Semi-Retyrd
Recycles dryer sheets
I think most people would agree that the current growth in the US national debt is unsustainable. IMO it is ok for the national debt to grow at less then the GDP so that as a percentage of GDP, it gets smaller each year. However this has not been the case in recent years. The only two ways to reduce the annual deficit are a) to cut spending or b) to increase revenue. Since the largest sources of spending are entitlements like Social Security and Medicare followed by interest payments, I think there is not a lot of room to cut spending without increasing the poverty level or defaulting on our debt and ruining our credit rating. Most Americans are already being squeezed on health care.
At the same time the top 1% of Americans own some $54T of wealth - more than they will ever spend in their lifetime.
Here are some considerations behind my proposal -
1) Any change should be modest so that the legislation is short and fairly easy to comprehend by the voting public.
2) Most Multi-Millionaires and Billionaires in the top 1% worked hard for their money and deserve to enjoy it in any way they feel like during their lifetime. They should be able to buy all the toys they want and dodge all the taxes they can dodge within our current income tax system during their lifetime.
3) Wealth taxes on an annual basis are too difficult to implement because appraising illiquid assets like paintings and yachts, and private businesses is a complicated, time consuming, and expensive process that is best only done once.
4) Our current taxation system does have one wealth tax - the estate tax that is levied only once after death for an estate worth more than $15M/person or $30M/married couple.
5) If the estate tax really worked, then my proposal would not be necessary. However, this tax only generates less than 2% of revenue currently collected by the US government. Why? Because there have been no changes to this tax for decades and it is now so full of loopholes, that it is is hopelessly out of date.
6) Consider the tax on lottery winners. Lottery winnings are considered ordinary income and taxed as such when collected. No one complains about this because just getting lucky is not considered a worthwhile reason to avoid taxes.
7) Now consider heirs. Most people collect little or nothing when their parents or other relatives die. The ones that do collect large amounts didn't work for it. They just got lucky in winning the birth lottery.
So based on the above considerations my proposal is to repeal the estate tax which clearly isn't working and replace it with an inheritance tax. My proposal would be each person would be entitled to a $2M lifetime exemption from the tax and any inheritance beyond this amount would be taxed as ordinary income in the same way as lottery winnings. If a person inherited an illiquid asset like a painting or a private business it would only need to be appraised and taxed once.
This idea solves the buy, borrow die means of tax avoidance and eliminates the step up in basis tax avoidance and allows all existing tax avoidance trusts to continue without requiring changes. However, whenever a trust pays the beneficiaries, the distributions would then be taxed as ordinary income.
Finally I would assume that very large estates would give most of their assets to charities to avoid tax. I would propose that charities also get a $2M exemption and that receipts beyond this would also be taxed but maybe at a lower rate like long term capital gains to give large donors an incentive to give to them instead of spoiling their kids.
If this proposal were implemented it could not only reduce the deficit but if a portion was reserved for Social security, it might make SS and Medicare solvent.
What do you think?
At the same time the top 1% of Americans own some $54T of wealth - more than they will ever spend in their lifetime.
Here are some considerations behind my proposal -
1) Any change should be modest so that the legislation is short and fairly easy to comprehend by the voting public.
2) Most Multi-Millionaires and Billionaires in the top 1% worked hard for their money and deserve to enjoy it in any way they feel like during their lifetime. They should be able to buy all the toys they want and dodge all the taxes they can dodge within our current income tax system during their lifetime.
3) Wealth taxes on an annual basis are too difficult to implement because appraising illiquid assets like paintings and yachts, and private businesses is a complicated, time consuming, and expensive process that is best only done once.
4) Our current taxation system does have one wealth tax - the estate tax that is levied only once after death for an estate worth more than $15M/person or $30M/married couple.
5) If the estate tax really worked, then my proposal would not be necessary. However, this tax only generates less than 2% of revenue currently collected by the US government. Why? Because there have been no changes to this tax for decades and it is now so full of loopholes, that it is is hopelessly out of date.
6) Consider the tax on lottery winners. Lottery winnings are considered ordinary income and taxed as such when collected. No one complains about this because just getting lucky is not considered a worthwhile reason to avoid taxes.
7) Now consider heirs. Most people collect little or nothing when their parents or other relatives die. The ones that do collect large amounts didn't work for it. They just got lucky in winning the birth lottery.
So based on the above considerations my proposal is to repeal the estate tax which clearly isn't working and replace it with an inheritance tax. My proposal would be each person would be entitled to a $2M lifetime exemption from the tax and any inheritance beyond this amount would be taxed as ordinary income in the same way as lottery winnings. If a person inherited an illiquid asset like a painting or a private business it would only need to be appraised and taxed once.
This idea solves the buy, borrow die means of tax avoidance and eliminates the step up in basis tax avoidance and allows all existing tax avoidance trusts to continue without requiring changes. However, whenever a trust pays the beneficiaries, the distributions would then be taxed as ordinary income.
Finally I would assume that very large estates would give most of their assets to charities to avoid tax. I would propose that charities also get a $2M exemption and that receipts beyond this would also be taxed but maybe at a lower rate like long term capital gains to give large donors an incentive to give to them instead of spoiling their kids.
If this proposal were implemented it could not only reduce the deficit but if a portion was reserved for Social security, it might make SS and Medicare solvent.
What do you think?
