I recently stumbled across a Forbes article complaining that President Obama would like to make death a taxable event. The article was referencing a January 17th, 2015 press release that called for, among other things, a new realization event when appreciated property is received by gift or bequest.
Vocabulary
In tax law terminology, if you own property that increases in value (or “appreciates”), you have “income” because your net wealth has increased. But, the tax code doesn’t usually make you “realize” that income (and pay taxes on it) until you actually sell the property and “realize” the income.
Why? We are concerned that you won’t have money to pay the tax, or the value of the property might go back down before you sell it, or we didn’t have an easy way of accurately measuring its value in the first place. It just wouldn’t be feasible or enforceable.
The tax law has both “realization” events and “recognition” events. You have to both realize income and have the tax law recognize that you realized the income, otherwise you don’t have to pay tax — yet.
The amount of money you pay for a property is its “basis.” Basis gets adjusted by certain things, and so your “adjusted basis” is supposed to represent your investment in a property. The actual fair market value of the property minus the basis equals the amount of income/gain that is built into the property, and which can be realized/recognized at an appropriate event.
So what is the problem?
Americans decided long ago that 1) people shouldn’t pay taxes at death; and 2) the heirs shouldn’t have to pay taxes on appreciation that occurred when they didn’t have control of the appreciated property. Hence, the “stepped-up basis” rule. When you die, the basis in the property is automatically “stepped up” to fair market value at the time of death.
Ordinarily, realization and recognition rules only ever delay taxation on income. But, the stepped-up basis rule means that if you can hold off on selling those stocks of Apple that you bought back in the 1980’s long enough, then neither you, nor anyone you know or love will EVER have to pay taxes on your gains.
Take, for example, a hypothetical guy named Larry. Larry decides to found a massive corporation and call it Moracal. Since he built it from the ground up, his basis in his personal Moracal shares is approximately $0. Decades later, Larry’s net worth is around $50 billion. But Larry is getting old. He knows that if he can just hold out for a few more decades, he will have built a massive empire to last his family through the next, say, 20 generations+, all without ever paying any income tax whatsoever.
Suppose Larry wants to buy an island. He locates one that costs about $1 billion. Larry would have to sell over $1.2 billion worth of shares in order to generate $1 billion in after-(capital gains) tax return. Then, he would have to fork over about $250 million to the government. Larry would rather have his kids inherit that $250 million. So, Larry decides to take out a loan from his friend, Bill, instead. Larry agrees to pay 5% interest (capitalized into the loan), with the full principle and any accumulated debt payable one year after Larry’s death. Larry puts up $1 billion of Oracle stock as security for the loan. Larry has successfully purchased his island and avoided paying any income taxes ever. In fact, if Larry wants to, Larry can set up shop and run a tourism business on his personal island to help defray the interest expense from his $1 billion loan.
So what is the solution?
There are a number of possible solutions.
We could put a cap on the amount of time that an asset could appreciate without being taxed (say ten years or five years).
We could simply tax all gain every year, and do away with these rules.
When we DO finally collect taxes, we could charge interest on any tax that might have been levied, but was instead deferred (this is actually the best solution, in my book, for reasons that I will explain in a later post; in particular, it would seriously undermine the current incentives to waste billions of dollars on clever tax-planning).
Or, we could get rid of the stepped-up basis rule and make billionaires who have deferred taxes their entire lives finally pay a tax on their estate when they die.
So what is wrong with this last solution, which Obama has proposed?
Nothing. There’s not a damn thing wrong with it, unless you happen to be a billionaire looking for ways to avoid ever paying a fair tax on your income.
As previously mentioned, I have plenty of other ideas about how the tax code could be improved. But that simply isn’t and can never be a criticism of a completely rational, non-partisan, sensible, and obvious solution to a single, discrete problem in the tax code.
A Christian woman recently filmed herself evocatively expressing her distress at the recent marriage equality decision from SCOTUS. She apparently posted the video on her private facebook account, it was quickly uploaded to youtube, and now the internet is having a field day. I would like to make myself clear: I strongly disagree with almost everything she said. But, I also don’t approve of the way that the internet has reacted.
My Two Cents
Bullying a religious extremist is like bullying someone who is mentally disabled. Regardless of whether her extreme views are warranted (they aren’t), they come from a good place.
