This week, Bloomberg Politics reported that investor and businessman, Sheldon Adelson, was taking advantage of a loophole in the current tax law to pass assets on to his heirs. Passing new tax laws in 1990–both the House and Senate were Democratic controlled at that time–is what created the loophole initially. It takes advantage of a special trust called a “GRAT” (grantor retained annuity trust), which allows placing assets into an irrevocable trust, where the person creating the trust pays a tax. The trust pays an annuity every year, and upon expiration, the beneficiaries receive the remaining assets in the trust, tax-free.
Adelson and other businessmen have successfully used this mechanism to pass their assets to others and to avoid paying penalizing government fees and estate taxes to the tune of $100 billion over the past 13 years. Adelson himself has been able to pass $7.9 billion of his money to his heirs. Mark Zuckerberg (of Facebook fortune) and Lloyd Blankfein (of Goldman Sachs Group) have also taken advantage of the loophole.
Proponents of big government seem suddenly to realize the additional billions that they could spend if the loophole were closed, and they bemoan the fact that it’s still available. Adding to that, the fact that there is simply such large amounts of money mentioned, and other’s greed and envy kick in as well. Ironically, the concerns that people utter, reflect the same thinking as Adelson et al., namely that, “I don’t have enough” and “I need a way to save what I have now for myself and my children”.
Quickly after that, any parallel thinking ends, and arbitrariness kicks in. All too suddenly, a self-concerned commenter engages in the conditioned response of this administration– “Surely those terribly rich men have enough money already? Why shouldn’t I be able to help spend some of that? Those businessmen must have made that money illegally or exploitatively…”
So, let us review: Congress screws up when they rewrite the tax code, Congress continues to refuse to fix the loophole, people are able to save their own money, and give it to their children. And the unavailable money that the government cannot collect is largely the businessman‘s fault? I am not sure what mental gymnastic enables one to bend logic that far, but it is quite a stretch.
I expect it will be some time before Congress does anything to close this loophole, since the right’s opposition to taxes is well-known, and the left has far too many big donors taking advantage of the loophole to close it. One thing is certain–whenever a government attempts to increasingly micromanage and legislate things, they will always underestimate the ability and ingenuity of the people to find ways to wriggle out of the most awful laws. The people may be dumb enough to vote for the Congressman, but they are smart enough not to follow his laws.
Another day, another fiscal-cliff deal gone down the drain. John Boehner, already taking heat from the right for his softening stance on raising taxes, has come out with another offer to the president and the left. Called “Plan B”, the plan formerly had the support of Nancy Pelosi. Plan B would set the lower limit for raising taxes at the $1 million level. Plan B is very similar to the same bill that had Senate Democrats’ support in 2010.
For her part, in an interview with Andrea Mitchell, Pelosi now says she only supported the plan to “smoke out the Republicans”, and see at what level they would consider raising taxes. Pelosi was negotiating purely in bad faith, it seems. She did not have anything serious to bring to the discussion, and she was merely wasting time. That, or she is negotiating from the standpoint of “getting an inch, and taking a foot”. Whatever her motive was, it is plain to see how destructive and pointless it was.
Mitch McConnell says he would support the Plan B design, but he would do so with reservations. McConnell would rather have a bill that did not raise taxes on anybody. With Boehner’s support of this newest plan, numerous other House members raised objections to the new tax considerations, but they seem to recognize that without any plan, taxes would greatly rise. The gambit now is to “shield” as many people from the massive tax increases as possible. Sean Duffy, Jim Jordan, and Raul Labrador all seemed lukewarm at best to the prospect of voting for any tax increases, with Labrador refusing to even share his criticisms.
Called out for his part (or non-part) in the fiscal-cliff talks was Harry Reid. One Republican adviser said Reid has been on the sidelines for the cliff negotiations. Reid has also claimed that, despite numerous revisions to their positions, and despite the most recent offer, Republicans “…have threatened to abandon serious negotiations”. Perhaps more proof that he is merely running interference for the White House, Reid also claimed that President Obama has not heard from Boehner since Boehner’s new offer on Monday.
President Obama has balked at every offer the Republicans have proposed so far. Threatening a veto of everything has him in the position of a win-win situation. On one hand, if nothing happens, and taxes explode, he can continue to spend, thanks to the new revenues. On the other hand, if the Republicans cave in, he can both claim he negotiated the excellent deal, and privately, he can tell his sycophants he made Boehner and the Republicans submit. White House officials are also now claiming that the President will refuse to negotiate with Republicans out of principle. That of course, will allow President Obama (and Reid) to claim they attempted to negotiate, but were simply prevented from passing any legislation by the blocking Republicans (yet again).
To the left, the worst thing to come of failed fiscal-cliff talks is that President Obama has to postpone leaving for his Christmas vacation. They face: finally getting huge tax increases, yet again, furthering the narrative of a blocking, do-nothing, Republican party, and they get huge military cuts. Merry Christmas, America.