In 2006 I predicted the federal estate tax would ultimately NOT be repealed, but that it would be frozen at 2009 levels: $3.5 million exemption ($7 million for couples), at a top rate of 45 percent [click here].
Post 2006 developments have only confirmed my initial estate tax predictions. The latest evidence: The Wall Street Journal’s Wealth Report Blog reported here on a new Financial Times/Harris Poll finding growing worldwide support for raising taxes on the wealthy. Here’s the Wealth Report Blog’s take on the poll:
The study of 8,748 adults in eight countries found that more than half of respondents in all countries believed the wealthy should be taxed more. Here are the soak-the rich rankings (i.e., the percentage of respondents from each country who said “The government should tax the wealthy more”):
Japan — 77%
Spain — 65%
Germany — 64%
U.S. — 62%
China — 60%
Italy — 59%
U.K — 56%
France — 51%Granted, there are some obvious problems with the poll — it defines neither “wealthy” nor “tax more.” And it’s a relatively small sample size per country.
Yet the responses become more interesting when they’re compared with another poll question: Is the gap between rich and poor too wide?
In this ranking — call it the envy ranking — Japan is at the bottom, with only 64% of respondents saying the gap is too wide, while another 20% believe it’s just right. France has the second-highest envy ranking, with 85% believing the gap is too wide — yet it has the lowest “soak-the-rich” ranking. Germany is ranked first in the envy ranking at 87%, while the U.S. ranks second to last, with 78% saying the gap is too wide.
You would think that the countries with the highest envy ranking would also be the most likely to want to hike taxes on the rich. So why is the relationship nearly the opposite?
One answer might be existing tax codes. France already taxes its earners heavily, so there might be less pressure to tax people even more, even though the envy ranking is high. The U.S. probably has the highest wealth gap of any of the other countries, yet taxing the rich isn’t as popular here, since more voters aspire to become wealthy themselves.Another answer may be relative wealth gaps. Germans says their wealth gap is too wide –but Germany is among the more meritocratic economies in the world when it comes to distribution of wealth. Germans’ definitions of “too wide” are probably different from those of Japanese and American respondents.