Inheritance Tax Should be Abolished

[youbet]

Aside from a general hostility to inherited wealth, I have a real problem with the step up basis on inherited assets. It is fundamentally unfair to those who have "paid along the way". But I suspect those who abhor the estate tax would also object vociferously to the elimination of this provision as well.

I dislike the step up basis provision for another reason........ It's another government effort to manipulate the way folks manage their assets. Older folks holding equities with large unrealized capital gains are strongly influenced not to sell in order to optimize their estate planning regardless of their opinion of the quality and prospects of the equity. I just don't like taxes that influence investment decisions. Makes for an inefficient market.

Regarding the estate tax in general, I've done some research into statistics of who actually pays and who would pay under various proposals and personally feel an estate tax with an exemption in the $3.5 million range (today's dollars and inflation adjusted) would impact very few of the folks I'd be concerned for. The average value of estates over $3.5 mil is in the mid-teens, even after taxation, the heirs would be wealthy by most standards.

As I've said to the point of boredom, loop holes must be closed. Here's the exemption level, here's the tax rate, pay.

 

[Rustic23]

...(today's dollars and inflation adjusted) would impact very few of the folks I'd be concerned for. ...

You have made my point. If you are not concerned for the people you consider wealthy, then those that make considerably less than you will not be concerned when they allow government to take your assets.

What's the old story,.... I didn't protest when they came to take my neighbors... but when they came to take me!

We need taxes to run government. I just believe it is the slippery slope when we tax some and exclude others just because we don't care about them and their numbers are too small to do anything about it.

 

[ERD50]

Aside from a general hostility to inherited wealth, I have a real problem with the step up basis on inherited assets. It is fundamentally unfair to those who have "paid along the way". But I suspect those who abhor the estate tax would also object vociferously to the elimination of this provision as well.

Suspicion confirmed! ( I didn't want to disappoint you).

My problem with eliminating the step-up in basis at death is - it further complicates an already too burdensome compliance effort. And, it creates too many opportunities for 'cheating'.

You are asking the executors of an estate to go back and figure the cost basis of something that may have been purchased years ago, possibly over many transactions (re-invested dividends?), by someone that may not have kept good records (it's a pain even with good records), and you can't even ask them for help (well, you can ask....).

I say simplify! Eliminate ALL capital gains taxes - they are burdensome, and subject to cheating. And just like the estate tax, since they can be a large one-event hit, people look for ways to circumvent. 1031 exchange? See, more complexity! Don't throw more rules on top of bad rules to 'fix' them - get rid of the bad rules! Simplify!

Do that - and there IS no argument over who paid what when and is it 'fair' that they are being taxed again. The inconsistencies surrounding this estate tax are mind boggling to me.

And this can all be revenue neutral, so I'm not talking about taking food stamps away from some starving child, OK?

-ERD50

 

[armor99]

You have made my point. If you are not concerned for the people you consider wealthy, then those that make considerably less than you will not be concerned when they allow government to take your assets.

What's the old story,.... I didn't protest when they came to take my neighbors... but when they came to take me!

We need taxes to run government. I just believe it is the slippery slope when we tax some and exclude others just because we don't care about them and their numbers are too small to do anything about it.

You are exactly right Rustic23! Lots of people favor wealth redistribution when it helps them financially, or even someone else. But if it is suddenly discovered, that THEY in fact are the ones considered "too rich", then that attitude suddenly evaporates. If the govt must tax... then tax everyone... not just some. I would love to see a flat tax one day... Say everyone pays 15% (or whatever percentage is agreed upon). Would certainly be a lot more fair than today. I am equally against 40% of the US paying NO taxes, as I am the very weathy using loopholes to get around paying their taxes.

 

[Freein05]

Absolutely not...........

How could they continue the Bush tax cuts granted in a time of war, first time ever! Our country will be BK. Our children and grandchildren will be paying back the debt on Bush's ill conceived tax cuts. The biggest tax cut would could get is to have the US debt paid off. I think interest on the US debt is now the 3rd or 4th largest item in the budget.

People keep using the term liberal. So I will us the term conservative. It was two so called conservative presidents who produced the largest deficit in US History. The first was the actor/president - and our current president. Now tell me conservatives know how to balance a budget.

 

[youbet]

You have made my point. If you are not concerned for the people you consider wealthy, then those that make considerably less than you will not be concerned when they allow government to take your assets.

What's the old story,.... I didn't protest when they came to take my neighbors... but when they came to take me!

We need taxes to run government. I just believe it is the slippery slope when we tax some and exclude others just because we don't care about them and their numbers are too small to do anything about it.

I guess I'm just pragmatic. You could make your assertion about any progressive tax. "Gee, if folks making fourteen zillion bux a year are in a higher tax bracket than me, maybe they'll lower the bracket limits and catch me next!!!"

If you're against all progressive taxes, I understand your point. If you are only against progressivity (is that a word?) in estate taxes, you're inconsistent so I disagree.

