Estate Tax

[RandomGuy]

This may have been touched upon by others, but I figured I'd start a new dialogue with you RG, if I may.

Taxes, in my mind, should be as voluntary as possible, and should serve a specific purpose. The estate tax, to me, is deplorable. If you earn a certain amount in a lifetime, you are taxed on that. Cool beans. Then you decide to hand that off to your offspring, and your offspring is taxed again on that money.

But if it was taxed originally as a source of income, where does the justification for taxing the recipient again? He did not make that income, it was gifted to him. If I gift something to my wife for Christmas, the gov't doesn't make me give 8% of the gift when I hand it over. If I give my child a toy, I don't hand over an extra 8% when I give it to him. (etc etc)

Stepping in and demanding a "fair share" of what a person wishes to give to his parents also strikes me as cold. The passing of a loved one is obviously an intimate affair, and the gov't claiming a percentage of money saved for loved ones leaves me with a bad feeling. (I know this is based on an "ewww" feeling and thereby isn't the strongest argument, but felt I needed to air my biases.)

This goes back to the entire notion of an income tax, and the notion of "economic gain".

I spelled this out earlier in the thread, but re-visiting it seems relevant.

If I buy a loaf a bread from the baker, she pays income tax on the profit she makes from that bread, and all the other goods he sells. She takes what is left, then decides to buy a new oven. She gives money to an oven manufacturer, who presumedly makes a profit from that sale.

Should then the oven manufacturer not be taxed on its profit, because technically, the bakers profits were already taxed?

Or should then the manufacturer be taxed on its profits, on the theory that its income is seperate from the baker's?

To be honest, there is also an element of "screw the rich" in the estate tax.

I will present some of Teddy Roosevelt's speeches at the time when he was arguing for such a tax:

It is important to this people to grapple with the problems connected with the amassing of enormous fortunes, and the use of those fortunes, both corporate and individual, in business. We should discriminate in the sharpest way between fortunes well-won and fortunes ill-won; between those gained as an incident to performing great services to the community as a whole, and those gained in evil fashion by keeping just within the limits of mere law-honesty.

Of course no amount of charity in spending such fortunes in any way compensates for misconduct in making them. As a matter of personal conviction, and without pretending to discuss the details or formulate the system, I feel that we shall ultimately have to consider the adoption of some such scheme as that of a progressive tax on all fortunes, beyond a certain amount either given in life or devised or bequeathed upon death to any individual — a tax so framed as to put it out of the power of the owner of one of these enormous fortunes to hand on more than a certain amount to any one individual; the tax, of course, to be imposed by the National and not the State Government.

Such taxation should, of course, be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits.

A heavy progressive tax upon a very large fortune is in no way such a tax upon thrift or industry as a like would be on a small fortune. No advantage comes either to the country as a whole or to the individuals inheriting the money by permitting the transmission in their entirety of the enormous fortunes which would be affected by such a tax; and as an incident to its function of revenue raising, such a tax would help to preserve a measurable equality of opportunity for the people of the generations growing to manhood.

We have not the slightest sympathy with that socialistic idea which would try to put laziness, thriftlessness and inefficiency on a par with industry, thrift and efficiency; which would strive to break up not merely private property, but what is far more important, the home, the chief prop upon which our whole civilization stands.

Such a theory, if ever adopted, would mean the ruin of the entire country--a ruin which would bear heaviest upon the weakest, upon those least able to shift for themselves. But proposals for legislation such as this herein advocated are directly opposed to this class of socialistic theories.

Our aim is to recognize what Lincoln pointed out: The fact that there are some respects in which men are obviously not equal; but also to insist that there should be an equality of self-respect and of mutual respect, an equality of rights before the law, and at least an approximate equality in the conditions under which each man obtains the chance to show the stuff that is in him when compared to hisfellows.

http://www.tax.org/Museum/1901-1932.htm

I don't entirely disagree with that.

I think that at some point we have to ask ourselves, does one human being really *need* to have billions of dollars?

Is the ac ulation of vast wealth even moral?

I don't think so. You can't take it with you, and you do your children no favors in giving them something they have usually done little to earn.

