The Estate / Death Tax

I'm for it. Very few people are actually affected by this, and yet the govt. gets money which it desperately needs with the mounting debt.

As you mentioned inheritance isn't 'earned' by the people who receive the money.

 

you know, the phrase "death tax" is a republican propaganda technique.

It's technicallly called the "Inheritance tax". "Death Tax" is a term invented by right wingers in order to conjure up negative associations, just another example of republican Newspeak:

Just wait, I guarantee you somebody will soon bring up the mythical subject of "double taxation" in this thread as well; another GOP distortion.

 

Personally, I think you ought to have it or not have it. Either way, I don't particularly care.

What I dislike is that because there are so many loopholes, the wealthiest are able to avoid the tax. To me, if the tax is there, then people should have to pay it. I may or may not agree with the tax itself, but as long as it's there, it ought to have teeth.

What I have disliked, though, is seeing what the estate tax can do to people who don't plan ahead. I've seen businesses that were in the family for decades have to be sold off just to pay the taxes. Children of the founder who had worked at those businesses all their lives not only out of a job, but having to get rid of something that was part of their lives for a very long time. Something they helped build. This was especially a big deal in the Panhandle where family farms were forced to be sold to corporate interests solely because of the estate taxes.

And, in the past, there have been estate tax problems that forced people to get rid of childhood homes or other more personal treasures that do have a financial value, but tend to have a higher personal value to those who would be inheriting.

They've solved some of those problems by upping the value at which the estate tax kicks in, which is a fine solution, I suppose.

But the problem with any kind of tax is that it does things it's not supposed to do. Estate taxes are supposed to prevent the superwealthy from transferring the bulk of their wealth to their heirs. But the superwealthy can get around it (I actually had a fairly long talk with Jimmy Irsay about this very topic. It was financial planning such as that which allowed the Irsay family to keep the Colts. The Cooke family couldn't keep the Redskins because they didn't make these plans), so the only people who end up losing are people who either don't take the time to plan ahead, or those whose estates aren't really transferring that much in terms of wealth.

 

It is a death tax. I assume "inheritance tax" was thought up to sound less intrusive. Only rich people have inheritances, after all.

It's not really double taxation since the tax is levied on wealth that is transferred. Any transfer of money or assets is subject to taxation.

But the estate tax only brings in less than half of what the home interest deduction costs the Federal Government. So maybe we're focusing our energy in the wrong place in terms of generating money for the government.

 

Estate Tax Myths and Facts
Myth: The Estate Tax is a "Death Tax."
Fact: 98% of Americans who die pass their estate on to their heirs completely tax-free — in fact, they get a valuable tax break on capital gains. Zero estate tax is charged on assets left to a spouse or to charity.

"What I dislike is that because there are so many loopholes, the wealthiest are able to avoid the tax."

Myth: The wealthiest Americans are able to completely avoid paying estate taxes.
Fact: Wealthy Americans most definitely pay estate taxes. In 1998, out of 47,000 taxable estates, there were 374 that were larger than $20 million. Those 374 estates paid over $4.4 billion in estate taxes — more than 20% of all estate taxes collected that year.

"What I have disliked, though, is seeing what the estate tax can do to people who don't plan ahead. I've seen businesses that were in the family for decades have to be sold off just to pay the taxes"
Myth: The Estate Tax must be repealed because it is forcing family businesses to close.
Fact: This issue has been wildly exaggerated. Only 3 of every 10,000 people who die leave a taxable estate in which a family business forms the majority of the estate. Family businesses can be protected by raising exemption levels. Repealing the entire Estate Tax is unnecessary.

" This was especially a big deal in the Panhandle where family farms were forced to be sold to corporate interests solely because of the estate taxes"
Myth: The Estate Tax must be repealed because it is forcing family farms to sell out.
Fact: As with family businesses, this issue has been distorted. Only 3 of every 10,000 people who die leave a taxable estate in which a farm forms the majority of the estate. On April 8, 2001, the New York Times reported that the pro-repeal American Farm Bureau Foundation could not cite a single case of a family farm lost due to the estate tax. In any case, family farms can be protected by gradually raising exemption levels. Repealing the Estate Tax will likely encourage the growth of mega-farms, thereby hurting smaller operations.


http://responsiblewealth.org/tax_fairness/Estate_Tax/Estate_Tax_Myths.html

 

Gosh, I wish you'd bring up something other than a stock argument....

Myth: The Estate Tax is a "Death Tax."
Fact: 98% of Americans who die pass their estate on to their heirs completely tax-free — in fact, they get a valuable tax break on capital gains. Zero estate tax is charged on assets left to a spouse or to charity.

Mr. Paige, as you say, since only rich people have inheritance, and for the most part, only rich people pay the "death tax", why shouldn't it be called the inheritance tax? Since over 98% of people who die don't have to pay it, then do you not see why calling it a death tax is misleading?

