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Thursday, June 22, 2006

Taxation, not misrepresentation

Posted by on June 22 at 17:25 PM

I was spending the morning reminiscing over my article in this week’s paper when Tipster Kendra called to say she ran into some petitioners for I-920 (which would repeal the WA estate tax) outside the Safeway on 15th and Harrison who weren’t telling the whole truth. Big surprise in politics, right? Still, she claimed the signature gatherers told her that the estate tax affects every income bracket and when she loudly accused them of being liars, they called over Safeway security. The grocery cop heard the complaint and then told Kendra, “Keep up the good work!”

Moderately well versed in estate tax fact and fiction, I strolled over to the petitioner’s table outside Safeway to play the part of the young, dumb voter.

Me: What’s this Death Tax thing?
Petitioner: It’s a double taxation issue. When you die, all the money that you’ve worked for, the government taxes again.
Me: Who do they tax?
Petitioner: Everyone, people say it’s a tax on the rich, but they hire financial advisors and get through all the loopholes. Who it hurts is the middle class businesspeople.
Me: It’s not just on the rich? I thought you’re estate had to be worth over a certain amount, like $2 million or something?
Peitioner: Nope, I know people who have had only $200,000 who have been hit with it. I’ve heard horror stories.
Me: So, like, my parents have a $300,000 house and, like, $20,000 in the bank. Would they be hit with the estate tax?
Petitioner: Yes they would. It’s a tax when you die, that’s why it’s called the Death Tax.

These are paid signature gatherers who work on campaigns all over the country. These guys were hired by Direct Democracy, which in turn was hired by the group that needs signatures (in this case, Committee to Abolish the WA Estate Tax).

Here’s what the petitioner got wrong: Estates worth less than $2 million are exempt from the estate tax. Farms are also exempt from being counted toward the $2 million. The tax isn’t on death, but on the inheritance the transfer of money from someone who’s kicked the bucket to their kids. In Washington, 250 families are affected by the estate tax.

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I just wanted to let people know that I was so upset by the fact that these petitioners were lying to people's faces that I decided to print out a pie chart showing how many people in WA are actually affected by this tax, and labeled it "The Truth About the Estate Tax."

I stood about 10 feet away from the table and answered questions if I was asked.

The petitioners told me that I was in violation of Federal law for doing this (another lie) and threatened to have me arrested.

They ended up telling the Safeway manager that I was harrassing them and he asked me to leave (note, I never once spoke to the petitioners during the time I stood there with the sign.) I was the only person there telling the truth and I was the one ejected from the property.

I encourage people to contact the Safeway on 15th and John, 206-323-4988, and tell the manager you read about this on the Stranger Blog.

They know they can't win without falsifying the issue. Please don't let them get away with it.

So isn't what they're doing illegal? Couldn't they be taken to court over this?

So isn't what they're doing illegal? Couldn't they be taken to court over this?

you would think, wouldn't you?

When I called the Secretary of State about this, they informed me that it is not, in fact, against the law to blatantly lie about a petition as long as the text itself is correct.

You could literally tell people you had a petition to give everyone free ice cream on Thursdays and have them sign a petition to ban puppies and sunshine from within city limits.

The best we can do is make some noise about it. Contact your media outlets and contact the manager of any business establishment where these petitioners are allowed to collect signatures.

The law may not be on our side, but the facts speak are if people are willing to stand up and speak the facts.

Look, whomever gets to draft what goes on the ballot gets to lie. That is what ballot measures are for. When you see a measure they give you to vote on, trust me, they are lying! That is how the drafters of those things make their very good $$$$$$.

Yeah, that's pretty dispicable that signature gatherers are misleading people like that.

But to be fair, Kendra, you're not telling the whole story either.

Sure, only estates larger than $2 million have to file estate tax returns. But that's only what economists call the "legal incidence" of a tax.

What really matters is the "economic incidence," or who bears the real economic burden of the estate tax. (See

Legal and economic incidence are different because taxes don't stay where lawmakers put them. Instead, people who are taxed generally are able to shift some or all of the burden onto others by changing behavior in response to the tax.

