I am not by any means an expert on these 2 issues, but from my limited understanding of both, it certainly seems that each of these 2 taxes are blatantly unconstitutional because in each case, the tax by definition is double-taxing the same dollar, which is clearly prohibited. $1 that is earned as corporate income is taxed at the corporate level as corporate income tax, and then it is taxed again as personal income tax when distributed as dividends. $1 that is earned and taxed during the lifetime of an individual as income tax is then taxed again when devised in a will upon death. Both of these seem completely unconstitutional and improper to me. My only explanation, as a conservative, is that rich bureaucrats use them as pandering tools to poor voters, claiming that they are attempting to help them by further taxing the wealthy, productive members of society, even though the majority of legislators are wealthy and are negatively impacted by both, or will be when they croak, and completely regardless of the unconstitutionality of them both. Are there any legitimate arguments that the dividend tax and/or the death tax should be continued, other than those people who just think that the government needs more of our money or that rich people don't have a right to be rich for generations? If nothing else, this maddening forum at least gives me a place to get the opinions and rationales of the liberal mind, which is certainly in full force here, much to my chagrin. Instead of letting it drive my crazy, I'll try to use it as an educational tool.
1. clearly prohibited -- by what? 2. "Double taxation" is a myth in and of itself. When the federal government taxes something, it is not physicaly taxing the actual dollar or dollars -- if that were the case, a dollar would be taxed only once when it first enters into circulation, and then could never be taxed again. What the government taxes is each transfer of that money, because each time money is transferred, value is created and income is realized.
If you believe folks with billions of dollars should be able to leave their entire estate to their heirs with no taxes, no argument will be able to change your mind. With the estate tax - most of what is being taxed was *never* taxed once. If that's OK with you, no argument will ever change your mind, either. http://slate.msn.com/id/103874 . . . A Times article Thursday about the ad noted correctly that this "repeats one of President Bush's familiar themes." Indeed it is probably the most tediously repeated sound bite of the estate-tax debate. It is also false. Not "controversial" or "disputed" or "misleading," but out-and-out false. Most of the accumulated wealth that is subject to the estate tax was never subject to the income tax. This is so obviously, overwhelmingly true that anyone with the slightest business or financial experience surely knows it. Even George W. Bush. Well, probably even Bush. Yet he keeps on repeating the lie. Bob Johnson—a real businessman—must surely know it, since he is a walking example of wealth accumulated without the handicap of taxation. I don't mean to suggest that Johnson has done anything wrong or even sneaky. The point is the opposite: The rules are such that Johnson would have had to go out of his way—way, way out of his way—if he'd wanted his wealth to be taxed as he accumulated it. The same is true of almost every fortune large enough to qualify for the estate tax, probably including that of every other signer of that ad. If they read what they were signing, they knew they were signing a public lie. . . .
Why have a death tax? If the money has been earned and taxed once already why should the heirs pay MORE taxes on it? It has already been taxed. Same thing with corporate dividends, why should they company pay taxes on it then the individuals that OWN the company pay taxes on it too? Makes no sense and is contrary to what this country stands for, money should only be taxes once. Heck, it drives me nuts to have to pay SALES tax on a used vehicle, it has ALREADY had taxes paid on it. RIP OFF...SCAM..... DD
Did you read the above posts? If we were to apply your theory, all money would be taxed once, the second it comes off the printing press. That is ludicrous. It's not the money that's being taxed, it's the transaction. See below:
ok..help me out with this. walk me through the dividend argument here. i get what you're saying for estates...but not so much with the dividend tax. the owners of the business pay taxes twice on the same dollar earned.
LOL, that takes me back to second year law school tax class. I think I got a B- in that, maybe later! The short answer, I believe though, is that a lot of corporate profits aren't even taxed in the first place.
Sam, I heard that getting rid of the estate tax would hurt philanthropy. Do you know anything about that.
