Estate Taxes

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sophie
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Re: Estate Taxes

Post by sophie » Thu Oct 17, 2019 8:06 am

Ad Orientem wrote:
Wed Oct 16, 2019 3:47 pm
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.
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.
Wait a sec - don't businesses pay tax only on net income, not total revenue? Employee costs are part of their business expenses are they not? It makes no sense to consider money paid to an employee as part of profits.

Otherwise, it would be hard to understand how some corporations who employ thousands of people manage to pay almost no tax.

By the way...estate taxes in some form go back thousands of years. The Romans had it, and so did medieval England. It's historically limited to the aristocracy though. It's only the modern estate tax that hits the middle and upper middle class.
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Re: Estate Taxes

Post by moda0306 » Thu Oct 17, 2019 9:35 am

Kriegsspiel wrote:
Wed Oct 16, 2019 6:29 pm
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.

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I see what you're saying with all of this, but I'd add a few points to consider...

Keep in mind, I'm going to set aside all state/local taxes AND payroll taxes as that's what you've also done... we can bring them back in but we can't just pick and choose when convenient to include them in a taxpayer's tax load...

1) Some of this debate is "income level x vs y and their tax load," but to me this is also very, very much a discussion of capital vs labor (not to go all Marxy on you guys). For instance, while a doctor may retire somewhat wealthy, he starts out earning from income, can't deduct his education expenses against his future income (as "basis," similar to a business owner or investor can). So if I have $300k of wages as a doctor, it's much more heavily taxed than, say, $300k of capital stock value increase, income, appreciation, etc. I'll highlight details on this more in my further points.

2) If we're going to strip out FICA/Medicare taxes, you also have to cut out a massive, massive portion of government spending. What is left-over is vastly taken up by a combination of military and interest on the debt (the latter of which mostly driven from the former, as, once-again, the biggest form of the under-funded general fund spending has been military... the "welfary-side" of the government that we're ignoring has been remarkably over-funded or PAYGO-funded depending on the decade). So the question is WHO should pay for the military.. and to me it is entirely appropriate that the wealth owners of international western capital interests (either through the publicly traded stock market or through direct ownership) should be the ones paying for the military, as its main function in reality is to defend Western capital interests.

2a) This gets into what I see to be a bit of an injustice that takes us back to capital vs labor. I think the tax on capital (an inheritor or even proprietor owning $10 million of net worth producing $500k of annual taxable income owes FAR more to the perma-war surveillance state than a doctor earning $500k per year. This is before adjusting for the fact that wages are a far-less forgiving way to express income than return on capital, to begin with. This is why I'm in favor of some combination of higher taxes on capital-income, a wealth tax, corporate income tax and a rich tax on inheritances, even if we just use the income tax regime to do it.

2b) One thing I find unfortunate and upside-down is that the corporations whose bottom lines are most-benefitted by the military (ones with lots of overseas investment and resource-flow interests) are the ones most-likely to be able to skirt the Corporate income tax through location/accounting-meddling. I don't know this for sure but it's my impression.

3) While you can manipulate your "true wages" through certain deductions from income, it's pretty limited. When you earn income from capital, there's a whole host of benefits (beyond lower rates of taxation) that help you...

3a) Certain income doesn't even show up. Capital gains aren't taxed until recognized. Life insurance and annuity gains aren't recognized until collected upon, if-ever. Retirement account assets (admittedly, not a huge portion of the capital class' wealth position, often) is allowed to grow tax-deferred until retirement. Further, businesses and property owners are allowed to take huge deductions agains their basis while the value of their assets actually go-up, and often this is never captured, as these folks get a massive step-up in basis for their kids when they inherit the rental/business... a basis that they can now take as depreciation. Keep in mind, this exists in the same world and at the same time as 1) these folks are the main beneficiaries of military protections and freebies from military to police, as opposed to doctors and first-year entrepreneurs/earners, and 2) these people, unlike people who throw tens/hundreds of thousands into education, get to deduct their basis (investment) against their income.

So I take a bit of an alternate opinion on this. I think the ongoing tax-load that (through its main expense of military spending and interest on past military spending) largely goes to pay for protection of their capital interests of folks who earn $500k from capital, either through higher taxes on capital income or a straight-up wealth tax, should be far-higher than a doctor earning $500k from a career forged through decades of hard-study and gobs of (currently) non-deductible dollar investment.

