Citizens for Tax Justice also posts a study of estate taxes. In 2003, of the
2,448,288 Americans who died, 30,276 (or 1.4 percent) left behind estates
large enough to be taxable. The heirs to these estates managed to keep their
federal taxes down to a minimum. Estates worth more than $5 million paid an
average of 11.5 percent in federal taxes. Even the very largest estates,
those worth $20 million or more, were taxed for only 14 percent of their net worth
after expenses. (In contrast, most Americans1 wages are taxed at about twice
this rate.) Robert McIntyre, the national asset who runs Citizens for Tax
Justice, calculates that the 30,000 who paid the estate tax in 2004 come to
about forty-eight per member of Congress. “Perhaps our leaders know most of
these people personally,” McIntrye writes. They act as if they do: the
Republican Congress has cut the tax sharply on the way to abolishing it in
2010, making the United States a paradise to die in.
A second Bush tax cut, on capital gains and dividends, is the subject of papers prepared by the Tax Policy Center and the Center on Budget and Policy Priorities. “American families all across this country have benefited from the tax cut on dividends and capital gains,” President Bush said in a January speech to the Economic Club of Chicago. “Half of American households—that’s more than 50 million households—now have some investment in the stock market.” That statement will not restore Bush’s reputation for honesty. In 2003 Bush cut the tax rate on unearned income to 15 percent. Half of American households benefited, right? That’s Bush’s implication.
In fact nearly 40 percent of the stock held by those households is in IRA or 401(k) accounts, which are “not subject to taxation, and thus would not receive a tax benefit from the reduction in the tax rates on dividends and capital gains,” write Joel Friedman and Katharine Richards of the Center on Budget and Policy Priorities. The taxable gains enjoyed by most of the rest are comparatively minuscule. Indeed, the share of income from capital held by the bottom 80 percent of the population has fallen from 23.5 percent in 1989 to 12.6 percent in 2003.
Okay, some Republican politicians argue, but the tax cuts increased the value of all stock, including stock held in IRAs and 401(k)s. Not according to a Federal Reserve study, which found that the tax cuts did not raise the value of stocks. So who gained from the cuts? The top 10 percent of households, who own 70 percent of all taxable stocks, and especially the top 1 percent, who own 29 percent. It gets worse: 54 percent of all income from capital gains and dividends goes to the top 0.2 percent, a group only slightly larger than the 30,000 who leave taxable estates. These folks—the ruling class—derive a third of their income from capital gains. They are taxed on that income at a lower rate then most of us pay on our wages. And we must also pay payroll taxes. They pay no payroll tax on their capital gains.