It's amazing that anyone thinks that: (1) all loop-holes are independent of financial scale. (2) all citizens have the same time & resources & stakes for exploring loopholes. edit: mrp beat me to it basically.
bobrek; You and the others arguing double taxation are totally missing the point. Its not you who is being taxed twice since you are dead. Unless you believe that you live on within your possesions but that is a question better suited to metaphysics. If the argument is about the capital being taxed more than once I think andymoon and others have pointed out that capital is always taxed multiple times. Say for instance I import and sell Yao Ming lichee snacks from China. I pay a tarriff on those snacks to get them here. At the same time back in China in the manufacturer of those snacks pays a tax to the Chinese government. Now under your definition both I and the Chinese manufacturer are being double taxed since the capital, both the snacks and the money I paid for them is taxed twice. I am paying a tarriff and since my money and me are the same the taxes the Chinese manufacture paid is the second tax. WHile the Chinese manufacturer is taxed once for the revenue he makes off selling the snacks and once more off the tarriffs I have to pay to get them into the US. You could stretch this chain out all the way to where the Chinese manufacture is also getting taxed for the Harris Country property tax paid by employee who earned his salary selling those same Yao Ming lichee snacks. The point is its those transactions that are being taxed and not the whoever generated that capital. Which is the same as its not the person who generated the wealth being taxed after death for the estate tax but the transaction regarding the transfer of that wealth. Its no different than any other transfer of capital.
I'm one of a small number of pro-life libertarians. I can understand the last sentiment, because for the first time in several years, I'm doing that to avoid a Democratic presidency. We had eight years of that crap and look where it got us....no where.
The estate pays the tax, so it's taxed before the transfer. Legally, your estate is effectively you, just dead. If there were no transfer, the estate would still be taxed. Other than a donation of the estate to charity or some other specific loopholes (exemption for a spouse, for instance), the transfer is irrelevant to the tax. If my Dad were to die tomorrow (here's hoping) with an estate large enough to trigger the estate tax (which, at present, would not be the case), the tax would be paid before any transfer to me and would be paid whether I got the entire estate or my sister did or my brothers did or none of us did. But I don't see it as double taxation. For one thing, there's no guarantee that any tax was paid on the assets in the first place. It's not a tax just on the cash that was earned and saved. It's a tax on the assets. Say my father started a business in 1970. Throughout the years, he paid taxes on the income from that business, when he dies, though, the estate tax isn't taxing that income again, they're taxing the things purchased with that income (assets) and the value of the business itself that's never been taxed (the capital gain, essentially). Some of the cash that's been taxed as income may be left over as part of the estate, but the bulk of the estate isn't likely to be that cash. I guess you could see that as double taxation (maybe partially), but I would maintain that, for the most part, it isn't.
I can't speak for andymoon but speaking for myself if my parents had died about 4 years ago I would've had to deal with the estate tax myself. I don't know how there portfolio stands now but if they were to pass on now I still might. I'm an entrepeneur myself and I hope to one day make many times more money than the floor of the estate tax. I also plan on having kids and even then I still support the estate tax. I will admit that my support in the estate tax is part sociological. The problem with not having an estate tax is one that can be seen in many third world countries and throughout Chinese history where families continued to hold onto wealth (property and money) which stifled economic growth. The dependence on inherited wealth put a clamp on the economy because there evenutually was no incentive for heirs to work or even invest in the economy when they were getting money for merely existing even though they ended up controlling most of the wealth of that society. The name for this was aristocracy and it is something that we Americans specifically fought to get away from. The previous way this was remedied was through war and violent revolutions. The estate tax is one solution to remedying that situation short of eventually waging violent war on the Kennedys.(of course I'm all for that too.) IMO the estate tax is both a remedy to that situation while also not discouraging wealth creation as some conservatives would categorize it. Given that I want a good life for myself I will still work hard to earn as much money as I can and to provide a good life for my children. Part of that good life is money but another part of it is having a good schools and a safe society. That can only be provided through taxes to pay for schools and public safety. I feel better knowing that some of that can be paid by a tax that I will never have to pay since I will be dead when its collected. As for my kids the floor for the estate tax is fairly high so they won't be destitute and anyway if I've taught them right and they've gotten a good education they should be able to become productive members of society themselves rather than depend on me to set them up for life. Also to answer bobrek's 20K heirs I don't plan to have 20K heirs and would say that anyone who plans to have more kids than they could even provide for while alive are irresponsible. But that's a debate for another thread.
