Is it fair to use the current surplus for estate tax cuts when other taxes are rising

Great Debates
1

The prosperity is when all ships are supposed to rise, but the tax cuts proposed apply only to those with yachts.

The rich/poor gap is widening, and that’s not the way to address the problem.

We have one of the lowest estate taxes now among Western nations, and also the least help for the general population, in terms of general health care or school funding.

Also, the national debt is still rising. The projected drops always assume the economic boom will continue for 5 years more. How realistic is that?

2

It is very fair, as long as those who paid the estate tax actually line up and apply for it. :smiley:

How taxing the wage earner is fair, and taxing the dead,(and those parasites who feed off the dead) is unfair, i cannot imagine. After all, us wage earners, and investors actually did something to EARN the $$ we get,and are taxed on.

Those who benefit from estates have done nothing, except those who bumped off the old rich geezer to inherit the $$, and oddly enuf, THOSE aren’t supposed to collect. :smiley:

3

Show_Biz wrote:

This is because the Federal budget “surplus” is only a surplus when you count the Social Security windfall we’ve been getting. (And Social Security surplusses can’t be used to pay for regular on-budget items, which include paying down the National Debt.)

If you ignore the Social Security and other off-budget “surplusses”, the on-budget Federal items were in a deficit from Fiscal Year 1961 through Fiscal Year 1998. Only in Fiscal Year 1999 did the Federal budget finally star to show an on-budget surplus (of a paltry 0.7 billion dollars).

4

Oh, except maybe put 30-40 years of hard work into the family business, or working in the fields, or taking care of family matters so that others have more time to build the business.

As for the ones who actually did nothing at all, I guess the government is more deserving than even these children? I don’t have kids yet, but I can’t imagine thinking that any part of my estate is better served by going to the tax collector than my children.

I’ll probably never reach the estate tax threshhold, but you never know. Even so, if I think a tax is morally wrong, it would be hypocritical of me to think it was wrong for certain people and not others.

5

divemaster is right. It’s bad enough that the taxman takes such a big bite of our wealth in the form of income taxes, but then taxing it again just because someone dies downright wrong. At least it’s reasonable that an income tax is somewhat fair.

I’m now well above the current threshold where the estate tax would start if I were to die, and I don’t even have a yacht. I don’t consider myself rich - I’m still working hard because someday I would like to retire comfortably. But the thought that if my wife and I were to die, the goverment would take a large bite out of my little boy’s money, and that of our little one who’s still in the womb, makes me mad.

6

**

That's an unfair statement don't you think? The estate taxes even affect people who aren't wealthy enough to purchase yachts. It can affect middle class folks who managed to invest their money wisely or bought a home that is worth a lot.

Marc

7

The estate tax is the most important tax of all time, it should never be repealed under any circumstances. It helps to insure that no one family can stay super-rich generation after generation simply through inheritance. We do not need a hereditary aristocracy in this country. It was asked if it is fair for the gov’t to get the benefits of a man’s hard work after he dies. Hell yes! Our great nation and economy allowed you to accumulate enormous wealth and to keep it until your death, you don’t need it anymore so now it goes back to the nation that created it. Does anyone really believe they could become a millionaire by working real hard in Zaire or Rowanda or Vietnam or Haiti? Does anyone really believe they could exceed the $600,000 estate value threshold (where the first estate taxes kick in) without participating in the economy? Perhaps you could accumulate a few thousand dollars by panning for gold in Montana, but any serious accumulation of wealth would reflect America’s economic health. That is, America has just as much a claim to your enormous wealth as you do. Let me ask you, is it fair for my heirs to have to put up with your filthy rich heirs who did nothing to earn their place in society except to outlive you?

8

Is it true that the first Federal Estate Taxes were not passed in the U.S. until the 20th century?

9

SarumanRex wrote:

Which he paid income tax on in the process of earning.

Except for the fraction of that enormous wealth you had to pay as income tax.

You, of course, who earned it, had nothing whatsoever to do with creating it :rolleyes: , which I guess was why you had to pay income tax on it.

No, but I bet I’d pay less income tax there.

Of course not. If my estate gets anywhere close to that threshold, it means that I must have been participating in the economy. Said participation having been subject to income tax.

Which you would have to pay income tax on if you did.

Which is why people who accumulate more wealth pay more income tax.

