Inheritance tax: A hated tax but a fair one

[RandomGuy]

Such levies pit two vital liberal principles against each other. One is that governments should leave people to dispose of their wealth as they see fit. The other is that a permanent, hereditary elite makes a society unhealthy and unfair. How to choose between them?

When the heirs loom
Some people argue for a punitive inheritance tax. They start with the negative argument that dead people no longer enjoy the general freedom to disburse their wealth as they wish—as the dead have no rights. How could they, when they are not affected one way or the other by what happens in the world?

That does not ring true. The logic would be to abrogate even the most modest of wills. But inheritances are deeply personal and the biggest single gift that many give to causes they believe in and loved ones they may have cherished. Many (living) people would feel wronged if they could not provide for their children. If anything, as the expression of their last wishes, bequests carry more weight than their passing fancies do.

The positive argument for steep inheritance taxes is that they promote fairness and equality. Heirs have rarely done anything to deserve the money that comes their way. Liberals, from John Stuart Mill to Theodore Roosevelt, thought that needed correcting. Roosevelt, who warned that letting huge fortunes pass across generations was “of great and genuine detriment to the community at large”, would doubtless be aghast at the situation today. Annual flows of inheritance in France have tripled as a proportion of GDP since the 1950s. Half of Europe’s billionaires have inherited their wealth, and their number seems to be rising.

However, in 2017, it is not clear exactly how decisive a role inheritance plays in the entrenchment of the hereditary elite. Data from Britain suggest that people tend not to lose their parents before they reach the age of 50. In rich countries the advantages that wealthy parents pass to their offspring begin with the sorting mechanism of marriage, in which elites increasingly pair up with elites (see article). They continue with the benefits of education, social capital and lavish gifts, not in the deeds to the ancestral pile.
Even if the link between inheritance-tax rates and inequality were clear, wealth can pay for a good tax lawyer. In the century since Roosevelt, Sweden and other high-taxers discovered that if governments impose a steep enough duty, the rich will find ways to avoid it. The trusts they create as a result can last even longer than the three generations it takes for family fortunes to go from clogs to clogs.

Armed with such arguments, some leap to the other extreme, proposing, as the American tax reform does, that there should be no inheritance tax at all. Not only is it right to let people hand their private property to their children, they say, but also bequests are often the fruits of labour that has already been taxed. And a large inheritance-tax bill is destructive, because it can cause the dismemberment of family firms and farms, and force the sale of ancestral homes.

Yet every tax is an intrusion by the state. If avoiding double taxation were a requirement of good policy, then governments would need to abolish sales taxes, which are paid out of taxed income. The risks that heirs will be forced to sell homes and firms can be mitigated by allowing them to pay the duties gradually, from cashflow rather than by fire-sales.

In fact, people who are against tax in general ought to be less hostile to inheritance taxes than other sorts. However disliked they are, they are some of the least distorting. Unlike income taxes, they do not destroy the incentive to work—whereas research suggests that a single person who inherits an amount above $150,000 is four times more likely to leave the labour force than one who inherits less than $25,000. Unlike capital-gains taxes, heavier estate taxes do not seem to dissuade saving or investment. Unlike sales taxes, they are progressive. To the extent that a higher inheritance tax can fund cuts to all other taxes, the system can be more efficient.

Transfer market
The right approach is to strike a balance between the two extremes. The precise rate will vary from country to country. But three design principles stand out. First, target the wealthy; that means taxing inheritors rather than estates and setting a meaningful exemption threshold. Second, keep it simple. Close loopholes for those who are caught in the net by setting a flat rate and by giving people a lifetime allowance for bequests; set the rate high enough to raise significant sums, but not so high that it attracts massive avoidance. Third, with the fiscal headroom generated by higher inheritance tax, reduce other taxes, lightening the load for most people.

A sensible discussion is hard when inheritance taxes prompt such a visceral reaction. But their erosion has attracted too little debate. A fair and efficient tax system would seek to include inheritance taxes, not eliminate them.

https://www.economist.com/news/leaders/21731626-case-taxing-inherited-assets-strong-hated-tax-fair-one

[dabom]

If people thought the centralization of money was bad, just imagine 10X worse. :lol

[sickdsm]

The amount of money to start up in commercial farming is staggering. I've stuck my neck out for millions of dollars in debt. Why? For a better like for my kids of course. Without a way to pass along the infra structure and land,no one in their right mind would farm. If bou thinks big ag and factory farms control your food now it would be laughable under that scenario. Farmers live their wholelife poor and die rich. Why toil and avoid an easier lifestyle if theirs no future?

