In this thread discussing Romney’s statement’s on Estate Taxes, Fuzzy Dunlop made the following statement:
Rather than hijack that thread, I thought I’d start a new one. This is a good point. In principle, I’m opposed to the elimination of Estate Tax. But in principle, I’m also opposed to stupid and unenforceable laws. Is there a way to actually enforce an Estate Tax fairly and uniformly? Or does the nature of the tax mean that there will be inevitable, unfixable loopholes to dodge payments?
I don’t think it is the nature of the tax as much as it is the law regarding trusts and corporations.
I think the basic problem is that most people would prefer that their kids get their money rather than the government. And are prepared to go to fairly considerable effort to make that happen.
I like my kids a lot more than I like the government, and even more than the theoretical and faceless people who are going to allegedly benefit if the IRS grabs my house when I die instead of leaving it to my heirs. And if that means I have to hire smart lawyers to think up arcane and elaborate ways of doing an end-run around the law so that my kids get as much as I can manage, and the feds as little, that’s OK by me.
My duty to provide for my family is a lot more immediate and pressing than my duty to hand over whatever I have been able to accumulate for the government to spend on Medicare, or whatever.
Maybe the government thinks they need the money more than my son or my daughter. Sorry, but I disagree.
Regards,
Shodan
I’m sure Bill Gates’ son will need $10B rather than the $6.5B he get after a 35% tax. I can think of many things the govt could do with $3.5B that would be more important than having Gates’ son be mega rich rather than mega, mega rich.
What loopholes are you talking about. My family has a family trust that will exist until my daughter is 45 (or our death, whichever comes later) and all our assets are placed in the trust, allowing them to be passed on w/o paying an Estate tax.
Of course, when there are distributions, the distributions (or a portion of them) will be taxed, so it’s not a “tax free shelter”, but it really simplifies the estate process and eliminates courts, probate, etc.
The above is really simplified - the actual document is 45 pages long and goes into detail re: a number of circumstances (a lot of them dealing with the question “what happens if we both die and Sophia is a minor?” - who controls the money, how does she gain access to any of it (and for what purposes), etc.)
The loopholes that were being discussed in the other thread don’t seem unfixable to me. The issue was a particular type of blind trust. It was based on this article, which - spoiler/hijack alert - concerns the estate planning techniques used by a presidential candidate.
I don’t know how the mechanics would work but the Obama administration has already proposed eliminating this loophole.
Well, adjust the capital gains tax rates to something comparable to normal income, for starters.
You’re missing the point. Maybe you, or the government, think whatever you want to do with my money is more important than whatever my son and daughter would do with my money. But I don’t. And therefore, I am going to do what I can to get as much to my kids as I can manage.
If you are suggesting only a 35% tax on estates of $10B, fine, but it is not a very worthwhile idea - there aren’t that many Bill Gates-sized estates in the US. And at the rate we are racking up debt, $3.5B ain’t going to last the US government more than about ten seconds.
If you are suggesting a 35% tax on all estates, fine - I am going to do what I legally can to avoid that tax. Loopholes, in other words.
And no, you aren’t going to be able to write a law that a smart lawyer can’t think of a way around it, at least to some extent.
Because, as I said, my basic motivation is to get what I built up over a lifetime to my kids.
Regards,
Shodan
Wow, nobody has ever started a thread about something I said before. I probably wouldn’t have put it exactly that way if I thought more about it.
What I meant was estate tax dodgers are operating toward a different goal that income tax dodgers. Normally people want to earn as much income as possible and one element of that is avoiding taxation. There’s always an arms length counter party they’re earning the money from in the first place. Even if you have $10 million cash to invest in anything you want, you have to invest in something you believe will be profitable. Then you have the income and you find ways to not have to pay tax on it.
Contrast that with people who want to avoid the estate tax. There you have a rich person who wants to give away enough of his wealth to avoid it being large enough to be taxed when he dies.
Doesn’t that seem different? It seems to me that with enough time and planning the vast majority of the tiny fraction of people wealthy enough to by hit with the estate tax at all are going to be able to accomplish that goal.
