Wow, I don’t think I could say as many bizarre things in two paragraphs if I tried! The part about the GOP welcoming me into the country’s wealthy with open arms brings tears to my eyes.
Now, why don’t you go to the cites that I’ve mentioned in my previous posts for some reality check on how wealth is really distributed in this country?!? And, why is it that the Democrats don’t want any more rich? A vast left wing conspiracy? I also love your attempt to reconcile the inheritance tax with the claim that the Democrats are for keeping those who are rich rich but making sure others don’t get rich.
Just how low do corporate taxes and capital gains taxes have to go before this country becomes too “business friendly” in your mind? Hell, why don’t we have the working stiffs subsidize the capital gains investments of the rich!?! Who needs a capital gains tax…We can raise payroll taxes and use the money to pay people “matching contributions” on their capital gains windfalls! I think you are being insufficiently imaginative in your ideas to create a business-friendly environment, Southern Style!
Ok guys, let me take you one at a time. Not that I’m afraid of the two of you, it just makes for better posting.
:: responding to spoke- in a way that lets me post the short answer(s) first ":
All economies have highs and lows. Japan’s is down right now (compared to recent highs) just as are many other economies, including our own. They will bounce back. The Japanese economy IS a major factor in the global economy. When the Brazilian economy hiccups, the world hardly notices. When the Japanese economy dips, well – you knew enough about it to include it in your post.
As long as capitalism is alive and well in this world, there will always be rich (and the super-rich). I don’t have a problem with this. First, it’s not my place to tell someone else how much money he can make. Nor is it yours.
Wanting rich people in this country has nothing to do with cheering for mom and apple-pie. Money is power, pure and simple. Development projects in other countries will need funding. This funding will buy tractors, power plants, consultants, communications equipment, and thousands of other things. If the project is funded with American money companies like John Deere, General Electric, EDS, and ATT will have infusions of cash in exchange for goods and services. If the project is funded with Japanese money those dollars will tend toward Mitsubishi, Nippon, and other Japanese companies.
What motive would one have for denying someone the opportunity to make money, even huge amounts of money, in exchange for buying goods and services from American companies that directly results in jobs for Americans?
You say that it’s too much money? Who put you in charge of determining how much money someone can make? What rule are you going to impose on the Japanese, German, British, and Honk Kong banks to tell them that they have to make less money than the American funding source? You can’t come up with a good rule? Fine. What you’ve just done is ensure that the same American money will attempt to fund the project through foreign corporations. Money that was directly responsible for jobs in America is now used overseas to fund competitors. How does that help anyone?
And the money is taxed. The purchase of every chain saw, pickup truck, computer, and telephone results in a transfer of moneys to the government. Every dollar paid to the employees that built the chain saw, tuned up the truck, configured the computer, or installed the telephone results in revenue to the IRS, Social Security, Medicare, and most all of your favorite project.
Quit thinking like a kid trying to sell greeting cards on the street corner. WalMart is opening a SuperStore right behind you.
I didn’t say anything about denying anyone the right to make money. Even huge sums of money. More power to 'em.
What I did say is that they should have to pay taxes on that income the same as Joe Breadwinner. They should pay taxes for income from investments, just the same as Joe pays taxes on his salary.
No, I said that they should pay taxes on the money they make, instead of expecting the middle class to carry the entire tax burden of the nation.
Yes, and that money comes out of the pocket of Joe Consumer, not the wealthy investor you’re talking about. When I buy a chainsaw, I’m the one paying taxes on it, not the Poulan Corporation. Once again, the middle class foots the bill.
Yes, and that money comes out of the paychecks of those workers.
I’m still waiting to hear why those workers should be taxed on the income they worked for, but the mega-rich should not be taxed on the income they get from inheritance or investment. Explain to me again why that’s fair, because I must be missing it.
The middle class is being hoodwinked by the Republicans, pure and simple.
Not only that, but it is only taxed at state and local levels, has no impact on the federal budget.
Southern Sytle wrote:*
spoke- wrote *
Theoretically, without the taxes, they would be paid less wages. Still, this is relevant how? It doesn’t replace the fact that capital gains = income and income is taxed.
spoke- wrote *
Investment gains, to the best of my knowledge is not on the chopping block. Capital gains is geared to continue being taxed and should always be taxed. If they are on the chopping block, they shouldn’t be.
[disclaimer] I did not read the entire thread so if there was some allegation that Bush is for axing capital gains altogether I missed it, I have heard reduce, but not cut [/disclaimer]
Inheritance taxes and gift taxes however are double taxation of the same money. It is a tax to punish the rich for staying rich and trying to hand down to their children instead of squandering every penny they ever make. It is a BAD BAD tax. However, until it can be replaced by cuts in expenditures or other tax sources, it can’t be removed. GW would sign the Republican Party into a 2002 overthrow if he were to borrow more on the deficit. They can’t and won’t do that.