[RandomGuy]

The amount of money to start up in commercial farming is staggering. I've stuck my neck out for millions of dollars in debt. Why? For a better like for my kids of course. Without a way to pass along the infra structure and land,no one in their right mind would farm. If bou thinks big ag and factory farms control your food now it would be laughable under that scenario. Farmers live their wholelife poor and die rich. Why toil and avoid an easier lifestyle if theirs no future?

Odds are your farm is unlikely to trigger the tax.

That said: if you have spent millions of dollars buying equipment and seeds, but not done any tax planning, which is fucking cheap compared to your other expenses, your family deserves to lose the farm, and it is your own fault, 100%.

I'm not a tax guy, and I can think of about 3 different methods of transferring a farm to heirs that bypass this tax.

[spurraider21]

How many farms have had to close in the last 2 decades due to estate tax?

[RandomGuy]

How many farms have had to close in the last 2 decades due to estate tax?

https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threatens-small-farms

That is a number likely in the single digits.


Moreover, most farmers and business owners with estates large enough to owe the tax have sufficient liquid assets (such as bank accounts, stocks, and bonds) to pay the tax without having to touch other assets or liquidate their farm and business, a 2005 Congressional Budget Office (CBO) study found.

It's a myth.

[RandomGuy]

https://www.cbo.gov/publication/16897

CBO report
Effects of the Federal Estate Tax on Farms and Small Businesses
2005

[spurraider21]

So we should overhaul this tax section because of like 5-6 farms over past couple decades. Good plan :tu

[DarrinS]

RG sure loves OPM.

[RandomGuy]

RG sure loves OPM.

PDQ Bach, man

[sickdsm]

Odds are your farm is unlikely to trigger the tax.

That said: if you have spent millions of dollars buying equipment and seeds, but not done any tax planning, which is fucking cheap compared to your other expenses, your family deserves to lose the farm, and it is your own fault, 100%.

I'm not a tax guy, and I can think of about 3 different methods of transferring a farm to heirs that bypass this tax.

Translation: Game the system


Who said i haven't done any tax planning?

Changing the tax system is going to change the planning.

I incorporated. I have a team of tax lawyers on a subscription service. I meet with my family lawyer probably about once a year we end up discussing estates.


But please, patronize me some more.


The bottom line is the small ma and pa farmers that bou envisions don't plan. They end up dieing and the siblings sell the farm because there wasn't any planning done.

[sickdsm]

Odds are your farm is unlikely to trigger the tax.

That said: if you have spent millions of dollars buying equipment and seeds, but not done any tax planning, which is fucking cheap compared to your other expenses, your family deserves to lose the farm, and it is your own fault, 100%.

I'm not a tax guy, and I can think of about 3 different methods of transferring a farm to heirs that bypass this tax.

Stay out of the casino's. I'm 37 and I'm halfway there. The AVERAGE age of a farmer is about 60. I would be well over a 10 million threshold by then, assuming i don't inherit a dime. I can think of 5 younger guys that are in a similar position within a 30 mile radius. They all busted their ass, took lots of risks. To farm 1500 acres, which is borderline on being able to make a living without another full time job in town, you'll probably need a couple million $ in equipment and infrastructure. That's assuming you don't own an acre of farmland. Even with those big $$$, you'll still live a harder life than the 40 hr guy in town.


Capitol gains has sold many a family farm.

[spurraider21]

The bottom line is the small ma and pa farmers that bou envisions don't plan. They end up dieing and the siblings sell the farm because there wasn't any planning done.
Except the estate tax has a nice 11 million dollar exemption, so small ma and pa farmers aren't hit by it. Hence the miniscule number of farms that are actually sold/closed due to estate taxes. Just more talking points to convince the every man that cutting the inheritance tax has THEIR best interests in mind.

:cry but the small farms!:cry

[dabom]

Except the estate tax has a nice 11 million dollar exemption, so small ma and pa farmers aren't hit by it. Hence the miniscule number of farms that are actually sold/closed due to estate taxes. Just more talking points to convince the every man that cutting the inheritance tax has THEIR best interests in mind.

:cry but the small farms!:cry

Farmers get a lot of money from the government. They usually get more benefits than a typical person on welfare. :lol

[DarrinS]

Who does the inheritance tax benefit?

[dabom]

Who does the inheritance tax benefit?

Not the Rich.

[DarrinS]

Not the Rich.


Ah, there it is.

[sickdsm]

Except the estate tax has a nice 11 million dollar exemption, so small ma and pa farmers aren't hit by it. Hence the miniscule number of farms that are actually sold/closed due to estate taxes. Just more talking points to convince the every man that cutting the inheritance tax has THEIR best interests in mind.