In the case of the estate tax, there's lots of evidence wealthy estate holders pass on much of the burden to heirs, which are often much less wealthy. The correlation between the wealth of decedents and their kids is about 0.5, suggesting the estate tax is a lot less progressive than a lot of non-economists assume.

Also, there's a huge literature on how the estate tax discourage entrepreneurship. And that hurts the wages of workers, not just rich CEOs. Sure, this isn't a huge effect because it hits a small number of people, but it's real and important. Even the US Treasury has published papers on this recently (See

I don't want to defend jackass petitioners. And I'm not saying Washington State should dump the estate tax. All I'm saying is that the issues are more complex than a lame ideological soundbyte about "taxing the rich." That ain't right either.

Seriously, the estate tax is a pretty shitty tax by lots of criteria, if we were designing one from scrath. We'd be better off sending checks straight to low-income people, funded by a much more efficient and less harmful tax that that one.

If the "economic incidence" of the estate tax means that more of our multi-million- and multi-billion-dollar estates are diverted to charity, and to the creation of a less aristocratic and more meritocratic society, then it is a good tax. Estate taxes are, by definition, the most progressive taxes imaginable.

The children of American millionaires are doing just fine. If "D" had anything concrete to say about defects in estate taxes, you can be sure he would have.

UI - Seems to me that both sides like to stretch the truth when it suits their cause. 250 Washington families impacted by the tax? Would that be 250 families PER YEAR. Guess the full story isn't important if supports your side. Maybe that's why you're unpaid...

Nat: here's a defect in the estate tax for you. It lets too many estates UNDER $2 million off the hook.

After all, inheritances technically count as economic income to the kids of rich decedents.

So here's the question: Why should income from estates be taxed any differently from other kinds of income we earn, like from wages, or selling a painting, or anything else?

I don't have a good answer, except that phoney politics drive our tax policy, not good economics.

If we were being honest about building a good tax system, we'd be advocating an income tax that taxes all estates as regular income, at regular income tax rates -- not arbitrarily exempting $2 million as a handout to upper-middle class Bellevue soccer moms.

That's why there'd be no seperate, inefficient estate tax in a well-designed tax code. That's how one of the early federal income taxes was designed back in 1894, and that's how it should be today.

Of course, you won't see that in DNC and RNC talking points. But it's old news to folks who study public finance.

yo Factchecker -- 250 families a year in a state with 2,606,623 households? That's only .000095% of the population paying the tax annually. Next time I'll be more specific about the absolutely miniscule number of obscenely rich people paying this tax.

In the case of the estate tax, there's lots of evidence wealthy estate holders pass on much of the burden to heirs, which are often much less wealthy.

This sentence doesn't make any sense to me. The wealth being taxed is the estate. If an heir inherits the estate, then how can they be much less wealthy than the wealthy estate holder who died? They just got his estate, which would make them as wealthy as him, plus whatever their net worth was, which if I'm reading your comment right, would be on average about half the estate holders net worth.

If that's what you mean by "correlation between the wealth of decedents and their kids is about 0.5," then the poorest people paying the estate tax are already worth about $1 million before they get their inheritance. Taxing these millionaires does not seem in any way regressive to me.

By the way, the statement that "Estate taxes are, by definition, the most progressive taxes imaginable" is pretty laughable. That'd be howled out of Econ 101.

The idea that "by definition" a particular tax must be progressive or regressive is just plain wrong. It ignores the whole idea of "economic incidence", which is that it's not obvious who bears a tax just by looking at who pays the bill. To know if it's progressive, we have to look beyond that to see how it affects behavior.

Nat assumes the estate tax makes people give money to charitable soup kitchens. To some extent it does. But maybe it also makes them give money to Yale University, which is also a nonprofit. Does that lead to more "progressive" tax system? Probably not.

And worse yet, what if the estate tax encourages rich people to just hide their assets in cahoots with their estate planners? Well, that hurts everybody because we don't get any tax dollars for programs from that hidden income.

With a more broadly based tax on income or consumption we could raise far more money for programs, while doing far less harm to the economy. And avoiding the political lightning rod of seperate special estate taxes altogether.

so I guess it's time for a petition to outlaw lying about petitions?

D- Let's take a look at what you're saying here. We don't want an estate tax because it's not optimal (name a tax that is). Or because it's prone to tax evasion (like offshore corporations? or the million other schemes the superwealthy can afford to pay their lawyers to dream up?).