I'm less on board with someone in a $70k per year household lecturing a doctor as-to why they should pay 5x what they pay... but I'm totally game for capital interests getting soaked for the cost of our military.
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Re: Estate Taxes

Post by vnatale » Thu Oct 17, 2019 9:39 am

Yes, it is definitely true that businesses pay taxes on net (tax) income and NOT revenues. And, there are usually differences between tax income and book income due to different accounting / tax treatments. Depreciation would be a prime one wherein straight-line would be chosen for book while both accelerated and maximum expensing would be chosen for tax. That alone would initially cause net tax income to be less than net book income.

Vinny
sophie wrote:
Thu Oct 17, 2019 8:06 am
Ad Orientem wrote:
Wed Oct 16, 2019 3:47 pm
pugchief wrote:
Fri Oct 11, 2019 7:27 am

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.
Wait a sec - don't businesses pay tax only on net income, not total revenue? Employee costs are part of their business expenses are they not? It makes no sense to consider money paid to an employee as part of profits.

Otherwise, it would be hard to understand how some corporations who employ thousands of people manage to pay almost no tax.

By the way...estate taxes in some form go back thousands of years. The Romans had it, and so did medieval England. It's historically limited to the aristocracy though. It's only the modern estate tax that hits the middle and upper middle class.
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Re: Estate Taxes

Post by shekels » Thu Oct 17, 2019 9:47 am

Kriegsspiel wrote:
Wed Oct 16, 2019 6:29 pm


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!
I have to admit I hate the term PAYING THEIR FAIR SHARE..
Like it is Fair to screw people based on their economic condition.

Let's face it an Income Tax is very Punitive, and the Wealthy find avenues around tax on income.
So a new strategy is needed.
So let's say we just tax everyone the same, poor and rich alike.

When the masses start paying for a bloated Government maybe that is when the realization comes.
That the Government needs to be reigned in and it is a spending problem.


We can begin to end class warfare .

Estate taxes may also have a valid reason, but it depends on where you live.
Last edited by shekels on Thu Oct 17, 2019 10:02 am, edited 1 time in total.
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Re: Estate Taxes

Post by Xan » Thu Oct 17, 2019 9:50 am

Moda, you certainly make some good points. One that I'd like to explore a bit is the part about corporate taxation. Do you believe corporations should be taxed at all? It seems to me that taxing people who own the corporation, via income taxes on dividends, capital gains (whatever the rate should be) on gains, etc, is sufficient rather than taxing twice.
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Re: Estate Taxes

Post by mathjak107 » Thu Oct 17, 2019 3:07 pm

The problem with taxing the shareholders is the same dollar earned by the corporation making millions of dollars would be taxed anywhere from zero to the top brackets based on personal tax rate
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Re: Estate Taxes

Post by Kriegsspiel » Thu Oct 17, 2019 7:45 pm

moda0306 wrote:
Thu Oct 17, 2019 9:35 am
I see what you're saying with all of this, but I'd add a few points to consider...