She is just trying to be a good person. She actually believes the things that she is saying, and if we viciously attack her for expressing herself, then we are encouraging dishonesty and a closed dialogue. In order to make the world a better place, we HAVE to encourage people to speak their minds, and then we have to engage in a calm, open, intelligent and respectful dialogue.
When someone’s mind has been corrupted such that they are incapable of seeing logic and such that they are not capable of functioning effectively in the ordinary course of civilized discourse, the correct response is to pity them for their disability, and to take proactive steps to ensure that their disability does not harm anyone else in society. The answer is not to make gratuitous and hurtful videos making fun of an inability to pronounce the word, “extremists.”
The LGBT rights movement is fundamentally a movement of love and respect. The point of the movement was not to wrest control away from some group of people. The point of the movement was to gain basic decent human dignity, rights, and respect. The message we have sent has finally reached a mass audience, and its obvious correctness has been bulldozing over the opposition. Today, finally, it is legal for a gay or lesbian to marry their partner in every single state. We are well on the way to passing non-discrimination laws, and to dealing with a myriad of other issues. Now is not the time to abandon the values that we have worked so hard to cultivate, and to turn around and bully others.
Conclusion
You can tell, if you watch the video, that the Christian woman actually believes what she is saying. Maybe she has a low IQ. Maybe she was born with a crazy gene. Maybe she is actually a very judgmental and not nice person. But, she recognized in her video that people were likely to disagree with her. Her answer? Love. She expressed a continuing love for the people who she believed to be so very crazy themselves. If we meet her love with hatred, anger, and bully-like personal attacks, then we are in the wrong. We can hate the words that she said, and we can combat them with logic. But for the person, we have to find within ourselves the same love and respect for which we have fought so hard.
“Your acid partisanship blinds your eyes to the truth and paralyzes a nation.” – Me
Hyperpartisan Meltdown – a new weekly segment where I pick an article from a hyperpartisan newsource, melt down all of the BS, and see what, if anything, is left.
This week I picked an article from Townhall, an extreme rightwing publication, called, “So Much for the Free-Speech Left.” For an optimal reading experience, take a glance at the original BS here. Always feel free to leave your thoughts in the comment section, and refer me if you happen to stumble across a hyperpartisan news article that is ripe for a meltdown.
The Melting
You know you have reached a rightwing publication when the links to other articles bear pictures of muslim men and frowning Hillary Clintons in defensive postures, and when hovering over a picture of rainbow flags outside the Supreme Court reveals the caption, “Mass Hysteria in America.” Pictures of gold coins advertise investment managers, and a pop-up asks you to vote on Marco Rubio. And, of course, the title of the piece refers to the “left,” disparagingly. These should all be signs that what you are about to read should be taken with a very large grain of salt.
The article begins by pointing out that there is violence and vulgarity in movies. Hollywood makes movies. 1) The word “Hollywood” is apparently now interchangeable with “the left;” the article offers no further evidence of liberal beliefs beyond what makes its way into movies. 2) Last I checked, the movie industry was a business, and reactionaries, of all people, should be aware that businesses are not emotional, political entities. They operate to maximize profits, and that means that they put things in movies that are going to make people buy movies. Roughly half of the people in the country are Republicans. If movies are loaded with violence and profanities, it is because people (including Republicans) LIKE to watch violence and and profanity. It is absolutely ridiculous to think that “liberals” have a secret plot to inject violence and profanity into our culture by means of “Hollywood.” For starters, even if liberals thought it was a good idea, there are like 100,000,000 of them, and they aren’t exactly known for being good at communication and teamwork… or voting…
Then, the article foregoes any attempt at logical argument and dives straight in with an insupportable conclusion: “When it comes to perfectly decent speech — spoken innocently with no bad intention — those same liberals need smelling salts.” What “perfectly decent speech” is being referenced? Presumably, from context, the author is referring to speech that sounds racist, but actually was not intended to offend. Now, I am actually a huge fan of the biblical idea that “he who takes offense when offense is not intended is a fool.” But, the article overlooks some pretty big problems: 1) Only the person who said the racist thing can know whether they intended offense. 2) When someone says something that is racist, it can cause harm to people regardless of whether it was intended to offend and regardless of whether it DID offend (it may make someone feel bad, it may make someone else think that racism is okay, it may divide us, etc.). And, 3) liberals, in fact, generally DON’T take offense when they don’t think offense was intended (they might still inform of the potential damage that the words that were said could cause, but that is just simple courtesy.).