:cry but the small farms!:cry

Small ma and pa farmers are at the end of the life cylcle. That farm is getting sold or rented out when they retire. Economy of scale makes it not profitable. lol at convincing yourself that since they are selling out because of the capital gains, that the estate tax is a non issue.


Those farms are nipped in the bud well before they're relevant to this issue. Tax planning in general? Yes.

[dabom]

Ah, there it is.

What is?

[spurraider21]

Small ma and pa farmers are at the end of the life cylcle. That farm is getting sold or rented out when they retire. Economy of scale makes it not profitable. lol at convincing yourself that since they are selling out because of the capital gains, that the estate tax is a non issue.


Those farms are nipped in the bud well before they're relevant to this issue. Tax planning in general? Yes.
Wat? Estate tax is objectively not an issue unless their farm is worth substantially more than 11 million.

[sickdsm]

Farmers get a lot of money from the government. They usually get more benefits than a typical person on welfare. :lol

Farmers are the backbone of a rural economy. They pay LOTS more in then they get back, mainly on a state level. The food stamp (welfare) and CRP (hunter's welfare) are the major part of the farm bill. Lots of rural states, like SD and Nebraska are hurting bad because of farmer income. A 1500 acre farm in NE nebraska pays about $150k in property taxes per year. The money i get from the federal govt, which i am required to be signed up for, is pocket change. I'm all for complete elimination of all Govt subsidies in farming. Until then i can't compete, much like if one NBA team decided the salary cap was too high and decided to cap it at half. Its all about using the tools you have, like RG stated. There's a lot of restrictions tied to those funds.

[dabom]

Farmers are the backbone of a rural economy. They pay LOTS more in then they get back, mainly on a state level. The food stamp (welfare) and CRP (hunter's welfare) are the major part of the farm bill. Lots of rural states, like SD and Nebraska are hurting bad because of farmer income. A 1500 acre farm in NE nebraska pays about $150k in property taxes per year. The money i get from the federal govt, which i am required to be signed up for, is pocket change. I'm all for complete elimination of all Govt subsidies in farming. Until then i can't compete, much like if one NBA team decided the salary cap was too high and decided to cap it at half. Its all about using the tools you have, like RG stated. There's a lot of restrictions tied to those funds.

I just want people to stop screaming bloody mary when some people are on welfare. :lol

[sickdsm]

Wat? Estate tax is objectively not an issue unless their farm is worth substantially more than 11 million.

Capitol gains will destroy that farm way earlier, they don't have a chance at sniffing the estate tax. It's akin to worrying about infection after a poisonous snake bite, forgetting that you won't make it long enough to deal with that.

[DarrinS]

I just want people to stop screaming bloody mary when some people are on welfare. :lol

No problem with welfare if it’s temporary and not a lifestyle.

[dabom]

No problem with welfare if it’s temporary and not a lifestyle.

I agree. A couple years should be fine. Single moms can stay longer. No reduction in subsidies the more money you make. That's why people on welfare don't like to make more money for fear on losing benefits.

[sickdsm]

I just want people to stop screaming bloody mary when some people are on welfare. :lol

Most people have no problem with helping those who are trying to help themselves. People complain about welfare thinking about the ones doing nothing to further themselves. No one has a problem with the family trying hard getting a little to get by. Farmers in general work harder and longer hours than anyone, we're not parked on the couch waiting for the direct deposit.

I was that kid that people put the anonymous presents under the tree for. I didn't get any milk at home growing up because we got milk at school (free lunch). I wore donated used clothes. I was not allowed to go out for any sports (except wrestling since that was in winter and someone would drive us home) since we were expected to work all year long. I could go on. I don't have to do that to my kids. So your wildly mistaken if you think i'm some 1%'er, silver spoon, trash anyone getting some help GOP'er. I hate those that don't take advantage of the opportunity they have. I have no problem with help for those who work for it.

[dabom]

Most people have no problem with helping those who are trying to help themselves. People complain about welfare thinking about the ones doing nothing to further themselves. No one has a problem with the family trying hard getting a little to get by. Farmers in general work harder and longer hours than anyone, we're not parked on the couch waiting for the direct deposit.

I was that kid that people put the anonymous presents under the tree for. I didn't get any milk at home growing up because we got milk at school (free lunch). I wore donated used clothes. I was not allowed to go out for any sports (except wrestling since that was in winter and someone would drive us home) since we were expected to work all year long. I could go on. I don't have to do that to my kids. So your wildly mistaken if you think i'm some 1%'er, silver spoon, trash anyone getting some help GOP'er. I hate those that don't take advantage of the opportunity they have. I have no problem with help for those who work for it.