What if I made up a tax on Ferraris and Lambourghinis, should I call it, the "Ferrari and Lambourghini" tax or the "Car tax"? Which would be more appropriate and less misleading?


Myth: The Estate Tax raises little revenue, so repealing it will have no effect.
Fact: Right now, the estate tax raises $30 billion a year for the federal government. That’s about 9% of the non-military discretionary budget. By 2011, the cost of the repeal will reach $60 billion a year, a time when the baby boomers begin to retire in large numbers. Meanwhile, the states stand to lose $9 billion a year by 2010, since they also receive revenue through the federal estate tax.

 

I just don't see anything wrong with calling it a death tax. It happens at death. It's a tax. Death tax. Nothing wrong with that. The fact that most people won't pay it doesn't make any difference.

And I didn't say it didn't bring in any money. I said it didn't bring in nearly as much as it costs to have the home interest deduction, but you don't see a whole lot of people lining up to get rid of that. Why not? If the goal is revenue for the Federal Government, then the home interest deduction should be on the table.

If the real reason is to affect behavior, then that's a different story.

But hey, I mentioned other stuff in the other post and said that if you're going to have it, you ought to have it instead of letting those who the tax is most supposed to affect get away with financial planning that allows them to avoid the tax.

I don't know how you change that, but if you want the tax, you should have the tax, not have a half-way tax that allows the superrich to get out of it.

And you should support getting rid of the home interest deduction if the reason you support this tax is to raise revenue.

 

(i edited this in above probably after you posted this)
Mr. Paige, as you say, since only rich people have inheritance, and for the most part, only rich people pay the "death tax", why shouldn't it be called the inheritance tax? Since over 98% of people who die don't have to pay it, then do you not see why calling it a death tax is misleading?

What if I made up a tax on Ferraris and Lambourghinis, should I call it, the "Ferrari and Lambourghini" tax or the "Car tax"? Which would be more appropriate and less misleading? And do you not understand that it only became "the Death Tax" when the Republicans launched a publicity campaign against it?

the goal isn't just revenue for the federal government.

true, but wherever there are taxes, tax avoidance follows.

It's not the sole reason; anyway, if my sole reason was to raise revenue, that argument can be transposed into so many contexts its not worht getting into.

 

I would say it's a myth that only rich people have inheritances and have been subject to the taxes. I've seen people have to sell their businesses and farms to pay these taxes. These were not people who lived high on the hog or anything like that. They had a valuable asset, but not one that threw off a lot of cash. They lived relatively normal middle class lives.

I'm sure it only became the inheritance tax to provoke a sense of class warfare against the wealthy. By the by, it was called a "Death Duty" in England in the 1700s. So, that way of referring to it does have some degree of history.

Which is why the tax shouldn't apply to everyone, and it doesn't now. I mentioned before that with higher exemptions (i.e. the tax not kicking in until a higher amount), the problems that I have seen would largely be solved.

But the estate tax doesn't always just hit the rich. It hits people with assets that have a certain value (which has gotten higher in years). You'd have to have a tax that was on Ferraris and Lambo and occassionally on your mother's old Buick to be a better analogy.

 

The goal isn't just revenue for the federal government.

FranchiseBlade listed it as part of his reason for supporting it.

To me, it shouldn't matter how much it brings in if the point is to tax the transfer of assets from one generation to the next. But you will hear many people complain about the lost revenue from the phasing out of the tax. If maximizing revenue is important, then lets get rid of a lot of tax loopholes.

 

So, the estate tax is not for revenue purposes, and it's not to keep the very wealthy from transferring their assets to the next generation.

What is the purpose again?

 

It isn't like everyone gets a lottery draw at birth to see if they will get a big inheritence. People who are "lucky" enough to get a taxable estate had parents (or great, great grandparents, etc. some willing benefactor) that chose to leave them money. If I am fortunate enough to have a huge estate that I leave to my kid, I don't want the government taking a big chunk out of it. If I lived forever, the government wouldn't get a penny of that money, but since I am going to die, they get their greedy paws all over it? That is not fair, and that is why there shouldn't be an inheritance tax.

 

By the by, there is technically a difference between an estate tax and an inheritance tax (an estate tax is a tax levied on the value of the deceased estate, an inheritance tax takes into account the relationship of the heir to the decedant and the size of the specific transfer. So different heirs would potentially be taxed at different rates. But the tax comes off the top at the time of death, before the transfers are made and regardless of who they are made to). Franklin Roosevelt actually addressed Congress in 1935 asking that an inheritance tax be added in addition to the estate tax that was already in place.

So, the use of the term inheritance tax is apparently incorrect. Propaganda? Perhaps.

