Death Tax and the DarK Side of Warren Buffet

[Hamlet]

Hey, I'm all for lower taxes, I just think the estate tax is about the lowest priority tax to be cut.  You want to stimulate employment?  Let's tax about cutting the employer's half of FICA.  It's a hidden, sleazy, and regressive tax.  Of all the Federal taxes I pay, FICA is on my most hated list 

We need to talk about cutting the spending side of things before we should be cutting taxes any further anyway.  We are borrowing too much money for my comfort.  When the Baby Boomers retire, we are going to have a tough time with the bill   

I concur Hamlet.........  The way tax loopholes are normally structured, only the ultra-rich may avail themselves.  Upper middle class folks who've managed to accumulate a few million via saving, investing, entrepreneurship, etc., get the shaft.  Let the exemption be 5 million, as you suggest, and then tax the crap out of amounts over that. 

 

[2B]

Hey, I'm all for lower taxes, I just think the estate tax is about the lowest priority tax to be cut.  You want to stimulate employment?  Let's tax about cutting the employer's half of FICA.  It's a hidden, sleazy, and regressive tax.  Of all the Federal taxes I pay, FICA is on my most hated list 

We need to talk about cutting the spending side of things before we should be cutting taxes any further anyway.  We are borrowing too much money for my comfort.  When the Baby Boomers retire, we are going to have a tough time with the bill   

FICA is the most regressive of all taxes. If you make minimum wage you don't pay any income tax but the FICA tax takes over 12% including the employer part.

The Bush proposal to eliminate the "death" tax would have eliminated the step up in basis for all inherited property. That would mean that even for estates below the former "limit" the heirs would owe income tax on granny's $100K portfolio when they cashed in. At that point all estates would be taxed.

What I've found with my FIL, he has no record of what he's paid for many of his investments. I'm trying to avoid selling these until after his death to avoid the chaos.

 

[samclem]

FICA is the most regressive of all taxes.

It's true that FICA tax is "regressive." Remember, though, that this is offset somewhat by the "progressive" FICA payout structure. Lower income wokers get more in benefits for each $$ paid in FICA taxes than higher-income workers do.

 

[2B]

It's true that FICA tax is "regressive."  Remember, though, that this is offset somewhat by the "progressive"  FICA payout structure.  Lower income wokers get more in benefits for each $$ paid in FICA taxes than higher-income workers do.   

You assume that once a low paid worker always a low paid worker. For the lower paid people starting out, they pay a high percentage of their income. As their career grows they may max out SS and qualify for the "progressive" payout.

 

[samclem]

You assume that once a low paid worker always a low paid worker. For the lower paid people starting out, they pay a high percentage of their income. As their career grows they may max out SS and qualify for the "progressive" payout.

2B,
I'm not sure I understand your point. All workers, until they hit the cap, pay exactly the same percentage of their income into SS. After they hit the cap they don't pay any additional FICA taxes, but also don't earn additional credit that would raise their SS checks in retirement.
All I was saying is that the folks earning less get a higher payout per dollar paid in than higher wage earners.

Example: Worker born in 1951, begin paying FICA in 1970, pays every year until he retires at age 66.

If he earns (and pays FICA taxes on) $20K income every year, his monthly SS retirement check is $1741

If he earns (and pays FICA taxes on) $60k income every year, his monthly SS retirement check is $1974

The worker who paid 300% more in FICA taxes enjoyed a whopping 14% higher SS check in retirement. So, from a "what you get for what you pay" viewpoint, SS is not regressive at all. It is, in efect, not just an intergenerational wwealth transfer system, but also a high income to low income wealth transfer system.