Not true. You can send your kids to private school (which is generally better than public school) and get them private security (which will protect them before they are harmed instead of after any emergency has already occured).
Explain away my example then. The day before I die, I can distribute my 1 billion dollars evenly to 20 million children at $50 per child. No one is getting rich or gaining any type of advantage due to this dispersal. The day after I die, my estate has LESS than 1 billion dollars to distribute, therefore, my money has been taxed twice.
The day before you die, you give away $1 billion $10,000 at a time, which works out to 100,000 people on the receiving end, there would be no tax. If you don't do that, and you die with a will that lays out 100,000 people who will each receive $10,000 each, your estate wouldn't be able to follow through with that because the tax would come off the top of your estate, even though one day earlier, the same transaction would be tax free. So, if you want to give away your $1 billion to 100,000 different people, do it before you die. Which is kind of why the U.S. should maybe consider an inheritance tax rather than an estate tax. I mean, if I'm a a billionaire, and I want to divide my estate up and give an equal share to each person who lives in my home town (which would come out to less than $11K per person), should that be subject to the estate tax? If the goal is revenue generation, then sure. But if it's to prevent further development of a class of idle rich, then my will alone would accomplish that. If there was an inheritance tax, it would tax those who received the wealth. The estate tax taxes the wealth largely regardless of how it is distributed. If Michael Dell wants to will his shares of Dell Computer to the all the employees of Dell Computer, it's entirely possible that the estate tax would prevent a large number of shares from reaching those employees. But if he does it just before he dies, chances are, there's no tax at all.
It was taxed as income, but it's not income anymore. I mean, buying something is double taxation if you think about it. I earn $25,000, buy a car, and I'm charged a tax on the $25K I spent. But that money was already taxed as income. So I'm doubly taxed. An estate tax is not an income tax. It's an asset tax. The $25K car is considered an asset and taxed under the estate tax. Not because of the transfer to someone else counts as income, but because it's an asset left in your estate at your death. I mean, I understand how it could be considered double taxation to some degree, but then so would any other tax you pay. Your property taxes? Double taxation because the money you use to pay them was already taxed as income, and so on. But, in the eyes of the law, the estate tax is simply a different tax that sometimes applies to the same money the income tax did.
At that point then why don't I just drink bottled water all the time, pave my own roads, test my own food for safety, hire a private fire fighting company, conduct my own certification for doctors and any other professional I may use, run my own air traffic control system and etc... After all what do I have to pay taxes for when I can just pay for building a safe society just for for myself and my family.
You're dead. Unless the govt has figured out a way tax people in the afterlife you're not being taxed. As I and other posters have shown money and capital are taxed repeatedly. Almost every time a transaction is taken. This isn't double taxation unless you consider that money earned selling Yao Ming lichee snacks is taxed a 7% sales tax when sold and then you are taxed income tax for the income earned selling Yao Ming lichee snacks to be double taxation also.
So, who is being taxed? If it's not you (through your estate), and it's not those who receive the money (the tax is assessed before distribution), then I guess there really isn't an estate tax already.
My estate (what was my money) IS being taxed. My estate, in essence, represents me in the afterlife. Folks keep using the argument that money is continually taxed, but every time your money is being "taxed again" you are receiving some sort of benefit (car, clothes, boat, etc.). In my example there is absolutely no benefit to me that I (or my estate) is receiving from this tax. None of the heirs is getting rich. Although I don't agree with it, I can understand the argument that an heir should not simply be given millions of dollars, but in the example I gave, the entity benefiting most is the government.
I agree with that. Like I said, it seems to me that if the goal is to prevent the idle wealthy (or make some of them who aren't Paris Hilton or Liesel Pritzker or Jimmy Irsay pay the cost of inheriting large sums), then an inheritance tax would be more appropriate.
Air traffic control can be more effectively done by the private sector, as one example. Canada does it and their system is a way above ours in terms of equipment and training. Anything can be done more efficently by the private sector except protecting private property rights by the use of force, which is the role of govt.
No, actually I am saying "Don't lower the taxes that ONLY affect the rich because they have had their taxes lowered by over 2/3 (since the progressive income tax started) while the rest of us have not had a reduction in taxes at all." If there is room in the budget for tax cuts, cut taxes that affect everyone equally, like payroll taxes. I am just tired of the rich getting their tax bills cut while I pick up the slack.
I don't blame them for using the loopholes, but it pisses me off when they bribe their elected officials to get NEW loopholes created, like they do every single session of Congress. I, for one, would favor eliminating EVERY loophole, including the credit for children, which I now qualify for.
