WASHINGTON — If you have worked hard for five decades, made pots of money and now want to squander it all in Las Vegas on wine, women and baccarat, go ahead. If, however, you harbor the anti-social desire — stigmatized as such by America's judgmental tax code — to bequeath your wealth to your children, this would be an excellent month to die. Absent a congressional fix before Jan. 1, the death tax, which is 35 percent on estates above $5 million, reverts to 55 percent on those above $1 million.
This is one of many tax changes that could be triggered. The Hoover Institution's Tammy M. Frisby, writing in Policy Review, says that — not counting temporary disaster relief tax breaks — 31, 56 and 37 provisions of the tax code expired in 2010, 2011 and 2012, respectively. “The country,” she says, “is trying to create sustained economic growth using temporary tax laws.” It is not working.
Unless Congress quickly reaffirms its follies, this month the tax credit that subsidizes wind power — a long-standing adventure in industrial policy — expires. This is not quite a sufficient reason to go over the “fiscal cliff” but would be a consolation for doing so.
The cliff, an action-forcing mechanism, could cause a potentially constructive chaos of questioning. Is it wise to increase taxes as student debt passes the $1 trillion mark, dampening graduates' powers as consumers? Two-thirds of them have mini-mortgages (average debt, $27,000). Is it wise to increase the top tax rates, which are paid by small businesses with more than half of small business income, just as the Obamacare tax (called a mandate until Chief Justice John Roberts' clarification) produces many “49ers”? Those are businesses that stay below the 50-employee threshold for providing insurance, or reduce full-time employees to part-timers. A defense sequester might raise questions about who — Denmark? Poland? — our 54,000 troops in Germany are protecting Germans against.
Washington, with its (at most) one-track mind, is fixated on the “Bush tax rates” but cannot even accurately describe its monomania. It actually is the Bush-Obama rates. Two years ago, when the economy was, as now, sputtering along barely above stall speed, Obama — joined by 43 Senate and 139 House Democrats — extended the rates for two years because the economy was too weak to absorb large tax increases.
That was then. This is now:
When Sen. Richard Durbin said “Social Security has not added one penny to the deficit,” Charles P. Blahous III, a member of the Social Security board of trustees, wrote to The Washington Post to say that in 2012 this program will add $165 billion because benefit expenditures exceed Social Security tax revenues by that amount and “this gap is filled entirely by revenue that the federal government borrows.” The fact that the second-ranking Senate Democrat is off by 16,500,000,000,000 pennies reveals the sort of precise thinking that got the country into its current condition and that supposedly will produce a cure. It is enough to make you want to hop in your Fisker and drive off a fiscal cliff.