If you have the case of a family business, and someone is working within the company, it is just as easy to give them stock options that bypass this anyways. Good business and succession planning can bypass the estate tax and easily pass on a larger family business to ones children. That in and of itself nullifies the "family business" argument.

[RandomGuy]

I'm not familiar with the specifics of the US tax system, but my thoughts are:

1) Isnt it easy to skirt around these regulations? For example, my wife's father passed away recently, he was quite wealthy for local standards (15M USD). he had 6 kids and his wife was alive. before dying, he basically bought houses, businesses, mutual funds, pensions for everyone and thus avoided inheritance taxes. Ok, if he had died unexpectedly there would have been taxes to pay, as it was IIRC the family payed about $800 of inheritance tax.

2) As life expectancy rises, and given that wealthy people have better access to medicine, as well as better access to lawyers and accountants, what happens when those really wealthy people live for 150, 180 years, and have no incentive to pass the wealth on to the next 3-4-5 generations under them? it seems to me the inheritance tax is to encourage old people to spend their money, on themselves or others, rather than sit on it. That doesnt seem like a bad thing to me

It is fairly easy if you do some good planning, as I have noted.
Such transactions in the US are generally subject to gift taxes if they are beyond a certain threshold, $13,000 per person per year in 2009.
http://www.irs.gov/businesses/small/...108139,00.html

For reference here is a quick FAQ about the estate tax at the US tax authority (Internal Revenue Service or IRS) website:
http://www.irs.gov/businesses/small/...108143,00.html

[TeyshaBlue]

This goes back to the entire notion of an income tax, and the notion of "economic gain".

I spelled this out earlier in the thread, but re-visiting it seems relevant.

If I buy a loaf a bread from the baker, she pays income tax on the profit she makes from that bread, and all the other goods he sells. She takes what is left, then decides to buy a new oven. She gives money to an oven manufacturer, who presumedly makes a profit from that sale.

Should then the oven manufacturer not be taxed on its profit, because technically, the bakers profits were already taxed?

Or should then the manufacturer be taxed on its profits, on the theory that its income is seperate from the baker's?

To be honest, there is also an element of "screw the rich" in the estate tax.

I will present some of Teddy Roosevelt's speeches at the time when he was arguing for such a tax:




http://www.tax.org/Museum/1901-1932.htm

I don't entirely disagree with that.

I think that at some point we have to ask ourselves, does one human being really *need* to have billions of dollars?

Is the ac ulation of vast wealth even moral?

I don't think so. You can't take it with you, and you do your children no favors in giving them something they have usually done little to earn.

If you have the case of a family business, and someone is working within the company, it is just as easy to give them stock options that bypass this anyways. Good business and succession planning can bypass the estate tax and easily pass on a larger family business to ones children. That in and of itself nullifies the "family business" argument.

It's the very insertion of qualifiers like "need" that grenade the debate from the get-go. "Need" is completely subjective and maybe even inaccurate.
What is today's metric for "Needs Met"? Because once that arbitrary line is crossed, then all dollars ac ulated are superfluous as is implied by the term "needs". It's practically a recursive argument at that point.

[RandomGuy]

It's the very insertion of qualifiers like "need" that grenade the debate from the get-go. "Need" is completely subjective and maybe even inaccurate.
What is today's metric for "Needs Met"? Because once that arbitrary line is crossed, then all dollars ac ulated are superfluous as is implied by the term "needs". It's practically a recursive argument at that point.

That is actually what a progressive tax rate is based on, as well as the official poverty level.

The economic concept of "marginal income" comes from thinking on this subject, i.e. at what income level is it possible to buy a minimum level of food, shelter, clothes, transportation?

Past this point, any extra income just buys better food, clothes, etc.

This is the point at which income taxes should be applied.

That isn't to say that taxes should be completely 100% confiscatory at that point. That is extremely counterproductive and no one advocates that.

At some point, and we have touched on morality here via bible-quote pissing contests, one has to ask "how much is too much?" and be serious about it.

Most of the taxes pushed by progressives and ultimately passed around the turn of the 1900's were done so purely on the moral basis of some things that the bible says about wealth.

WC et al. may not like that, but I would simply ask anyone to dig up the actual arguments of the day, and tell me that "liberals" of the time were "Godless". Far from it. They were some of the more devout from what I have read.