I think ultimately the point of having an estate tax is not purely for the revenue it generates. It's because we live in a democracy, and when you get rich off the money your parents had and this estate gets passed from generation to generation undiminished, you've got what we call an aristocracy. And that's what we made this country to try and avoid.

i'd also like to point out that the 0.5 correlation figure is meaningless without more context. it doesn't necessarily imply the heirs are less wealthy than the decedents--it certainly doesn't mean they are half as wealthy on average.

I am highly sympathetic to the pleas of Sarah the unpaid intern and equally disgusted with the activists and all other Eyman clones. But the math around this 250 families business is just bogus - in fact, the response above proves it: there is no possible way that 0.00959%
, or 0.01% (original calculation above off by 2 orders of magnitude, but whatever) of the population are subject to a tax on estates of $2m or more. Just look up your average federal income tax statistics - the current threshold for the top 1% of taxpayers is $295,495 (2003, US federal data) PER YEAR. Don't you think a good chunk of those folks will find a way to accumulate a measly $2m over their lifetimes? 25,000 households/year in the state of WA would be a more reasonable estimate.

The business accounting website has an article with quotes from pros and cons. It quotes facts from the PI and other sources.

"In 2005, the Washington estate tax applied to an estimated 210 estates, valued at more than $2 million. It exempts farms and timberland if they constitute at least half the value of the estate, the Post-Intelligencer says. The state estate tax may be deducted from the federal estate tax.",%20%25Y

Are you saying that there are only 250 estates in the state of Washington worth more than $2 million? I'm pretty sure that is not true.

Wait, I see, it is 250 new estates every year, not "In Washington, 250 families are affected by the estate tax." Nice misdirection there.

Oh, now I understand. It doesn't matter if you misrepresent numbers to bolster your case as long as it's an "absolutely miniscule number" that you're lying about. I realize that you're new - but is that the journalist credo taught at The Stranger?

Lots of safeways are allowing the same lying crew to harass customers. I should make more time to confront them but that would take finding which store they are at to day.

The biggest lie they tell is that they are not "Paid".

The crew at the 21st ave SW store last month had a whole stack of petitions, some of which contradicted each other. Why would a Schizophrenic volunteer as a signature gatherer?

RE: It seems pretty obvious that per year was implied. There are of course more then 250 families worth over 2 mil, but only around 250 of them die every year. This is out of about 80k deaths per year.

As for the whole double taxation thing. All money is taxed multiple times. When I spend my money I pay sales tax. Then the business pays B&O tax and payroll taxes. The employees then pay property tax and sales tax on that money and so on. This is even considering federal taxes. If we only taxed money once, the government would last about a year.

The question is whether it is appropriate to tax the money people leave to others in there estates. I don't see why it shouldn't be. Especially if it is such huge amounts. Helps to prevent wealth concentrations which are bad for the economy.

So the stat "250 families a year in a state with 2,606,623 households? That's only .000095% of the population paying the tax annually" is meaningless. You should be comparing 250 to 80,000 not 2,606,623. Actually the number should be less than 80,000 because you should be comparing households hit by the death tax to households not hit by the death tax, not households hit by the death tax to deaths, because infant deaths, etc. are not relevant to the discussion.

Giffy - If you follow your own link, you'll find that the total number of deaths in Wa is 44k - not 80k. If you account for the infant deaths, etc suggested by Michael, I think that it's fair to say that the death tax hits 250 out of 40k deaths per year - or .0063 (which is .63%) The US Census Bureau estimates 6.3 million Wa residents. At a rate of .63% approximately 40,000 Wa residents will be impacted by the death tax. To print (in bold no less - go back to the original post) that "250 families are affected by the estate tax" is no less disingenuous than the bullshit that the petitioners are trying to pull. The intern will someday learn that she never will get paid if she has to hide the truth to make her argument more compelling (unless, of course, she starts up a signature collection firm).

Soon it will be mine!

According the the WA State Department of Revenue, 0.5% of all households are subject to the Estate Tax.

I can see how that "250" figure is misleading for both the person reporting and the readers.

The fact remains that this tax affects less than 1 percent of us and these petitioners are lying.

