Kimstu:
I do believe this is a typo on your part and you meant they have no objection.
If given the choice, the vast majority of people would choose to lower their taxes and not keep the rate the same. capacitors statement that Americans haven’t favored a tax cut for three years is rediculous. Unless there is a cite somewhere to be found.
[aside]The fact that some rich (or “rich,” in some cases) people propose keeping, or even increasing, the estate tax really isn’t relevant, is it? I’m sure there were some poor people who supported certain welfare reform measures, too. Neither case tell us anything about the merits of either program; they just tell us that people sometimes can act outside of narrow self-interest.[/aside]
I understand and agree with the idea that none of us earns our money in a vacuum. We live in a society where our abilities to generate income and wealth are supported by certain laws, structures, infrastructure, etc. And maintaining that framework requires revenue. Aside from certain niggling philosophical differences with the execution, I’m cool with that. I certainly wouldn’t earn what I earn if I lived in Upper Volta.
But I’m not unsympathetic to the argument that people should be free to pass their wealth on to whomever they want without interference. Presumably, throughout the accumulation of that wealth, they paid the piper when required: income tax, payroll tax, capital gains tax, sales tax, etc. So if they have a big chunk of change left when they kick the bucket, and want to give it to someone in the family, what business is it of mine (or the government’s)?
The rhetoric about “working really hard to be born into a wealthy family” cuts both ways, after all. One the one hand, sure, they didn’t get to choose who they were born to, so one can argue that winning the sperm lottery doesn’t entitle them to that wealth after their parents die. (Although certainly they get to benefit from it while their parents were alive.) But on the other hand, the fact that they didn’t get to choose shouldn’t necessarily preclude the parents from passing that accumulated wealth on to their kids if they so choose, unhindered. It’s an equally good argument for either position, I think.
If someone happened to be born to wealthy parents, and those parents want to leave them $10 million, well, good for them. I don’t begrudge them that any more than I begrudge the people who hit the Powerball their winnings.
I’m quite certain I’m never going to have a million dollars in net worth, let alone the $5 million-or-more-sized estates described in jshore’s link, so it really doesn’t affect me either way. I’m just not completely convinced that, because this is an easy way for the government to pull in money, it’s the right thing to do. Expediency does not equal fairness. (And Unc’s comments are compelling as well: If the government wasn’t so big, it wouldn’t need so much money. That’s for another thread, though.)
I think that most homeowners in large California cities will have estates of $1,000,000 or more in the next 20 years.
Can you elaborate on this? I don’t disagree with this, basically because I don’t really understand how payroll taxes work. If %50 of people are not paying federal income tax but are paying via payroll taxes is it fair to say that they pay taxes? Doesn’t the employer pay payroll taxes? If payroll taxes went away tomorrow would everyone in america get a raise tomorrow?
I used the word “suffering” in response to capacitor’s post which seemed to have a very heavy rich people = evil, poor people = suffering ring to it.
By saying that most poor people are close to suffering I hope you don’t mean the entire 50% of the US that isn’t paying income taxes. If they all deserve to get a free ride on the backs of the other richer half because of this suffering, then one could make the arguement that we all don’t pay tax except the richest 5%.
I was trying to place the theoretical family one level up from where you have them. You are saying $50-75K. I said $70K or so. So, lets go with the folks in the bracket above what you said: a household income of 75K+. I notice your site (cite/site??) only has figures up to there. Remember this is household income. Two people working. I know with the cost of living in my area that $75K certainly isn’t rich. I will try and find some figures on how much these people pay later on, this post is getting long enough as it is.
At least one of those didn’t come from me! 
By using the phrases “punish the rich” and “thinking rich people are evil and lazy” I am just paraphrasing what I am hearing the pro-estate tax people say in this thread.
For instance when I said that the “rich” were already paying “a little more for defense” I was responding to capacitor, who implied that they currently didn’t.
But then you wrote back to me:
This sounds like rich bashing. They can afford it. Not that it’s fair, or right, or proper. But they have the money, so let’s take it from them. Plus there is more of us than them, so we can even get away with it. 
One last thought…
When you posted
You forgot the word socialist in that sentance.
From CurtC:
I am curious, what precisely makes this immoral?