10

So then you make them PARTNERS in the business, or incorperate and give them stock. And if the estate is paying significant estate tax, it is very doubtfull if the heirs are going to be “working in the fields”. The estate tax slams those who did not share while they were alive.

Oh, and tracer, re “less tax”: the total tax burden for the us citizen, ranks 39th of the 40 industrialized nations. Ie, we pay less taxes than nearly any other 1st world country. And are you so sure that rich man paid taxes on his millions? A lot of millionaires pay NO income tax, you know. But I’d rather have a bigger share left over when I was alive and could enjoy it. Cut estate tax, and you have to make it up somewhere, and that somewhere is going to be the middle-class wage-earner.

11

Well, much as I want to argue with SarumanRex’s points, I agree with his conclusion. I’m disgusted with the recent inheritance law. I think for a society it’s wrong for money to accumulatate in families. And I think individually, it’s wrong for an 18 year old to be able to retire. I certainly don’t want that for my kids.

The money doesn’t need to go to the government. In fact frankly, I don’t think it should. Instead, it can be used to build foundations for charitable causes.

12

I like Bill H.'s idea of using the accumulated wealth of dead millionaires to create charitable foundations. When John Paul Getty died he left the vast majority of his 4 billion dollar estate to the Getty museum, making it the best endowed museum in the world at that time. Now every member of the public who visits the museum can enjoy the Getty billions. William Randolph Hearst built San Simeon which is now part of a non-profit foundation open to tourists. Ive been there, it’s nice.
It is also true that if you want to avoid estate taxes you can give your heirs a share of the family business while you are still alive. The reason many rich people (like Getty) don’t do this is because their sycophant heirs aren’t worth a bucket of spit.

13

I don’t know the exact date, but it was well before the income tax was constitutional. In fact, the main rationale behind the estate tax was that the government had little other way to tap into accumulated wealth.

Wholly different today. What with income taxes, corporate taxes, capital gains taxes; the goverment has several other ways of getting its share. In my opinion, the estate tax is an artifact whose time has come and gone.

for danielandthewolvesden; I did not mean to imply that family members were “working in the fileds” like migrant workers or something. Truthfully, they would most likely be managers. But this still doesn’t prevent them from contributing heavily to the family business/farm. In the case of a farm, the land plus a few pieces of heavy machinery will likely put an estate over the estate tax threshhold, with or without cash reserves on hand. (Then, often as not, the land is sold and subdivided for cash. Development ensues. From a conservation standpoint, the best thing to do is repeal the estate tax so this doesn’t have to happen so much.)

I agree that there are things one can do to find loopholes in the estate tax. Creating corporations or trusts or something. But why should one have to spend big $$$ to pay accountants and lawyers to do this? I can imagine a complex estate situation could cost well over $10,000 in administrative fees just to avoid the estate tax. Then what do you have? The government doesn’t get the money–a big chunk goes to the lawyers!

I still say that the rightful heir of an estate is the family, not the government. Of course, if the deceased didn’t want the kids to have the money; well, the will could certainly reflect that.

For those of you who are so vituperative against the rich and accumulated family wealth: Well, all I can say is that this class envy gets rather tiresome. Who cares if some other family is wealthy? What do I care if someone inherits gobs of money? It’s no skin off my nose. Good for them. I certainly don’t sit around begrudging their fortune.

It’s like a joke I read just recently. Two Russian farmers live side by side. Nikolas was rather poor, but Ivan was fortunate enough to have a goat. Well, one day, Nikolas came across a genie who offered him one wish. He thought long and hard, especially about Ivan’s good fortune. He then presented his wish:

“I wish that Ivan’s goat would die.”

That’s what I perceive with many of the attitudes shown here (and elsewhere). “It’s not fair that someone else has more,” or “They didn’t have to work hard for what they have.” Therefore, take away what they have. Ugh.

14

no. it’s not fair.
I feel so sorry for all those dead rich people. NOT!

15

divemaster wrote:

Slight hijack nitpick: Federal income taxes were Consitutional before the passage of the 16th Amendment. (The first Federal income tax was passed in 1861 to help finance the Civil War; it was ruled a perfectly constitutional indirect-tax by the Supreme Court in 1866). The 16th Amendment merely took taxes on income derived from property out of the class of Direct Taxes which had to be apportioned to the States according to their population (a very messy process).

Carry on.

16

My bad…thanks for the clarification, tracer. Hopefully, this does not detract from my contention that the estate tax in the days of the robber barons was just about the only way for the federal government to tap into accumulated wealth, and that that has changed with our current tax laws.