Thank you Malcolm
In answer to the OP… The poor are best benefitted by a robust economy, regardless of who sits in the oval office.
Politicians have very little effect on the economy. They will take credit and good years and blame the world in bad years, the truth is they can’t control it nearly as much as they want you to believe.
Well, gift taxes are a necessary evil. Without them, it’s easy to predict that lots of otherwise-taxable income would be handed over in a way that it’s legally disguised as a gift. (I’ll pay you 30,000 per year salary, with a promise to give you a gift of 70,000 every New Year’s day…)
Inheritance isn’t something that can ever happen by choice, though. So that is indeed an unnecessary double taxation.
Dammit, I’ve made this point before with no response, but now we’ve got a group agreeing that the estate tax is double taxation.
Let’s say Mr. Investment Banker earns $1 million a year, on which he pays about 50% in tax (federal, state and local combined). He’s got $500,000. He spends half of it. Let’s say he retires after 10 years with $2.5 million in the market.
Fast forward 40 years. Assuming that money doubles approximately every ten years and that Mr. IB was able to live without touching this nest egg, it has now mushroomed to $40 million, which is taxed at a 55% rate.
At best (or worst, depending on your viewpoint), only 6.25% (2.5/40)of this is a “double tax”. Mr. IB earned $2.5 million from working; the rest is from investment returns. It has not previously been taxed. Why is this unfair? In addition, his heirs get a stepped-up income tax basis, so that if they sell the remaining $18 million of assets they pay no capital gains tax (bringing the effective estate tax rate down, but I’m too lazy to figure out how much). True, there is a substantial difference between a 20% tax and a 55% tax, but if you concede that capital gains are appropriate to tax, why is the fact of taxation (forgetting for the rate for a moment) at death any different?
I imagine there are abuses in the tax law, but I don’t believe (and am too lazy to look it up right now) that a company can gift to an employee under any circumstances, any funds exchanged are viewed by the tax code as compensation and the company is responsible to withhold federal and state income taxes as well as FICA and FUTA.
And even now, gifts are excludable to 10k per year per family member. I don’t think that exclusion applies to unrelated people. I would be for eliminating that tax only between immediate family members and not between family owned companies and family members, that way someone is always paying the taxes on the money as income.
As I mentioned earlier, there have been repeated calls from Republicans in Congress to eliminate the capital gains tax altogether. Although Bush has not made such a proposal, I expect he would not veto a Republican-sponsored bill to that effect.
AAAARRRRGGHHHH!
No, it is not “double taxation.” It is a taxation on the transfer of wealth in the same way that income tax is a tax on the transfer of wealth. The child who is inheriting the money didn’t accumulate it. The parent did. To the child, the inheritance is simply a form of income. Unearned income, at that.
Transfers of wealth are taxed, even when the same money gets transferred repeatedly.
Let’s say I work to earn 50,000.00 bucks. That income is taxed. Then I turn around and use that 50,000 bucks to hire an employee, and then pay him the 50,000 in salary. Guess what? It gets taxed again! This time, the employee pays the tax, but it’s the same money.
[sarcasm]Outrageous! Double taxation! No employee should ever be taxed, because the money he is being paid has already been taxed![/sarcasm]
Now let’s look at Joe Gotbucks. He earns 50 million bucks. He pays taxes on it. Then, through the vehicle of inheritance, he transfers the 50 million to his son, Gotbucks, Jr. To Junior, that 50 million is income. He didn’t even have to work for it, unlike our salaried employee in the previous example.
Now why should our hypothetical employee have to pay income tax on his salary (which he *worked for), if Gotbucks, Jr. doesn’t have to pay tax on the unearned income of his inheritance?
[Malcolm]The middle class is being flim-flammed, bamboozled, and led astray![/Malcolm]
Well, no doubt the deal would have to be properly sneaky; I’m sure it wouldn’t be that easy to disguise income in that way. But that’s what lawyers are for… But with gift taxes, there’s no way to do that.
spoke-
Income taxes are different, in my understanding (of course, I’m not an economist), because labor is additional value created. The money I’m handing over to the employee is not merely a transfer of my money. It’s my giving the money in exchange for that created value.
So here’s the more accurate scenario (in my view):
I earn 50,000 on which I’m taxed.
I hire someone to do $50,000 worth of work for me. He does the work. I’m now in possession of assets worth $100,000.