Scylla:
Taxes and such are paid to the government so that the government has the resources to protect you and your offspring from various threats (natural disasters, foreign threats, disease, etc.). There is no “debt”. Technically, if someone’s estate is above the limit of the estate exemption, they have more to lose from these threats than those with estates that are exempt, yes?
On another tangent: What exactly makes us think that we are entitled to our parents/forebears wealth and property? I see that no-one has addressed this point. It is one thing to want to have heirlooms/memorabilia to remember the beloved departed, but what entitles us to their fat wad of cash?
nahtanoj
pld: *But I’m not unsympathetic to the argument that people should be free to pass their wealth on to whomever they want without interference. Presumably, throughout the accumulation of that wealth, they paid the piper when required: income tax, payroll tax, capital gains tax, sales tax, etc. So if they have a big chunk of change left when they kick the bucket, and want to give it to someone in the family, what business is it of mine (or the government’s)? *
Well, because so many economic transactions are taxed, you can’t give grocery money to the grocer, or wages to your employee, or fees to your veterinarian “without interference”—that is, without the recipient being taxed on the transaction. Why should willing your money to a recipient after your death be different?
I understand that inheritance issues are a prime target for the visceral feeling of “that money is MINE and I can DO WHAT I WANT WITH IT!” that naturally springs up when we think about our own property. Sure, you can do what you like with your money—believe me, if the government were trying to dictate whom you were allowed to leave your money to or confiscating all of it on your death, I’d be yelling as loud as anybody—but it’s probably going to involve somebody getting taxed on it. Even when it’s your own darling children and you intensely feel with every cell in your body how much more infinitely worthy they are of getting your money than some faceless bureaucrat, it doesn’t alter the unemotional fact that economic transactions are generally taxed, and high taxes on megabuck legacies are not very privative.
Debaser: Can you elaborate on this? I don’t disagree with this, basically because I don’t really understand how payroll taxes work.
Sure. Payroll taxes are the revenues collected under the Federal Insurance Contributions Act (FICA) and the Self-Employed Contributions Act (SECA) out of the paychecks of workers and profits of employers (and the self-employed). The first something-like-$70K of total wages per worker are taxed at a rate of something-like-12.5% (my figures are from 1997 so I think the numbers may be a little different by now) to fund the Social Security “Old Age and Survivors Insurance” (OASI) program and the “Disability Insurance” (DI) program. All of total wages are taxed at something-like-3% for funding of Medicare hospital insurance. Both percentages are split down the middle between the employer and the individual worker (so if you’re self-employed, you pay the whole thing yourself), but the employer’s share is tax-deductible.
If %50 of people are not paying federal income tax but are paying via payroll taxes is it fair to say that they pay taxes?
Um, yeah, I think so. The FICA money coming out of their paychecks is going directly into the pockets of your and my elderly relatives who receive Social Security, after all; sounds to me like a typical redistribution of wealth via taxation. Just because they don’t make enough money to contribute revenue to the rest of government expenditure via the federal income tax doesn’t mean they aren’t paying taxes at all, IMHO.
Now some people in the lowest tax quintile (20%), if they file for the Earned Income Tax Credit or EITC, do actually wind up with a total negative federal tax liability: i.e., they pay no federal income tax and their EITC refund is more than they paid in payroll taxes. But the number of filers who qualify for total negative tax is nowhere near fifty percent of the whole population.
Doesn’t the employer pay payroll taxes?
Yes; see above.
*If payroll taxes went away tomorrow would everyone in america get a raise tomorrow? *
Well, my crystal ball’s in the shop, so I can’t answer that one. I don’t think it’s a situation we’re going to be facing anytime soon. 
I will try and find some figures on how much these people pay later on
Okay. I’ll be pretty surprised if any of the people you’re talking about turn out to be actually paying as much as 50% of income in total tax burden, but I’ve been surprised before and survived it.