Systems of morality, and concepts of equality, fairness, and so forth underlie a lot of the tax system, and as such are actually fairly important.

[TeyshaBlue]

Systems of morality, and concepts of equality, fairness, and so forth underlie a lot of the tax system, and as such are actually fairly important.

Can't argue that. Probably explains why our tax system ranks only slightly ahead of current Republicans in popularity.

We're real happy with our tax system in America.

[LnGrrrR]

If I buy a loaf a bread from the baker, she pays income tax on the profit she makes from that bread, and all the other goods he sells. She takes what is left, then decides to buy a new oven. She gives money to an oven manufacturer, who presumedly makes a profit from that sale.

Should then the oven manufacturer not be taxed on its profit, because technically, the bakers profits were already taxed?

Or should then the manufacturer be taxed on its profits, on the theory that its income is seperate from the baker's?

Yes, but those are transactions entered by different parties, and as you stated, you can't obviously track each dollar for once-taxation.

The other issue I see with that is that we don't charge taxes on "added utility" alone. As I said before, when I give a gift to my wife, that increases her "profit". I don't get taxed on that again, right? Would you agree that, in essence, inheriting money is rather analagous to inheriting a gift?

I think that at some point we have to ask ourselves, does one human being really *need* to have billions of dollars?

Is the ac ulation of vast wealth even moral?

There's a lot of things Americans don't "need" though. Does one human being need to eat so much that they're overweight? The "one person doesn't need X" argument is not a strong one, I find.

As far as ac ulation of vast wealth being moral, I don't think so. If one earned that wealth fairly, of course. Now if someone chooses not to donate/help/etc their money, we may think of that person as a jerk, but it doesn't mean they are immoral.

I don't think so. You can't take it with you, and you do your children no favors in giving them something they have usually done little to earn.

But that's a personal opinion. Sorry RG, I don't find it particularly strong. As you pointed out yourself, Paris Hilton came from a rich family but made her own cash.

If you have the case of a family business, and someone is working within the company, it is just as easy to give them stock options that bypass this anyways. Good business and succession planning can bypass the estate tax and easily pass on a larger family business to ones children. That in and of itself nullifies the "family business" argument.

Right, but the point isn't "How easy is this law to bypass" but rather "how moral/correct/useful is this law"?

[LnGrrrR]

Can't argue that. Probably explains why our tax system ranks only slightly ahead of current Republicans in popularity.

We're real happy with our tax system in America.

To be fair, I'd be surprised if there was high approval for any program in which your money is taken away

[LnGrrrR]

That is actually what a progressive tax rate is based on, as well as the official poverty level.

The economic concept of "marginal income" comes from thinking on this subject, i.e. at what income level is it possible to buy a minimum level of food, shelter, clothes, transportation?

Past this point, any extra income just buys better food, clothes, etc.

This is the point at which income taxes should be applied.

Totally agree, which is why a flat tax isn't exactly fair. Obviously, 10% of 30,000 (300) means alot more to that person than 10% of 1,000,000 (10,000) does, because as you rightfully pointed out, the first example most likely cuts into a person's necessities.

At some point, and we have touched on morality here via bible-quote pissing contests, one has to ask "how much is too much?" and be serious about it.

I agree here, I just don't think the estate tax is morally acceptable. Income taxes are a different story.

[TeyshaBlue]

As far as ac ulation of vast wealth being moral, I don't think so. If one earned that wealth fairly, of course. Now if someone chooses not to donate/help/etc their money, we may think of that person as a jerk, but it doesn't mean they are immoral.

Ac ulation of wealth has no intristic moral values to assign to it. The methodology behind the ac ulation is fair game. But to predicate a position on the simple belief that ac ulation itself is immoral poisons the debate. Might as well discuss the morality of living to be 100 years old or breathing more air than one needs.

[TeyshaBlue]

To be fair, I'd be surprised if there was high approval for any program in which your money is taken away

[LnGrrrR]

Ac ulation of wealth has no intristic moral values to assign to it. The methodology behind the ac ulation is fair game. But to predicate a position on the simple belief that ac ulation itself is immoral poisons the debate. Might as well discuss the morality of living to be 100 years old or breathing more air than one needs.

