Jack Lew, the Treasury Secretary, has announced a new interpretation of established tax law pertaining to the valuation of shares of closely held businesses – when those shares are valued for gift and estate tax purposes. Typically, shares of a closely held business (as opposed to a publicly traded company) are discounted heavily because no one would pay a higher market price for shares of a family owned business when they would probably be a minority owner. When those shares then pass from say a parent to a son or daughter, because the shares are discounted, the total value of the shares are not hit with the gift and estate tax. (This can be very important when say family farms pass from one generation to the next – because much of the value of the family farm business is tied up in land. In the past, particularly before the estate tax exemption was raised, family farms were sold simply to pay the estate tax.)
You can argue whether discounting shares is the correct approach or not. (I agree with the discounting approach.) The point is Mr. Lew is making up his own rules – and changing long established interpretation of tax law. Congress didn’t vote to change this. So now its OK to to simply make your own rules and change established interpretations – without the Legislative branch first voting?
If a republican becomes President, is everyone going to be OK if his or her appointment to Secretary of Health and Human Services simply re-writes the rules of some section of the Affordable Health Care law? Lets say the new Secretary decides to waive the tax penalty for not buying health insurance. Everyone going to be OK with that? Regardless of what’s actually in the law or how the law has previously been interpreted by prior administrations, any administration can change the rules now? What about say, abortion – can a future bureaucrat re-write the rules of something – anything – pertaining to abortion? Everyone OK with that possibility? We won’t hear any complaints from the media right?
This is also in part the responsibility of our esteemed Congress. For far too long, they have left the interpretation of law to the various federal departments – shirking their responsibility to clearly define how a law is to be interpreted and implemented.
Republican or Democrat, you would think anyone in politics or the media would be up in arms. This is a perfect example of 2setsofrules and another example of our government sliding into a Banana Republic. In way too many instances, Obama and his minions have not changed the law by going through Congress; instead, they simply change the rules. When anyone can simply re-interpret the rules and laws, without the vote of the Legislative branch, without the vote of the people, there are no rules and laws. And that’s a big problem.