*By using the phrases “punish the rich” and “thinking rich people are evil and lazy” I am just paraphrasing what I am hearing the pro-estate tax people say in this thread. *
Well, my point is that I’m not sure that you’re hearing the same thing that we’re actually saying. Pointing out that rich people can afford to pay higher taxes with less deprivation than poor people, or pointing out that it’s illogical to think that unearned income increases the industry and productivity of rich people (if it’s in the form of large legacies) but destroys the industry and productivity of poor people (if it’s in the form of welfare payments) does not equate to having a bad opinion of rich people or wanting to punish them.
*“Good. After all, they can afford it.”
This sounds like rich bashing. They can afford it. Not that it’s fair, or right, or proper. But they have the money, so let’s take it from them.*
Again, I think you’re reading a lot into that statement that isn’t really there. It’s not “bashing” somebody to point out that they can afford to make a larger contribution to a common enterprise, without feeling seriously deprived, than other people. Rewrite the sentence to make it about me, if you like: I pay lots more in taxes than the homeless guy I buy the local street paper from. Good. After all, I can afford it. Am I Kimstu-bashing? I don’t think so.
And if we’re going to talk about wealth distribution in terms of what is “fair”—are you sure you want to go there? Is it “fair” for somebody to get lots of money just for being born into a wealthy family, or “winning the sperm lottery” as pld puts it? It’s certainly not clear to me that a tax policy with no wealth redistribution, if such a thing is possible, is actually “fairer” than one that has some.
Kimstu:
Lemme get this straight. You find it acceptable to consider the source of income when levying a tax on it? Why so? Why should a larger percentage of a dollar received in certain economic transactions be subject to a higher tax rate? Maybe we can start classifying the worth of certain jobs, too. Say, tax pornographers, baseball players and casino owners at a higher marginal rate than health care professionals, teachers and firefighters. You can’t argue that their services, and hence the money paid for them, are worth the same as Larry Flynt’s. If it’s income, it’s income. Tax it all at the same rate and leave the value judgements out of it.
And sure, a guy getting 450,000 dollars in an inheritance after paying a 55% tax on the initial million is still left with “a lot” of money. But how do you decide how much is “a lot?” $100,000 is a lot, too. And to a guy making an average wage, $25,000 is a lot. To a guy earning a couple hundred thousand each year, it’s not so much. “A lot” is an extremely relative term.
UB: You find it acceptable to consider the source of income when levying a tax on it? Why so? Why should a larger percentage of a dollar received in certain economic transactions be subject to a higher tax rate?
Because taxation isn’t just a money-harvester machine that snarfs up the same x percent of all the money it sees: it’s also an engine for influencing economic development by responding differently to different financial choices. For example, why are different forms of expenditure taxed differently? Why do you get a fat tax deduction for owning a home or raising a child or donating to charity but not for buying a powerboat or consuming Doritos? Taxation is not just about extracting the money, but about extracting the money from the places in society where we as a society judge it is easiest to afford it, while leaving as much money as possible available for the economic activities we most want to encourage.
Maybe we can start classifying the worth of certain jobs, too.
Isn’t that what salary differentials do?
Say, tax pornographers, baseball players and casino owners at a higher marginal rate than health care professionals, teachers and firefighters.
Well, if the people in the former group make more money than those in the latter group, they do get taxed higher. That’s what progressive taxation’s about: taking more money from those who can better afford it. That’s the point of the inheritance tax, too; after all, it isn’t a tax on all inherited money, just on fortunes of over a million bucks.
“A lot” is an extremely relative term.
Right, which is why taxing progressively makes sense.
If the growth in wealth was mostly gains on stocks or appreciation of the value of their house, then they havn’t paid taxes yet. Capital gains taxes are only due on the sale, not on the appreciation of value.
Now the heirs have to pay estate taxes, but they DON’T have to pay capital gains taxes. Their tax basis is the market value at the time they inherit, not whatever daddy/mommy paid for it.
No, it isn’t. Because you persist in looking at estate taxes as from the perspective if the dead. And that’s just nonsensical. The only reasonable perspective, is that of the heirs, and to them, this wealth transfer is completely unearned.
Just like winning the lotto.
Fine, then you won’t mind if we make the estate tax and the winnings tax equal to each other. (I believe that the estate tax is higher at present, but not by much, does anyone know for sure?)
Sure it is, because the taxes have to come from somewhere. And it’s far better to tax unearned income than earned income.
