Tim Johnson Watch

Representative Tim Johnson was elected to represent the residents of Illinois' 15th Congressional District in Central Illinois. His constituents should know what he's doing.

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Location: 15th Congressional District, Illinois, United States

A concerned citizen of Central Illinois.

Thursday, April 14, 2005

Tim Johnson Votes For Mega-Millionaires Over His Constituents

Yesterday, H.R. 8, a bill co-sponsored by Tim Johnson to permanently repeal the estate tax, passed the house of representatives.

If enacted into law, H.R. 8 will hurt all Americans -- costing the federal government $290 billion over ten years, or about one percent of the budget.

Who will this bill help? Certainly not Johnson's constituents here in Central Illinois. For a married couple, the estate tax does not apply for estates less than $3 million, a number that's going up to $4 million next year and $7 million by 2009. Maybe that should be popular in Beverly Hills, but it does nothing for the residents of Johnson's district, who have a median household income of $38,583 and a median home value of $79,200.

Where is the News-Gazette? Its top story is about the State House's approval of red-light cameras, but it doesn't even mention Tim Johnson's co-sponsorship of a bill to give away massive amounts of his constitutents' money to the super-rich.

9 Comments:

Anonymous Luke said...

I appreciate that this blog is policy focused, but I will likely not agree with everything that is posted here.

If HR 8 is such a bad bill, why did dozens of democrats vote for it? Why did 16 Democrats co-sponsor it along with Tim?

The Farm Bureau supported this bill. Do you believe that a Congressman from the 15th Congressional District of Illinois should ignore farmers?

HR 8 was about helping farmers, ranchers, and small businesses and these same people already pay their fair share of income and other taxes. In fact, they pay too much...

This was a good vote for the 15th District.

12:44 AM  
Anonymous Anonymous said...

If Johnson really equates the Farm Bureau with "farmers", then we really are in trouble!

The Farm Bureau is basically just the Sinn Fein of the agri-chemical industry -- they provide a sympathetic, politically acceptable face for pro-corporate policies that destroy small family farms and despoil our environment. This bill is the perfect example of how they work -- in the name of the small, hard-working family farmer, we give yet another huge windfall to the super-rich. This represents a loss of revenue to the federal government, which necessarily will be reflected in cuts in services, higher taxes, or larger deficits -- all of which are costs paid by all of us for the benefit of the wealthiest of Americans.

Family farmers will eventually wake up to this game. Too bad Mr. Johnson hasn't.

9:05 AM  
Blogger Stephen said...

Would you go with a cap that exempted 99% of estates? That would be about $3.5 million.

11:31 AM  
Anonymous Anonymous said...

Michael posted:
"If enacted into law, H.R. 8 will hurt all Americans -- costing the federal government $290 billion over ten years, or about one percent of the budget."

"a bill to give away massive amounts of his constitutents' money to the super-rich."

This money belongs to the people who earned or inherited it. It isn't the government's until the government confiscates it. The less government confiscation and spending the better, IMHO.

Why should death be considered a taxable event?

11:33 AM  
Blogger Michael said...

Luke,

We appreciate your readership even if we don't agree on all issues. However, this bill does not protect farmers in this district. How many family farms in this district are worth over $7 million (the combined exemption by 2009)? Few, if any. Moreover, even if there are a few such farms, the existing rules allow estate taxes to be deferred for up to 14 years to make sure that family farms are not lost to taxes.

This is bill is for the mega-wealthy, a category that includes vanishingly few citizens of this district (including its farmers).

12:08 PM  
Blogger Michael said...

(Second) Anonymous,

I'm not sure that I understand your point. If you consider all taxes confiscatory and improper, who will pay for what the government does? Do you really want the military to disband? How about the FBI? What will you cut? Whatever it is, it hasn't happened under the present administration, which turned a surplus under Clinton into a massive deficit. Since we have to have some taxes, the question is which ones. Do you really believe that taxing heirs of a share of their inheritance over $7 million is worse than, for example, taxing working people's income (lower income workers now pay a higher share of total income taxes than under Clinton)? If that's really your view, I'm afraid we'll just have to disagree....

