From the President – 9-9 – Weekly Update

Sep 17, 2019 | Estate Taxes

I want to thank all of the Family Enterprise USA andPolicy and Taxation Group members that flew into Washington, DC to participate in our combined Board Meetings and Capitol Hill visits.
 
Having family business leaders join us on Capitol Hill as we explain the need for the elimination of the death tax – as well as our proposal for a rate reduction to help us get there – is invaluable.
 
The most effective lobbyist for your message is you, the business leader and constituent of the members of Congress. 
 
And it’s not a one-way street. One of the newest FEUSA members who had never lobbied before said the time and investment was well worth it. He learned firsthand how our democratic system works, perfected his pitch to congressional members and their staff, and left with a great appreciation for the work our organizations do. 
 
While our meetings were productive and we hope they will bear fruit soon especially in regards to the introduction of a rate reduction bill in the House, the feedback from those in attendance regarding our dinner guest was universal praise.
 
Representative Bill Huizenga (MI-2-R), a third generation sand and gravel pit business owner, was extremely engaging and genuine. His recent experience with the death tax with the recent passing of his mother gave him some firsthand knowledge on what other business owners will go thru.
 
And while he lamented the fact that his business interests didn’t hit the current exemption, he was interested in helping us any way he could including an Op-Ed about his experience and the need for full repeal!
 
After a six-week summer recess, Congress returned to Washington, DC with a full plate of work and a limited timetable to produce results.
 
In many ways, the next few months may be the last chance for this Congress to produce any real legislation until 2021. Lawmakers in both parties agree the partisan politics of the 2020 election will kick into high gear as soon as January, making any deal-making and compromise all the more difficult.
 
That doesn’t leave Congress much time as the House only has 13 legislative days in September before they leave for another two-week recess — and only 45 legislative days left in the year. Senators are scheduled to be in DC for only 53 days before the end of the year.
 
The immediate concern, of course, is to keep the government open as current funding ends on September 30. We expect the House and Senate will need more time to negotiate the appropriations funding bills and will approve a time extension to allow them to get this done without a shutdown.
 
Other significant items they might consider during this end of year window also includes tighter gun restrictions, the rewrite of NAFTA, and lower prescription drugs. 
 
Of course, what concerns us most is the possible tax agenda, and we learned that it is expected that a deal might be made on the various tax proposals in DECEMBER.
 
Why is that relevant?
 
For those that have seen the FEUSA/PATG presentation on the history of the death tax, you’ll recall that all of the tax deals that impacted our issue seem to happen in December while business is wrapping up for the year. We expect this tax bill to include a recently House-passed retirement savings bill, possible some extenders, and maybe even some “green” energy provisions.
 
You may recall that the House Ways & Means approved tax extenders bill used a clawback of the doubling of the estate tax extension to finance their spending. We don’t believe that will have traction in any final measure that’s approved, but we continue to press for its removal.
 
CAPITOL HILL HAPPENINGS
 
Wyden Unveils His Own Wealth Tax Targeting Investments: Senator Ron Wyden unveiled his own wealth tax on Thursday, taking a slightly different approach to targeting the same non-wage income as proposals from Democratic presidential hopefuls Elizabeth Warren and Bernie Sanders. 
 
The plan to tax some investments annually, rather than when they’re sold, would apply to taxpayers who earned at least $1 million or have assets worth $10 million for the previous three years. Wyden, the top Democrat on the Senate Finance Committee, is seeking to require wealthy investors to pay the Internal Revenue Service every year on the amount their assets have appreciated, changing a longstanding feature of the tax code that taxes aren’t due until something is sold.
 
CAMPAIGN TRAIL
 
 Bernie Sanders:
Presidential hopeful Bernie Sanders unveiled a climate change strategy on Thursday that would mobilize $16.3 trillion to help the U.S. generate 100% of its electricity from renewable energy by 2030 and achieve “full decarbonization” by 2050.
 
The plan would “launch a decade of the Green New Deal,” a 10-year federal “mobilization” that would factor climate change into every policy action from immigration to foreign policy while promising to create 20 million jobs in the process.
 
The plan outlines dozens of policies aimed aggressively moving the United States off of fossil fuels in the electricity, transportation and building sectors, restoring U.S. leadership and financial aid under the Paris Climate Agreement and pouring trillions of dollars to assist fossil fuel workers and vulnerable minority communities in the transition to a green economy.
 
The campaign says the plan would be funded through trillions of dollars in higher taxes on fossil fuel companies and the rich, scaled back military spending, and more.
 
 
Elizabeth Warren:
Warren claims her tax plan only asks the super-rich for “two cents.” But how much of a hit would billionaires and their peers really take if she implemented a 2 percent annual wealth tax on people with more than $50 million of assets? 
 
