Thursday, March 03, 2005

Morally Bankrupt 

A few years ago Republicans argued that the estate tax -- or, as they like to call it, the "death tax" -- had to be repealed on grounds of simple decency, because so many grieving widders 'n' chilluns stood to lose the family farm to tax bills should Paw keel over behind the plow. (The argument was, of course, wholly meretricious: not a single farm has ever been lost to estate taxes.) We don't know exactly what happened between then and now, but that deep reservoir of Republican compassion for the American middle-class property owner has mysteriously dried up:
Mostly along party lines, the Senate voted 59-40 Wednesday to reject a Democratic amendment that would have allowed older people to get special homestead exemptions to keep their homes when they file for bankruptcy. Currently, such exemptions are determined by the states.

Also rebuffed, 58-39, were two proposals focused on people whose significant medical expenses for illness force them to file for bankruptcy.

The first would have allowed people to keep at least $150,000 of the equity in their primary residence. If, in addition, medical bills exceed 25 percent of the person's income, the second proposal would have exempted them from a new test in the legislation measuring income and assets of bankruptcy applicants to determine if debts can be discharged.

Under unlimited homestead exemptions in a half-dozen states, "fat cats who go into bankruptcy don't lose their mansions," said Kennedy, author of the twin amendments. "Where is fairness in this bill?" . . . .

Banks, credit card companies and retailers have pushed since 1997 for a bill overhauling the bankruptcy laws. Consumer and civil rights groups and unions say the legislation would shred a safety net for those who have lost their jobs or face mounting medical bills.
Molly Ivins notes that bankruptcies due to medical expenses have risen by 2200% in the two decades between 1981 and 2001. Three-quarters of Americans who file for medical bankruptcy have health insurance; ninety percent of them are middle-class. Yet . . . .
In a classic example of moral accounting, Sen. Charles Grassley, R-Iowa, the bill's chief sponsor, said, "People who have the ability to repay some or all of their debt should not be able to use bankruptcy as a financial planning tool so they get out of paying their debt scot-free, while honest Americans who play by the rules have to foot the bill."

That's a startling example of the "straw-man" school of argument. The study by the Harvard profs shows that in the two years before filing for bankruptcy, 19 percent of families went without food, 40 percent had their phone service shut off, 43 percent could not fill a doctor's prescription and 53 percent went without important medical care.

So, who are these feckless, irresponsible moochers using bankruptcy to avoid paying legitimate debts? Why, look at this: The New York Times reports "legal specialists say the proposed law leaves open an increasingly popular loophole that lets wealthy people protect substantial assets from creditors even after filing for bankruptcy."

What, our Republican Congress passing a bill that favors rich people at the expense of "honest Americans who play by the rules and have to foot the bill"? If you have a lot of money (most people filing for bankruptcy don't have this problem), you just put it in an asset protection trust and walk away. You don't even have to set up the trust offshore anymore -- five states have made it legal to set them up in their borders, and you don't even have to live in any of the five to do it.

If you don't like that feature of the bankruptcy bill, try this one: You may have read of the hardship on the families of those who have been called to fight in Iraq, including, of course, severe financial stress leading to many bankruptcies. Democrats in the Senate tried to put an amendment on this bill exempting military personnel, and the Republicans voted it down.
UPDATE: Daily Kos fingers the four Democrats who voted with the Republicans to kill Amendment 28 (the medical-bankruptcy exemption):
Joe Biden (DE)
201 Russell Senate Office Bldg., Washington, DC 20510
(202) 224-5042
E-mail: senator@biden.senate.gov

Thomas Carper (DE)
513 Hart Senate Office Bldg., Washington, DC 20510
(202) 224-2441
Web Form: carper.senate.gov/email-form.html

Tim Johnson (SD)
136 Hart Senate Office Bldg., Washington, DC 20510
(202) 224-5842
Web Form: johnson.senate.gov/ContactPage/emailform.htm

Ben Nelson (NE)
720 Hart Senate Office Bldg., Washington, DC 20510
(202) 224-6551
Web Form: bennelson.senate.gov/email.html

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