12:19 PM  
Anonymous Anonymous said...

(Second anonymous)

I don't consider all taxes improper and I agree that the current administration has cut taxes and spent more than the previous administration.

Presumably, this money was taxed when it was earned. Why tax it again? To punich the rich? To redistribute wealth?

I don't understand your point about lower income workers and income taxes. The upper 50% of taxpayers pay 96.5% of the income taxes. Many lower income workers pay no income taxes (or receive EITC). Perhaps you are referring to FICA, Medicare, etc. I agree with you on the impact of those taxes on the poor.

I just don't think that we should tax somebody 50% and more of their estate just because they die. The only people making money off of this are lawyers and accountants because the super-rich plan ahead so they don't have to pay estate taxes.

2:00 PM  
Blogger Mac said...

Ask Johnson whether its fair not to tax estates just because they've already been taxed. If he knows anything about the bills he's been voting for over the last few years (many Republicans don't because the bills are written and voted on without anybody reading them), he'll know that the wealth taxed by the estate tax isn't "already taxed" in many instances, or it is taxed at a much lower rate than most workers pay on their wages.

The wealthy own most of the property in the country (often because they inherited it, not because they earned it). They tend to invest in tax-free investments. Vice President Cheney, for example, has thousands of dollars in municipal bond funds that aren't taxed. The wealthy pay ZERO% tax on income from these tax-favored investments. (Our Congress has a habit of passing provisions that give favorable tax status to those types of income that the wealthy tend to have--the repeal of the billionaire's estate tax is just the latest in a long string of such giveaways.)

Furthermore, the wealthy, unlike the poor, can make large charitable contributions to their pet causes for multiple benefits. Unlike ordinary Americans who don't itemize (that's 70% of us), the wealthy get to (1) choose what their money supports (2) get all kinds of quid pro quo value for that money in name recognition, dinners, awards, and power connections, and (3) still get a big tax writeoff.

Even worse, they can generally get huge loans (millions of dollars) using their stock as collateral, use the loans for personal consumption, and let the stock pass at inheritance to their heirs, who get a stepped up value (it's called "monetizing" their assets). RESULT: their children pay off the loans with no tax, and the wealthy have actually used their stock gains during their lifetimes without paying any tax! That's ZERO tax, not double tax.

Even when there is a tax to be paid, it's often at a lower rate than the typical American pays on working wages. That's because our tax system already favors the type of income earned by the wealthy during their lifetimes by taxing their capital gains and dividends at only 15%. The Republicans like Johnson intend to lower that rate to ZERO percent, and STILL give them a pass on the estate tax.

By the way, the wealthy don't have to have any of their capital gains withheld to be sure they pay the tax. Compare that to to wage-earners who pay the tax in advance through withholding and then may get a refund if tax was over-withheld. Research suggests that the wealthy cheat on reporting their capital gains because of that lack of withholding. (There's also a lot of cheating in the calculation of the basis amount for calculating capital gains.)

We recently learned that several thousand very well off individuals--lots of doctors and dentists, in particular-- started up their own offshore "banks" in the Cayman Islands, had money paid to those banks, and then spent that money using credit cards, in a tax scam to keep from having to pay tax on whatever part of their income would be subject to tax. That's just one example of how they use their wealth to avoid tax. of course, that's not smart tax advice--that's criminal fraud. But this ability of the wealthy to avoid tax--through special provisions written into the tax law just for them and through various ways of cheating that they find--is just one more reason that their estates should be subject to tax at death. A lot of the ways they avoid the estate tax, too, can be eliminated with ease--just get rid of those various provisions that let them do so.

