Gift and Estate Tax, a good thing?

Great Debates
21

Say I use the same money to pay an employee. Does Uncle Sam not have a claim on part of the transferred assets, as income tax?

The main argument I can see against removing taxes on gifts is the wide-open potential for abuse. XYZ Corp. could pay its CEO minimum wage, and then around Christmastime the board could give him an $18 million dollar “gift”. ('Tis the season, and all.)

As the estate tax goes, eliminating it would necessarily mean that services would have to be cut or taxes would have to be raised elsewhere, probably across the board. Try selling that to the average American as the trade-off for a tax cut that (after 2006, anyway), by definition, applies to millionaires.

Dr. J

22

That responsible weath web-site is a joke. Every opinion on the page is dripping with bias.

The above statement is rediculous on it’s face. The Estate Tax’s purpose is to diminish capital accumulation. That is what it does. To say that there is no empirical evidence that it is doing that doesn’t make sense.

And the next sentance implies that people with money are lazy and should be punished. :rolleyes:

23

Geez, I just hate those people who express biased opinions! :rolleyes: Anyway, if what you are trying to say is that they are an advocacy group with a certain point-of-view, then you are correct. But then, advocacy is also the intent of the people trotting out the various myths that Responsible Wealth is attempting to counter.

Well, this probably hinges on your definition of “capital accumulation”. I think you are being purposely (well, I hope purposely) obtuse here in your interpretation. The question is whether the tax is providing a significant disincentive for people to accumulate wealth. They are not claiming that people don’t succeed in keeping less of the wealth that they accumulate with the estate tax. But, the point is that the estate tax repealers are claiming that the estate tax hurts us all by making all those wealthy folks who are going to be subject to the tax when they die less productive in creating jobs and doing all those wonderful groovy things that we know they do. And, the answer is that there is apparently that there is no empirical evidence that this is the case.

No, what it implies is that if you are given enough money and material goods at a fairly young age to last a lifetime, then it does seem to breed a certain disincentive to actually go out and be productive. (This is, after all, something that conservatives take as an article of faith when it involves the meager amounts of money paid out to those on welfare. Apparently, they are much more dubious when it involves copious amounts transferred from one generation to another.) As a colleague of mine at work put it, giving your children a large inheritance is one of the cruelest things you can do to them.

24

Wha? Huh?

What fuckin’ country do we live in? Last I checked, our private property rights were supposed to be protected and respected. What fucking right does the gov’t have to horn in on my estate when I die? Just because it is over an arbitrary dollar figure, a huge tax is imposed? Total horseshit, and anyone who agrees with it is nuts. The only (political) basis for the tax is that the bar is set high enough for most people to support it, because most people realize that they will not leave estates of that size. So people support an unfair tax because it doesn’t affect them, justifying it by saying that the rich already have enough money. Insane!

It is a poor reflection of our society that there are huge sums of people that think this is a good idea.

25

Why, exactly, is anyone whom agrees that money should be able to be passed on unbounded through generations, instead of being at least used for things that benifit us all, both inspiring more to work as they don’t accumulate as much capital, and puts infastracture for others to work.

26

Debaser: Bias? Many rich people, the ones whose offspring benefit the most from a estate tax repeal, and including the members of Responsible Wealth, oppose the repeal of the tax, They made themselves millionaires. They do not an aristocracy as it is occuring in Britain, which could occur by the repeal of the tax. Bias? Their position goes against their own self-interest. Or are you one of those who admire the Kenny Lay types. Guys like him benefits the most from a repeal. Supporting people like him is the opposite of responsible wealth if I ever heard one

27

capacitor, how have you come to learn that the creators of the responsible wealth web site are millionaires? Cite?

I oppose the death tax. I do not admire Ken Lay. By bringing this up, you seem to be banging on the “rich people are evil” or “rich people should be punished” drum. The free market took care of Ken Lay. He will never work again, much less run a major corporation. He will probably end up going to jail, as well he should.

28

I guess you didn’t bother to read their site, did you?
who they are and some specific members

Um, There’s no such thing, never has been (in this country at least). So why even bring it up?