 
Instead of $97 billion, Microsoft founder Bill Gates would now have $36.4 billion, according to the figures. Rather than $44.9 billion, Walmart heiress Alice Walton would be sitting on $15 billion. Instead of $160 billion, Amazon founder (and Washington Post owner) Jeff Bezos would have $86.8 billion.
 
Some economists, seizing on such numbers, say Warren’s tax could do more than just make the wealthy uncomfortable: “It could erase great fortunes.”
 
 
The Berkeley duo of Emmanuel Saez and Gabriel Zucman are usually the economists most associated with Warren’s wealth tax — after all, they supplied the estimate that the levy would raise some $2.75 trillion over a decade. 
 
Now, Saez and Zucman are expanding upon its defense in a paper authored by the two economists that, among other things, takes on critics like former Treasury Secretary Larry Summers who say the tax would raise far less because of how adept the rich have gotten at avoiding the estate tax. 
 
The retort from Saez and Zucman: Critics underestimate the revenue-raising power of the wealth tax by not fully accounting for the estate tax exemptions and the death rate among the rich.  And as for the wealth tax’s experience elsewhere? 
 
Only three European countries have a wealth tax now, down from a high of a dozen. Saez and Zucman argue that the issues that plagued the wealth tax elsewhere — like the mobility of certain assets — would matter less in the U.S., which isn’t part of something like the European Union and has an exit tax that would be strengthened under Warren’s proposal. 
 
The two also warn the U.S. to stay strong, should such a levy ever get into effect: “European wealth taxes were also undermined because of a poor policy response to complaints by merely rich taxpayers. Instead of increasing the exemption threshold, the responses eroded the base or created tax limitations that benefited billionaires the most. Drawing the lesson from this experience, a US wealth tax could avoid this pitfall.”
 
 
Elizabeth Warren proposes major expansion of Social Security, in which the wealthy would pay higher taxes to fund a $200 increase in monthly payments to recipients. 
 
She would impose a 14.8% payroll tax on wages above $250,000, split between employees and employers which she claims would affect less than the top 2% of earners (current rate is 6.2% levied on the first $132,900 of wages). Warren would also create a new 14.8% tax on a portion of investment income for individuals making more than $250,000 or families making more than $400,000 a year.
 
 
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STATE NEWS
 
California
California Proposal to Revive Estate and Gift Tax Fails to Advance:  S.B. 378 has potentially died in the Senate Rules committee as it has not yet advanced to the Senate floor for a vote. However, similar proposals could arise in the future and there are already some preliminary calls to reintroduce the measure in the next legislative session.
 
 
Illinois
 
 
New York
 
 
 
 
 
WEEKEND READS
 
 OPINION — There is a lot to unpack when it comes to the Democratic presidential candidates’ many proposals to transform America, but the real question isn’t whether they will work. They won’t. It’s about how these Democrats expect to grow the economy to pay for their plans because simply “taxing the rich” won’t cut it. 
 
 
“The Rich Can’t Get Richer Forever, Can They?” by Liaquat Ahamed in The New Yorker: “Inequality comes in waves. The question is when this one will break.” 
 
“The Last of the Ayn Rand Acolytes,” by Alexander Sammon in TNR: “This year’s Objectivist Conference revealed that her cult of hyper-capitalism has a major recruiting problem: All the young people want to be socialists!” 
 
Opinion The skepticism is understandable, but it misses the larger political point: Corporate America fears the system is failing. As Dalio wrote, this is an “existential” moment. The guardians of capitalism seem to realize that they must respond to right-wing populists and left-wing progressives alike or face a worsening political crisis that is already hobbling the country.
 
The corporate panic about capitalism could be a turning point, opening the way for a future president to begin fixing the problems of stagnant wages and inequality that are at the core of America’s disarray.
 
Democratic presidential candidates have been strewing proposals for radical change across the campaign trail: Some are well-considered, but many are wildly impractical and doomed to fail. America’s historical experience teaches us that economic reform succeeds when it goes mainstream, and that’s what’s happening now.
 
 
“Higher spending on the military, rising interest expenses on government debt and weak revenues early in the fiscal year combined to push the deficit up 19% from October through August, compared with the same period a year earlier.
 
Government spending climbed 7%, to $4.1 trillion, outpacing higher federal tax receipts, which grew 3%, to $3.1 trillion.
 
That brought the total deficit to $1.07 trillion so far in fiscal 2019, which started Oct. 1, or 4.4% as a share of gross domestic product. The last time the U.S. recorded a budget gap of that magnitude in the first 11 months of the fiscal year was in August 2012, when the deficit totaled $1.16 trillion, a period when the U.S. was still climbing out of a deep recession.
 
” New federal deficit projections soared to $12 trillion through 2029, the Congressional Budget Office said on Wednesday. For a government operating on a credit card, that kind of red ink would average 4.7 percent of gross domestic product through the next decade, a significant increase from the 2.9 percent average over the past 50 years
 

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