The Rich Get Richer and the Poor Grow Old

Although I like to consider myself well-versed in budgetary and funding topics (well-versed for a lay person), there are definitely still some areas where I am learning the ins and outs. The Delaware estate tax is one of those areas, and as I have been reading about this I’ve become more and more dissatisfied with the decision that was made to cut the tax, as per House Bill 16.

I read Rep Pete Schwartzkopf’s explanation, how this tax was a trade-off for another vote. I understand the concept and importance of compromise, and that we sometimes trade what is good for something we conceive of as better. Right now I’m moderately addicted to this game called Egg, Inc., and as I build my egg farm I have to make choices that impact my farm valuation, which helps me advance in the game. Sometimes I have to determine whether doing a “prestige” is worth it, because to “prestige” I have to completely scrap the entire operation, start over from step one, and rebuild my whole farm. However, in doing so I earn a significantly larger amount of money per egg, so I can move through the levels more quickly, and it certainly makes the upper levels more attainable due to the increased output.

What does raising chickens to lay eggs in a phone game have anything to do with Delaware budgets? Nothing at all, in this particular instance, but I needed a handy way to show I get the concept of compromise and trade-offs for benefits.

The real question that must be asked is: “Is the trade-off worth it?”

Who decides the worth or value of a trade-off? If my 9 year old has 2 Pikachu Pokémon cards and wants a Charizard Mega EX super badly, he will happily trade his 2 cards to his 11 year old sister for that 1 card. For him, the benefit is greater than the loss.

Again, not the same, but you see where I’m going with this (I hope).

From here on out, I’m going to be a purist, so if you can’t handle that, remember I owned it and don’t get upset with what I’m going to say.

If a piece of legislation is best for the state and its citizens, it should be passed. Period.

Why should the Delaware estate tax not have been eliminated? Here are some basic facts of which you should be aware:

  • The Estate Tax impacts only the wealthiest among us, the heirs to large estates.
  • The first $5.49 million (per person) of an estate is exempt from the tax. The exemption for a married couple is $10.98 million. Only amounts over these thresholds are subject to the tax.
  • Nationally, about 2 estates out of 1,000 are impacted and the heirs owe on average 17% of the estate’s value.

The U.S. and Delaware have a huge wealth gap in large part because taxation policy preferences benefit the wealthy throughout their lifetime. The estate tax is literally a last chance to recoup and redistribute excess wealth from over a lifetime of tax preferences. Over time, the amount of earnings is compounded, so without a higher-bracket income tax or capital gains tax there is an exponential loss of revenue.

You cannot cut your way to prosperity.

In 2016, the estate tax yielded $9.3 million in revenue. Every year the amount collected for the Estate Tax fluctuates greatly because it depends on the death of a very wealthy individual, and no one can predict when a large estate will be left for heirs. Compare that to the $22 million project cuts to public education, and although the amounts aren’t guaranteed there is a clear problem with cutting revenue streams (ANY revenue streams) while constitutionally-guaranteed and socially-responsible public goods are being reduced. Delaware should be focused on creating revenue rather than reducing it. Since 2008 the state budget has been subject to severe cuts and subsequent budgets were kept low. In effect, we never climbed out of the hole created by the recession.

Perhaps someone could define “shared sacrifice” for me, because I’m not clear on why the wealthy are exempted, even partially, from the sacrifice. Why must the rich be appeased in a deal when the poor are not? How can the legislature seriously entertain throwing away $5 million in revenue when facing a deficit of more than $300 million? Why are the kids, who aren’t even taxpayers, subject to more harm than the wealthy, with as few of these estate tax scenarios exist?

A person much wiser than I once said, “the definition of insanity is doing the same thing over and over and expecting different results” (it wasn’t Einstein, but it’s frequently attributed to him). With that in mind, why are we still cutting budgets without increasing revenues? If you need more money to pay the rent, you don’t just pay less rent; you find another way to make money. It’s a no-brainer. And I know folks in the GA have brains, so clearly something else is going on here.

From the cheap seats, this “trade-off” was not worth it.

“There is nobody in this country who got rich on his own. Nobody. You built a
factory out there, good for you. But, I want to be clear: you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory and hire someone to protect against this because of the work the rest of us did. Now look, you built a factory and it turned into something terrific or a great idea. God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
~Elizabeth Warren, 2011, PhD, Harvard Professor, Led the establishment of
Consumer Financial Protection Bureau, US Senator

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3 Responses to The Rich Get Richer and the Poor Grow Old

  1. What Not says:

    When the Democrat Reps vote enmass against against the Citizens in the Red Clay suburbs, We respond by voting for Republican tickets. This action allows the estate money to be sheltered. Extreme PC thought, like the foul language recently used by Kowalko replying to thoughtful Citizens on this blog, actually set back the interests of our society. Direct result.

    • jax2816 says:

      I AM a citizen in the Red Clay suburbs, and I’m not sure what you mean. I’ve voted both Repub and Dem over time, as well as several “third party” candidates. I don’t believe that Rep Kowalko has EVER commented on my blog. Perhaps you are confusing my original blog with Exceptional Delaware’s reblog of my post?

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