Next, the article goes off on a rant about liberal “micro-aggressions,” “where conversation becomes a minefield of political correctness.” I don’t know about you, but I don’t feel like I am walking in a minefield when I am talking to people. For me, being respectful of others comes naturally 99% of the time. Occasionally I say something stupid, or hurtful, or mean. Then, I apologize and try to go on with my life trying to be a decent person.
If someone were to hand me a list of things that I might be saying, which might represent subconscious prejudices and negative attitudes towards others, and which might be coming across subtly in my verbal and non-verbal communication and thereby causing friction in the workplace and potentially reducing the value of others’ experience, I would say thank you and think carefully about the words that are on the list.
The author attacks such lists because they include entries which could be innocuous in some contexts. But what the author doesn’t realize is that it isn’t about the words themselves. It is about the ideas, feelings, and emotions that they represent. If you are glad that you live in the land of opportunity, and that is the thought that you consciously and subconsciously intend to convey, then there is no microaggression. On the other hand, if your real intent, conscious or subconscious, is to put somebody else down because they haven’t been able to succeed, then that IS a microaggression, and you are being a micro-jerk by saying it. Employers trying to educate their employees about how not to be micro-jerks is a solid business practice, and it is disingenuous for a conservative proponent of the free market to criticize the way a liberal (assuming that the university administrators actually are liberals) runs HER business. If the author still doesn’t understand how seemingly perfectly innocuous statements can be disruptive microaggressions that can bring an institution to its knees, I would suggest the movie, Mean Girls.
Near the bottom of the page, I would like to point out that the author actually does something perfectly reasonable: he complains about how distressingly complicated it is to be nice (Note that the reverse-compliment is a particularly well-known form of micro-aggression. ;P). It is true that in order to respect a person, you have to balance a respect for a person’s background, including his ethnic heritage, with a respect for the fact that he is still a complete human being. Trying to “integrate” Native Americans by destroying their culture in the name of being “color-blind” is NOT respect, for example. ALLOWING Native Americans to pay tribute to their culture, while at the same time ALLOWING them to participate in ordinary society to the extent that they desire to is NOT complicated. It is simply respecting their autonomy, because this is AMERICA.
Grammatically, it is kind of weird that the author moves on to the next topic within the same paragraph. His paragraphs are kind of haphazard and random in general, and the article as a whole pretty much lacks any semblance of structure. He complains that:
If you are a “store owner following a customer of color around a store,” presumably because you believe he might be shoplifting, you believe he is “going to steal,” and he is “dangerous.” And that is wrong.
First of all, old man, we don’t refer to people as “of color” anymore. Seriously. Find another way to express that thought. Second of all, YES, if you are only following black people around in your store, and you assume that all non-white people are dangerous criminals and thieves, then unless you happen to live in a really bad all-black neighborhood, you are probably a racist. Why? Because the vast majority of “people of color” are not any more likely to rob you than the white person that you are NOT following around. Also, I don’t want to get into the complex causes of criminality, but let’s just leave the idea in the air that maybe black people are humans too, and the reasons for higher criminality (to the extent that disparate arrest and imprisonment are actually caused by higher criminality and not just disparate enforcement) among some communities is ultimately caused exclusively by past and present racism and not by your imagined lazy/criminal gene.
On the second page, the author continues to rant about how things that aren’t really micro-aggressions, like asking an Asian person why he is so quiet, where he was born, or for help on your math homework, are perceived to be micro-aggressions by “nutty professors.” Yes, Mr. Author, these things COULD all be innocent. But lets face it: frequently they ARE micro-aggressive, and frequently they may be misperceived as micro-aggressive even if they aren’t intended that way. Professors aren’t “nutty” for trying to educate students about the complexities of human communication, and encouraging everyone to just not get an education is a recipe for disaster!
What’s Left?
When we melt off the partisan BS, we find a few weak points: 1) Movies are vulgar. 2) Sometimes some liberals go overboard, criticizing microaggressions that aren’t actually micro-aggressive. 3) Sometimes it is difficult to function in a complicated modern social world, especially if you are a cranky, stubborn old man who still refers to people as “colored.” 4) Sometimes people who see people of other races as inferior don’t like to be criticized when they voice their honest opinions directly or through microaggressions that those people are inferior or are likely to have negative qualities. 5) The word, “Liberals” is interchangeable with “professors” and “Hollywood.” And, 6) education makes you ignorant.
