Inheritance Tax Should be Abolished

[W2R]

Yes, especially if "one" spends only $16K a year!

Well, "one" intends to start spending a whole lot more than that in a couple of years! I'm planning for a $24K-$30K ER budget (adjusted for inflation). That $24K figure has been my goal all along, and now I have an inheritance that apparently is going to drop in my lap shortly. Nothing is in hand, but either way I think the $16K/yr will only last another year before I cave.

 

[Culture]

I general, If find that most people who are upset about the estate tax fall into one of two categories; 1) people who would not be affected by the tax but are opposed to all taxes, of any type and 2) people who are upset that they are going to finally have to pay taxes on all those capital gains that have NEVER been taxed before. I have little sympathy for either group. Feel free to argue that taxes are overall to high, I agree. But do not take the ludicrous position that all taxes are bad, or that capital gains should not be taxed in any way, shape of form if you happen to die (yes, I know the basis steps up at death, but the estate tax make up for this).

There are few exceptions to this rule.

 

[USK Coastie]

So how many times do we want to pay taxes on a dollar? We pay income tax when we earn it. Capitol gains tax when we take what is left and invest it in the economy instead of putting it in a mattress. And finally we pay estate tax on what is left when we die.

A national sales tax paying tax on a dollar earned one time looks better and better not that the Dems or Reps would dare change the current system due to the power it gives them.

 

[eridanus]

The Repubs want to cut the inheritance tax and the Dems want to cut the AMT, but no one has explained where that money is coming from when it's gone.

So ante up. What government services would you cut or reduce from the budget to lower our taxes? I'll start with the roads near your home.

 

[Freein05]

So how many times do we want to pay taxes on a dollar? We pay income tax when we earn it. Capitol gains tax when we take what is left and invest it in the economy instead of putting it in a mattress. And finally we pay estate tax on what is left when we die.

A national sales tax paying tax on a dollar earned one time looks better and better not that the Dems or Reps would dare change the current system due to the power it gives them.

One thing you are forgetting is the money you put into an IRA or 401K received a tax benefit going in. It actually saved you taxes and the money is growing tax free while in an IRA or 401K. So your statement is not entirely true.

 

[youbet]

the Dems or Reps would dare (not) change the current system due to the power it gives them.

And there is the issue in a nutshell.........!

 

[youbet]

This almost could be considered to be a form of charity given by the federal government to estate lawyers. .

Thank you for saying that. I get in big trouble when I do!

I know I'm repeating my position to the point of boring you all..... but I feel if there wasn't much wiggle room through estate planning, there would be less resistance to the tax. Of course, federal income taxes are in a similar situation.

 

[ERD50]

This almost could be considered to be a form of charity given by the federal government to estate lawyers. Anyone with an estate that size who has the slightest clue, will have paid an estate lawyer good money to set up their estate properly from a tax perspective.

Thank you for saying that. I get in big trouble when I do!

You'll probably get in 'trouble' just for acknowledging that someone else said it!

I really do not understand how some liberals who are in favor of wealth re-distribution can also be in favor of the current estate taxes. The really 'rich' avoid it, well-to-do lawyers and planners benefit from it. Is that the kind of 'wealth redistribution' they really had in mind? Makes no sense to me. Can a liberal explain this? Isn't it just a tad more than a bit hypocritical.

I won't be surprised if the explanation is along the same lines as a self-proclaimed environmentalist warning us of the dangers of of CO2 while jetting around the world and keeping his personal swimming pool heated...

-ERD50

PS - anyone have a figure for just how big (in $) the estate tax avoidance industry is? It would be interesting to imagine what could be accomplished if all those dollars and bright minds were being utilized in a truly 'value added' cause.

 

[RetireeRobert]

I general, If find that most people who are upset about the estate tax fall into one of two categories; 1) people who would not be affected by the tax but are opposed to all taxes, of any type and 2) people who are upset that they are going to finally have to pay taxes on all those capital gains that have NEVER been taxed before. I have little sympathy for either group.

1). Can you point out anyone on this Forum who have argued against ALL taxes? Or anyone in the major political parties who argue against ALL taxes? This is a common untrue slur thrown out as a red herring.

2.) Capital gains that have never been taxed before means the appreciated assets have never been sold before. And you know what that means? It means the owners have never benefitted from spendable cash before either. Why should the government be the first to realize a huge chunk (55%) of cash on the appreciation of those assets instead of the surviving families when the owners dies? Corpse robbing used to be socially unacceptable, but for the government it's legallized.

 

[Gumby]

..

