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Old 11-20-2007, 12:50 PM   #41
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No different than from other taxes.
Sales Tax? -ERD50
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Old 11-20-2007, 01:31 PM   #42
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Oh yes. Think about online purchases. And businesses are always trying to find sales tax exemptions. Our state's sales tax law is sprinkled with special interest exemptions.
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Old 11-20-2007, 02:39 PM   #43
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Oh yes. Think about online purchases. And businesses are always trying to find sales tax exemptions. Our state's sales tax law is sprinkled with special interest exemptions.
Apples and oranges, IMO. The reason some on-line purchases do not get reported is because it is a state-by-state tax, not a Federal tax. And if the company has a business presence in my state, I get hit with the tax, itis automatic - no way around it.

All taxes are subject to influence by special interests. But more to the point - are expensive strategies utilized by the super-wealthy more often to avoid estate taxes or to avoid sales taxes? Well, I can't remember anyone offering me a free dinner to explain their system for assuring me that I could pay less in sales tax, and therefore have more money to pass to my heirs.

And certainly, that is mostly due to sales taxes being single digits, verses the 50% (above the exclusion) that is the estate tax. Which is my point - lower % equals higher compliance, Fairer to the moderately wealthy (and the poor) if people pay ALL of a smaller %, rather than some paying near zero of a larger %.

-ERD50
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Old 11-20-2007, 03:08 PM   #44
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I do think that if we are going to have an estate tax , that it should be with a fairly high exemption to allow for personal circumstances (passing on a business, care for a disabled child - what does a lifetime of care cost?, etc), and at a fairly low rate. If you are going to say that trusts can be set up to accomplish some of this, isn't that where all the loopholes come from? A high exemption and a low rate would help avoid loopholes and increase compliance.

-ERD50
Hmmmmm...... But would this be fair for the professional "circumventers?"

Say I want to pass a legacy to my grandson with cerebral palsey. Is it fair for me to be able to do so without it passing through the government to redistribute as they wish, with perhaps my grandson benefitting in some way? Or, if there is a loophole, would it be fair to the professional "circumventers" for me to be able to take advantage of that loophole without paying them big bux (at the expense of my disabled grandson) to pay for their next Hummer?

As Martha said "no different from other taxes."

Everyone has to get a fair piece of the pie here you know!
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Old 11-20-2007, 03:09 PM   #45
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He did not write any cheque. He pledged up to $30 B but only advances funds when the cause needs the cash. At the rate that his wealth continues to grow, he may never have to touch the principal. (Although the principal is pledged, and he just continues to manage it as a trust..)
and how much of that trust is going to estate taxes?
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Old 11-20-2007, 03:33 PM   #46
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The hypocrisy of Warren Buffett is - why didn't he just leave all his money to the gov't if he thinks estate taxes are a good thing?

So it is good for everyone else with a > $1M estate, but he would rather direct how his money is used, and name his children as administrators?

Which begs the next question: If Warren thinks private charities do a better job with the money than the gov't, why shouldn't we ALL direct more money to private charities, and eliminate some govt social programs?

2 plus 2 just ain't adding up to four.

I wish I could remember the source, but I heard an interview with a rep from a private charity - they were 'complaining' about the 'competition' they were getting from a gov't program. They said when the charity worked with the people, they had strategies in place to make some real, long term progress. Then the govt came in and just threw heaps of money at the problem, with no real long term strategy. But, then donations dropped off, because people saw that the govt was throwing all this money around.

Now, I don't know if that is representative or not, but something tells me that it is.

-ERD50

PS: Be interesting if the govt allowed a Credit for cash charitable contributions (rather than deduction) for up to, say, 50% of your taxes?
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Old 11-20-2007, 04:08 PM   #47
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I don't speak for Buffett, but I imagine that his preferred use of estate money would be: Private Charity > Government > Useless heir

The estate tax creates an incentive to give money to charity instead of leaving massive amounts to children who's only qualification for managing that wealth is coming out of the right womb.