Well put. To frame it another way, some people think that it's "immoral" to have children, because each child uses up resources, contributes to pollution, etc etc. (Fine for the person themselves, but if they start advocating it for the world at large... well they're pretty wacko.)

[CosmicCowboy]

Totally agree, which is why a flat tax isn't exactly fair. Obviously, 10% of 30,000 (300) means alot more to that person than 10% of 1,000,000 (10,000) does, because as you rightfully pointed out, the first example most likely cuts into a person's necessities.

Clearly math isn't a strong suit...

[Th'Pusher]

This may have been touched upon by others, but I figured I'd start a new dialogue with you RG, if I may.

Taxes, in my mind, should be as voluntary as possible, and should serve a specific purpose. The estate tax, to me, is deplorable. If you earn a certain amount in a lifetime, you are taxed on that. Cool beans. Then you decide to hand that off to your offspring, and your offspring is taxed again on that money.

But if it was taxed originally as a source of income, where does the justification for taxing the recipient again? He did not make that income, it was gifted to him. If I gift something to my wife for Christmas, the gov't doesn't make me give 8% of the gift when I hand it over. If I give my child a toy, I don't hand over an extra 8% when I give it to him. (etc etc)

Stepping in and demanding a "fair share" of what a person wishes to give to his parents also strikes me as cold. The passing of a loved one is obviously an intimate affair, and the gov't claiming a percentage of money saved for loved ones leaves me with a bad feeling. (I know this is based on an "ewww" feeling and thereby isn't the strongest argument, but felt I needed to air my biases.)

But gifts cash gifts over $13k annually are in fact taxed. Do you take issue with the gift tax as well?

[LnGrrrR]

Clearly math isn't a strong suit...

Ha!

<---re ed

Obviously, I meant 3,000/100,000.

[LnGrrrR]

But gifts cash gifts over $13k annually are in fact taxed. Do you take issue with the gift tax as well?

Yes, I think that the "gift tax" touches along the same lines, although I don't find it as unacceptable from a "moral" standpoint because I think that the passing-down of one's life savings to their heirs involves some degree of "sacred-ness", if you will. (Again, I know that's not a strong argument.)

[RandomGuy]

if someone chooses not to donate/help/etc their money, we may think of that person as a jerk, but it doesn't mean they are immoral.

In the most absolute sense, I think it does.

In a world where no small number of children and families literally live on garbage dumps, millions of children starve to death every year, and there are more people in crushing poverty in the world than in all of the US, the US spends more money on PETS than it does food aid, I think something is a tad out of kilter.

Christina-Aguilera-Shoe-Closet1.jpg


Living in a Landfill: Cambodia > IMG_0827.jpg


Is it "serial killer" type of immorality? No.
Do I give all of MY money to charity? No.

We don't want to think that women who spend more on shoes than the average person in the US earns in a year is immoral, because at some point we all aspire to that level of wealth, in our worship of materiality.

People don't like to think their value systems are immoral.

[RandomGuy]

•2007: $41.2 billion

http://exoticpets.about.com/cs/resou.../petstates.htm

Real GDP (2009 est.): $23.7 billion.

\

In Fiscal Year (FY) 2009, the
United States provided more than $2.9 billion of food assistance to developing countries

http://www.fas.usda.gov/fy09ifar.pdf

9,330,596,000

http://www.usaid.gov/policy/budget/cbj2007/summary.html

There is a reason the US is resented a bit in some circles, and I don't think that is entirely without merit.

[LnGrrrR]

In a world where no small number of children and families literally live on garbage dumps, millions of children starve to death every year, and there are more people in crushing poverty in the world than in all of the US, the US spends more money on PETS than it does food aid, I think something is a tad out of kilter.

That's a slippery slope. Technically, you probably don't need the internet you're using to post this message, or a cell phone, or any number of items. Should these "luxuries" make you immoral? What's the tipping point?

I would say that it IS moral to do something with your wealth, but it is not IMMORAL to not do so. It's not an all-or-nothing thing.

And most people that do have that much cash are probably donating a good deal of cash to charities anyways.

For instance, took me a few seconds to find these articles:

http://crushable.com/entertainment/g...pport-charity/

http://justjared.buzznet.com/2010/05...ew-ambassador/

Does this mean she's now "moral"? Even though she has a lot of shoes?

