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

Great Debates
41

All taxes have thresholds, for sales tax it’s around 5 cents, for gambling winnings it’s $1200, for personal income tax it’s $7,050 for singles. The threshold on income tax exampts the poorest Americans from all personal income taxes (exept social security). I would like to re-iterate my support for the high threshold on estate taxes (it is apparantly being increased to $1 million). This threshold will already exempt any debt ridden farm or business (I believe only net value counts towards any tax).

People seem to be offended by the fact that a man who has worked and paid taxes all his life to accumulate wealth now has to pay an estate tax after he dies. It is NOT the man who has died that is being taxed it is the estate itself and by extension the inheritors. Think of it this way, who goes to jail if no one pays the inheritance tax that is owed? Will they dig up the dead guy and throw him in jail? No, they’ll fine and imprison the inheritors since they are the ones being taxed. To eliminate the estate tax will only serve to give a tax break to the rich kids. If you want rich kids to get tax breaks just say that and stop implying that this tax hurts the middle class. I am middle class and I have never heard of one single middle class person who has ever inherited anything even approaching 1 million dollars. If you actually know of middle class people who have had to pay estate taxes on their inheritance then I would like to hear about it. BTW I don’t consider a person who is inheriting a $1.5 million dollar business that nets $100,000 a year to be middle class.

42

Ok – finally something out of the “just tax the damn thing” mentality is starting to gel.

SumaranRex,

What you’re really saying is that you consider yourself average and therefore anyone that is more successful than you must be rich and should be taxed accordingly.

On the other hand, I also consider myself middle-class, and unless a golden meteorite crashes into my back yard don’t see any way that I’ll ever become “rich”. But I hold no malice or ill-will toward those that have achieved a greater financial reward than have I.

I was born into a construction family. Plumbing, sheet metal, and roofing. After completing college I embarked on my own career and have been in the computer industry ever since.

The hypothetical concrete business I’ve been using is real. I’ve seen the carnage that estate taxes have caused in many types of construction businesses. When these businesses were created 40 years ago, it was critical that they be located near railroad tracks. That was by far the most economical way to deliver bulk goods. Concrete, sand, asphalt, lumber, etc. ship much more cheaply in a freight car than on a semi-trailer. So a man borrows enough money to buy a $10,000 piece of dirt next to a railroad spur well outside the city limits. Today, inflation and urban sprawl have raised the market value of the piece of land to $500,000. But to the guy that owns it the value is simply in it’s location next to the train track. Tax laws being what they are, his property taxes have continued to escalate so that every year he’s paying taxes on $500,000 just for the privilege of keeping this pile of dirt that he’s owned for 40 years. And he busts his butt to make a good living.

In your example you say that his wife will inherit his half. Hardly a convincing argument. Perhaps the wife has already died. If not, she certainly will someday and either way ONE of them will leave a $1.5 million business to heirs.

Working in the IT industry, I see quite a few people, particularly management and executives, with $100,000/yr income. These people get into their suit every morning, drive to an office that someone else has paid for, and make arbitrary decisions about someone else’s business and use someone else’s money.

I’m on the side of the guy that has spent his entire life working hard to be his own success. The corporate manager that’s making 6 figures with somebody else’s money also gets my respect, but he clearly comes in second.

Again I’ll ask, why shouldn’t the man that’s worked so hard his entire life be able to pass the fruits of his success to his heirs? Maybe there’s a lot more at stake than just creating a second generation of “rich kids”.

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Debts are accounted for on the estate tax as deductions. If the decedent’s gross estate is $1,000,000, with debts (and/or administrative expenses, such as funeral bills, etc. ) of $999,999, then the taxable estate is the difference between those two figures, or $1.00.

As for the argument that because one pays taxes on income, therefore there should not be an estate tax because that money has been taxed already, that argument doesn’t fly. The taxable event occurs when the money changes hands, in this case, from the decedent to his heirs. The goal of the estate tax was and should remain to break up huge concentrations of wealth, just as huge feudal land estates had to be broken up with the land distributed to the peasants.

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And I’ll say again, it is NOT the man who is being taxed but his heirs. You said it yourself, the man earned it, the money is his NOT his kids. When it passes to his kids they are getting income that they DID NOT EARN. What you’re asking is why should rich kids have to pay taxes on their inheritance income in EXCESS of ONE MILLION DOLLARS. They should have to pay taxes for the same reason I have to pay taxes on lottery winnings, wages, capitol gains and everything else, because everyone pays taxes on all forms of income. Just because I’m giving money to somebody I love does not make that a tax free charitable donation. What would you suggest the threshold be for inheritance taxes $10 million, a billion, a hundred billion, or no estate taxes at all? Do you stand to inherit millions? Is that what this is about?

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So the management guy putting in 40-60 hours a week isn’t working hard? :rolleyes:
What exactly do you consider working hard?

46

Geez, I turn my back for a couple of minutes…

Bingo. The money is his. You said it yourself. He can certainly arrange to get the bulk of the company’s value transferred to family members before he retires. Unless he has the bad taste to die young and/or unexpectedly.

It’s only half my point. The value of the intact company is irrelevant. The owner paid $10,000 for a piece of land that is now worth a half million to someone else. He certainly wouldn’t pay that kind of money today to build the business in its current location. The inherent worth of the company is that it generates a steady $100,000/yr. Just as the $800,000 invested in a long term bond or annuity at 12.5% also generates $100,000/yr.

Yet you endorse breaking up one of these two assets.

Nope. Not unless someone in the family is holding a winning Lottery ticket that I know nothing about.

And it’s also pretty clear that you don’t stand to inherit that kind of money, either. The difference is I don’t begrudge the guy that will inherit the money anything.

Sorry. I guess my point got lost. Both the small business owner and the corporate manager put in long hours and are rewarded according to their efforts and successes.

The small business owner gets more of my respect simply for how he’s accomplished it. Often times he gambles everything that he has for enough cash to start his business then suffers through pretty lean times while building the business. If he fails, he loses everything that he owns. Eventually (hopefully) it pays off.

The hypothetical manager to whom I referred comes into the picture only after someone else has risked his future (and that of his family) and created a successful company.

47

I have heard the argument made ad nauseum that the hiers do not earn the inheritance and therefore, somehow, they don’thave as much of a right to the money as say…welfare recipients.

So tell me, if it is just to take money simply because it is not earned then how should we treat social services and welfare. I am certain that those unrelated to a rich dead guy are not earning those portions of his fortune that are taxed.

For the record, I do not stand to inherit anything. I plan on leaving my progeny millions though if things go right.

48

Welfare and unemployment compensation are taxed just like any other form of personal income, though many recipients do not exceed the $7,050 annual threshold. The argument is whether rich kids deserve some kind of tax break on their inheritance income in excess of 1 million dollars. Please explain to us all “ad nauseum” why you think they should get a tax break, without using the tired old fact that the gov’t hasn’t “earned” the money. The gov’t earns its income by providing us with various useless stuff like national defense, highways, sewage treatment, police, fire fighters, schools…