Keep in mind, I'm going to set aside all state/local taxes AND payroll taxes as that's what you've also done... we can bring them back in but we can't just pick and choose when convenient to include them in a taxpayer's tax load...
Right. I'm just talking about the federal government.
1) Some of this debate is "income level x vs y and their tax load," but to me this is also very, very much a discussion of capital vs labor (not to go all Marxy on you guys). For instance, while a doctor may retire somewhat wealthy, he starts out earning from income, can't deduct his education expenses against his future income (as "basis," similar to a business owner or investor can). So if I have $300k of wages as a doctor, it's much more heavily taxed than, say, $300k of capital stock value increase, income, appreciation, etc. I'll highlight details on this more in my further points.
I like the idea of taking income tax off the table.
2) If we're going to strip out FICA/Medicare taxes, you also have to cut out a massive, massive portion of government spending.
Yes! Social Security and Medicare/aid amount to 60% of federal spending.
What is left-over is vastly taken up by a combination of military and interest on the debt (the latter of which mostly driven from the former, as, once-again, the biggest form of the under-funded general fund spending has been military... the "welfary-side" of the government that we're ignoring has been remarkably over-funded or PAYGO-funded depending on the decade). So the question is WHO should pay for the military.. and to me it is entirely appropriate that the wealth owners of international western capital interests (either through the publicly traded stock market or through direct ownership) should be the ones paying for the military, as its main function in reality is to defend Western capital interests.
I'm with you until you argue that wealth owners should be the ones (only ones?) paying for the military. I think we should increase the amount funded with tariffs (currently $72 billion), and excise/VAT/sales taxes. The US collected $84 billion in excise taxes 2017. That's $256/US citizen, but again, I'd assume wealthier people pay more in excise taxes, and also non-citizens buying stuff here. Relatedly, I still think Trump was on to something when he said that NATO members should pay the US if they don't meet their military contributions. Since we're spending $1.9 trillion for "discretionary" spending ($989 billion on the military, $437 billion on everything else) and the debt ($479 billion), it's clear that we need to cut down on our military operations for it to be possible to pay for those aspects of the federal government with tariffs and sales taxes.

Now, if we are using the military to benefit our country's corporations (depending on how you're defining that), then I'm seeing that is a benefit for a lot of other people besides the owners. You don't have to own stocks to benefit from protected shipping lanes. The federal government should also be protecting citizens from bad guys through intelligence services, federal law enforcement, the State Dept, etc. Those are textbook examples of common goods that should be paid for by everyone. If you're talking about something like what Trump was talking about (requisitioning the Iraqi oil), that seems like it would definitely benefit American corporations and citizens (at the expense of Iraqis and whoever they would have sold it to), but I don't think that's what you were talking about (?).

And in the end, rich people only have as many votes per capita as poor people do. And if they keep returning people to office who are fucking them, then they can't really complain about a perma-war surveillance state.
2a) This gets into what I see to be a bit of an injustice that takes us back to capital vs labor. I think the tax on capital (an inheritor or even proprietor owning $10 million of net worth producing $500k of annual taxable income owes FAR more to the perma-war surveillance state than a doctor earning $500k per year. This is before adjusting for the fact that wages are a far-less forgiving way to express income than return on capital, to begin with. This is why I'm in favor of some combination of higher taxes on capital-income, a wealth tax, corporate income tax and a rich tax on inheritances, even if we just use the income tax regime to do it.
I'm wondering whether the federal government should tax income. I like the ideas behind the consumption taxes.

The wealth tax and inheritance taxes I still don't like. The main aspect I don't like is the government taking a slice of the value of something that isn't "taxy." Like I said before, when you inherit a rental property, you inherit something taxy. Your parents had to pay real estate taxes and income taxes on it: rentals are a service industry. So since you're going to inherit the taxes, that's less of a stretch. But inheriting a nice painting, or your mom's jewelry, or some silverware that's been owned by your family for generations... Once your ancestor bought it (and paid sales tax, say), they aren't paying any more taxes on it. It's your stuff! Giving non-taxy stuff like that to someone when you die and can't use it anymore should be free from the government trying to use it as an excuse for a money grab. More on this below.
2b) One thing I find unfortunate and upside-down is that the corporations whose bottom lines are most-benefitted by the military (ones with lots of overseas investment and resource-flow interests) are the ones most-likely to be able to skirt the Corporate income tax through location/accounting-meddling. I don't know this for sure but it's my impression.
I agree that some problems with globalism and corporatism are coming into focus. It's a tough problem to get your head around. I think it's a Prisoner's Dilemma wrapped inside an Ultimatum Game.
3) While you can manipulate your "true wages" through certain deductions from income, it's pretty limited. When you earn income from capital, there's a whole host of benefits (beyond lower rates of taxation) that help you...

