Thom Hartmann: Well the class war is on full bore as Warren Buffet points out and his class is winning. Should the Paris Hilton Tax, the Rich Brat Tax be brought back? It’s dead this year. Right now if any wealthy person dies their heirs receive all of the cash free of taxes. Interestingly Roy Disney’s daughter, Abigail Disney, the multimillionaire heiress of the Disney, one of them, of the Disney fortune said that his, her father was able to, “My father was able to amass his fortune not in spite of but because of the American system, the roads that enabled people to get to Disneyland, the patents that protect Mickey Mouse and Donald Duck, and the Marshall plan which helped provide a vast European market for the company.” She feels that the estate tax, which helps pay for the things that helped her father, her grandfather rather and his brother become billionaires is a good thing.
Now the Heritage Foundation has a different opinion. And Curtis Dubay is with us. He is a senior policy analyst in tax policy at the Heritage Foundation. Heritage.org the website, if you want to check it out and read Curtis’s writings on it. Curtis, welcome to the program.
Curtis Dubay: Thanks for having me.
Thom Hartmann: Glad to have you with us. How can you justify having the very least deserving of all types of people who acquire wealth in the United States. I mean some people acquire wealth by working really hard, some people acquire wealth by betting on the stock market, they only pay 15% income tax. Why are you saying that if somebody has the accident of being born into a rich family they should acquire their wealth on the death of somebody with zero taxes?
Curtis Dubay: Well, you’re looking at it the wrong way. What about the incentive of the person who’s building wealth for his, throughout his lifetime. He gets near the end of his life, he still is earning lots of money. But he has a choice now. He can keep pouring that money back into his business, investing it, creating new jobs, creating ways to pay higher wages for his workers, or some other workers somewhere else. But for every dollar that he then earns on that investment he has to give over half of it to the government. Or he can take that money and blow it on a new yacht, exotic around the world vacation, any number of ways. The point is that the Death Tax destroys jobs because…
Thom Hartmann: Wait a minute, you've totally lost me here. If somebody, I own a corporation. I’ve run seven corporations in my life, both S corps and C corps. And if you put money into a C corp, and you die, if you have any kind of reasonable estate planning whatsoever and you’ve distributed the stock appropriately, there’s no tax on that.
Curtis Dubay: I think that’s a good point. There’s a big distinction between C corporations, big corporations…
Thom Hartmann: But you’re talking about people who are building big organizations and hire lots of people. You know the only estate tax that they’re paying is on the money that they’ve already taken out in pay that is their personal wealth that they’re passing along to their rich brats. And so you know why shouldn’t there be, you know if we’re going to have a tax on people who work for a living, why not have a tax on people who are rich brats for a living.
Curtis Dubay: Once again you’re misconstruing the effect of the tax. You’re looking at a few people who pay it and saying well you know they don’t deserve what they earn so they should pay higher taxes. That’s not the point. This tax destroys lots of jobs…
Thom Hartmann: Why not?
Curtis Dubay: Because it doesn’t just fall on rich brats, it falls on small family owned businesses, businesses that families have worked many years to put together so, that provide jobs for lots of people. When the owner of that business dies, the family gets hit with the Death Tax. And we’re talking about, it can be a small business, but they own lots of assets and property that push their value over the threshold and make them subject to the death tax. When they pay it, oftentimes these families don’t have the cash on hand to pay the IRS the tax bill and that business has to be liquidated or portions of it have to be sold off.
Thom Hartmann: You make a strong argument with which I agree, for the threshold, for the Paris Hilton Tax, being high enough that somebody who started a dry cleaning shop and they want to pass it along to their kids or corner grocery or, you know, a small business, a small publishing company or whatever, they’re doing a magazine local newspaper.
Curtis Dubay: Farms, tree farms, things like that. Lots of property.
Thom Hartmann: Sure. But the fact of the matter is that back in 2001 when Frank Luntz first did his whole focus group thing and, with payment from the Walton heirs, and in secret in fact, it took some time before it came out that they’d spent over a hundred million dollars lobbying to have the phrase changed from Estate Tax to Death Tax. That when Frank Luntz first came out with that term and the American farm bureau started using it saying the death tax is going to destroy farmers, the New York Times challenged them to produce one farm family who lost their farm because of the Estate Tax and the American Farm Bureau spent all of 2001 looking for one and was unable to find even one. I mean it’s not happening.
Curtis Dubay: Well, it doesn’t matter if the whole business is lost, it can still have the growth of the business can be greatly curtailed or the business could have to be shrunk. If you have to sell off a portion of the farm or a portion of the business that means you’re employing less people and that means there’s a hit to the economy. And that certainly takes place.
Thom Hartmann: Well not necessarily. If your business goes under, if any business goes under, because it’s mismanaged, because it’s been sucked dry by a greedy SOB who’s running it, or because the Inheritance Tax took a piece of it, if a business goes out of business and there’s an opportunity in the marketplace, some other business is going to rush in and fill that void. Come on, nature abhors a vacuum and business more than anything else.