 

[RetireeRobert]

When I first glanced at this, I thought you said "but you're not passing on".

I momentarily had visions of the Fountain of Youth.

 

[youbet]

[
Do you mean not passing it on, period? Or would you allow some tax free gifting to others while you are alive?

 

[ERD50]

2.) Capital gains that have never been taxed before means the appreciated assets have never been sold before. And you know what that means? .....

There is another thing that people miss about the capital gains issue. Let's look at two individuals, born/die on the same date and equal in all ways except:

Person A sells all his stocks (all highly appreciated) over a period of years, to convert them to bonds or other investment choices. He pays the cap gains tax of X%, and all of this (above the exemption) is still subject estate taxes.

Person B held the same portfolio, but didn't realize the gains. Never paid cap gains tax, but pays the same estate tax as person A.

Why should they pay the same in estate taxes, just because they made an earlier investment decision? It's crazy, says I.

-ERD50

 

[ERD50]

Well, at least that is consistent - I can respect your opinion on the matter, even though it differs from mine.

I still think you will find problems with this approach - what about leaving money for a needy child? You are saying that even though I may have worked extra long and extra hard, and saved every penny I could, and maybe chose not to retire early so that I could provide for this child, that I should not be allowed to do so? This child would need to become a ward of the state, regardless of my efforts to provide for him/her?

I would not want those choices taken from me, were I in that position.

-ERD50

 

[mexmeme]

Yes, especially if "one" spends only $16K a year!

I'm getting tired of this too.

 

[samclem]

One thing you are forgetting is the money you put into an IRA or 401K received a tax benefit going in. It actually saved you taxes and the money is growing tax free while in an IRA or 401K. So your statement is not entirely true.

Not so fast. The money is not growing "tax free," it is growing "tax deferred." When you withdraw the gains, you pay tax on it. When you draw out what you deposited, you pay tax on it. So, all in all you didn't avoid any taxes, you just delayed them.

This is why the net buying power of funds in a traditional IRA or a traditional 401K would not be adversely affected by the institution of a national sales tax. It's a slightly different issue with Roth IRAs/Roth 401Ks, since the owner did pay tax on the funds.

 

[Freein05]

Not so fast. The money is not growing "tax free," it is growing "tax deferred." When you withdraw the gains, you pay tax on it. When you draw out what you deposited, you pay tax on it. So, all in all you didn't avoid any taxes, you just delayed them.

This is why the net buying power of funds in a traditional IRA or a traditional 401K would not be adversely affected by the institution of a national sales tax. It's a slightly different issue with Roth IRAs/Roth 401Ks, since the owner did pay tax on the funds.

Not so fast if you are lucky enough to die before you start taking money out you will not pay taxes on the money. Someone else will. You are also forgetting the advantages of being able to reduce your tax liability for the contributions you make to an IRA or 401K. So those lucky people who die before using their IRA or 401K money never pay taxes on it and also have had their tax liability reduced by them. Some people really know how to bet the tax man. Who said death and taxes can not be avoided.

 

[toofrugalformycat]

Well, at least that is consistent - I can respect your opinion on the matter, even though it differs from mine.

I still think you will find problems with this approach - what about leaving money for a needy child? You are saying that even though I may have worked extra long and extra hard, and saved every penny I could, and maybe chose not to retire early so that I could provide for this child, that I should not be allowed to do so? This child would need to become a ward of the state, regardless of my efforts to provide for him/her?

-ERD50

First, the kid could get $2 mil before anything is taxed, right? Second, surely you'd set up a trust in the kid's name if you had significantly more than $2 mil. Or even if you didn't, you'd have to set up some sort of trust to designate continuing care for after you croak. Unless you had no money, in which case the "death tax" is immaterial.
BTW, I'm not a lawyer either, and even if I were, I wouldn't trust my advice.

 

[ERD50]

First, the kid could get $2 mil before anything is taxed, right? Second, surely you'd set up a trust in the kid's name if you had significantly more than $2 mil. Or even if you didn't, you'd have to set up some sort of trust to designate continuing care for after you croak.

I assumed he meant you passed nothing on. The current exclusion changes year-by-year, and becomes infinite in 2010, so I figured it didn't qualify as 'easy'.

If you can set up a trust to evade the tax, rich people will find a way to use it to their advantage. Maybe Ms Hilton would become depressed and suicidal if she didn't have a huge amount of money to spend. Pay some psychologists to attest to that, and well, pretty soon you have your trust set up for a 'needy child' and you are avoiding the tax. They are called 'loopholes' because they utilize exceptions in the tax code that are usually set up with good intentions, but people find ways to use them that were not intended. Else, they wouldn't be called 'loopholes' they would just be called 'paying your taxes'.

