Commentary––

Taxes That Don’t Really Hurt

By William A. Collins

 

Whom to tax?

Oh me, oh my:

I hope it isn’t,

You or I.

 

Have you bumped into Edward S. Lampert lately? How about Steve Cohen?

Maybe Mary Anselmo? No? Well, keep your eyes peeled for them, and for Norman Hascoe, Paul Jones II, and Lou Gerstner, too. Of course if you really wanted to find these folks, you’d be best advised to look in Greenwich. That’s where they all live. It so happens that these six are Connecticut’s entries in the Forbes magazine list of the 400 richest Americans. They range from Mr Lampert’s rank of 140 to Mr Gerstner’s of 396. Frankly I was scandalized that Connecticut didn’t do better, what with our elite pretensions and all.

And not surprisingly, all six also share one other commonality. They oppose the estate tax. As do many prosperous folks in Greenwich and other well-heeled Connecticut towns. They’d prefer to pass their nest egg on to the family unscathed by government demands. That’s natural enough. Almost everyone else already does. You see, one has to possess at least $1 million in net assets at death before the tax collector will bother to come round.

Probably you won’t be surprised to hear that Republican lawmakers in both Washington and Hartford are keen to repeal this tax, too. Rich voters tend to give them a lot of campaign cash. Never mind that both the federal and state governments are broke, or that it’s hard to see how dead people have much need for that money. Indeed that’s how the tax was first passed in 1916. It promised (correctly) to raise plenty of revenue and not hurt anyone. Heirs, though, still think they ought to receive all that wealth which they never had to earn.

As their strongest argument, weepy Republican congressmen used to conjure up visions of farm families who would have to sell the spread just to pay the tax. Worse luck for them, they could never find a family where this had actually happened. Farms were eventually exempted anyway, and countless other loopholes have also been added. Nevertheless the estate tax still brings in revenue galore, much of which represents appreciated assets that heretofore had never even been reported.

And if the estate tax is an eminently fair levy that we should fight to retain, the Internet sales tax is an eminently fair levy that we should fight to create. But this one is trickier. Millions of American families now buy lots of stuff off the web, thus avoiding the local sales tax altogether. Others achieve the same end with phone or mail orders. That amounts to a passel of votes.

Those voters, in turn, are abetted in their opposition by the booming Internet sales industry. But that industry is not yet as organized as the super rich, and doesn’t shower as many donations on campaign treasuries. Thus governors and local shop owners –– the wounded parties from this loophole –– are hopeful. They’re pressing Congress to impose a system where a purchaser’s zip code would trigger the appropriate tax rate to be added to the purchase price. Collections would then be remitted electronically to the proper state or county.

Not only would this system raise millions for states like ours, but it would also help level the playing field for abused local merchants who have to charge the tax now. Overburdened mom and pop stores already have enough trouble competing against Wal-Mart and Costco, without having to take on subsidized Internet competitors, too. Tax-free mail, phone, and cyber orders have just been one more nail in the coffin lid of downtown businesses.

Perhaps needless to say, estate and Internet taxes are only two of the scores of major revenue issues facing tax policy gurus today. Our tax codes have developed more loopholes than the Alamo. But Congress, media owners, and the rich don’t want us to start tinkering with them anytime soon.

(Columnist William A. Collins is a former state representative and a former mayor of Norwalk.)