Leona Helmsley Omnibus Tax Reform Act of 2009

by Bruce Webb

Well there is no such bill, but it would be a good title for what we would see if we put the entire economic right tax agenda together. Because what seem to be totally different arguments end up delivering the same outcome.

We can start with the corporate income tax. The argument here is that it represents ‘double taxation’ and/or that it just gets passed through in prices. Okay we can debate that in comments if you like.

Then we can move on to the estate tax. Along with emotional appeals to the ‘death tax’ you get an argument about it being unfair to small business and family farms. Another topic for debate.

Moving along we have tax on dividends and tax on capital gains. Once again we have our old friend ‘double taxation’ along with arguments that taxes on these simply reduce motivation for re-investment.

Well then we can step down the road to marginal tax rates. Obviously higher rates similarly reduce reinvestment.

Which brings us to the Flat Tax. Here the argument is that you can save billions in compliance costs and so have everyone paying less. This argument is a hoot, but I’ll leave it for others.

What would happen if you passed all of this as a package? And all with arguments stemming from economic equity and efficiency in order to get majority support?

Billionaires would never have to pay a dime in federal taxes. There are I believe five Walton’s heirs. If you eliminated corporate income tax there would be that much more to distribute as dividends, which should also serve to drive the stock price up. If you eliminate the tax on dividends than each would have just that much more money to spend or reinvest. If you further eliminate taxes on capital gains (all in the interest of the larger economy of course), any stock sales for the purposes of diversification or otherwise would not be subject to tax. And if as a final step you eliminated the estate tax the entire capital accumulation would pass tax free to the next generation.

If we choose we can have a spirited debate on all of these separately or in combination, have at it (I am going out for lunch). But if we yielded individually on each issue to these economic right proposals and all of it was wrapped up into one bill the post title becomes perfectly appropriate. Because when it comes down to their total agenda the economic right fully agrees with the famous dictum of heiress Leona Helmsley:

“We don’t pay taxes. Only the little people pay taxes …”

Why does the Queen of England have multiple palaces and huge collections of jewels and gilded carriages? Because until recent times Royals paid no taxes at all and certainly no taxes on capital. Did the British Monarchy actually deliver value in exchange for that status? Well the American Colonists certainly didn’t think George III was worth it, but that is a decision for the British People. The question is whether we want to transform holders of great family wealth into our own heriditary tax-free aristocracy? Do we want to transform ‘hedge fund king’ from a metaphor to a reality?

If so lets get busy on the Helmsley Act.

If not always remember that the first question you should ask about such proposals is ‘cui bono’ and not just at the margins. Who gets how much?