybe the Dems should "keep their powder dry" for when they have to votes to do both, but I think it's much better to have a Republican Congress and White House up the minimum wage than a Dem congress and White House.

    Meanwhile, the Dems when accused of preparing to "raise taxes" can just grin and say, "Yeah, on dead rich people."

    -- a different chris

     
  • At 5:04 AM, Blogger failingeconomist said…

    "I’m sorry, this is nuts. Only a tiny percentage of small businesses will ever be liable for the estate tax and it is paid out after they are dead."

    I’d actually say that the number of dead small businesses that would be liable to the estate tax would be exactly and precisely zero. Dead for a business is equal to bankrupt, ir no value. Who can tax that?

    What you mean of course is dead people who used to own small businesses. And surprisingly, the existence of inheritance tax does indeed change people’s behaviour. Looking at somewhere with much lower allowances (the UK it’s about $500,000) people go through all sorts of contortions to be able to pass on the business without taxation.
    That has nothing to do with the minimum wage though, of course, you’re right there.

     
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  • At 11:06 AM, Blogger Guy Barry said…

    Some things never cease to amaze.How can estate tax have anything to do with minimum wage? Is 1+1=3?
    dumb

     
  • At 1:24 PM, Anonymous Erik L. said…

    I have read that the amount of money collected by the estate tax is very likely less than the amount of money people spend trying to avoid the estate tax. Thoughts?

    BTW the fact that a person has to die for the tax to come into effect doesn't mean it can't have an effect on employment. For a business large enough to be hit, it is possible that the tax hit is large enough that the heirs cannot afford it and have to sell. If the sale results in a liquidation then jobs would be lost.

    I read an article in the National Review some years ago that claimed that a significant portion of Warren Buffet's investments involve buying such assets. He gets a good deal because the family needs to sell to pay the tax and then he takes the otherwise viable business and makes a mint. Thus explained his championing of the tax.

     
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