In fact, if the GOP tax plan becomes law, we may be looking at a future where our 1,600 richest hold more wealth than the nation’s entire middle class.
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According to the New York Times, Gary Cohn, the director of Donald Trump’s National Economic Council, has dismissed concerns about Trump’s plan to repeal the estate tax because “only morons pay it.”
Interestingly, among the so-called morons whose estates filed returns and paid tax in 2015 were 266 taxpayers worth more than $50 million when they died and whose average net worth at death exceeded $100 million.
Another 132 people at that level of wealth had estates that filed returns in 2015 and avoided estate tax only because they left the bulk of their estates to a surviving spouse or a charity.
These two groups together, 398 people in all, would make up the great majority of the Americans with over $50 million in wealth who these days are dying in any one-year period.
So do the great majority of ultra-wealthy Americans really rate as “morons”?
Of course not. Cohn bases his assertion on the reality that estate tax in America can be avoided entirely through various avoidance strategies. But those strategies become increasingly intricate as a taxpayer moves up the wealth scale, and that leaves the level of effort required to avoid tax entirely directly related to the size of the estate. For estates in the $50 million range or higher, the effort, and the complexity, needed to avoid tax entirely can be substantial.
Cohn’s “moron” claim betrays his own obsession with tax avoidance. Tax avoidance seems paramount to Cohn, whose own net worth stands at about $266 million. Cohn assumes his super wealthy peers all share his anti-tax obsession, and only a moron, he believes, would not go to the great lengths required to entirely avoid estate tax on a $100 million estate.
In that respect, Cohn counts as dead wrong. Many wealthy people, for varying non-moronic reasons, don’t make it their mission in life to avoid estate tax. Some conclude that their descendants will do just fine with the multimillion-dollar after-tax inheritance they’ll receive. Some are childless and don’t feel a compelling need to increase the windfall going to the niece they’ve not seen in ten years.
Others find tax-avoidance planning strategies distasteful. Imagine that? Still others see life insurance as a simpler way to replace wealth lost to estate taxes. Finally, some taxpayers, content with a modest level of estate tax planning, prioritize simplicity in their lives over saving every possible dollar in estate tax.
For all these non-moronic reasons — and maybe some more — the great majority of extremely wealthy Americans leave at least a little estate tax on the table. They’re not morons. Reason drives their decisions, not stupidity.
Their reasonable decision making, in turn, totally obliterates Cohn’s logic in support of estate tax repeal. Cohn acknowledges that the estate tax has become effectively voluntary, but wants to refuse the billions paid each year, voluntarily, by America’s wealthiest.
Cohn’s approach would not save “morons” from their own stupidity. His approach would bestow a tax windfall on a group that has voluntarily chosen to forego the effort needed to secure that windfall under current law.
A much more rational approach would be to recognize that the original purpose of the estate tax — to prevent undue accumulations of private wealth — has become more critical now than ever before. Recognizing that reality, we should plug the loopholes in the estate tax and thwart the over-the-top avoidance planning of Cohn and a relative handful of other extremely wealthy Americans obsessed with passing on massive fortunes without paying estate tax.
As Louis Brandeis famously observed: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Choosing democracy requires that we maintain — and strengthen — the estate tax.
The aggressive estate tax avoidance planning of Gary Cohn and wealth hoarders like him is concentrating America’s wealth in the hands of a few. These few need to be stopped.