Frankly, I think he's right. It is foolish for a billionaire to leave that money to their children. The children are unlikely to make good use of that money, unless the billionaire is very good at driving home the values that created that wealth. The old saying "shirtsleeves to shirtsleeves in three generations" has a strong basis.


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The hypocrisy of Warren Buffett is - why didn't he just leave all his money to the gov't if he thinks estate taxes are a good thing?

So it is good for everyone else with a > $1M estate, but he would rather direct how his money is used, and name his children as administrators?

Which begs the next question: If Warren thinks private charities do a better job with the money than the gov't, why shouldn't we ALL direct more money to private charities, and eliminate some govt social programs?
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Old 11-20-2007, 04:11 PM   #48
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Which begs the next question: If Warren thinks private charities do a better job with the money than the gov't, why shouldn't we ALL direct more money to private charities, and eliminate some govt social programs?
The answer for that one isn't too complicated. There is no way to ensure that the increased spending by the private charities would be coordinated with the reduction in spending by the govt social programs. Particularly if you want to maintain the relative independence of the private charities and not have the government meddling excessively.

I think we should all direct more money to private charities. But I don't want to see private charities directed by the government to ensure equitable coverage, any more than they already are. So, social programs will continue to be necessary if we are to be able to say we have safety nets for all.

But, make no mistake, I'm a big supporter of private charity.
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Old 11-20-2007, 04:24 PM   #49
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The hypocrisy of Warren Buffett is - why didn't he just leave all his money to the gov't if he thinks estate taxes are a good thing?

So it is good for everyone else with a > $1M estate, but he would rather direct how his money is used, and name his children as administrators?
I agree with that.

Warren verbally supports estate taxes then uses the resources of his vast empire to avoid paying them and maintain private control.

He's a brillant guy..... but this time his end run is surprisingly obvious.
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Old 11-20-2007, 04:53 PM   #50
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I don't speak for Buffett, but I imagine that his preferred use of estate money would be: Private Charity > Government > Useless heir

The estate tax creates an incentive to give money to charity instead of leaving massive amounts to children who's only qualification for managing that wealth is coming out of the right womb.

Frankly, I think he's right. It is foolish for a billionaire to leave that money to their children. The children are unlikely to make good use of that money, unless the billionaire is very good at driving home the values that created that wealth. The old saying "shirtsleeves to shirtsleeves in three generations" has a strong basis.
I agree with your observations, however...

I just feel uncomfortable with the idea that I (in the form of the govt) should tell the person that earned the money, how best to distribute it. If they earned it legally, paid all the legal taxes in the process, I just think it should (for the most part), end there.

I think it's the 'good for the goose, good for the gander' principle. I don't want someone telling me what to do with my money, why should I be able to tell them, just because they were better at accumulating than I? Sounds like 'sour grapes' to me.

As far as the '3 generations' comment - that is often true. So why not just let nature take it's course? If the billionaire DID drive home strong values, maybe that money has a good home?

I don't buy the 'encourages charitable giving' line. If I don't give to charity, the heirs keep half the money, half goes to estate taxes. If I do give to charity, it ALL goes to charity, heirs keep nothing. All that says is the donor thinks that the charity is a better home for the money than a 50-50 split between govt/heirs. I think that says a lot about what people think of the govt.

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Old 11-20-2007, 05:41 PM   #51
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Apples and oranges, IMO. The reason some on-line purchases do not get reported is because it is a state-by-state tax, not a Federal tax. And if the company has a business presence in my state, I get hit with the tax, itis automatic - no way around it.
Missing my point. If the company doesn't have a presence in your state, do you pay the tax? Do some people buy online just to avoid the sales tax? Sure do.

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All taxes are subject to influence by special interests. But more to the point - are expensive strategies utilized by the super-wealthy more often to avoid estate taxes or to avoid sales taxes? Well, I can't remember anyone offering me a free dinner to explain their system for assuring me that I could pay less in sales tax, and therefore have more money to pass to my heirs.

-ERD50
The wealthy spend time trying to minimize all taxes. Actually, many don't spend the time and I know a number of wealthy people who could easily reduce their tax burden with some more planning.

