You say that the ONLY people who are affected by the estate tax are the wealthy. This is not necessarily the case. The estates of the wealthy are affected. There is less money in that estate to pass down to other people. Those people may or may not be wealthy. If a wealthy person wants to pass down his estate to a lower or middle class person, there is less money to pass down, thus that lower/middle class person IS affected as well. Based on my income and holdings, I am considered middle class. I just think that the estate/death tax is unfair, regardless of who it benefits. I do not think a person's estate value should change for the sole reason that they die. Even if it only affects 1 person in the entire country, I still would believe that.
Why is it unfortunate? People buy life insurance just for reasons like this. BTW a properly planned estate (like Paris Hilton now planning for her estate) has time for the insurance cash value to build tax free over many years. The premiums would not be that excessive.
Why is it fair that Yao Ming was born with the genes to make him 7'6"? That's the breaks of the game. But, if they truly want to deal with estate taxes, I would prefer to see Paris Hilton get taxed. That is the problem. She WON'T get taxed. The money is taxed before it gets to her. Regardless of the estate tax, she still gets 1 billion tax free. Her bequeathor's estate gets taxed before she gets any money. Change the law so that the estate's value stays the same, but the folks that RECEIVE the inheritance have to pay the tax (if applicable). That way if (in my example), I simply want to give $10,000 to 1000 folks I still can.
The person in the "lower/middle class" who inherits a half million dollars will be affected by the addition of $500,000 to his/her net worth. How much of that estate is directly due to benefits that person received from society? Education, the court system, roads and other infrastructure, and a cornucopia of other government provided services helped that person to amass their fortune and the state has the right to recoup for those benefits. That is how our income tax was designed and it is wrong to lower taxes on the wealthy while the lower classes see no net reduction in tax rate. Again, if you want to fight to replace the income tax, I am all with you, but as long as you want to see taxes on the rich reduced while the rest of us get squat, I will fight against you.
Perhaps unfortunate is a poor choice of words. If I have a $10,000,000 estate that I want to ensure does not get taxed, I can buy life insurance to do so, however, I have to pay money to purchase that life insurance which diminishes the value of my estate. The cash value of the policy may increase, but how much depends on when I die.
Any guesses on what Bill Gates cost basis is on his $50B worth of MS stock. Probably less than a million. When Billy G dies, the new cost basis for the MS stock in his estate is $50B. Billy G just took a walk on the LTCGs on that $50B. Without estate taxes, the IRS never sees any of that money. How can that be possibly fair tothe rest of us who pay LTCGs (or STCGs) on our stock transactions?
Say you are an entrepreneur and have made "it" by age 50. Your planned life expectancy is to age 90-95. GIven 40+ years and tax free, compound earnings in the cash value of life insurance, the premiums should not be that great. It appears you would be miffed at paying any premiums, but the ultra-rich are not. In the end this would be a big policy from which the insurance company would be happy to get their cut. Win. Win.
The way I understand it, is when/if the estate tax is eliminated in 2010, the cost basis is carried over to the heir.
2010 is a mythical year. Congress will fix 2010 later. Everything reverts back to 2001 rules in 2011, making 2011 another mythical year which Congress will also fix.
I am a big fat arrogant slob called Federal Government, spending more and more each year borrowing the money like there's no tomorrow, knowing I may not be able to pay it back, knowing I am spending away the future earnings of every citizen. I won't control my compulsive spending and I don't want anyone else to try. In fact I buy votes help feed my addictive behavior as I glutonously spend, spend, spend, spend. I am going to keep increasing my spending gorging every year and I will continue to borrow to do it if it bankrupts the country. All I have to do is collect enough tax money to pay the interest and keep the bankers somewhat secure that they won't get forked in this scam. The Federal Reserve board of directors seem to be happy to let me keep the massacre going. So here we go, now I definately need more tax revenue to stuff the fat pockets of my banker masters to keep them happy and keep that interest on the debt liquid. How can I sqeeze more tax dollars out of the earned income of the private sector and make it a political boost to my raging appetites to spend uncontrollably? A sin tax? Naw I like sin stuff myself. A flat tax? hmmm then I could jack that all around after all I just need to be able to tax the people. How about some kind of tax on the wealthy! Shazaam! Bingo! Let's start with estate tax. Man people will defend me til the end on that one. Even Michael Jackson will wonder who to leave it all to. That will fly right over the head of the stupid masses. Let's steal from the rich and give to the poor. Sounds Hollywood. I mean people will champion this great cause. And Big Fat Government can laugh at all the stupid liberals cheering and the stupid conservatives belly-aching and raise the victory flag one more time. Now next time I will need something just as devious to feed my big fat government belly... Shazaam again, let's tax cigarette smokers 100,000%. Whoopee! we gonna make America smoke free. Hey and at the same time we will spend money on the tobacco companies through subsidies and find a way to get more people smoking and just let the poor stupid morons figure out how they are going to pay as much for cigarettes as they do tickets for their gasoline.- Hey we might even start giving out cigarettes in our new welfare package. It's tough being the boss.