No Unc’s comments are pure emotional horseshit, as usual. The size of the govt is irrelevant, so long as we have SOME government we will have taxes, and fairness still dictates that we tax unearned income at a higher rate than earned income.
This example is quite unrelated to the real world because: (1) The inheritance tax rate does not step up from 0% to 55% in one fell swoop. There is at least one if not more steps in between. (2) The tax rate of 55% is a marginal tax rate, just like on the income tax, so only the amount of money that exceeds that marginal tax rate is taxed at that rate. For example, if the tax rate was 0% on the first million and 55% after that (which, as I noted it’s not, but let’s keep things simple), then a $2,000,000 estate gets taxed $550,000 and thus $1,450,000 remains. (3) The exemption limit is scheduled to go up over time.
Let’s make our examples have at least some approximate resemblance to reality.
As to the question of real world examples of how much tax is actually paid by someone making $75 K or so, here is one: Dr. J. is single with no dependents. He has no significant tax deductions (e.g., no house mortgage interest deduction) other than the money he puts into a 401K (the max allowed of $10,500 last year). He lives in what is considered to be a very high-tax state. On income of ~$90,000 in 2001, he paid a total of 32% of this income in federal and state income and payroll taxes last year. [That rises to ~36% if you consider also the part of the payroll tax that his employer paid as a tax on his income.]
Well, you are welcome to call most of the other Western democracies socialist if you want. However, I ought to warn you that doing so may run you afoul of other conservatives on this Board who like to claim that capitalism/market economies have triumphed over the socialist/communist economies. If the U.S. qualifies as the only, or virtually the only, Western democracy that is not socialist then I hardly see how such a triumph has in fact occurred!
Well, it depends on how you ask the question. Sure, most people like the idea of tax cuts in the abstract but when they are presented with choices and recognize that they can’t have it all…i.e., do you want tax cuts, or fiscal responsibility, or spending to improve education, … then I believe that polls show that tax cuts don’t fare all that well. I imagine when people understand the distribution of who gets what in the Republican tax cuts, they fare even worse.
The death tax - and it is a death tax, the person’s money being taxed is dead and unable to receive any of the so-called benefits that the money is going towards - is unfair and excessive. It can be justified using all manners of statistics and reasonsings, however, it is only a tool that is being used to fill the coffers of the already bloated federal goverment.
I mean, does this money buy anything nearly as valuable as the liberty and freedom it takes away. The tradition of passing the value of our estates onto our heirs has been a part of our system of common law for centuries, but now, the tax is now suddenly more important than what it robs us of, even if it robs just a portion of the wealthiest among us. It just isn’t right. It is less right than any other tax I can think of.
Is there people out there who feel that the federal government is somehow hurting for money?? Or do they just have an easier time accepting this tax as a little get-even with the rich in this nation, knowing that it will never affect them personally?
Debaser, the Republicans tried to run on tax cuts for the past four years, and yet they lost the Senate and the lead in the House is slimmer and slimmer. Also, it took some wrangling in Florida to get Bush in the Presidency.
Also, there is a war going on. How do you suppose we pay for it if we keep on cutting taxes for the rich?
You do realize the estate tax isn’t a new fangled notion? Its been in place since 1916. And prior to 1916, we implemented it in the early days of our nation on an as needed basis. I’d rather have an estate tax that effects me regardless of when I die, than one that kicks in simply because I was unlucky enough to die when we needed to finance the war of 1812.
Kimstu:
Which is exactly what I suggested. With the exception that inheritance is treated as normal income, because in the end, that’s exactly what it is. Contrary to what you may think, I believe a progressive tax can be implemented fairly and is a desirable thing.
Kimstu again:
No. Progressive taxation says nothing about the source of the income, which seem to be your contention. By levying a larger tax rate on income, or a portion or an income, simply because it derives from a particular source, is wrong. That is the distinction I was trying to draw. All dollars have the same value in the market and thus all dollars should be taxed at the same rate (assuming, of course, that it is desirable to tax them at all). The government, by taking a larger percentage of them from specific sources of income, is saying those dollars are worth more, or less, than others. They are making an arbitrary value judgment and that, too, is wrong. After all, why should the government be entitled to a larger share of a piece of a pie simply because it’s cherry, rather than peach?