The safety net in the US is full of holes. I have a relative that is 21 years old. She is borderline employable has a job with no health insurance but got some needed medication through a program in her state of residence for small copay. Now that program changed and she can't get the medication. Her drug bills without assistance would be about $700 a month. She has unpaid hospital bills exceeding $50,000. No possible way she can pay. We are struggling to figure out what to do and what other resources might be available. She must have her medication. She does not qualify for medical assistance because she isn't disabled.

This story is repeated over and over throughout the country. Many people in her position give up, don't take their drugs, and end up in the hospital.
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Old 11-20-2007, 05:58 PM   #52
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I agree with your observations, however...

I just feel uncomfortable with the idea that I (in the form of the govt) should tell the person that earned the money, how best to distribute it. If they earned it legally, paid all the legal taxes in the process, I just think it should (for the most part), end there.
It won't end there. If the estate tax goes, we will have to just collect the taxes while you are alive.

Quote:
I think it's the 'good for the goose, good for the gander' principle. I don't want someone telling me what to do with my money, why should I be able to tell them, just because they were better at accumulating than I? Sounds like 'sour grapes' to me.
Someone is always telling us what to do with our money. Feed, clothe and shelter your children or have them taken away. Pay rent or the mortgage or get kicked out of your home. Buy a nice suit because the job requires it. Pay property tax and support schools for children you don't have. Pay income taxes to support wars you don't believe in. Pay taxes to finance a safety net. Sour grapes? Do you know any really poor people? I don't hear a lot of sour grapes. Many poor people I know blame themselves for all their inability to be successful.


Quote:
As far as the '3 generations' comment - that is often true. So why not just let nature take it's course? If the billionaire DID drive home strong values, maybe that money has a good home?
Historically, when nature took its course, some people got very very rich and the rest were poor.

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I don't buy the 'encourages charitable giving' line. If I don't give to charity, the heirs keep half the money, half goes to estate taxes. If I do give to charity, it ALL goes to charity, heirs keep nothing. All that says is the donor thinks that the charity is a better home for the money than a 50-50 split between govt/heirs. I think that says a lot about what people think of the govt.

-ERD50
Give to charity all money over the estate tax exception and the rest to your heirs. There you go, no money to the government and very little planning required.
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Old 11-20-2007, 08:50 PM   #53
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RE: State sales Tax:
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Missing my point. If the company doesn't have a presence in your state, do you pay the tax? Do some people buy online just to avoid the sales tax? Sure do.
I fully understand that people can and do buy out-of-state to evade the state sales tax. I still say apples/oranges - two diff taxing districts, the logic does not extend to the federal estate tax. At any rate, that form of state sales tax evasion is available to pretty much everyone, whether they are middle-class, wealthy or super-wealthy.


Quote:
The safety net in the US is full of holes.

This story is repeated over and over throughout the country. Many people in her position give up, don't take their drugs, and end up in the hospital.
First, I'm sorry to hear of your relatives problems. But this is kind of changing the topic from how taxes are collected to how social programs are implemented. Yes the govt needs to collect $X to provide services. I'm just saying that I view an estate tax with loopholes as a poor way to collect it. Actually, your example points out some of the problems with govt run programs, but that's another topic...

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It won't end there. If the estate tax goes, we will have to just collect the taxes while you are alive.
Yes, without changes in spending, they will need to find another way to collect that 1.4% of revenue. Again, better ways than the estate tax w/loopholes, IMO.

Quote:
Historically, when nature took its course, some people got very very rich and the rest were poor.
That may be, I was just responding to the comment from Hamlet that wealth disintegrates in three generations.



RE:I don't buy the 'encourages charitable giving' line.

Quote:
Give to charity all money over the estate tax exception and the rest to your heirs. There you go, no money to the government and very little planning required.
If someone is super-rich and the goal is to pass the maximum to their heirs, charitable donations would be discouraged by the rules you point out. How about a simple example with simplified rules just to get the point across?

Assume the estate tax exclusion is $1M and everything above that is taxed at 50%.

Mr MoneyBags has an $11M estate. One heir; a brat daughter that he wants to leave as much as possible to, because he thinks she is an angel.

