CDP
The unexpected rise and predicted fall of Donald Trump has many on the Right debating how conservatism can bounce back after the election. The odiousness of some of Trump’s supporters has made one common question some version of: How can Republicans, and more specifically conservatives, convince Group A and Group B that we care about them and that conservatism is good for them? One theme that has emerged is a desire to purge the more repugnant of those backing Trump from the ranks of conservatism, and sometimes this desire has spilled over to include purging those who say they will reluctantly vote for Trump in an attempt to keep Hillary Clinton from the presidency. The argument goes that as long as conservatism is viewed mainly as an ideology for rural white people, it can never be a viable political option for more urban and/or minority voting blocs. This argument seems to largely be made by white urbanites who, in their efforts to clamber over the carcasses of the political dead to become the thought-leaders of a new movement, lose sight of what conservatism means to many of those white rural types. Or at least what it used to mean.
Problems of definition are unavoidable. Over the decades some very smart people have attempted to define “conservatism” with varying degrees of success. For our purposes here what is needed is a fairly simple definition, recognizable to the average voter who identifies as a “conservative”: a desire to conserve the limiting system of representative governance of our founding documents; the belief that human agency is in the main hampered, not aided, by government interference and regulation; and the belief that human dignity is naturally desirous of, and even dependent upon, liberty and personal autonomy. Obviously, by this definition, Donald Trump is no conservative. You’d be hard pressed to find a clip of him mentioning the Constitution, and most of his proposals actually increase the size and scope of the federal government. But this fact isn’t what upsets the Purgetariat. After all, it isn’t as if the last two Republican Presidents, or the nominees in ‘08 or ‘12, were actually much interested in culling the herds in Washington. Yes, Republican-controlled Congresses have passed a few reforms, but mainly they’ve only managed to slow the rate of bloat, and that only barely. What bothers the purgers is Trump himself, and his racist following. The argument over how to save “conservatism” isn’t actually about conservatism. It’s about a certain subset on the Right believing that government actually is the answer to a lot of problems, they just believe that they’re the people best suited to administer that government. They insist that the complaints of this or that group must be heeded, but they rarely if ever express the idea that the solutions to the problems aren’t to be found in any government policy, particularly at the federal level. You don’t like racism? Congratulations. That’s a bold stance. You want to marginalize the white nationalists? I applaud that. But focusing on those things as the problem with conservatism as a political ideology is missing the truth that the Trump nomination has laid bare, namely that identity politics and reliance on government to be all things to all people has reached a tipping point on both sides of the aisle. The idiocy of the way primary voting works in a lot of states isn’t blameless for Trump either, and that’s the fault of the Republican party. The simple truth is that in most of the states containing the rural white rubes, Trump only received a plurality of the vote. Many were open primaries. That fact leads one to suspect that a great number of people who will cast votes for Trump in a few weeks do so out of a misguided party loyalty and an abiding hatred for Hillary Clinton. It means that Trump, with his walls and bans, wasn’t their first choice, or really even a choice for them at all until the rubber met the road and the prospect of a Hillary presidency actually stared them in the face. You can personally believe that Trump is so dangerous that a vote for Hillary is necessary. But assuming that many, maybe even most, Trump voters are Trump supporters is dishonest. This should give us hope, or at least a shield against total despair. So what does conservatism need? Surely one thing is a leader, or leaders, on the national stage who can espouse the idea that self-government is to be desired by all Americans, not only rural white people; who can good-naturedly educate a new generation of voters on the idea that the answers aren’t to be found in Washington, and that a lessened Federal government is an opportunity for citizens to decide contentious domestic issues locally, amongst themselves, as the Founders intended; who can explain why the idea that a Congressman from a state a thousand miles from you should have any say in the affairs of your state on almost all of the issues Congress currently concerns themselves with is antithetical to the way our system is designed. I still believe most Americans, of all stripes, are open to these arguments, that most are open to the idea of the true American Dream: living your entire life with the only interaction you ever have with the federal government being in the voting booth. *Personal addendum: no, I’m not voting for either of them. I want less government.