I'm pragmatic about estate taxes because I do believe that levels of absolute dollars matter. When you can leave enough behind that heirs have no issues keeping the family business or farm going nicely, or, despite the taxes, they are still left quite wealthy, then the impact of the tax is minimal. Taxes have to be collected from someplace.

But I'm against loopholes. I'm against taxes that influence investment decisions. And I'm against the step up in cost basis at death since it's just another scheme to have someone else pay.

 

[Rustic23]

I'm against all progressive taxes. I believe we all live here, and we should all pay the bill.

Freein05,
As I have pointed out in other threads, Presidents don't spend, Congress spends. Look it up in the Constitution, Congress holds the purse strings. I think you know this, but it is harder to blame your congressman that is bringing home the pork and easier to blame the President. The President does submit a budget, however, how many times have we heard it is 'dead on arrival'. The President makes an easy target, but until we get Congress to stop the Ear Marks, things will not get better. If you want to give the President the line item veto, then I would be willing to blame him for the budget woes.

I tried to keep this non political as I did not blame or credit any Congress or President. That's because I think they are all equally guilty. For me I have decided I will vote against all incumbents in the primary.

 

[samclem]

How could they continue the Bush tax cuts granted in a time of war, first time ever! Our country will be BK. Our children and grandchildren will be paying back the debt on Bush's ill conceived tax cuts.

Oops, somebody else who didn't get the word.

We're in a (continuing but reducing) deficit not because of tax cuts, but because of increased spending (on lots of things, to inculde the war(s), but also including record domestic spending).

This year (with the tax cuts, and I'd argue, largely because of the tax cuts and their beneficial impact on the economy) the government took in more revenue than ever before. More, not less. 6.7% more than the year before. And government revenue grew 14.5% and 11.8% in the two years preceding that. Pretty impressive, and (IMO) probably at least in part due to the tax cuts. If you want still more government revenue (and I think you do!) maybe you should be arguing for an extension of the tax cuts.

 

[youbet]

I say simplify! Eliminate ALL capital gains taxes - they are burdensome, and subject to cheating. -ERD50

I'm surprised to hear you call for a transfer of wealth from one group to another!

If two people are both consuming taxpayer provided services and both have income, why should the wage earner pay and the equity trader not pay? Simple, to effectively transfer wealth from the wage earner to the portfolio trader. And I disagree. Let folks in both professions pay their own way!

If you are saying eliminate both capital gains taxes and wage driven income taxes, that's different.

 

[FinanceDude]

How could they continue the Bush tax cuts granted in a time of war, first time ever! Our country will be BK. Our children and grandchildren will be paying back the debt on Bush's ill conceived tax cuts. The biggest tax cut would could get is to have the US debt paid off. I think interest on the US debt is now the 3rd or 4th largest item in the budget.

People keep using the term liberal. So I will us the term conservative. It was two so called conservative presidents who produced the largest deficit in US History. The first was the actor/president - and our current president. Now tell me conservatives know how to balance a budget.

Keep the politics to the political threads........this thread is about TAXES!!!

 

[samclem]

If two people are both consuming taxpayer provided services and both have income, why should the wage earner pay and the equity trader not pay? Simple, to effectively transfer wealth from the wage earner to the portfolio trader. And I disagree. Let folks in both professions pay their own way!

Would you at least favor indexing the cap gains tax for inflation? Right now, when Auntie Em sells that stock she bought, we pretend that the $5 per share she paid in 1957 is the same as $5 today. The cost basis should at least be indexed for inflation so that she's taxed on the real gain, not the increase in numerical dollars that are each worth less.

The differential treatment of cap gains is perhaps a rough counterbalance to this problem. When the cap gains rate = the income rate, the inflation factor will become even a bigger fairness issue.

 

[ERD50]

If you are saying eliminate both capital gains taxes and wage driven income taxes, that's different.

Are you playing the 'straight man' here?

Once again, I keep getting reinforcement on the idea of an NST. Look at all the problems it solves:

A) Would Paris be the poster child for inherited wealth arguments if she lived a modest life style, spending less than $30,000 per year? We would never have heard of her. So, tax spending.

B) Trader making money on short term cap gains versus the 'wage slave' earning an income and getting his W2 sent to the govt? No problem - tax spending and it all works out. The trader pays when he buys that new beemer, or that fancy dinner.

I really cannot think of a 'fairer' system that the NST (though I wish they would drop the self-promoting 'fairtax' name - nothing is ever truly 'fair').

-ERD50

 

[Freein05]

Keep the politics to the political threads........this thread is about TAXES!!!

I was not the first one to bring politics into this as a matter of fact you also did. My post was responding to your political answer.

 

[FinanceDude]

I was not the first one to bring politics into this as a matter of fact you also did. My post was responding to your political answer.

Saying "absolutely not", is not political, it is an opinion.
Whether it will or will not is immaterial, I "think" it will not happen that Bush's tax cuts will be continued......

