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Die another place

June 28, 2010

Tom Harkin, unavowed socialist senator from Iowa, has teamed up with the Senate's avowed socialist, Bernie Sanders, to come up with a new estate tax. The results are as ugly as you'd expect. The Tax Policy Blog reports:

As reported by Janet Novack in Forbes, Senators Harkin, Whitehouse and Sanders are urging their colleagues to match Obama's exemption levels -- $3.5 million and $7 million -- but to demand a top rate of 65% on estate value above $500 million (dubbed a "billionaire's tax" because the threshold for couples would be $1 billion). Rates of 55%, 50%, and 45% would apply to estates valued lower.

Just as elderly, wealthy people have often moved to states with no estate tax to save money for their children, enactment of this bill could well start a wave of relocations to low-tax countries by people who often have homes abroad already. Here is a 2006 study by Jagadeesh Gokhale and Pamela Villarreal that compares estate tax rates in major countries. Only Japan would have a higher top estate tax rate if this bill became law. Of course, wealthy people would be more reluctant to renounce U.S. citizenship than they would be to move to Florida, but with hundreds of millions of dollars at stake, such moves would occur.

U.S. Taxpayers abroad are severing their U.S. ties in disturbing numbers. This won't help. And if you believe that taking 2/3 of somebody's wealth and giving it to the U.S. government to manage will be a good use of the money, I can get you a good deal on some Fannie Mae stock.