The quoted bit about “assign a low value to assets” is misleading. Tax payers have to assign a value to lots of illiquid assets but they do so knowing the IRS can challenge them if they believe it’s unreasonably low.
But there’s not a bright line between “loophole” and “fair taxation”. Is 1/10th interest in a tightly held private business worth 1/10th of the total enterprise value? If I had a business you believed was worth $10 million and I offered to sell you 1/10th, but you had no control over the business at all and couldn’t sell it to anyone without my permission and blah blah blah any other restriction I can get away with, would you pay $1 million for it? If no reasonable person would pay $1 million for that heavily illiquid asset, is it fair for the IRS to count it as a $1 million gift?
Of course, if you wait, and your estate gives the entire business to your heir at once, then it’s worth $10 million. That’s why you have to plan ahead.
The real problem is that most Congressmen are rich and they have no intention of paying the taxes that they impose on other rich people. The way it’s supposed to work, in their view, is that they take advantage of the loopholes. If non-politicians take advantage of them, it’s an outrage. And definitely not their fault for putting the loopholes in there, no way no how.
Who the hell are you to say what Bill Gate’s kid needs or does not need? And why is “the govt” entitled to a *single cent *of this money, that has already been taxed? If Bill Gates lived forever (and don’t put it past him), would “the govt” be entitled to any extra?
Shit-can the Estate Tax. Its robbing the dead, and screwing the lliving.
Gates is a terrible example btw, since iirc he’s planning to only give each child a million and basically give the rest away to charity and endowments.
I also disagree with you that the government can do better things with that money than Gates himself did. Consider…if the government can do that why do they need Gates money?? 
Realizing this is Great Debates, I certainly do not mean this as an insult to the quoted poster. More of an implied “Universal” you, meaning “anyone”.
Sorry for the confusion. 
I don’t understand this argument. You don’t get your income tax-free because your employer was taxed, and you don’t to buy stuff tax-free because your income was taxed. Why is the alleged fact that “this money” (whatever that means with a fungible asset) was already taxed grounds for getting rid of the estate tax?
We are the citizenry of the USA, from whom the government derives its power to levy taxes. It is our desire that high-value estates be heavily taxed, so as to slow the inevitable accumulation of wealth into a permanent overclass of idle rich. In our infinite wisdom and generosity, we have allowed for an exemption, so that no one is forced to sell the family farm. We may quibble on the exact values of the exemption and rate.
Because we already tax virtually every other transaction where money exchanges hands, and passing wealth on to your children should be no exception.
It doesn’t “rob the dead”, it keeps wealth from accumulating in the super-wealthiest families and staying there. If you support its elimination, you are buying and swallowing the snake oil being sold to you by the richest Americans, the super-billionaires who are the only ones truly affected by the estate tax.
I’ve posted about this a number of times. And I repeat the challenge I’ve made over and over: show me where the estate tax has been a disincentive to becoming wealthy, and I’ll remove my support for it.
Personally I feel the estate tax is every bit as repugnant as our odious willingness, as a society, to tax lottery winners.
I don’t think it’s misleading at all. It’s how this method works. Even if the value of the asset is not set in stone and is a matter of interpretation to some degree, it seems like it is quite easy to get away with saying an asset has nominal value or little value (call it a worst-case scenario valuation) and then turning around to sell it for a lot of money later.
I don’t really think the “loop holes” that people find and use are accidental. The people who write the laws write this crap into law so they can take advantage of them.
Then when other people take advantage of them as well, they feign outrage.
Imagine that.
What we need is some truth and actual transparency in our governmental workings.
All we get is false promise after promise.
I can’t really question your personal motivations, but I’ll also note the famous story of John D. MacArthur, who basically didn’t care at all about the philanthropic eneterprises he set up near the end of his life. On the contrary, his sole motivation was to keep the federal government from getting any of his wealth.
One good argument in favor of an estate tax is that it blunts the establishment of a permanent aristocracy, which (IMO as history shows) inevitably becomes opposed to general democratic principles and often leads to revolutions that end up redistributing the wealth anyway, just with a lot more bloodshed.