17

Geez, some of you people really do have a hard-on for someone that manages to do better than average.

The problem with the death tax is who generally gets hurt and how.

Many, many, many family businesses have an “on paper” value in excess of the $600,000 threshhold. What the death tax manages to accomplish is to financially ruin a great many of these small businesses and leave fewer and fewer choices for people like you and me.

Pick a discipline. Any discipline.

Construction. A small family-owned cement/concrete business has a paper value of 1.5 million. It sits on a piece of commercial property valued at $500,000 (originally bought for $10,000), has 4 vehicles in the fleet, $30,000 in inventory (sand, cement, rock, etc) and employs 15 people. The owner dies and to pass the business on to his family is impossible. The death tax wants 55% of $900,000, or $495,000. The family has no choice but to sell out, hoping to get two thirds of the paper value, paying the half million in taxes and leaving a half million for the family.

Now you want to be pissed because someone worked his entire life with long hours, infrequent and short vacations, ulcers, helped to support more than a dozen families at one time, and wants to leave the fruits of 30 years of hard labor to his family.

And once the government has successfully busted up the company, there’s now one less competitor in town and everyone that gets a sidewalk, driveway, slab floor, or any other concret product now gets to pay a little more. As does the taxpayer who finds one less decent guy bidding on the city’s business.

But all that some of you can see is a half million dollars and are pissed that it’s somebody else’s.

Jerks.

18

A couple of points (I was just discussing this issue with my mother-in-law the other night):

  1. The inheritance tax exemptions are probably too small as they currently exist. Many not-so-rich people will exceed them due to the fairly significant rises in real-estate and stock prices in the recent past. Simply the raising the exemption limit to $5-10 million would protect most of the small businesses and farms that provided the anecdotal support for the law change. Eliminating the inheritance tax altogether benefits mostly the super-rich. Alternatively, exempt small family businesses and farms from the tax on the condition that they not be sold for some period of time–the argument, after all, was that families shouldn’t be forced to sell out just to pay the taxes.

  2. Does anyone know if they eliminated the step-up in basis for capital assets when they eliminated the inheritance tax? Right now, in compensation for the inheritance tax, the cost basis of assets like stock, real estate, etc. is stepped up to the value at death. This saves the heirs the 10-20% tax on the gains (a benefit that goes even to people who are below the tax exemption). I’d be more comfortable with eliminating the inheritance tax if the cap gains tax wasn’t also essentially forgiven, especially since very few people make millions through their salary–most make it through increase in capital asset value, whether that be a business they built themselves or the gains in an investment. Why should the heirs avoid the tax just because their parents didn’t cash out before they died?

I’m frankly not averse to inheritance taxes, even though my in-laws estate which my wife will inherit half of (no time soon, God willing), would probably be subject to them.

Rick

19

[said with a cooler head]

A really big detail that I’d left out of my previous example is the demographics of the deceased. In the case of our fictitious concrete company, the owner is a guy 50 years old that had the bad sense to have a heart attack (often from work induced stress) and die before he had a chance to retire and enjoy the fruit of all of his years of hard work.

In today’s era of “fairness”, I find it difficult to comprehend that there are people so greedy and short-sighted that they want to punish this man and his family by confiscating all that he’s accumulated in a life-time.

All he did was try to support his family in the best way that he knew how, support a dozen other families, and try to put himself in a position that noone had to support him when he was ready to retire.

20

SouthernStyle, I am above-average in the bucks department. I have done the things you describe business owners doing, including creating jobs for literally hundreds of people. If you’ve read my ramblings in other forums, you know that I am very much in favor of free-enterprise and hard work. I am very much against taxing or ortherwise dampening people and businesses who are productive. SarumanRex and I have clashed heads a few times; I suspect he could tell you a thing or two about my stances in these areas.

So, I don’t appreciate being referred to as a jerk or as greedy and short-sighted.

When I say the things that I did in my previous post, they aren’t just hypothetical abstracts. I’ve also taken actions in my personal life to the same effect. I love my children and want the best for them. And as a direct result of that, I will not leave them enough money (either directly or in the form of a business) to retire when I die. Frankly, I think any other choice would be immoral.

But more importantly than my personal desires for my children, I feel that as a society, the worst thing we can do is encourage people to enjoy fruits they haven’t earned. Passing on a large chunk of money to one’s heirs gives them a leg up that they don’t deserve.