Interesting article Woof: clarify something for me -- I'm not up on US tax law: The 'no tax on accumulated wealth' is based on unrealized gains on assets -- ie stocks that had gone up in value but not yet sold. Grampa bought at $100 and it was worth $1000 when he died. Junior got the inheritance -- after estate tax only if grampa was really rich -- and used $1000 as his 'cost' when he eventually sold the stock. Does Grampa pay tax on the $900 'gain' or is this what was supposed to be covered by the 'estate tax'? If Grampa doesn't pay tax on the $900 boost to Junior's cost base, then the article is really dead on. The new plan actually makes more sense theoretically without exemptions. It could -- if you eliminated the exemptions -- simply defer the potential tax liability to Junior to when he sell the stock. Of course the 'exemptions' give him the freebee. It seems odd. If Grampa sold the stock the day before he died, he triggers a bigger tax hit than if Junior sold it the day after he receives it???
Seems like the prevailing notion behind supporters' arguments are just that, "It's only the rich people affected, so don't worry about it." Isn't it a 14th amendment violation to over-tax the wealthy b/c they are wealthy and will survive the increased burden? It's obviously not the physical $1 that is being taxed multiple times. The double taxation doctrine as I understand it was important to the founders b/c it was a underlying pillar to support limited government. It's not so much that corporations can afford the extra tax so let's tax them, but that the government has no right to tax the corporation/shareholders and the shareholders again so why let them? And yes, I believe that $1 that is possessed by any American, rich or poor, belongs to that American and can be treated as he chooses. I don't care if he has 10 yachts or lives in a box; he has a right to that $1 b/c it's his and no other entity, be it the government or another, less fortunate American, has any higher claim to that $1. That is why I think the death tax is ludicrous and anti-American.
i freaking hated federal income tax!! worst...class...ever. curiously, i sat through that class with Refman...pretty much thinking about sports. it was the last final i ever took!! woo hoo!! 4 hour freaking finals should be outlawed.
LOL That's pretty funny. For some reason, this image sprung to mind: PROF: The federal income tax is... MAD MAX: Ditka...Bears...Polish Sausage...da Bulls...
I am postitive that premise is wrong, at least in some circumstances. When stock is passed down generations the original cost-basis is carried through. Once the person who inherited the money sells the stock, they pay taxes on the original cost basis, not the one upon transfer, meaning that Junior's costs basis in your example is still $100, not $1000. So upon selling the shares, taxes will be paid. There might be some scenario where your example holds true abou the new cost basis, but in most it does not.
actually you're not far off...but it was me and refman discussing shandon anderson, whether houston would get an NFL team or not and what a jackass clemens was for not signing with the 'stros!
those feelings didn't last very long...i have always been a huge roger fan...since his days at UT. he's the reason the red sox are my 2nd favorite team.
My limited understanding of taxes is that the shares take on the cost basis of the value upon death, stepped-up basis rule. This can continue for generations. The only taxes are incurred when the shares are sold. However, to take advantage of this, one must be prepared to present the paperwork to the IRS documenting the original purchase and all the inheritance of shares. Last I heard they were trying to close this loophole even with the scheduled elimination of the estate tax.
I can confirm that the 'stepped- up' basis is true. The cost basis for the inheritor is the price of the inherited stock at closing on the date of death. Capital Gains taxes are not paid by the inheritor until the stock is sold. All estate taxes are paid by the estate prior to disbersal to the hiers and the inheritance is not a taxable event to heirs. I think that for the purposes of federal estate taxes, the value of the estste is deemed to be the gross total value of all property owned at the time of death. I belive there is no adjustment made for cost basis for stocks or real property. You lawyers correct me if I'm wrong, I only speak from my experiences a decade ago.
Let me clarify my statements above. There are two different scenarios. The first is when the stocks are passed down through direct inheritance. In that case, the cost basis is determined upon the death of the individual passing to stock down. (The scenario mentioned regarding Junior) The other scenario involves a trust whereby the cost basis is determined when the trust is established and carries through all generations that the trust is applicable for. So, the original cost basis of the trust remains. I hope this helps.