Conclusion
The author displays the hyper-partisan lens through which he sees the world in every paragraph. The article abandons logical argumentation with the first sentences, jumps haphazardly from topic to topic, and reads more like a live-stream of crazed consciousness, or a soliloquy at a Tea Party rally than like any kind of thoughtful and structured written work. Finally, the article unprofessionally uses sentence fragments and seemingly random paragraph breaks.
Yes, sometimes some liberals go overboard in their criticisms of others. But, the author of the article treats liberals as a tiny group of malevolent and powerful satanic angels which have taken control of hollywood and academia and whose sole purpose is to make the lives of honest, decent human beings harder. It perhaps should come as little surprise that a person who doesn’t understand why racial sensitivity is important, should also not see the logical problem in viewing liberals that way.
A lot of the article can be explained away with the probability that the author of the article apparently just doesn’t understand what the word “microaggression” refers too.
All I can say is this: the two biggest problems facing American capitalism today are 1) we don’t have enough workplace drama in our companies, and 2) we don’t have enough uneducated people on our streets. If we could just solve those two problems, ah, what a country this could be.
I Would Suggest…
…that if the author of the article finds that going through life without saying something racist is like walking through a minefield, then he should take a look in the mirror and reconsider the way that he subconsciously thinks, or DOESN’T think, about other human beings.
Black outrage over racial inequality in America has come to the forefront of the national conscience with media coverage of riots in Baltimore and other cities and a white supremist’s terrorism of a black church in Charleston. The story was recently punctuated by an evocative address by President Obama, in which he stated that racism is “a long shadow that’s still part of our DNA that’s passed on.” In response, Ms. Pavlich has written an article claiming that America is not a racist nation because 1) other nations are MORE racist, and 2) because overt racism is no longer sanctioned by the government or by our social mores.
This is patently ridiculous. The first point is technically irrelevant, and the both points miss the point. The author clearly doesn’t have any idea of what people are talking about when they say that racism is still a major problem in this country. People who complain about racism still being a widespread problem aren’t claiming that slavery is still widespread, that the USA is the most racist country in the world, or that the KKK is the dominant organizer of modern American life. The author therefore sets up a straw man at which to direct her blows.
Yes, most of the world is living in the relative middle ages; poverty leads to tension; tension leads to intolerance and violence. Yes, racism is surprisingly prevalent in many Western European countries. I still am highly skeptical of the claim that there isn’t a SINGLE country out there that is less racist than us, but even if that were the case, I would still take issue with this article’s claim that racism isn’t widespread or problematic.
1) Statisticsshow massive and continuing racial disparities in incarceration rates, arrest rates, stop-and-frisk rates, poverty rates, and so on. Poverty leads to crime and drug abuse, which lead to poverty, true. To some extent, the massive racial disparities are the result of an perpetual deleterious spiral that is only the indirect result of slavery and racism in years past. However, even when crime rates and demographic factors are accounted for, there is frequently still a shocking disparity. Discrimination is still practiced against minorities on a daily basis, and the aggregate effects continue to drive people down.
2) The individual stories of minorities in America show a system of life that affects their psyches in thousands of subtle ways, demeaning them, and socializing them into a world where they are less than, and where they don’t have a fair chance to rise above their circumstances.
3) Overt racists have become rare, yes. But Obama was not blowing smoke when he said that racism is literally encoded into our DNA. Prejudice derives from the interaction of a complex array of social, biological and genetic factors. It is largely subconscious, and it frequently manifests itself in seemingly insignificant ways. Subconscious racism is absolutely a part of the fabric of this nation, and I would be surprised if there were a single person not subject to it.
Conclusion
On some level, it can legitimately be argued that racism is part of the same evolutionary adaptation that lead to the original sense of morality in the first place, and perhaps you can argue that it is out of our control, and not such a bad thing anyways if it continues to exist on THAT level. However, to deny its existence on the simple basis that you don’t have any experience of being black in America is simply disingenuous.
Rating: This article is patently ridiculous and logically fallacious (straw man/missed point).
Sometimes Profound 