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Old 11-08-2010, 04:38 PM   #61
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Originally Posted by ERD50 View Post
These justifications are getting odder and odder to me.

I say we should put some huge annual tax on attorneys. After all, any attorney worth his/her salt would be able to find the loopholes to exempt themselves. So what if it takes 40 hours to research, document and fill out the paperwork - lawyers love that stuff! /satire

But really, that justification is just as poor (IMO) as "it only affects about 14,000 estates a year" (which could be far more people).


-ERD50
What justification are you talking about? SamClem mentioned small businesses and the difficulty of paying the tax. I said that the evidence of this being the case is not there. He argued about the difficulty of paying over 14 years. I questioned that.

Anyway, we have chose who and what to tax and we base those choices on a variety of factors. The estate tax is a no-brainer for me. I do not value the ability of the super rich to pass wealth on to the next generation tax free. I do not think that there is a basic human right to pass on what you have tax free.

Given that we as a society taxes transfers I see no reason to exempt transfers on death. And if you believe there are too many loopholes, close them. The biggest loophole is an exemption of a certain dollar amount. I am OK with something of an exemption. I would probably put it lower than most people. The other big loophole is charitable giving. Most people seem fine with that one, though I have no strong feelings about it. (Some of the structures used though I think we should garbage as simply tax avoidance schemes.) We did a bunch of loophole closing with the 1986 tax code. Maybe it is time for a clean up again.
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Old 11-08-2010, 05:02 PM   #62
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Originally Posted by Martha View Post
The biggest loophole is an exemption of a certain dollar amount. I am OK with something of an exemption. I would probably put it lower than most people. The other big loophole is charitable giving. Most people seem fine with that one, though I have no strong feelings about it. (Some of the structures used though I think we should garbage as simply tax avoidance schemes.) We did a bunch of loophole closing with the 1986 tax code. Maybe it is time for a clean up again.
To the OP's point about language, how is a deduction for charitable giving a loophole? How is the unified credit a loophole? Is the annual gift exclusion a loophole? These are statutory exclusions from the tax base and work as intended. The tax reform act of 1986 did in fact close loopholes - which were (and still are today) ways to avoid tax when tax was intended to apply - through poor drafting of statutory language or unintended consequences of complex laws. Just because you disagree with the tax policy doesn't make it a loophole.

I think most people won't argue with you that there is not a basic human right to pass on what you have tax free. However, at the same time there it is not a baseline of the government taxing every thing or transaction with all exceptions being loopholes in the system.
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Old 11-08-2010, 05:17 PM   #63
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We did a bunch of loophole closing with the 1986 tax code. Maybe it is time for a clean up again.
Call it loophole closing or simplification--I'd be in favor of that (at least in principle). Still I don't think our legislative branch will be dealing with any large, broad issues unless they absolutely have to for the next 2 years.
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Old 11-08-2010, 06:00 PM   #64
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The absence of an estate tax in 2010 has allowed the late George Steinbrenner to pass over 1 billion dollars with no federal estate tax to his heirs. With a stepped up basis. Good year for the rich to die.
Our gov't at work! That's the way Congress wanted it and that's the way Congress made it be. I can hardly wait to see what plan they come up with next!
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Old 11-08-2010, 06:09 PM   #65
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Call it loophole closing or simplification--I'd be in favor of that (at least in principle).
Amen to that. The various devices and methods to reduce estate taxes that have existed over the years is proof positive that the lawyers who make up Congress exist primarily to pass legislation that benefits their professional brothers and sisters in the private sector. Those Congress-critters wanna make damn sure there is plenty of legal work to do if they don't get elected next time 'round.
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Old 11-08-2010, 06:40 PM   #66
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Wow. You guys got real worked up on this one. I think the Canadian system works better. No estate or gift taxes. On death accrued cap gains are deemed to occur and tax is owing (about 20%on the gain). Only taxed once. Obviously other income attracts tax as you would expect in the year of death(eg salary, divs, interest, etc).
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Old 11-08-2010, 06:58 PM   #67
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Wow. You guys got real worked up on this one. I think the Canadian system works better. No estate or gift taxes. On death accrued cap gains are deemed to occur and tax is owing (about 20%on the gain). Only taxed once. Obviously other income attracts tax as you would expect in the year of death(eg salary, divs, interest, etc).
That does sound better, at least on the surface, eh?