 

It does not keep the wealthy from transferring their assets to their children. It's a tax on that transfer. We choose what to tax and when. Some folks think people with names like Ford and Rockerfeller should not be able to horde the benefits of living in a capitalist society propped up by government enforcement of laws and spending ( that's the only place the Bushies seem to be able to create jobs ... ) from generation to generation without paying for it. The Republicans rejected any minimum floor on the tax - the first hundred million tax free was offered by the Democrats and the Republicans rejected it. There's no such thing as a free lunch. If one wants to pay for our federal spending with social security income as the current adminstration does, that's one way to do it. Eventually the states will have to pay for their costs via either property, income, or sales taxes. Sales taxes are the easiest to increase. The usual straw man argument the Republicans use is some guy lost his family farm because of it. Name someone - you can't because there were a ton of exceptions for farming.

 

I'm not picking on you, your opinion is just that, but this attitude is why it was easier for the Republicans to pull this off. Everyone thinks they can/will be rich and are thinking, if I'm in those shoes, I don't want to be taxed based on some far out scenario. The problem is, only a tiny fraction of folks, like high school players who become NBA stars, would ever be affected by these things. Also, the eliminate of the tax has eliminated *any* tax on certain transactions, so rich folk get a free ride on our backs. If you think that's fair, that's fine, but I do not.

 

My step-mother's family sold their farm near Hereford upon the death of the family matriarch to pay the estate tax bill.

But like I said, there are exemptions up to $1,000,000 (or about to be). That's plenty for nearly everyone.

It's funny that the Dems bring up Rockefeller and Ford. The estate tax sure has prevented them from having all their wealth transferred from one generation to the next. Rich people like them don't pay the estate tax. The Walton family paid virtually nothing in estate taxes on Sam's death, despite billions of dollars in transfer. Because he planned ahead and transferred stock to his children before he died, he saved an estimated $11 BILLION is estate taxes on his death.

 

I don't doubt they sold their farm but I seriously doubt they *had* to do it. If they sold it, it was because none of the children wanted to run the business. Otherwise, they should have contacted the lobbyists in favor of the estate tax repeal, and they could have become the poster child - the only known case in modern history of a family farm losing the family farm due to the estate tax.


http://www.responsiblewealth.org/press/rwnews/2001/estate_tax_nyt_farms.html
.
.
.
Yet tax return data show that very few farmers pay estate taxes. Only 6,216 taxable estates in 1999 included any agricultural land and equipment, the I.R.S. report shows. The average value of these farm assets was $440,000, only about a third of the amount that any married couple could leave untaxed to heirs. What is more, a farm couple can pass $4.1 million untaxed, so long as the heirs continue farming for 10 years.
.
.
.



You bring up nice examples of folks working around the system. But the estate taxes brought in lots of revenue, for which the Bushies proposed tax cuts to replace the *revenue*. The idle rich bring nothing to capitalism except entertainment value. There are a couple of insane Fords and Hiltons that get their fifteen minutes. I for one think this should not be valued.

 

I don't recall any lobbyist for an estate tax repeal at the time that the farm was sold.

And $440,000 isn't 1/3 of the amount of a family with only one surviving "parent" who then dies. And the exclusion was not $4.1 million when the matriarch died. It was $750,000, and that included the priviso you mention that the farm be operated as a going concern for the next ten years or be subject to recapture.

Between the life insurance and the value of the farm land, the amount was in excess of the exemption. Since the farm wasn't all that profitable anyway, the estate taxes certainly influenced the decision to sell. They may well have been able to go on without selling, but it was not estate-tax free, nor would it have necessarily been easy to do.

I guess it depends on what you mean by "lost to estate taxes"

But I said before, I'm perfectly fine with having it, but it just seems like if the owner largest retail organization in the world can die without a cent of estate taxes being owed, then there might well be something wrong with the system.

And if we need revenue, let's end the home interest deduction, too.

 

Are there insane Fords? The Fords I know all seem fairly level-headed.

Even the black sheep of the family Bill Ford, who's running Ford Motor now, seems like a pretty industrious guy. And he was, for a while, the only car manufacturing guy who was at least paying some attention to environmental concerns and acknowledging that, as a company, they can do better in environmental areas and gasoline consumption areas.

He seems to have backed off of that, probably because he still has a responsibility to shareholders and that requires selling cars that people want to buy.

I don't know if Ford would be better off without a Ford in the executive office or having a hand running the company. Certainly, according to Iacocca, there were some Fords who weren't so good at running the company. And Bill Ford's father can't seem to get the Lions to run very well for very long.

This has nothing to do with the estate taxes, I was just thinking that the Fords aren't so bad, and seem to be at least attempting to make their way in the family business.

Not everyone is Paris Hilton (whose trust will keep any estate taxes from being paid on wealth transferred to her) or Liesel Pritzker (also a trust fund kid), though I do guess Liesel was in Air Force One so maybe she is contributing.