29

jshore, I don’t think I am being obtuse with the “diminish capital appreciation” comments I made.

What is your definition of “capital appreciation”?

The estate tax diminishes, or decreases, or makes less, the amount of capital that families accumulate. To say that the estate tax doesn’t diminish capital appreciation is false.

jshore said…
But, the point is that the estate tax repealers are claiming that the estate tax hurts us all by making all those wealthy folks who are going to be subject to the tax when they die less productive in creating jobs and doing all those wonderful groovy things that we know they do.

The responsible wealth web site that you quoted from did not say this. What they said was

“Fact: There is no hard empirical evidence that U.S. capital accumulation has been held back by the Estate Tax.”

When the estate tax takes a dollar out of someone’s estate they have just “held back” the U.S. capital accumulation by one dollar. It looks like this isn’t a fact at all! :eek:

*jshore said…
No, what it implies is that if you are given enough money and material goods at a fairly young age to last a lifetime, then it does seem to breed a certain disincentive to actually go out and be productive. *

This is what it really all comes down to. Those who approve of the estate tax feel money is bad and rich people are lazy. If we were to dig up stats on this what would we find? Do you think that people who inherit large estates are less likely to work for a living, get college and higher degrees, start new businesses? I doubt it. In fact, I would argue that the money passed on the them by their parents puts them in the postition to do all of these things.

30

Ahh, the’re limosine liberals. BTW, that link claims they are in the top 5% of income in the us. According to this site an income of $132,000 puts someone in the top 5% of U.S. incomes. Not quite a millionaires, are they.

Well, it’s a tax placed on you when you die. Sounds like a death tax to me.

31

I am not going to crunch any numbers here but bring up a philisophical point.

Who owns the wealth that a person creates?

The current system, and those who oppose killing the death/estate tax and gift tax, seem to think that poor-average people can own what they earn up to a certain point. At the same time, all those earn more than the ‘government limit’ do not have the right to decide where the money that is over the limit should go.

That is just wrong. If you earn it you should be able to distribute it in any way you see fit. When someone dies there is a thing called a ‘Will’ that outlines the persons wishes for where the money should go.

The government taxing a dead persons money is nothing more than searching a dead mans pocket for change. The government did not earn the money. The government is stealing from a dead person.

For those who argue that the relatives of the person who created the money don’t deserve it are missing a very big point. The only person who can decide who deserves the money is the person who earned it. The government didn’t make the money nor did the homeless.

Wealth is earned, not given.

Slee

32

Well, I suppose we could take a poll here and see how many people think that Responsible Wealth meant their statement in a way that is essentially self-contradictory and how many meant it in the way the nearly everyone who is familiar with the estate tax debate discusses the issue. [I.e., does the estate tax make the rich who would accumulate wealth subject to the estate tax less productive by reducing their incentive to do this?]

(And, by the way, unless the government burns the dollar that they take from the estate, it does not follow that taking a dollar out of that estate reduces U.S. capital accumulation by one dollar.)

The question is not whether they are inherently bad or lazy people or less likely than the general population to do all those groovy things. The question is whether having a guaranteed luxurious lifestyle for life reduces their incentive to be productive over, say, having all the basic advantages that come from being born into a wealthy family (good education, lots of creature comforts, …) but maybe not such gobs of money that it would be hard for them to spend it all if they tried.

In other words, this question is one that gets decided on the margin…Does an additional dollar of inheritance money given to someone who is already very well off cause him to be more or less productive. I don’t know the answer personally, but Responsible Wealth’s claim that there is evidence that it makes him less productive does not strike me as unlikely.

Finally, I disagree with you that this is what the issue all comes down to anyway. Personally, I could pretty much care less if giving people a large inheritance turns them into lazy oafs or not. The point of that argument is really just to poke some obvious holes in the supply side mumbo-jumbo that tells us that if we just give more tax breaks to the rich, then everybody benefits.