I don't think you're the one percenter. Whether you work hard or not, the government has been there to help you, and will continue to help you. To me, both are welfare. I just find it hypocritical that rural people don't see that.

[spurraider21]

Capitol gains will destroy that farm way earlier, they don't have a chance at sniffing the estate tax. It's akin to worrying about infection after a poisonous snake bite, forgetting that you won't make it long enough to deal with that.
Then go complain about that it the capital gains thread

[dabom]

Here's Warren Buffet talking about how his kids would make tons of money not doing shit for the rest of their lifes and their kid's kids. :lol

https://www.cnbc.com/2017/10/03/warren-buffett-thinks-its-a-mistake-to-eliminate-the-estate-tax.html

[sickdsm]

I don't think you're the one percenter. Whether you work hard or not, the government has been there to help you, and will continue to help you. To me, both are welfare. I just find it hypocritical that rural people don't see that.
Govt has helped all of everyone. I remember Newsweek or time had an article where they broke down what the average person received in benefits from the govt. They took various locations and various jobs and speed how much weeveryone was subsidized.. Everything from ordering online to owning a car.


You see the numbers paid out and think I live off the govt yet don't care that I pay a lot more in then I get back. All in the effort to insure a cheap abundant supply of food for the urban masses.

[sickdsm]

Here's Warren Buffet talking about how his kids would make tons of money not doing shit for the rest of their lifes and their kid's kids. :lol

https://www.cnbc.com/2017/10/03/warren-buffett-thinks-its-a-mistake-to-eliminate-the-estate-tax.html

Wonder if he was barely on the other end of the spectrum if his attitude would be different?

[sickdsm]

Then go complain about that it the capital gains thread
Hard to concentrate on two related taxes at the same time?

[RandomGuy]

Stay out of the casino's. I'm 37 and I'm halfway there. The AVERAGE age of a farmer is about 60. I would be well over a 10 million threshold by then, assuming i don't inherit a dime. I can think of 5 younger guys that are in a similar position within a 30 mile radius. They all busted their ass, took lots of risks. To farm 1500 acres, which is borderline on being able to make a living without another full time job in town, you'll probably need a couple million $ in equipment and infrastructure. That's assuming you don't own an acre of farmland. Even with those big $$$, you'll still live a harder life than the 40 hr guy in town.

Capitol gains has sold many a family farm.

So your farm won't trigger the tax unless it passes the floor threshold, and you have years to implement a strategy that avoids it, if you spent a few thousand ONCE on getting a decent tax strategy that can be implemented gradually over time.

"estate tax kills family farms" is a myth.

[RandomGuy]

Translation: Game the system

Who said i haven't done any tax planning?

Changing the tax system is going to change the planning.

I incorporated. I have a team of tax lawyers on a subscription service. I meet with my family lawyer probably about once a year we end up discussing estates.

But please, patronize me some more.

The bottom line is the small ma and pa farmers that bou envisions don't plan. They end up dieing and the siblings sell the farm because there wasn't any planning done.

Go back and read what I said. I didn't say you hadn't planned. I said you were an idiot if you didn't. Good for you that you have.

People who actually study this say those ma and pa farmers are exempt from the tax (see the data from the study), and all your statement does is reinforce my statement that shitty planning is what kills family farms, not the tax. I have done bookkeeping for enough small businesses to know why they fail.

Finding strategies within the tax law to minimize tax is merely good business planning, just like avoiding any unnecessary expense.

[RandomGuy]

Most people have no problem with helping those who are trying to help themselves. People complain about welfare thinking about the ones doing nothing to further themselves. No one has a problem with the family trying hard getting a little to get by. Farmers in general work harder and longer hours than anyone, we're not parked on the couch waiting for the direct deposit.

I was that kid that people put the anonymous presents under the tree for. I didn't get any milk at home growing up because we got milk at school (free lunch). I wore donated used clothes. I was not allowed to go out for any sports (except wrestling since that was in winter and someone would drive us home) since we were expected to work all year long. I could go on. I don't have to do that to my kids. So your wildly mistaken if you think i'm some 1%'er, silver spoon, trash anyone getting some help GOP'er. I hate those that don't take advantage of the opportunity they have. I have no problem with help for those who work for it.

The GOP doesn't really do any of that. They actively betray working people every chance they get in favor of the richest people in the country these days, and the current tax plan makes that crystal clear.

[boutons_deux]

...

[Spurtacular]

:cry Don't take muh welfare. :cry

:lmao

[dabom]

:lmao

Do you have any thoughts on anything brah?

[da_suns_fan]

I dont care if its fair or not.

Wars cost money.

Was true in the days of King Richard and is true today. The government has some huge wars bills to pay.

[Spurtacular]

I dont care if its fair or not.

Wars cost money.

Was true in the days of King Richard and is true today. The government has some huge wars bills to pay.

We could still do the wars without it, tbh.

[Spurtacular]

Such levies pit two vital liberal principles against each other. One is that governments should leave people to dispose of their wealth as they see fit. The other is that a permanent, hereditary elite makes a society unhealthy and unfair. How to choose between them?

When the heirs loom
Some people argue for a punitive inheritance tax. They start with the negative argument that dead people no longer enjoy the general freedom to disburse their wealth as they wish—as the dead have no rights. How could they, when they are not affected one way or the other by what happens in the world?

That does not ring true. The logic would be to abrogate even the most modest of wills. But inheritances are deeply personal and the biggest single gift that many give to causes they believe in and loved ones they may have cherished. Many (living) people would feel wronged if they could not provide for their children. If anything, as the expression of their last wishes, bequests carry more weight than their passing fancies do.

The positive argument for steep inheritance taxes is that they promote fairness and equality. Heirs have rarely done anything to deserve the money that comes their way. Liberals, from John Stuart Mill to Theodore Roosevelt, thought that needed correcting. Roosevelt, who warned that letting huge fortunes pass across generations was “of great and genuine detriment to the community at large”, would doubtless be aghast at the situation today. Annual flows of inheritance in France have tripled as a proportion of GDP since the 1950s. Half of Europe’s billionaires have inherited their wealth, and their number seems to be rising.

However, in 2017, it is not clear exactly how decisive a role inheritance plays in the entrenchment of the hereditary elite. Data from Britain suggest that people tend not to lose their parents before they reach the age of 50. In rich countries the advantages that wealthy parents pass to their offspring begin with the sorting mechanism of marriage, in which elites increasingly pair up with elites (see article). They continue with the benefits of education, social capital and lavish gifts, not in the deeds to the ancestral pile.
Even if the link between inheritance-tax rates and inequality were clear, wealth can pay for a good tax lawyer. In the century since Roosevelt, Sweden and other high-taxers discovered that if governments impose a steep enough duty, the rich will find ways to avoid it. The trusts they create as a result can last even longer than the three generations it takes for family fortunes to go from clogs to clogs.

Armed with such arguments, some leap to the other extreme, proposing, as the American tax reform does, that there should be no inheritance tax at all. Not only is it right to let people hand their private property to their children, they say, but also bequests are often the fruits of labour that has already been taxed. And a large inheritance-tax bill is destructive, because it can cause the dismemberment of family firms and farms, and force the sale of ancestral homes.

Yet every tax is an intrusion by the state. If avoiding double taxation were a requirement of good policy, then governments would need to abolish sales taxes, which are paid out of taxed income. The risks that heirs will be forced to sell homes and firms can be mitigated by allowing them to pay the duties gradually, from cashflow rather than by fire-sales.

In fact, people who are against tax in general ought to be less hostile to inheritance taxes than other sorts. However disliked they are, they are some of the least distorting. Unlike income taxes, they do not destroy the incentive to work—whereas research suggests that a single person who inherits an amount above $150,000 is four times more likely to leave the labour force than one who inherits less than $25,000. Unlike capital-gains taxes, heavier estate taxes do not seem to dissuade saving or investment. Unlike sales taxes, they are progressive. To the extent that a higher inheritance tax can fund cuts to all other taxes, the system can be more efficient.

Transfer market
The right approach is to strike a balance between the two extremes. The precise rate will vary from country to country. But three design principles stand out. First, target the wealthy; that means taxing inheritors rather than estates and setting a meaningful exemption threshold. Second, keep it simple. Close loopholes for those who are caught in the net by setting a flat rate and by giving people a lifetime allowance for bequests; set the rate high enough to raise significant sums, but not so high that it attracts massive avoidance. Third, with the fiscal headroom generated by higher inheritance tax, reduce other taxes, lightening the load for most people.

A sensible discussion is hard when inheritance taxes prompt such a visceral reaction. But their erosion has attracted too little debate. A fair and efficient tax system would seek to include inheritance taxes, not eliminate them.

https://www.economist.com/news/leaders/21731626-case-taxing-inherited-assets-strong-hated-tax-fair-one

:lmao Not quoting someone else's work.
:lmao Too lazy to come up with your own OP.

[RandomGuy]

[smiley][derision]
[smiley][derision]

[yawn]