wow. hey, half a billion is nothing to lose i guess. so we just assume they didn't work for it? and if they didn't, as bobrek said, so what, thems the breaks. why is yao ming tall, why does jim carrey get $20M a film to be funny, and so on. that's tough for the rest of us. basically your and andymoon's argument comes down to "well, it's not my money so i hope they take it away from them. those rich bastards, who are bastards b/c i'm not one of them, don't need it and probably didn't even earn it. this'll show 'em." that sounds so equitable. i don't understand how cost basis works for everyone, but No Worries, are you saying when you die that the cost basis doesn't automatically move up as well? if both you and bill gates die and neither owes tax on LTCG b/c the cost basis was moved up, then what's the problem. that Bill Gates has more LTCG?
BTW- I am confident that if there is an estate tax there is a loophole for the wealthy elite. Taxes hit the middle class. Loopholes are for rich tax lawyers and wealthy elite families who know how to stay wealthy over the centuries. What glorious piety our government is showing- I am sure all the super rich are about to pay their fair share. You know the ones who own the Federal Reserve Banks and the military industrial complex.
One of the things that everybody is assuming is that the estate is made up of cash. If I have $20 million cash when I die, my kids will have to pay tax out of the money they will get...no big deal really. The problem comes is that most estates aren't that cash heavy. A perfect example is my wife's family. They are farmers...the entire family, and family land is an important thing to them. If my wife's parent's were to die, and the net value of their farm, equipment, land, animals, crops, house, cash, ect. goes over the limit...we will actually have to pay the government to keep the estate, and they don't have enough cash to cover the taxes...so we'd have to sell off part of the family land to pay the taxes. The same is true for a family run business. The business may be worth enough to activate the estate tax, but the business might not be liquid enough to have cash to pay the taxes. So the family has to come up with cash to keep the family business, or sell the business to pay the tax. I forget what the business was, but there was an old family business in Houston that had this happen to them a couple of years ago. The business itself was valuable, not cash. The family could not pay the estate tax bill, so they had to shut down and liquidate a family business that had been around for 75 years. The estate tax is just a money grab. It is double taxation at its finest. Even if it only affects a very few people, that doesn't make it a correct way to tax.
Supermac -- I think that happened with the Chicago Bears. A non-cash asset transferred...and of course, the family had to sell. Seems I read about that a while ago.
This whole argument about the estate tax reminds me of the average people in the South, who didn't own slaves, had a slim to none chance of ever owning slaves (they being damned expensive, and beyond the means of the overwhelming majority... most were owned by those who had inherited their wealth), and yet felt that it was worth fighting and dying for. What we are really talking about here is another tax break for the wealthy, as if the Bush Administration hasn't gone far beyond what the wealthy, and the large corporate doners, ever dreamed they would get for their political support and contributions. Lets cut to the chase... if any of you here against the estate tax care about our record budget deficits, then how can you justify cutting, or doing away with, the estate tax at this time?? If we have a surplus, are paying down the national debt, etc., then it might be worth talking about. As it stands today, cutting the taxes of a tiny % of very wealthy people, while adding as much as a trillion$$ to the debt, seems to be lunacy. As does cutting taxes in the middle of a war. Keep D&D Civil!!
You are acting like we are arguing for a NEW tax. We are arguing not to repeal an existing tax that only affects the wealthy. Once again, if you want to change the system, that is fine by me but if you want to reduce taxes on the rich but not the rest of us, then you will find me in opposition.
No, my argument comes down to "well, we are already running a deficit so why in God's name are we reducing taxes on the wealthy (who can afford to pay it) while keeping everyone else's burden the same?"
You need to look at your history. I have never heard of a single instance where a business was liquidated to pay the estate tax. Bill Gates co-wrote an article in support of the estate tax in which they commented that not a single "family farm" has ever been lost to the estate tax either, here is an excerpt: "Proposals to reform the tax have been blocked since 2000 by the "all or nothing" repeal lobby, which understands the peril of not having smaller estates as camouflage. Once exemptions rise above $3 million, it becomes impossible to find a credible and photogenic farmer or restaurant owner who will complain about what opponents call the "death tax." It's hard enough to find them now. The pro-repeal American Farm Bureau was asked to produce an example of a farmer who had lost a farm because of the estate tax. It could not identify a single one." ANY tax amounts to double or triple taxation (sales tax taxes already taxed income as do property taxes, etc.) and a "money grab." What makes it "correct" to reduce taxes for the rich while leaving the rest of us at the same rate?