How does it work as far as a small business person passing on their busines to the kids?
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Old 11-08-2010, 07:14 PM   #68
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That does sound better, at least on the surface, eh?

How does it work as far as a small business person passing on their busines to the kids?
I think you will find that many of the people lined up in favor of high estate taxes have no kids. When they die they expect to have no further concern or responsibilities in this world, except perhaps a spouse who will of course get the estate tax free.

This thinking is anathema to me.

Ha
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Old 11-08-2010, 07:17 PM   #69
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I think you will find that many of the people lined up in favor of high estate taxes have no kids. When they die they expect to have no further concern or responsibilities in this world, except perhaps a spouse who will of course get the estate tax free.

This thinking is anathema to me.

Ha
I'm not quite sure what point you're making, Ha. Can you clarify? I personally think that most people in favor of high estate taxes don't have a significant estate, whether they have kids or not.
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Old 11-08-2010, 07:27 PM   #70
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I'm not quite sure what point you're making, Ha. Can you clarify? I personally think that most people in favor of high estate taxes don't have a significant estate, whether they have kids or not.
Yes, I wasn't clear. No estate or no kids, either one makes a person more supportive of estate taxes. If you have no stake, you are naturally for grabbing it from those who do. But it is a deep desire for many parents to give their children and grandchildren a leg up.

Andrew Carnegie set up the system of free public libraries across the US. Many other wealthy donors have funded art museums and collected and donated the paintings within them, and funded great orchestras and opera companies. The Rockefeller foundation has funded health related and other research for many years.

I think we all know (though some would deny this knowledge) what would have happened to this stored wealth had the government been able to get hold of it.

Poof!

Ha
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Old 11-08-2010, 07:31 PM   #71
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To the OP's point about language, how is a deduction for charitable giving a loophole? How is the unified credit a loophole? Is the annual gift exclusion a loophole? These are statutory exclusions from the tax base and work as intended. The tax reform act of 1986 did in fact close loopholes - which were (and still are today) ways to avoid tax when tax was intended to apply - through poor drafting of statutory language or unintended consequences of complex laws. Just because you disagree with the tax policy doesn't make it a loophole.

I think most people won't argue with you that there is not a basic human right to pass on what you have tax free. However, at the same time there it is not a baseline of the government taxing every thing or transaction with all exceptions being loopholes in the system.
My description of charities and the unified credit as loopholes was intentional. What is fair to one person may be a loophole to another.
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Old 11-08-2010, 07:36 PM   #72
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I think you will find that many of the people lined up in favor of high estate taxes have no kids. When they die they expect to have no further concern or responsibilities in this world, except perhaps a spouse who will of course get the estate tax free.

This thinking is anathema to me.

Ha
You imply that because some of us have no children we do not have responsibilities or people that we care about. Watch the mindreading.

It isn't like I favor a 100% tax with no exemptions.
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Old 11-08-2010, 10:43 PM   #73
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When they die they expect to have no further concern or responsibilities in this world, except perhaps a spouse who will of course get the estate tax free.

Ha
So that's an interesting point to ponder. We do occasionally turn over something new in these old discussions. So this leads to...

The people in favor of these Estate Taxes don't seem to like the idea of people being free to take the money they earned and that has already been taxed and pass it on to others. So to avoid hypocrisy, they should be in favor of taxing half the estate when one spouse dies. Why should that be different than leaving it to the kids or anyone else?

There are certainly cases where a child is more needy than a spouse. Why the distinction?

Yet, I've never heard a call for that.

-ERD50
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Old 11-08-2010, 10:50 PM   #74
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It isn't like I favor a 100% tax with no exemptions.
But why should you be able to set a limit on how much of the money someone has accumulated gets to be passed on? They (or someone) earned it, they (or someone) paid taxes on it along the way, if it is now legally theirs, let them decide.