Great discussion. However you cut it, very few families in Washington are affected by the estate tax when someone dies. It is only a tax on estates over $2 million and excludes family farms and timberland when that is over 50% of the estate.

Money from the Washington estate tax goes into the Education Legacy Trust Fund. It helps, among other things to pay for the State Needs Grants - helping to offset rising tuition costs for 10,000 Washington students.
It also helps pay for reducing classroom size in public schools.

No one likes to pay taxes, but taxes help pay for the things that keep our society going.

Safeway was wrong to eject someone engaging in free speech. But they don't care. Years ago when I was collecting signatures for a statewide bottle bill at the Safeway in the University District they tried to tell me I couldn't collect signatures on the public sidewalk in front of their store. They were wrong and I continued to collect signatures.

You are not harrassing petitioners if you engage in discussion with people who are being asked to sign. You do not lose your freedom of speech just because someone is making money collecting signatures and doesn't want anyone to tell people they are asking to sign that they are not being told the truth.

There is no enforced lose your freedom of speech rights around a signature gatherer. Do you lose your freedom of speech everytime you go into a Safeway store.
With the bottle bill Safeway was so obnoxious and spent so much money opposing it,and distorted the truth so much, we urged people to boycott Safeway and to this day I am not a shopper at Safeway.

This is another reason I refuse to sign ANY petition now. Let's get rid of the initiative process -- it has become a joke to our democracy.

Just a thought: Maybe the reason Safeway lets these guys lie to customers in front of their stores is because the local high-end management of Safeway has a stake in said estate tax. I mean, you're probably filthy fucking rich if you run the PNW division of Safeway, and this measure's purpose is simply to make the rich richer. I see no hardship in an estate tax if you're getting more than $2 million, given most of us won't make that much in our lifetimes, let alone be worth that much.

How many sigs have they gathered? All this may not matter so much if the measure doesn't have nearly the support to pass.

Agree with Mrs. Y. I refuse to sign petitions. You're harrassed to sign them, and the sig-collectors and signs advertising them are full of one-sided lies and misinformation.

Damned LIARS!

I'm one of the few people ever to PAY an estate tax, and it's not easy to end up having to pay one unless you're:

a. stupid;
b. won't hire a decent lawyer and accountant; and/or
c. have way too much money.

Um, ok, I just dissed myself. I claim c.

The signature gathering process for this particular initiative has left me open-mouthed in amazement at their sheer gall. In the 'burbs, they're setting up shop in front of discount stores - Target and Walmart and the like - and staffing the tables with what appears to be homeless persons. The signature gatherers are loudly haranguing shoppers with the type of misinformation you detail here, and PEOPLE ARE SIGNING the stupid fucking thing. How gullible can people really BE, anyway?!

I'm sorry, I do not now and never will believe that inherited wealth is a positive thing in a democratic society.

Just remember, we have no state income tax, so anyone who whines about "double taxation" is a frickin LIAR.

For many wealthy people who die, it's our FIRST CHANCE to tax them on their unearned income.

If your argument for the death tax is that it only affects 0.5% of the people, then my argument for getting rid of it is, it is even less than 0.5% of the budget.

Geni, I agree. The biggest, most obvious example of the perils of inherited wealth is Paris Hilton.

But Paris Hilton hasn't inherited anything. Her parents are still alive. Bad example.

Ted Kennedy is a better example of the perils of inherited wealth.

Sorry for the missinformation. I was still waking up and simply added all the columns, neglecting to note that the top one was for all causes.

I was watching the signature gatherers for this initiative in downtown. They were targeting particular people, not just everyone. They were targeting people who were dressed like professionals, and they completely ignored those people who were black and obviously poor. I was waiting for them to ask me to sign, but they were ignoring anyone who didn't have a certain look.

According to the store, they asked people to leave because there was a disturbance. The petition gatherers had obtained permission from Safeway and the protesters had not. Safeway generally gives permission to groups which ask to speak on their property. The person to contact is Sheri Myers in Safeway Public Affairs.

However, in talking to the store, I did hear that the petitioners threatened to hit Kendra in the face. If this is true, it's too bad nobody got this on videotape, or they could be arrested. Who would be interested in setting the signature gatherers up for a bust?

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