What the estate tax debate really comes down to are issues of basic fairness in how we structure our society and how we divide up the benefits and debts of our common enterprise, and whether we believe in some assemblance of equal (well…not too vastly unequal) opportunity or whether we believe that it is hunky-dory for people’s station in life to be largely determined by the wealth of the parents who they are born to.

sleestak, yes, we all understand the argument completely from the point-of-view of the dead-and-rotting person. But, the point is that this is not the only … or arguably, even the most relevant, point-of-view of the situation.

And, by the way, as I have noted in other threads, this idea that people are entitled to keep every cent that they “earn” is ludicrous in the extreme. Our society is a collective enterprise and noone earns what they earn in a vacuum. They make use of the various benefits that society provides to them. Trying to figure out exactly how much each person puts in to the enterprise and how much each extracts (in terms of using collective resources) is extremely difficult…dare say, impossible. So, let’s get rid of simplistic assumptions like this.

33

During the last big war the message was “taxes to beat the axis” now we have “Party on” from the current administration.

Estate Tax opponents ignore the cost of security of the land that preserves (or tries, I don’t forget 9/11) the peace that allowed that wealth to be acquired. The bottom line is that once that money is not collected, it has to come from people who can afford it the least. Or I should say: from people who don’t own any of this land of ours.

But once we realize that Taxes are based on economic transactions, inheriting money is as much of a transaction as receiving a wage.

IMO conservatives are right, up to a point: Wealth is earned, not given. And when that happens, the one who receives such a gift should get taxed. (With some exceptions of course).
This opinion from Frank Weber at American politics hit the nail in the head IMO:
http://www.americanpolitics.com/20020612estatetax.html

34

There is no tax placed on you when you die. If you think there is then you are don’t know enough to be involved in this conversation. A death tax would be ludicrous and uninforceable. how would they make you pay after you were dead? put you in jail?. :rolleyes:

35

Only the little people are to pay for the massive increase in the defense budget. Let those who have more to lose keep more of what they have, and stick it to the working class. Ahh, a good ol’ Repiblican campaign slogan.

The American people in general have not favored a tax cut, especially one exclusively for the rich, for the past three years, while fiscal responsibility is the name of the game. Tirades aside, the rich should contribute a little more for defense.

36

And who decides the dollar amount that seperates the “luxurious lifestyle for life” crowd from the “being born into a wealthy family” crowd? The federal government. And we taxpayers are supposed to expect that this line seperating the luxurious lifestyle folks who pay the tax will be raised yearly due to inflation, right?

I see a very slippery slope here. Having a household income of over $70,000 or so will put you in the “super rich, and deserve to be punished” category with many liberal politicians already. After 20 years of inflation and a couple of estate tax increases, and I can picture everyone being allowed to give $100,000 or so to their children and the rest gets gobbled up.

But, whether they take all of your money or just $1 of it, this tax is plain wrong. thermalribbon hit the nail on the head earlier when he pointed out that people support this unfair tax only because they know it won’t affect them and it punishes “the rich”.

37

This is a strawman. The propensity to work and produce may be reduced, but what about the corresponding increase in the ability to invest and purchase? People with large amounts of capital don’t simply sit around naked in piles of it. That money is invested in, or even simply spent on, things that generate jobs and income for others. Granted, the same things, in theory, happen when the government spends tax dollars, but the inherent inefficiencies of government spending dilute those dollars in a fashion foreign to the private market sector. Giving it to the government simply means you are paying someone else to spend, or give away, your money.

And going way back to the top of this thread, jshore has said:

Herein lies the problem. The government’s need for money. Curtail that voracious raptor by the lousy 1¾% of revenue to the federal government the estate tax provides, and the entire question becomes a non-issue. And sure, the estate tax is a “painless way” for the government to raise revenue. As said, they’re simply taking from the dead guy’s pocket. What’s more painless than that? Not even taking candy from the mouths of babes. I know some of you are arguing that the estate tax is not a death tax, but more of an income tax. Perhaps that’s true, but the trigger for collecting this revenue is still the death of an individual and the taxes are paid out of the decendent’s assets prior to the heirs receiving them. If it were a true income tax, the heirs would be filing this on their 1040’s.