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I had a somewhat animated discussion a couple of weeks ago with a couple of Twitter buddies about the federal “Death Tax” (more completely described as the unified lifetime gift and estate tax.) My initial assertion included two parts:
1) It is a terrible tax 2) The Republican party’s staunch opposition to it makes little sense The reaction was swift and focused entirely on the second part of that (so much so that I think they kinda missed the first part). I got a “No, it isn’t” (referring to the GOP’s opposition, not my assessment of the quality of the tax) and a “Should people be able to keep the fruits of their labor?” And then, of course, I got the standard go-to opposition to the Estate Tax…”Think of the family farmers!” But here’s the thing: almost nobody pays it. The GOP has devoted significant energy and political capital to criticizing a tax that impacts nobody who is not, by any definition, spectacularly wealthy. And then they wonder why the “Party of the rich” criticism sticks… On the surface, the Federal tax (which reaches a top rate of 40%) seems quite punitive, and also seems like it immediately sucks up the wealth of a hardworking American who simply wants to pass some money, a home, or some other assets to his children. It is also often cited as an economic attack on the wealthy, intended to seize wealth at death and distribute it from wealthy to non-wealthy (i.e., people who die with nothing and are unaffected). It is, however, not a tax on the wealthy. It is a tax on the children of the wealthy. And realistically, it is a tax on the children of the super-wealthy. Let's walk through a somewhat typical example to see how this tax might impact someone... My husband and I have two children who turned six in April. Let's imagine that I have a large estate, and I am not excited by the idea that the Federal Government is going to take 40% of that before my children can get it (I am ignoring state taxes, which are not insignificant). {Since the limits below are inflation-adjusting, I am just going to do the whole thing in today's dollars. I am also going to ignore investment gains, which should be pretty easy to understand.} There is good news, though! I can give each of the children $14,000 every single year without paying any gift tax or without using any of my lifetime exemption (more on that below). Even better, my husband can also give them each $14,000 every single year without incurring any gift tax. I am going to ignore non-children here, but we are also allowed to each give $14,000 every single year to anyone else (brothers, sisters, cousins, nieces, nephews, friends...) without incurring any gift tax. My life expectancy at this point is probably another 50 years. My husband's is probably 45 years. So, just through those annual gifts, we would be able to pass $2.66 million to our two daughters without anyone paying a penny of transfer tax. Of course, they may get married, at which point each of my husband and I can also give their spouse $14,000 per year. Grandchildren? $14,000 per year, per child from each grandparent. If they each marry at 30 and have two kids each? About $1.8 million additionally to the families of each daughter. But we’re not done yet! Next, we can pay an unlimited amount for medical or education expenses...which means we can gift a college and graduate education to our kids and our grandkids without incurring any transfer tax. If I am this rich, that means probably 12 years of private school at $35k/year, four years of private college at $50k/yr and then two years of graduate school at another $50k. There is another $720,000 each (more if they are a doctor or a lawyer!), plus I can absorb the risk of medical expenditures. If we pay for the kids’ school, too, we’re now passed $2.16 million just in education expenses to each of our two daughters and their families. So, great...now we have given them EACH $5.296 million over the course of our lives without anyone paying anything, and without touching our yet-to-be-discussed lifetime exemption. That is a total of $10.592 million (in today's dollars) just to our children. And if you have more kids than me, it is another $5.296 million per child. But wait, there's more!!! On top of the annual exclusion, I also get a lifetime exclusion which covers gifts above and beyond what I can give through the annual gifts. This is called a "Unified Credit" because it applies to gifts during my life AND gifts upon my death. In other words, whatever I don't use up during my life is available to apply to the assets I leave for my kids at my death. Chances are that I will survive my husband, but if I didn’t for some reason, I wouldn't leave anything to my kids at death...I would leave everything to my husband. A transfer to a spouse is a tax-free transfer, regardless of the size. Plus, he can give me his unified credit, which means that, upon his death, both of our unified credits would be available to apply to any assets that get passed to our kids (or anyone else). The amount of the Unified Credit in 2016? $5.45 million. That's right...whichever of us dies second would have TWO credits of $5.45 million to apply to assets passed to our two children. This means that, in total, we can pass $10.592 million to our children during our lives, and then we can pass another $10.9 million to them either during our lives or at death before they (or our estates) are liable for the first penny of “Death Tax.” And obviously, that would be after any gifts we made to other family members or friends within the annual exclusion, or any charitable gifts of any size. If, after I have given my kids their $21.492 million, and after I have given the rest of my family and friends whatever I may have decided to give to them, and after I have given away whatever I have designated for charity, there is still any money left over...well, then my two children would have to pay as much as 40% of the value of that property that was left over. Actually…wait…that’s not quite true. There’s even more to this, because large fortunes are often passed on to the next generation in the form of illiquid, hard-to-value assets (like, say, a farm), or in the form of “family limited partnerships” or other tax-management schemes. When using things like this, taxpayers are given some latitude in valuing their hard-to-value assets, and are often allowed to lop off as much as 25% of the value as a “control premium” for minority stakes in businesses. In simpler terms, that $21.492 million may actually be worth nearly double that, but we’ve come up with a passable rationale that values the assets at only half of their actual value. What haven’t we talked about yet? We haven’t given a nickel to charity, nor to anyone who is not our children or their families. We haven’t moved any assets overseas or used any elaborate offshore tax dodges. What we have done is gotten to a point where our $40+ million estate can pass to our children before we, or they, have to pay the first penny of federal estate tax. Which brings me back to my original point about the GOP’s opposition to the estate tax. They have chosen to dig their heels in and rally their base around an issue that affects only about 1 in 500 estates. They remain silent on several other broad, egregious examples of double-taxation that impact huge numbers of Americans, including the double taxation of Social Security and Medicare. They take issue occasionally, but with less vigor, with taxes on dividends that impact anyone who has a 401K. If you are trying to shake your reputation as being a party that serves only connected, moneyed interests, you’ve picked a really bad fight. |
MisfitsJust a gaggle of people from all over who have similar interests and loud opinions mixed with a dose of humor. We met on Twitter. Archives
January 2024
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