This is what is making me more and more in favor of NST and abolish every other tax, including capital gains tax. There just isn't any big financial incentive to avoid a bunch of small taxes.

-ERD50

 

[RetireeRobert]

.........They are called 'loopholes' because they utilize exceptions in the tax code that are usually set up with good intentions, but people find ways to use them that were not intended. Else, they wouldn't be called 'loopholes' they would just be called 'paying your taxes'.

This is what is making me more and more in favor of NST and abolish every other tax, including capital gains tax. ...........-ERD50

I'll vote for NST. When does it go on the ballot?

The death tax is just one joke we have been discussing in this thread. The income tax is its own joke. Remember when Money Mag ran its contest every other year?. They spelled out a hypothetical set of family/financial/work/business/medical/etc facts for a hypothetical family. Then asked 50 different of the best tax pros in the country to "prepare the tax return".

Yes, that's right, Money Mag ALWAYS got 50 different answers as to income tax bottom line. From the cream of the crop of tax pros.

It's ridiculous.

 

[ERD50]

I'll vote for NST. When does it go on the ballot?

The death tax is just one joke we have been discussing in this thread.

And AMT is the latest 'joke'. The 'joke' goes something like this:

Let's see, they pass the estate tax to catch the money from rich people, but rich people have ways to avoid paying it. They pass the AMT to catch the rich people who are avoiding income tax, and now the AMT catches the people it wasn't intended to catch.

Funny stuff, eh?

Arggggg.

-ERD50

 

[Rustic23]

This came in an email today.


Building Permit Tax, CDL License Tax, Cigarette Tax, Corporate Income Tax, Dog, License Tax, Federal Income Tax, Federal Unemployment Tax (FUTA), Fishing License Tax, Food License Tax, Fuel Permit Tax, Gasoline Tax, Hunting License Tax, Inheritance Tax, Inventory Tax, IRS Interest Charges (tax on top of tax), IRS Penalties (tax on top of tax), Liquor Tax, Luxury Tax, Marriage License Tax, Medicare Tax, Property Tax, Real Estate Tax, Service charge taxes, Social Security Tax, Road Usage Tax (Truckers), Sales Taxes, Recreational Vehicle Tax, School Tax, State Income Tax, State Unemployment Tax (SUTA), Telephone Fed eral Excise Tax, Telephone Federal Universal Service Fe e Tax, Telephone Federal, State and Local Surcharge Tax, Telephone Minimum Usage Surcharge Tax, Telephone Recurring and Non-recurring Charges Tax, Telephone State and Local Tax, Telephone Usage Charge Tax, Utility Tax, Vehicle License Registration Tax, Vehicle Sales Tax, Watercraft Registration Tax, Well Permit Tax, Workers Compensation Tax.

 

[Culture]

Capital gains that have never been taxed before means the appreciated assets have never been sold before. And you know what that means? It means the owners have never benefitted from spendable cash before either. Why should the government be the first to realize a huge chunk (55%) of cash on the appreciation of those assets instead of the surviving families when the owners dies? Corpse robbing used to be socially unacceptable, but for the government it's legallized.

I did not benefit from my paycheck until I received it, but I still had to pay taxes on it first. Why should capital gains be any different? Additionally, in most cases investors received benefits such as business income. I have a lot of unrealized capital gains in my business, and let me assure you I benefit greatly from the business.

Why is taxing the dead worse than taxing the living? Quite frankly I believe it is a better idea, not worse, given a choice between the two.

 

[Culture]

1). Can you point out anyone on this Forum who have argued against ALL taxes? Or anyone in the major political parties who argue against ALL taxes? This is a common untrue slur thrown out as a red herring.

The individual here are a little higher caliber in terms of financial knowledge than the average American, and I doubt that many feel taxes should be abolished. However, I personally know several people who think all taxes should be abolished. However, I agree I overstated my case. Really, what I should have said is that these people believe in the abstract that taxes should be eliminate or more commonly "greatly reduced," with no ability to explain where the spending cuts would occur.

 

[USK Coastie]

you think the federal government can better spend the money I might leave behind ( FIRECALC says $1.98) than anyone I might choose to leave it to?
Just remember that Tax revenues are at an all time high despite the Bush tax cuts and our Lousy economy according to the Dems and their buddies in the media.
If we weren't spending a pile of it on war I'm sure the Dems would want to spend it on expanding social programs and not reducing the debt. After all we know the Reps are trying to build bridges to nowhere