[TeyshaBlue]

In the most absolute sense, I think it does.

In a world where no small number of children and families literally live on garbage dumps, millions of children starve to death every year, and there are more people in crushing poverty in the world than in all of the US, the US spends more money on PETS than it does food aid, I think something is a tad out of kilter.

Christina-Aguilera-Shoe-Closet1.jpg


Living in a Landfill: Cambodia > IMG_0827.jpg


Is it "serial killer" type of immorality? No.
Do I give all of MY money to charity? No.

We don't want to think that women who spend more on shoes than the average person in the US earns in a year is immoral, because at some point we all aspire to that level of wealth, in our worship of materiality.

People don't like to think their value systems are immoral.

Again, the simple ac ulation of wealth is neither moral nor immoral. If you want to extend beyond the ac ulation, then that is another matter entirely. Without separating that reduction from the initial premise, then it could be argued that virtually any ac ulation is immoral. Christina Aguilera, by dint of exceptional artistic talent, has ac ulated wealth. That she chooses to spend it on shoes is irrelevant if we do not know what her charitable contributions are. Let's say she has 20k worth of shoes but donates 2 million to charities. Is that ratio acceptable or is she immoral? Is her shoe collection : Avg. American Salary ratio, which is kinda strawish btw, really a metric for morality?
She donates more to charities than the average person in the US earns in a year. By that metric, she must be extremely moral.

[RandomGuy]

Yes, I think that the "gift tax" touches along the same lines, although I don't find it as unacceptable from a "moral" standpoint because I think that the passing-down of one's life savings to their heirs involves some degree of "sacred-ness", if you will. (Again, I know that's not a strong argument.)

An estate tax that exempts up to 5M from this fully allows for the vast majority of people to pass their wealth on.

There is no full exemption like that yet, but it is proposed.

I am not against passing on things to your kids, but I am opposed to dynastic wealth of people with more money than many small countries. I don't think that is in tune with what our country should be about.

[boutons_deux]

Don't think the rest of the world doesn't know American Imperialist Empire sucks down 25% of the world's oil for 5% of the world's population.

[LnGrrrR]

There is a reason the US is resented a bit in some circles, and I don't think that is entirely without merit.

Those with advantages are often resented by those without such advantages.

Let me put it this way; if I'm starving, a piece of bread is wonderful. If all my neighbors are eating goose liver though, I probably won't be as happy. It's all relative, and for good reason. I'm at a disadvantage in the mating game if I don't compete with my peers.

[LnGrrrR]

An estate tax that exempts up to 5M from this fully allows for the vast majority of people to pass their wealth on.

There is no full exemption like that yet, but it is proposed.

I am not against passing on things to your kids, but I am opposed to dynastic wealth of people with more money than many small countries. I don't think that is in tune with what our country should be about.

I would argue that the government confiscating some of the money that people have earned and wish to pass on to their kids doesn't sound very "American" to me.

And I don't agree with the idea that more money = ok to be taxed in this specific situation. Inheritance is inheritance to me, whether 10 bucks or 10 million.

[LnGrrrR]

RG, what do you think of people who say that having children is immoral? After all, each child does more to cause pollution/spend resources etc. Do you think that's immoral when we already have trouble feeding the poor?

[RandomGuy]

[Christina Aguilara] donates more to charities than the average person in the US earns in a year. By that metric, she must be extremely moral.

And Jesus sat over against the treasury, and beheld how the people cast money into the treasury: and many that were rich cast in much.
42And there came a certain poor widow, and she threw in two mites, which make a farthing.
43And he called unto him his disciples, and saith unto them, Verily I say unto you, That this poor widow hath cast more in, than all they which have cast into the treasury: 44For all they did cast in of their abundance; but she of her want did cast in all that she had, even all her living.

I speak in the most absolute of terms, and as I have pointed out, don't really live up to those ideals either.

As has been pointed out, once you have a certain amount of money beyond what is necessary to sustain life, you have more than hundreds of millions of people.

If you choose to value hundreds of pairs of shoes over human beings, when you could simply do with a few, that is immoral.

I would cast myself in with that. I could easily live a bit more simply, and donate or give more.

That doesn't mean I don't recognize my own immorality.