 

[ERD50]

I'm against all progressive taxes. I believe we all live here, and we should all pay the bill.

Well, if you remain consistent with that I will respect your opinion on the matter.

But, just as a point of reference, I support the concept of a progressive tax system. Please note that no one has ever accused me of being a 'liberal' on this (or any other ) forum. .

The 'young, starting out' ERD50 made a fairly small salary, and paid fairly low tax rates and amounts.

Ten years, several raises and promotions and a second income later; I (we) paid a higher tax rate and amount. But I (we) had more discretionary income, so it was not really a 'burden'.

Both of 'me' think it works out pretty well that way.

Of course, you won't get people to agree on what the curve should look like, but I think most people, yes even the 'rich', would accept a reasonably progressive tax system.

And I think the poor would accept a reasonably modest curve, if they could be assured there were no 'loopholes' for the rich.

JMO - ERD50

 

[Freein05]

The estate tax like income tax should be progressive without all of the loop holes. The loop holes are what make our tax system so unfair. The average tax payer in the US does not make enough money to need the loop holes and if they did they could not afford the attorneys to set them up. People keep talking about the transfer of wealth. What about the average tax payer in the US who is paying their far share to support the government. It has been in the news recently there are about 5,000 high income US citizens who have set up off shore corporations to avoid US taxes. Now the real unfair transfer of wealth happens when the average US tax payer finances the infrastructure these crooks use while driving their cars on roads or flying their private. jets that the average tax payer paid for.

 

[samclem]

Freein5:
I agree 10% with the elimination of the loopholes. I think we'd differ in what constitutes a "fair share" since nearly 50% of people pay no net taxes at all. That, to me, isn't "fair" to those who are shouldering the burden. The folks who are taking advantage of the loopholes aren't "crooks", since they are obeying the law 100%. It is the law that is broken. No one is required to pay more than the law requires.

 

[FinanceDude]

Freein5:
I agree 10% with the elimination of the loopholes. I think we'd differ in what constitutes a "fair share" since nearly 50% of people pay no net taxes at all. That, to me, isn't "fair" to those who are shouldering the burden. The folks who are taking advantage of the loopholes aren't "crooks", since they are obeying the law 100%. It is the law that is broken. No one is required to pay more than the law requires.

Many laws are "broken" these days........and need fixing.........

 

[ERD50]

Freein5:
I agree 10% with the elimination of the loopholes.

Well, I'll agree the remaining 90%

I think we'd differ in what constitutes a "fair share" since nearly 50% of people pay no net taxes at all.

Honest question: Is that '50% pay no taxes' accurate? I think it means no 'income taxes'. They still pay SS and medicare and local sales taxes (and 'hidden taxes' in products that corporations must pass to the consumer).

Some of those income stats really bother me - aren't they based on 'filers' rather than the entire population? Not sure what to make of them.

-ERD50

 

[jefipius]

Are you playing the 'straight man' here?

Once again, I keep getting reinforcement on the idea of an NST. Look at all the problems it solves:

A) Would Paris be the poster child for inherited wealth arguments if she lived a modest life style, spending less than $30,000 per year? We would never have heard of her. So, tax spending.

B) Trader making money on short term cap gains versus the 'wage slave' earning an income and getting his W2 sent to the govt? No problem - tax spending and it all works out. The trader pays when he buys that new beemer, or that fancy dinner.

I really cannot think of a 'fairer' system that the NST (though I wish they would drop the self-promoting 'fairtax' name - nothing is ever truly 'fair').

-ERD50

<Plutocrat>
So you mean all I've got to do is earn my money in the US (no tax) and spend it outside the country? SWEEET! Canada here I come (6% GST)!
</Plutocrat>

 

[Martha]

Oh well, 'liberal' is a no-good label

Liberals don't want to be known as liberals. They seem to think it is libelous.

I am still bowing out of the estate tax discussion, but I did want to say that I am a liberal and I am proud to be a liberal and if you want to call me liberal Martha feel free.

 

[Dawg52]

I am still bowing out of the estate tax discussion, but I did want to say that I am a liberal and I am proud to be a liberal and if you want to call me liberal Martha feel free.

Ok. Liberal Martha. Hmmmm.........that wasn't so hard.

 

[Dawg52]

Oh yes, your one of my favorite posters on here. I guess the holiday season is getting the best of me.

 

[Martha]

Merry Christmas.

 

[Rustic23]

I guess I should say I am opposed to the progressive tax system as we have it.

Our current tax system is forced charity. I believe in charity, I support our church and several other organizations. However, I feel it should be my choice as to who get my money and not some inefficient government agency.

IMHO a tax system that allows 50% of the population to pay no tax, and is some cases receive direct payments from the public is a corrupt system and should be changed. I have said elsewhere on this board, that the statement 'that democracy will fail when the people learn they can vote them self a piece of the treasury' (paraphrased) is true, and we are see the beginning of that failure now.