Curtis Dubay: But what we’re talking about here is businesses that wouldn’t otherwise have had to sell of portions of their business, wouldn’t have otherwise had to shrink or would have otherwise grown faster. No matter how you look at it…
Thom Hartmann: Right they should have done their estate planning.
Curtis Dubay: It destroys jobs. Look, the estate planning is very expensive. Hiring estate tax planners and lawyers is expensive. What these businesses do if they pay for very expensive life insurance plans. Now they’re not as expensive as lawyers and planners, but they’re still expensive. They’re still diverting cash they could have used to grow the business to protect themselves…
Thom Hartmann: You’re talking about very, very wealthy people. You know you can…
Curtis Dubay: No I’m not talking about wealthy people. The wealthy people have estate tax planners and lawyers. The non, not so wealthy buy life insurance plans.
Thom Hartmann: This tax can be paid over 14 year period.
Curtis Dubay: In some cases. That still doesn’t change the impact it has on the economy.
Thom Hartmann: There are exemptions for agriculture. I mean there’s all kinds of holes already in this thing. I support raising the Paris Hilton Tax. I mean right now it’s at zero but if it pops back to where it was it’s probably going to be at 7 million for a couple, 3 and a half million for the individual.
Curtis Dubay: Let’s talk about Paris Hilton for a second. You use that a lot, that this is the Paris Hilton Tax.
Thom Hartmann: Yeah. I think she’s the classic example of the rich brat who doesn’t…
Curtis Dubay: Even if it falls on her, it does not mean that it doesn’t impact the economy. The Hiltons have worked very hard to build the empire they have. Now they handed off portions…
Thom Hartmann: Actually I think it’s the Pritker family that runs the Hilton hotels.
Curtis Dubay: Whatever. It doesn’t matter. Now Paris Hilton is a beneficiary of that. However, the estate that she’s handed isn’t just a big lump sum of cash. It is a big portion of that business that’s given to her. Now if the death tax is in place and she has to pay a substantial portion of that estate to the federal government, that is going to destroy jobs. She’s going to have to liquidate the portion of the estate that she’s getting and she’s going to have to hand over that cash to the…
Thom Hartmann: So you’re using the argument that because Paris Hilton’s yacht is not going to employ 5 people that that’s going to hurt our economy?
Curtis Dubay: No, forget the yacht, think about the portions of the Hilton Family businesses that she is entitled to when her father and grandfather pass away. That’s what I’m most concerned with. That’s going to be the vast majority…
Thom Hartmann: Like she’s running a hotel somewhere?
Curtis Dubay: She owns a big part of it. I mean I don’t know her estate in and out, I’m just giving you hypothetical example here. Her estate mostly consists not of yachts and mansions, it consists mostly of the Hilton Hotel chain.
Thom Hartmann: I don’t think so anymore. As I said I think the Pritker family has owned the hotel chain for many, many years, for many decades. But I may be wrong [It is Hyatt that they own; The Blackstone Group own Hilton - ed.]. But in any case, we’re talking with Curtis Dubay. He’s a senior policy analyst of tax policy over at Heritage Foundation, Heritage.org. Why is it that the people who are in favor of ending the Paris Hilton Tax don’t want there to be, they don’t want it to be paid for. I have not, it’s so bizarre. The Republicans fought tooth and nail to not give, to not put 38 billion dollars into paying unemployment benefits to working people who have by the way been paying into the unemployment fund for years and years. They fought tooth and nail on that because it wasn’t specifically paid for in the budget. But they want to knock a trillion dollars out of the budget, a trillion dollar hole, by eliminating the Paris Hilton tax. And they don’t want to pay for it. Why?
Curtis Dubay: Sure, I can answer that. Let me quickly on the case of the…
Thom Hartmann: We have about a half a minute, it’s all yours.
Curtis Dubay: Okay, they paid for the unemployment insurance. They paid for a portion of it now they’re long past that, now that’s coming straight out of general revenue. They didn’t pay for the extension that they’re getting now.
Thom Hartmann: Okay.
Curtis Dubay: The Estate Tax, not having to pay for its repeal. The fact is that when there is no death tax in place heirs do not get off tax free. They still pay a tax on the capital gain on the asset that you acquire based on the basis that the original purchaser had. We hear a lot about George Steinbrenner getting off tax free, his heirs, it’s not true.
Thom Hartmann: No, no but a maximum 15% capital gain.
Curtis Dubay: Right. He paid 8 million dollars for the Yankees, they’re now worth over a billion. That’s a billion dollar capital gain that they’ll pay. When you take the revenue from the increased capital gains tax and the increased economic growth you actually get absolutely no revenue loss.
Thom Hartmann: Okay, you can read all about it over at Heritage.org. Curtis Dubay, thanks Curtis.
Curtis Dubay: Thank you.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.
