In the Atlantic's new cover story, Michael Kinsley makes two big points. First, Baby Boomers have just about ruined this country. Second, they can still save it.
His idea? Something like a universal estate tax to skim off the Boomer generation's wealth to keep their children and grandchildren from having to shoulder crushing debt. These three paragraphs get to the heart of the argument:
A widely noted 1999 study estimated that at least $41 trillion will have been transferred from parents to children and grandchildren between 1998 and 2052. Most of the transfers in the last half of that time period will be Boomers passing money along to the next generation. But in the first half, money will mostly be coming from the previous generation to the Boomers themselves. Boomers could forswear all or part of this unearned inheritance. Or, more realistically, they could allow the government to tax it. At the moment, there is no federal estate tax. Congress, in a spectacular display of incompetence, voted a decade ago to eliminate it for one year only, and this is that year. Next year, unless Congress fiddles again, the law reverts to what it was in 2001, and estates of more than $1 million will pay rates of up to 55 percent. In 2009, the last year the estate tax was in force, it imposed a tax of up to 45 percent on estates worth more than $3.5 million, and raised only $25 billion--in other words, only a small proportion of the population paid it, but the few who did pay really got socked.
This would not be what I am suggesting here. I am suggesting a tax that reaches far more people--essentially anyone who inherits any significant amount of money--but at a much lower rate. The principle behind the current estate tax (or once-and-future estate tax) is frankly redistributive: to prevent large private fortunes from growing, generation after generation, with the recipients accumulating power as well as money. It does this very poorly, because of tax shelters and loopholes (all made possible by the power that people with large fortunes have already accumulated). But that's still the idea.
The idea of my tax is to produce a lot of money that can then be
used to pay off, or at least buy down, society's debts. If we could
collect just 20 percent of the alleged $41 trillion about to pass
through two generations, that would be more than $8 trillion.
I'll be responding at length later this week. My initial reaction is that I love the frame of generational sacrifice, I appreciate the out-of-the-box thinking with a universal estate tax idea that I haven't seen before, but my personal preference is for debt strategies that do many small things on spending, taxes, and entitlements, rather than one big thing on wealth transfers.
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