3a) Certain income doesn't even show up. Capital gains aren't taxed until recognized. Life insurance and annuity gains aren't recognized until collected upon, if-ever. Retirement account assets (admittedly, not a huge portion of the capital class' wealth position, often) is allowed to grow tax-deferred until retirement. Further, businesses and property owners are allowed to take huge deductions agains their basis while the value of their assets actually go-up, and often this is never captured, as these folks get a massive step-up in basis for their kids when they inherit the rental/business... a basis that they can now take as depreciation. Keep in mind, this exists in the same world and at the same time as 1) these folks are the main beneficiaries of military protections and freebies from military to police, as opposed to doctors and first-year entrepreneurs/earners, and 2) these people, unlike people who throw tens/hundreds of thousands into education, get to deduct their basis (investment) against their income.
Regarding capital gains not being taxed until recognized, that's how it should it, IMO. I will have to look more into depreciation, because it doesn't make sense to me. Regarding 2) people who throw money into educations "get" the education, they don't lose it. But people who sell their investments at a loss lost something. I don't get the comparison you're making. But again, if there was no income tax, there'd be nothing for a capital loss to offset, right?
So I take a bit of an alternate opinion on this. I think the ongoing tax-load that (through its main expense of military spending and interest on past military spending) largely goes to pay for protection of their capital interests of folks who earn $500k from capital, either through higher taxes on capital income or a straight-up wealth tax, should be far-higher than a doctor earning $500k from a career forged through decades of hard-study and gobs of (currently) non-deductible dollar investment.
I think we're pretty close to the same page. I'd rather see the tax-load paid for by tariffs and excise/VAT taxes. Coming back to the inheritance thing, if people had to pay a hefty tax when they bought something, they'd probably want to buy something that lasts. That's better for the environment. When something is really good and it lasts a long time, you can leave it to your kids. So the combination of a VAT and no inheritance tax on non-taxy items is good for the environment because it incentivizes the "right" behaviors.
I'm less on board with someone in a $70k per year household lecturing a doctor as-to why they should pay 5x what they pay... but I'm totally game for capital interests getting soaked for the cost of our military.
I'm not. If the politicians who vote for (or abdicate their responsibility for) military operations aren't voted out by non-capital interests, why should the capital interests have to foot the bill? If they keep voting those politicians in, they deserve some of the bill. You and I are already for decreasing military operations, and as shekels mentioned, if people see how much they're paying for it, they might become averse to it too.
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Re: Estate Taxes

Post by technovelist » Thu Oct 17, 2019 11:01 pm

I can make this discussion a lot simpler: Taxation is theft.
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Re: Estate Taxes

Post by sophie » Fri Oct 18, 2019 6:36 am

Kriegsspiel wrote:
Thu Oct 17, 2019 7:45 pm
I think we're pretty close to the same page. I'd rather see the tax-load paid for by tariffs and excise/VAT taxes. Coming back to the inheritance thing, if people had to pay a hefty tax when they bought something, they'd probably want to buy something that lasts. That's better for the environment. When something is really good and it lasts a long time, you can leave it to your kids. So the combination of a VAT and no inheritance tax on non-taxy items is good for the environment because it incentivizes the "right" behaviors.
Kriegspiel, I'm with you on the tariffs - and I'm one of probably very few who think that Trump's "war on China" might actually end up being a good thing in the long run. Just think about what transferring manufacturing to China implies: American companies lay off US workers who end up tapping public welfare funds; the companies risk exposing their innovative products to Chinese manufacturers who will then outcompete them by producing cheap knockoffs; cheap shoddily made junk is shipped to the US via giant cargo ships which burn #6 oil and produce more greenhouse gas emissions than the entire US auto fleet; the cheap junk quickly ends up as garbage which strains the landfill/incineration/disposal system, increasing local costs and ultimately property taxes. There is also the issue of contaminated foods and supplements sourced from China, for example the pet food melamine poisoning episode. The cheap prices of the imported goods do not reflect their full costs.

Of course, the only problem is that targeting China has simply resulted in manufacturers shifting to the next lowest priced locales, which is Vietnam and Thailand. There's always going to be cheap labor somewhere to exploit.

As far as the VAT...this is similar to the goal of the FAIR tax, which seeks to tax consumption rather than productive work or investment via a national sales tax on new (not used) goods. There are definitely problems with this approach, but it's also very elegant and can potentially simplify a lot of bureaucracy. For one thing, it includes effectively a citizens dividend, designed to negate the tax for low income legal residents. Illegal immigration would be automatically hit with a large negative incentive, since they'd have to pay the tax but will not get the dividend check.
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