The Times and the Death Tax

The New York Times finally finds a tax it doesn't like: the capital gains tax imposed in 2010 instead of an estate tax on inherited gains of more than $1.3 million. As The New York Sun pointed out in an editorial, the family that owns the New York Times has used elaborate trusts and two tiers of voting stock to mitigate the effects of the estate tax on its own family business. Under the tax system the Times editorialists support, families had incentives to keep investments locked in place to achieve the step-up in basis at death. The new system makes it worthwhile for families to reallocate capital to more productive uses regardless of the age or health status of the family patriarch or matriarch. Or at least, it reduces the role that tax considerations play in those decisions. As another New York Sun editorial on the same point put it, "the current step-up regime creates perverse incentives for investors. The older they get, the more incentive they have to hang on to assets they might otherwise be well advised to sell off, simply because the step-up system will reward them for holding by providing a way to avoid capital gains taxes." It's another example of how investments and business decisions are sometimes driven by government policies or tax laws rather than the underlying merits. Meanwhile, it's hard to fathom why the Times is so worked up against capital gains taxes applying to inheritances of more than $1.3 million when it favors the Pelosi tax on individuals with earned income of more than $500,000, as well as increases in the payroll tax on those with income above $97,500 and on the income tax of individuals with income above $100,000. If you earn more than $100,000, you should have to pay more tax, but if you inherit $1.3 million, you shouldn't have to pay any tax? You'd think the Times was starting to buy into the logic against double taxation, but then again, the whole editorial is an argument for bringing back the estate tax instead of the capital gains tax, so it's really hard to understand what logic or underlying principle there is here at all.