NC Budget and Tax Center

A stark contrast of the few favored over the many

I recently noted the differing approaches of President Obama and Congress regarding tax changes, developing a budget and supporting the economy. In particular, I noted Congress’ push to eliminate the federal estate tax – which applies to very large inheritances by a small group of wealthy heirs.

Over the years, the amount of inheritance that is exempt from the federal estate tax has increased exponentially while efforts to raise the minimum wage in line with the growing costs of meeting basic needs have stalled.

In 2001, the federal minimum wage was $5.15 an hour and remained at that level until 2008 when it was increased to $5.85 an hour and then to $7.25 in 2010, where it remains today. On this issue, North Carolina has not differed from federal law, with a state minimum wage of $7.25 as well.

By contrast, in 2001, the amount of estate inheritance that could be exempt from the federal estate tax was $625,000. By 2008, this exemption amount increased to $2 million and for 2015 the exemption amount is $5.43 million. In 2013, North Carolina state lawmakers completely eliminated the state’s estate tax (only 23 North Carolina taxpayers paid an estate tax for the 2012 tax year). In the same year state lawmakers eliminated the state Earned Income Tax Credit, which helped more than 900,000 low- and moderate-income taxpayers who earn low wages keep more of what they earn to offset an already regressive state tax system.

The steady increase in the inheritance exemption amount over the years acknowledges that thresholds for things like taxation must be adjusted to reflect economic reality if an inheritance that is passed along to respective heirs is to hold value. On the flip side, a basic wage floor has not been subject to the same practice of annual adjustment for inflation – meaning the minimum wage is able to purchase less and less each year.

This is a clear example of how tax and economic policies work to facilitate income inequality, worsen poverty, and heighten the challenge of making ends meet for millions of workers that earn low wages. Meanwhile, conscious and deliberate efforts have been made that further tilts the tax code to favor the wealthy and profitable corporations.

As the push to increase the minimum wage towards a wage that will help boost the economy continues, stark contrasts such as this must not get lost in the debate. An economy that works for all must ensure that economic opportunity is afforded to all, not just a few. Proponents of repealing the estate tax claim that ensuring that the wealthy remain wealthy is good for the economy, though evidence doesn’t support this claim.

Ensuring that hardworking North Carolinians and workers across the nation who earn low wages can support themselves and their family, however, is good for the economy. These workers are much more inclined to spend their increased wages immediately and spur economic activity in local economies across the state.

If policymakers are truly committed to boosting the economy, nationally and here in North Carolina, focusing on the middle- and bottom- of the economic ladder, as opposed to the top, is certainly an opportunity to usher in tax and economic policies that promote broadly shared economic prosperity.

5 Comments


  1. LayintheSmakDown

    April 24, 2015 at 1:55 pm

    I fail to see the correlation. Why would confiscating the assets of someone have anything to do with the wages of entry level jobs?

  2. Cedric Johnson

    April 24, 2015 at 3:55 pm

    There is not a correlation to be made, simply a contrast being highlighted. One form of assets (inherited estates on behalf of heirs) is protected while another form of assets (earned wages) are not. So again, no correlation is to be made here, simply highlighting a contrast of priorities. I appreciate the comment, which allows for clarification.

  3. LayintheSmakDown

    April 25, 2015 at 1:08 pm

    But there is no protection for anyone’s wages or assets really. It is just as likely that someone who has been able to accumulate assets to reach the death tax levels has that at risk, and I might add has paid considerable taxes on the assets over time. There are only protections on transferring assets so that you do not have to liquidate the assets, in most cases people cannot easily liquidate say a small business that is fair valued at a sizeable amount, but must continue as a going concern after the death of the founder.
    ……
    Also, who can you name with any kind of skills works on minimum wage long term? If you have any bit of skills you are paid more as the labor market is quite competitive. I for one have seen it in action during my unemployment. At a major retailer I got a part time job at, there were many associates who were just out of high school and they made more than $10 and hour within a year of graduation. This minimum wage thing just does not hold water.

  4. Alan

    April 26, 2015 at 7:13 pm

    I’d suggest our resident troll go read “What’s the Matter with Kansas” by Thomas Frank. You may find yourself looking in the mirror…

  5. LayintheSmakDown

    April 27, 2015 at 3:35 pm

    That has no application, some progressive narrative is irrelevant in the real world where their policies and theories fail every time.

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