A) Bequeaths no money to charity. The $1M exclusion passes to the brat tax free. 50% of the remaining $10M goes to estate taxes, leaving brat with $5M and the $1M exclusion. Brat gets $6M.

B) Bequeaths $10M to charity.
The $1M exclusion passes to the brat tax free. None of the remaining $10M goes to estate taxes or to the brat, it all went to charity. Brat gets $1M.

The choice is really, 'do I give half to the govt and half to heirs OR all to charity and none to heirs' (or some blend of the two). I guess there are more advanced strategies around this, but now we are back to loopholes for the super-wealthy, with that 'strategy' money going to the financial planners instead of to social programs which is where I thought you wanted it to go? And the more modestly rich get hit with the full bill.

So yeah, I think the estate tax is lousy policy.

-ERD50
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Old 11-20-2007, 09:52 PM   #54
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Well, if you are so worried about ways to minimize estate tax, what you call loopholes, get rid of them.

My worry is class mobility. With that we will have to disagree.
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Old 11-20-2007, 10:52 PM   #55
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OK, we will tax you now while you are still alive.

I support the estate tax. Already we have a big problem in the US with declining class mobility. I think of it as the Paris Hilton tax.
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My worry is class mobility. With that we will have to disagree.
Maybe we don't need to disagree. According to these sources (most from the Clinton administration), getting rid of the estate tax should HELP level the field.

There's a ton of interesting material there. Here's just a few tidbits, emph mine:

The Economics of the Estate Tax


Quote:
One of the more compelling arguments on the inequality aspect of estate taxation was prepared by Alan Blinder, a former member of the Federal Reserve Board appointed by President Clinton. In his book, Toward an Economic Theory of Income Distribution, Blinder attempted to decompose income inequality into its root causes, ....

Contrary to conventional wisdom, Blinder found that...

[E]state taxation is not a very powerful weapon in the egalitarian arsenal.... The reformer eyeing the estate tax as a means to reduce inequality had best look elsewhere.

Another critical analysis of the estate tax was prepared by Joseph Stiglitz, who served as Chairman of President Clinton's Council of Economic Advisers. ..... Stiglitz found that the estate tax may ultimately cause an increase in income inequality.

The conclusions reached by Blinder and Stiglitz have been replicated by numerous other researchers.

A survey of public opinion polls about wealth and income reveals that most Americans continue to view and support the concept of America as a land of opportunity. .... Even at the lowest income levels, a majority of Americans continue to support the opportunity to accumulate wealth.
-ERD50
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Old 11-21-2007, 02:29 PM   #56
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Nope, still believe in the estate tax, polls notwithstanding. And the research is mixed.

Actually, if you explain to people the estate tax exemption, far fewer people oppose repealing the tax (sorry, no link). A number of people misunderstand the tax and think far more people have to pay it than do have to pay it.

Also, people's opinions change when they are given a choice of raising taxes on higher income earners versus an estate tax.

People love to say how our country is a land of opportunity. Why then is our class mobility less than most European countries?
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Old 11-21-2007, 04:05 PM   #57
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Nope, still believe in the estate tax, polls notwithstanding. And the research is mixed.

Actually, if you explain to people the estate tax exemption, far fewer people oppose repealing the tax (sorry, no link). A number of people misunderstand the tax and think far more people have to pay it than do have to pay it.

Also, people's opinions change when they are given a choice of raising taxes on higher income earners versus an estate tax.

People love to say how our country is a land of opportunity. Why then is our class mobility less than most European countries?
Martha,

Would you support the elimination of the loopholes, workarounds, contengency clauses, etc., for estate taxes so that everyone who had an estate bigger than $X had to pay some percentage of the amount over $X ?

Like you, I'm concerned about the concentration of wealth and lack of class mobility in our country today. But it seems that with estate taxes, it's primarily the barely wealthy who actually suffer significant consequences. The super wealthy can afford the elaborate workarounds that wind up being built into the system.
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Old 11-21-2007, 04:15 PM   #58
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I'm with you, but all taxation faces the same issue. My first choice over ALL taxes is to reduce government spending to the absolute minimum. My preferred minimum would be much lower than the vast majority of Americans would support. I oppose Social Security, Medicare, the Department of Education, farm subsidies, etc. So if you recommend cutting a Federal program, I am probably with you.

If the rest of America opposes cutting spending, however, we are left with the choice of how to collect our tax revenue. I dislike all the other taxes more than the estate tax. Most of them make it that much harder to accumulate wealth in the first place. I would rather pay my taxes after I'm dead

What tax would you raise to offset the revenue loss of cutting the estate tax?

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I agree with your observations, however...

I just feel uncomfortable with the idea that I (in the form of the govt) should tell the person that earned the money, how best to distribute it. If they earned it legally, paid all the legal taxes in the process, I just think it should (for the most part), end there.

I think it's the 'good for the goose, good for the gander' principle. I don't want someone telling me what to do with my money, why should I be able to tell them, just because they were better at accumulating than I? Sounds like 'sour grapes' to me.
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Old 11-21-2007, 05:04 PM   #59
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What tax would you raise to offset the revenue loss of cutting the estate tax?
My preference would be to collect more federal income taxes by eliminating loopholes, but with no rate increase. Simply go through the tax code (I know, "simply" and "tax code" is an oxymoron) and cross out loopholes designed to be behavior modification tools until 1% more tax is actually being collected.
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Old 11-21-2007, 05:30 PM   #60
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Actually, if you explain to people the estate tax exemption, far fewer people oppose repealing the tax (sorry, no link). A number of people misunderstand the tax and think far more people have to pay it than do have to pay it.

Also, people's opinions change when they are given a choice of raising taxes on higher income earners versus an estate tax.
And was it explained to that group how the 'super-wealthy' take advantage of loopholes? They might view it differently with that info.

Quote:
. Why then is our class mobility less than most European countries?
I'm sure that is a very complex issue. But I bet the fact that our country enslaved some of it's population just ~ 150 years ago, and only formally started to protect their rights ~ 50 years ago, and kept another group of them on reservations has something to do with it. I suspect there is a pretty strong correlation between the poorest-of-the-poor and those groups. Those are some pretty deep-seated problems.

Rather than go into it point-by-point (while I should be prepping for company tomorrow), maybe just a little perspective will help:

I guess I just get defensive when the 'solution' to every problem seems to be to 'throw money at it'. Social ills? - let's get money from the 'rich'; etc, etc, etc.

I think it's fair to say that the govt, in general, is in the 'left-hand-not-knowing-what-the -right-is-doing' mode more than private corporations (they have their share though). I've seen corporations get into the 'throw money at it' approach, and it seldom works. It often prolongs the problem - with all those resources, surely we will fix it, so people tend to gloss over the real root causes. Often, after all the money throwing, some brave soul digs in and does the hard work of uncovering the root causes (which sometimes were ignored, because it might point out something embarrassing about some powerful group), and the problem gets solved quickly, with little expense.

I'm not saying our social ills can be fixed easily, but I am saying that I am very skeptical of 'money throwing'.

It reminds me of the Dilbert cartoon - the pointy-haired boss asks how to get the behind-schedule program back on track. The engineers have a long list of issues that would require the boss to make hard decisions and display real leadership. He keeps humming and hawing. Finally, out of frustration, Dilbert says 'We need faster computers'. Of course, faster computers won't solve the deep-seated organizational problems of the program, but it is something the boss can do by just allocating budget. The boss is *thrilled* and approves the expenditure for new computers, and walks away congratulating himself for 'solving' another tough problem!

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What tax would you raise to offset the revenue loss of cutting the estate tax?
I see youbet covered that already - I'll just add: The estate tax only accounts for ~ 1.5% of revenue. If the exclusion is raised, and the marginal rate lowered, and loopholes closed (people would be less inclined to pursue loopholes with a higher excl and lower marginal rate anyhow), you would still be collecting the same ballpark amount (maybe even more?), so there isn't that much offsetting required. So, yes, do it with better tax code.

-ERD50
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