So why don’t we do just that. Call it what it is, income. And tax the heirs at whatever marginal rate happens to in effect at the time on their 1040. This would accomplish a number of things:
[ul]
[li] Reduce the government’s bite considerably, from that, what was it 55%? up there, to, at most, whatever the top marginal rate happens to be[/li][li] Streamline the procedures used to collect and enforce this tax, and[/li][li] Remove the objection to a “death tax.”[/li][/ul]

38

Define “little people” and “working class”. The poorest half of people in this country already pay no tax at all. Who is it that is suffering so? I would argue that it’s the software engineer or middle manager who pays %50 of his income in taxes every year.

Lets ask 10 people on the street if they favor a tax cut. I am sure that they would all say they prefer the feds take more out of their check. :rolleyes:

The “rich” already contribute “a little more” for defense. What do you have more of a problem with: that we have a defense budget at all? or that the entire tax burdon isn’t placed singly onto the backs of the richest 5% of Americans?

39

Debaser: The poorest half of people in this country already pay no tax at all.

:confused: “No tax”? It’s true that about 50% of tax filers have incomes below the level at which federal income tax applies, but of course those people still contribute via payroll taxes.

*Who is it that is suffering so? I would argue that it’s the software engineer or middle manager who pays %50 of his income in taxes every year. *

Your use of the word “suffering” seems strange to me. I wouldn’t describe an educated professional with an income high enough to put him in a high tax bracket as “suffering” more than somebody who doesn’t even make enough money to pay taxes on it. Most of the software engineers and middle managers I know don’t seem to be suffering much; they can afford nice houses and cars and vacations and good schooling and healthcare and investments in addition to their tax burden, and good for them, say I. Most of the poor people I know, on the other hand, are a lot closer to what I’d call “suffering”. Anecdotal evidence doesn’t count, of course, but it illustrates why your choice of language strikes me as peculiear.

And your figure of 50% as a software engineer’s or middle manager’s tax burden also seems peculiar. What tax bracket is this professional supposed to be in, anyway? According to Congressional Budget Office/Joint Committee on Taxation data from 1999, a median-income family paid about 19% of its income in federal taxes. Families with incomes between $50K and $75K paid about 20% of their income in federal taxes. I find it difficult to believe that the rest of the total tax burden is taking as much as an additional 30% (!!!) of these people’s incomes.

The “rich” already contribute “a little more” for defense.

Good. After all, they can afford it. I don’t see why you want to make a class-war thing out of this (well, maybe I do see, if the purpose is just to obscure the point that wealthy people can afford to pay taxes). You don’t have to hate the rich to support the estate tax; as pointed out above, there are even quite a few rich people who support it. Heck, some of my best friends are high-income “richies” (including jshore, believe it or not). Yet I have no objection to their paying higher taxes than I do, just as I have no objection to my paying higher taxes than poor people. Tax rates overall are very low in this country compared to other developed countries; I don’t approve of government wastefulness or greed (any more than I approve of private wastefulness or greed), but I’m perfectly comfortable with the idea that even in the land of the free you’ve got to share “your” money.

Uncle B: *So why don’t we do just that. Call it what it is, income. And tax the heirs at whatever marginal rate happens to in effect at the time on their 1040. *

But recall GIGOb’s point that “once we realize that Taxes are based on economic transactions, inheriting money is as much of a transaction as receiving a wage.” Yes, they’re both transactions, but I think it’s reasonable to argue that inheriting over $1,000,000 that you didn’t lift a finger for is not exactly the same kind of transaction as getting paid wages for your hard work. It makes sense to tax the former at a higher rate: the heir isn’t being deprived of something s/he earned, and s/he’ll still have a lot of money left over.

I really think that using overheated rhetoric about this issue (e.g., emotional expressions like “death tax”, “robbing the dead”, “punishing the rich”, “thinking rich people are evil and lazy”, “stick it to the working class”, etc.) is just obscuring the basic facts. Economic transactions are taxed. Inheriting over a million dollars is an economic transaction for which a high tax rate is in practice not very privative. Therefore, large inheritances are placed in a separate tax category with a higher rate. So?

40

Debaser:

So keeping the rate the same is somehow not an option?:rolleyes: :rolleyes: