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Re: Estate Taxes

Posted: Fri Oct 11, 2019 7:57 am
by sophie
pugchief wrote:
Fri Oct 11, 2019 7:27 am
Of course it is wrong. That money has already been taxed.
Part of it hasn't been taxed. The step-up in cost basis at the time of inheritance amounts to a capital gain that was not previously realized.

Taxing that capital gain at the time of inheritance could be considered fair. However, it should be taxed at the individual's capital gains rate, NOT the punitive inheritance tax rates. Regarding an assessment, that happens anyway because (e.g.) the individual inheriting would want to able to claim depreciation and needs the new tax basis info for future sales.

And it would be nice to allow people to cut a deal with the IRS to pay over time, in cases where the assets are illiquid.

Re: Estate Taxes

Posted: Fri Oct 11, 2019 8:45 am
by ochotona
I don't have a problem with estate taxes
But I think they should be indexed to inflation, like capital gains

Re: Estate Taxes

Posted: Fri Oct 11, 2019 10:16 am
by moda0306
pugchief wrote:
Fri Oct 11, 2019 7:27 am
Kriegsspiel wrote:
Fri Oct 11, 2019 7:10 am
moda0306 wrote:
Thu Oct 10, 2019 10:36 pm
Inheritances are income to the receiving party.

Forget the estate tax. Tax it within the income tax regime.
I'd think that would have the same problems as the wealth tax. If your parents liked to collect art or cars or nice tools or some other non-financial things, and passed them down to you, you'd have to get them appraised, then come up with 15% of their value to pay to the government? What if a parent leaves their shares of the business to their child, they have to hire an auditor to tell them how much their family business is worth so that they know how big of a check to cut to the government? Seems wrong.
Of course it is wrong. That money has already been taxed.
The money has already been taxed (possibly... we don't know what form it came in) to the giving party. The receiving party, just like any business establishment that might otherwise receive the money if, say, it was spent with a lawn mowing service, gas station, etc, would have to pay income tax.

If some shlub mowing lawns has to pay income tax after it's already been taxed by the other party paying him, then certainLY it's not beyond reasonability for Preston Pendleton Pennypincher the Third to pay income tax on it.

Beyond that, Wage earners are triple-taxed every day with payroll, fed & state income taxes on the same income. This "you've already paid tax on it" bunk is just that... It's only applied to capital interests... never wage/labor.

Re: Estate Taxes

Posted: Fri Oct 11, 2019 12:07 pm
by pugchief
moda0306 wrote:
Fri Oct 11, 2019 10:16 am
pugchief wrote:
Fri Oct 11, 2019 7:27 am
Kriegsspiel wrote:
Fri Oct 11, 2019 7:10 am


I'd think that would have the same problems as the wealth tax. If your parents liked to collect art or cars or nice tools or some other non-financial things, and passed them down to you, you'd have to get them appraised, then come up with 15% of their value to pay to the government? What if a parent leaves their shares of the business to their child, they have to hire an auditor to tell them how much their family business is worth so that they know how big of a check to cut to the government? Seems wrong.
Of course it is wrong. That money has already been taxed.
The money has already been taxed (possibly... we don't know what form it came in) to the giving party. The receiving party, just like any business establishment that might otherwise receive the money if, say, it was spent with a lawn mowing service, gas station, etc, would have to pay income tax.

If some shlub mowing lawns has to pay income tax after it's already been taxed by the other party paying him, then certainLY it's not beyond reasonability for Preston Pendleton Pennypincher the Third to pay income tax on it.

Beyond that, Wage earners are triple-taxed every day with payroll, fed & state income taxes on the same income. This "you've already paid tax on it" bunk is just that... It's only applied to capital interests... never wage/labor.
Sorry. but I disagree. By that logic, if I pay for my little kid's clothes, food, school, or whatever, the transfer should be taxable to him. If I pay for his X after I die, how is that any different? The lawn guy analogy is ridiculous as he is labor and I am employer.

I do agree with Sophie that there is possibly logic in taxing the capital gains, but NEVER earned income. I also agree that any taxation should be allowed to be spread out over time if illiquid.

Your PPP rich guy is no different than an upper middle class guy with $1M in assets he wants to go to his children.

Re: Estate Taxes

Posted: Fri Oct 11, 2019 12:43 pm
by moda0306
pugchief wrote:
Fri Oct 11, 2019 12:07 pm
moda0306 wrote:
Fri Oct 11, 2019 10:16 am
pugchief wrote:
Fri Oct 11, 2019 7:27 am

Of course it is wrong. That money has already been taxed.
The money has already been taxed (possibly... we don't know what form it came in) to the giving party. The receiving party, just like any business establishment that might otherwise receive the money if, say, it was spent with a lawn mowing service, gas station, etc, would have to pay income tax.

If some shlub mowing lawns has to pay income tax after it's already been taxed by the other party paying him, then certainLY it's not beyond reasonability for Preston Pendleton Pennypincher the Third to pay income tax on it.

Beyond that, Wage earners are triple-taxed every day with payroll, fed & state income taxes on the same income. This "you've already paid tax on it" bunk is just that... It's only applied to capital interests... never wage/labor.
Sorry. but I disagree. By that logic, if I pay for my little kid's clothes, food, school, or whatever, the transfer should be taxable to him. If I pay for his X after I die, how is that any different? The lawn guy analogy is ridiculous as he is labor and I am employer.

I do agree with Sophie that there is possibly logic in taxing the capital gains, but NEVER earned income. I also agree that any taxation should be allowed to be spread out over time if illiquid.

Your PPP rich guy is no different than an upper middle class guy with $1M in assets he wants to go to his children.
If I were king for a day I'd have an annual exemption amount. But it is "income" for lack of a better term to the child.

This is no different in principle than having an exempt amount from income generally. Right now it's defacto 12,000 via a standard deduction.

Re: Estate Taxes

Posted: Fri Oct 11, 2019 6:59 pm
by I Shrugged
Kriegsspiel wrote:
Fri Oct 11, 2019 7:10 am
What if a parent leaves their shares of the business to their child, they have to hire an auditor to tell them how much their family business is worth so that they know how big of a check to cut to the government? Seems wrong.
That's exactly how it has always worked.

There are of course loopholes. One common one in a family business is to divvy up the holding between say parents and two children, so that no one owns a majority. It is accepted that a minority share of a closely held business is not worth the otherwise full value of said share. The discount applied to this can be substantial. However, and obviously, this plan can blow up in Dad's face during his lifetime if the kids are untrustworthy.

This is only one of many unproductive things that money is spent on in order to lessen tax burdens.

Re: Estate Taxes

Posted: Fri Oct 11, 2019 7:49 pm
by Kriegsspiel
I'm definitely ignorant of how inheritance works. Is it fair to say that "taxy" stuff, or things that they (now you) have to pay ongoing taxes on (stock/bond holdings, real estate, businesses, royalties..) are subject to inheritance tax, but non-taxy stuff, like household goods, art, collectibles, grandma's wedding ring... isn't?

Re: Estate Taxes

Posted: Fri Oct 11, 2019 9:37 pm
by I Shrugged
Everything in an estate is subject to the applicable tax.

Re: Estate Taxes

Posted: Wed Oct 16, 2019 3:47 pm
by Ad Orientem
pugchief wrote:
Fri Oct 11, 2019 7:27 am
Kriegsspiel wrote:
Fri Oct 11, 2019 7:10 am
moda0306 wrote:
Thu Oct 10, 2019 10:36 pm
Inheritances are income to the receiving party.

Forget the estate tax. Tax it within the income tax regime.
I'd think that would have the same problems as the wealth tax. If your parents liked to collect art or cars or nice tools or some other non-financial things, and passed them down to you, you'd have to get them appraised, then come up with 15% of their value to pay to the government? What if a parent leaves their shares of the business to their child, they have to hire an auditor to tell them how much their family business is worth so that they know how big of a check to cut to the government? Seems wrong.
Of course it is wrong. That money has already been taxed.
My employer has already paid tax on all of his money. If he wants to give me some, why should I have to pay tax again? This argument is circuitous. The most common means for raising revenue in the modern world is taxing the movement of money from person or entity A to person or entity B. IMO it is also the most fair and reasonable. I dislike taxes as much as the next person, probably more. But anti-tax sentiment has reached the point where the legitimate functions of the state are not being funded except by assumption of massive public debt. This is not sustainable. A recent study showed that on average billionaires are now paying a lower effective tax rate than the bottom tax rate for working class Americans. That is immoral. As a monarchist who is keenly aware of the history of revolutions and where they can lead, I would caution those who applaud this modern tax code that is of the wealthy, for the wealthy and by the wealthy.

IMO dividends and capital gains should all be taxed as ordinary income. Estates should be taxed as per the current code up to $100M. Any portion of an estate exceeding $100M should be taxed at 50%.

[Add] It's also worth noting that in the case of the estates of the ultra wealthy much of their wealth has never in fact been taxed. Stock portfolios that were simply bought (or inherited) just sat and accumulated massive value. Likewise real estate, yachts, valuable art and etc.

Re: Estate Taxes

Posted: Wed Oct 16, 2019 6:29 pm
by Kriegsspiel
I Shrugged wrote:
Fri Oct 11, 2019 9:37 pm
Everything in an estate is subject to the applicable tax.
I'm back to thinking it's bad.
Ad Orientem wrote:
Wed Oct 16, 2019 3:47 pm

My employer has already paid tax on all of his money. If he wants to give me some, why should I have to pay tax again? This argument is circuitous.
If you start from the assumption that income shouldn't be taxed, then it makes sense. It seems like it would be easier for everyone if the employer were taxed by the government for its product and that was it. Then they can figure out the value proposition for a worker more easily, and workers can have a clear picture of how much they're going to make. Income taxes are pretty strange when I stop to think about them.
The most common means for raising revenue in the modern world is taxing the movement of money from person or entity A to person or entity B. IMO it is also the most fair and reasonable. I dislike taxes as much as the next person, probably more. But anti-tax sentiment has reached the point where the legitimate functions of the state are not being funded except by assumption of massive public debt. This is not sustainable.
That really depends on what you're calling legitimate functions of the state.
A recent study showed that on average billionaires are now paying a lower effective tax rate than the bottom tax rate for working class Americans. That is immoral. As a monarchist who is keenly aware of the history of revolutions and where they can lead, I would caution those who applaud this modern tax code that is of the wealthy, for the wealthy and by the wealthy.
Ok, but they also pay most of the federal taxes too. The people in the meritocracy thread were concerned about the top 5% having too much power or whatever:

Image

The top 5% pays almost 60% of the federal income taxes (link), and the top 10% pay about 70%. The top 10% own 84% of the stock in American corporations (link), so it's mostly them paying the corporate income tax too. I'm guessing the top 10% pay pretty much all of the estate taxes too. They pay payroll taxes too, but payroll taxes, theoretically, should go towards social security and medicaid. So they aren't really funding the federal government. So if you take out the payroll taxes, then the top 10% are contributing 70% of the federal government's revenue. That doesn't seem immoral to me.

Looking at it a different way, if taxes on the elites were increased more, and maybe we get them to pay for, say, 90% of the federal government... It seems to me that they'd become even more powerful and elite, and less accountable to others. It seems to me that saying that elites aren't paying their fair share of taxes obscures the fact that they fund most of our government. And if they fund most of our government, it seems to me that they're going to find ways to control it or use it to serve their needs. A government that does less needs less tax revenue, and could have a more balanced tax base.

Come at me bros!

Re: Estate Taxes

Posted: Wed Oct 16, 2019 7:23 pm
by pugchief
It's hard to come at you when I agree with virtually everything you said. Thanks for taking the time to post the links and data.

Re: Estate Taxes

Posted: Wed Oct 16, 2019 8:26 pm
by Xan
Ad Orientem, I could not be more surprised that you are advocating confiscatory estate taxes.

My understanding is that they were invented by Marx in order to destroy the power of the the aristocracy. Do you advocate Queen Elizabeth giving half her estate to the government and half to Prince Charles when she dies? Or perhaps you envision a more totalitarian style, where the monarch is the state is the government. In that case, heavy estate taxes destroy the aristocracy in order to build up the monarch even more. Do you envision monarchy with no nobility?

I had understood that one of your arguments for monarchy (or at least defenses of it) is to point out that under monarchy, typically government spending was a tiny fraction of GDP, compared to the huge slice it is today. Yet now you're arguing for big estate taxes in order to support an out of control government. (As an aside, I'm not convinced that borrowing as opposed to taxing is fundamentally different, although it may pass costs to different sets of people.)

It seems to me that yearning for the glory days of monarchy and supporting a large estate tax are as far apart as east is from west. I'm curious how you reconcile the two.