You, among others, have also made the claim, or at least said something I have interpreted this way: “A person inheriting a large fortune, hasn’t done much of anything to actually earn it, so that makes it acceptable for the government to demand an increased share, simply because it is an easier place to extract it.” If I’m misinterpreting, I apologize, but that’s the very distinct impression I’m left with. If this is indeed what you, and the others, believe, the question, “Why?” is left to answer. Frankly, I don’t get it; it would seem illogical to me. If the heir hasn’t done anything to deserve this money, the government has most certainly done even less, making their claim to it even more suspect.
and kimstu one more time:
You make a salient point. I dunno why we tax expenditures at different rates. To provide incentives where the tax otherwise would be over-, or unfairly-burdensome? And why, simply because we do something that may be expedient for spending, would one assume that doing the same at the opposite end of the spectrum, earning, would be equally sensible.
However, what I’d really like to ask is “Why are we taxing expenditures at all? Is spending not the fuel of an economy?” Taxing spending, which provides a disincentive, would thus seem to be something that would damp an economy, burden it, or be an anchor dragging it down. And a smaller economy is likely not in the best interests of an individual (at whatever economic level she may be at), a public at large, or even a government. Perhaps an argument for another thread.
jshore:
All right. I see my example was apparently overly-simple and has no bearing in the real world. That is, if your facts are correct; something I have no reason to believe otherwise. However, I was simply using the numbers as presented in this thread to that time. So what you are saying, is that I can inherit the first million tax-free and the second million at a 55% discount? Let’s explore that using the example you’ve provided; I’ll do so shortly.
jshore again:
First, I thought we were discussion taxes on inheritance, and were only speaking of income and payroll taxes as incidentals. But sure, we can play that game.
From the 2001 tax booklets, I find your guy, making 75K (but with a perplexing income of 90K, so I assumed taxable income of $79,500) pays $18,907 in federal income tax; in my home state and city, he’d also pay $3,393 in state income tax and $1788 in city income taxes. To that, since we’re considering all payroll taxes, we need to add social security and Medicare. These come to $4,929 and $1,152, respectively. Combining all this, we find total payroll deductions of $30,169 on taxable income of $79,500, yielding a payroll tax rate of 37.9%. This represents nearly 6% more than your unexplained estimate of 32%. And if we add that last 4% you talk about, your hypothetical guy give nearly 42% of his taxable income to the various government authorities (not including various and sundry other taxes). All of which means nothing in this argument, since it’s not really about payroll taxes.
But what does this mean, you ask? Me, too. I’ve no idea, but let’s take a look at that $2 million inheritance again and say it went to our 90K guy. Your numbers on the tax owed on a $2 million inheritance indicate an effective tax rate of 27.5%, about 3.7% higher than Mr. 90k federal income tax rate of 23.8%. However, if we treat this inheritance, as simply income, Mr. 90K gets a name change to Mr. 1.09M and winds up paying the top marginal rate, which in 2001 was, what 39.6%? This means, under my proposal and all other things being equal, Mr. 1.09M would pay over $425,000 dollars in federal income tax.
As you can see, using those real world numbers you wished so hard for, my proposal, when everything is considered, changes very little in the way of revenue to the federal government. The things it does change, and they are benefits, overall, are just the items I mentioned in a previous post.
tejota
I almost didn’t respond to this because I think it’s a very unfair accusation in this thread. But lemme ask you, as I’ve asked kimstu above, “Why?” Why is it fair to tax “unearned income” at a higher rate than “earned?” This has yet to be explained sufficiently. And just what the hell is “unearned income?”
Whoops! An error in my numbers above. I stated that Mr. 90K would pay $1788 in city income taxes; that would be a 2.25% tax rate. This is incorrect. My city income tax rate is actuall 3.25% meaning Mr. 90K would be liable for $2583. Resumming then, we find, Mr. 90K gets an additional 1% added to his payroll tax rate, bringing him to 38.9%.
There is another place where the tax rate is different depending on how you acquire the money - the capital gains tax rate.
I’m fully aware of that. That, too, is outside the scope of this debate, but I’d make the same argument.