I can picture a case where an individual wants to apply the money towards a number of needy individuals that are not associated with any specific charity. I can also picture a case where the person just blows it. So what? That's what I call freedom, and freedom means you don't always need to do what others would want you to do (within the law).

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Old 11-08-2010, 11:18 PM   #75
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What justification are you talking about? SamClem mentioned small businesses and the difficulty of paying the tax. I said that the evidence of this being the case is not there. He argued about the difficulty of paying over 14 years. I questioned that.
I included the quote for reference, I thought I was clear. Again - Martha said:

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If a business that is valued in the multimillion dollar range can't afford estate tax debt attributable to the value of business over 14 years than maybe the business was overvalued.
As samclem pointed out, those payments may have to come out of cash flow unless they are going to sell off some of the assets of the business. I don't see that as a good thing to force a successful business to do. That would probably lead them to cutting jobs, but some (probably the ones in favor of these taxes) will then put the blame on "those greedy business owners". Most businesses aren't making huge % profits, doesn't take much to drop it to zero and need to dip into assets.

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The estate tax is a no-brainer for me. I do not value the ability of the super rich to pass wealth on to the next generation tax free. I do not think that there is a basic human right to pass on what you have tax free.
A few million years of evolution would disagree with you. It is very basic for a parent to try to pass on strength and security to their offspring. I'd call it absolutely fundamental to life.

OK, you can argue that $X is 'enough' to pass on, but I still say it is a basic human concept and those who respect that (even if they don't have > $X), will fight to protect the concept. I think it really comes back to the wording pointed out in the OP. Does one view the accumulation as the property of the accumulator, or the property of everyone else. You cannot giveaway something unless it is yours to give away.

-ERD50
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Old 11-08-2010, 11:33 PM   #76
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I would have to pay the estate tax if DW predeceased me. As a resident alien, I would not qualify for the unlimited spousal exemption. So, starting in 2011, I would have to pay a 55% estate tax on much of DW's assets including her half of our jointly-owned house, cars, bank accounts and taxable investment accounts. If I predecease her, DW would qualify for the unlimited spousal exemption and pay $0 in estate tax.
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Old 11-09-2010, 03:29 AM   #77
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I would have to pay the estate tax if DW predeceased me. As a resident alien, I would not qualify for the unlimited spousal exemption. So, starting in 2011, I would have to pay a 55% estate tax on much of DW's assets including her half of our jointly-owned house, cars, bank accounts and taxable investment accounts. If I predecease her, DW would qualify for the unlimited spousal exemption and pay $0 in estate tax.
My wife is a RA as well. I don't think the tax will apply to us in any event but you could check into the Qualified Domestic Trust. It may apply.
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Old 11-09-2010, 04:10 AM   #78
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So that's an interesting point to ponder. We do occasionally turn over something new in these old discussions. So this leads to...

The people in favor of these Estate Taxes don't seem to like the idea of people being free to take the money they earned and that has already been taxed and pass it on to others. So to avoid hypocrisy, they should be in favor of taxing half the estate when one spouse dies. Why should that be different than leaving it to the kids or anyone else?

There are certainly cases where a child is more needy than a spouse. Why the distinction?

Yet, I've never heard a call for that.

-ERD50
Morning ERD,

You're apparently assuming that profits on estate assets have already been taxed. That would have to depend on the assets of an estate. If they're real estate or bonds or stocks or an art collection, the profits on any gains of those assets may well not have been taxed.

I guess by some logic you could say that taxes should be paid on the assets of a deceased member of a partnership. Would I characterize the spouse exemption as hypocrisy? It's certainly not anymore hypocritical than advocating for tax cuts and fiscal prudence with borrowed money.
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Old 11-09-2010, 07:25 AM   #79
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There is an exemption for small business cap gains($500k) I believe. The big advantage for me is that I can gift assets to my daughter when I am still alive without any tax consequences.
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Old 11-09-2010, 07:29 AM   #80
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I think you will find that many of the people lined up in favor of high estate taxes have no kids. When they die they expect to have no further concern or responsibilities in this world, except perhaps a spouse who will of course get the estate tax free.

This thinking is anathema to me.

Ha
This does not reflect the views or choices DW and I have agreed on.
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