Are you thinking--well, there are audits to catch them when they cheat on their taxes? Think again. The Republicans have made sure that the IRS doesn't have enough money to enforce the tax laws. The number of taxpayers and tax returns filed have increased, and the budget has failed to keep up. So face-to-face audits of wealthy taxpayers have gone done steeply. The Republicans have even privatized tax collection--your tax records will be handed over to those tax collection agencies--you know, the ones that have been known to hound people who don't owe money until they pay anyway. Then the tax agency gets to keep 25% of the tax money that should be used to support government programs, from clean air, to clean water, to national parks to medical care for those millions of children who don't have insurance. What a waste!

By the way, lots of those dividends that the wealthy get that are taxed at really low rates come out of corporate income that has not been taxed at all. Johnson voted for tax bills that let that happen. He could have at least insisted that corporations pay tax on their own income before they get to pay out low-tax dividends to their wealthy shareholders.

When it comes down to it, the only people that are double taxed in this country are ordinary workers. They pay the full 6 1/2 percent on their wages for Social Security and pay the full tax on their wages for income tax through withholding. The wealthy CEOs who averaged $6 million this year pay only about 1/2 of a percent Social Security rate on their wages, because of the $90,000 cap! Raising that cap--and/or taxing the rich on their capital gains--would solve whatever possible shortfalls there might be in the future in Social Security without increasing the tax rate on ordinary Americans at all.

Furthermore, the idea that billionaires have a "right" to all that wealth (mostly inherited) without having the heirs pay tax when they receive it disregards all the other ways that our federal government provides a hefty welfare handout to the wealthy. Leases of government land, with roads built by the government, all costing taxpayers many multiples of what the giveaway leases pay but putting big money in the hands of the leaseholders. Contracts with companies like Halliburton that cheat the government, get caught, and then get the government to give them a waiver and pay them anyway! That's corporate welfare for you. Huge farm payments go from the federal government to agribusiness and millionaires to give them a nice tidy profit for doing nothing, while the real family farmers struggle on. We have long provided welfare payments to extractive industries--oil, gas, mining, and you can bet this energy bill that the Republicans are pushing is just another handout that isn't going to help ordinary Americans at all.

Many people that got wealthy in those areas did so only because of federal government handouts. Why do their heirs have any "right" to retain 100% of the benefit of that government largesse at the death of the initial recipient? Remember, we make elderly poor people pay out all of their assets before we will help them with medical care. Why should heirs have a right to "their" (inherited, unearned, and often subsidized by the government) assets without any tax charge at all?

If you think about it, the wealthy can only make (and keep) their wealth because of the various government institutions--from property laws to laws that make the markets possible to laws that permit various semi-monopolies that let them earn high returns from higher prices than would otherwise be paid (think Enron and the California energy crisis). They should have to pay disproportionately more to support those institutions in return.

Come on. Wake up to the fact that you're being sold a bill of goods about the estate tax.

And the Farm Bureau is one of the groups selling the bill of goods. The people who are funding the drive for estate tax repeal are some of the wealthiest families in America. They used family farms as their poster issue to make it look like they cared about ordinary people. When pushed, though, the advocates of the repeal of the tax on billionaires' estates admitted that no family farms are lost to the federal estate tax!

3:24 PM  
Anonymous Anonymous said...

So, to cut to the chase: It is not fair that rich people are rich. True, but so what? Not going to change. The rich will always stay rich and have the pull to keep the rules in their favor (look at the new Bankruptcy law & corporate credit card companies!)

Anyway, I guess we'll just agree to disagree. You made some good points, but didn't change my mind. Capitalist society and all.

How about a change of subject to a sort of related topic - I think we both agree the current taxation system is broken. What do you think about the national sales tax proposal -- also referred to as the "Fair Tax"? I am intrigued but haven't made up my mind. Fear of the ever-present black market.

Thanks for the intelligent debate. I hate to see blog comment zones turn into childish namecalling extravaganzas. I am in Peoria, BTW. Love to read central Illinois blogs like Spoons, Peoria Pundit, etc.

7:41 AM  

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