I hand over $50,000 of that to the worker. Now I’m in possession of the results of $50,000 worth of labor, and he’s in possession of $50,000 cash.
When the worker pays his tax, it’s not taxing my original money; it’s taxing the additional value generated.
With gifts, this isn’t true. No additional value has been created, it’s just been transferred. As I wrote previously, I’ll concede that gift taxes are necessary to avoid certain problems, but those rationales don’t apply to inheritance.
The $10,000 annual exclusion applies to anyone, anywhere, every year. You could give me $10,000 tomorrow, and I would thank you for it.
I disagree with the characterization of inheritance as “unearned income” and the income tax as a tax on wealth transfer, but I think these are really just semantic differences. The inheritance tax redistributes assets more obviously than the income tax because it obviously affects only the most wealthy members of society. But look at payroll taxes - Social Security, for example, is supposed to be a pay-as-you-go system, a clear transfer of wealth from the current generation of workers to the retired generation of former workers. Why is that fair (and workers, by and large, are far less well off than those subject to gift and estate taxes) and an estate tax, by which the government finally gets to collect on mostly previously untaxed assets (see my earlier post in this thread), is not?
Part of this has already been responded to (i.e., that there are proposals the Republicans have out there to eliminate the tax on capital gains). However, already capital gains is taxed at a lower rate than other forms of income. (I’ve noticed this now that I’ve moved money from CDs into mutual funds…Why the government would reward me to earn capital gains from mutual funds more than they reward me for earning interest in the bank, I’m not sure. I know the bank is less risky, but I am already taking a “hit” in terms of lower rates of return!)
Well, I suppose that is conceivable (that the tax would give them an incentive to spend the money), but it also provides them with an incentive to give some of it to charity in order to avoid the tax. And, it is not clear if the tax (which is, after all, only 55% at the highest marginal rate) would not provide an incentive for these people to work harder, as I noted previously, since, e.g., if they want think $4 million is a necessary nest-egg to leave to their kids they now need to save up somewhere around $6 million.
As the links I have previously cited show, this is not necessarily true. While a very sour economy does hurt the poor, a strong economy can exist (and has existed) with very little benefits accruing to the poor…or even the middle class.
Let me try again, spoke-.
The measure of a successful investment is the NET return. Hypothetically, invest a thousand dollars that returns 20% ($200). Tax on the return is 25% ($50). The gross return is 20% with a net return of 15%.
Invest another thousand in a venture that returns 25% ($250) but is taxed at 60% ($150). The gross return is 25% with a net return of 10%.
The second investment made more money but the first investment resulted in more disposable income. Most people would choose the second investment.
Here’s the summary. When the super rich are investing their money, they’re competing with others that have access to similar quantities of money. Those other people don’t have to be Americans named Rockefeller, Carnegie, Buffett, Turner, Trump, or Gates.
If you want the super rich to invest in jobs in this country two things must be true. They have to have enough wealth to compete with the wealthy of other countries, and they have to be able to earn at least as good a return as investing their money overseas.
If the U.S. taxing structure reduces the investor’s net return such that he can do better by investing in jobs overseas he’s going to do just that. The result is that he hires foreigners into foreign companies, funds competitors to U.S. companies, removes capital from the U.S. economy, contributes to the trade deficit, etc…
Demanding your “pound of flesh” moves the money overseas where careful investing means that the U.S. gets NO tax revenue from it nor does it get any economic benefit.
:rolleyes: You’re right, it’s a big incentive to make your living inheriting money rather than earning it. Gee, I think I’ll quit my job, go out and inherit some right now! :rolleyes:
Yes, it is double taxation.
I’ve been through this argument before too.
Income, by any definition, in any dictionary, in any reference, even in the IRS tax code is not the same as a gift or an inheritance. The IRS makes numerous allowances for transferring money and property to family members, i.e. gift exemptions, $675,000 inheritance deductions. Why would they do this if they viewed it as income? They wouldn’t, it isn’t, that is further why it is never taxed as income.
It is also taxed to the gifter, not the recipient. Thus, the giver is paying taxes on the money twice. Thus, double taxation. (Also, though I am reasonably sure we will never agree, estates = the decedent, same SSN, individual tax rates, all at the decedent’s basis on asset sales)
Originally posted by Cantrip*
Thanks, I was too tired to deal with it yesterday. I could also give you $2,000,000 and you could just thank me for it. The gifter pays the taxes, which is why it is double taxation.
However, that does affect the repeal of the gift tax, I would then correct my repeal to only immediate family members.
Originally posted by Cantrip *
But the only reason the asset gets a step up in basis is because of the inheritance tax. If not for the inheritance tax, the property would transfer to the heirs at the decedent’s basis and they would then pay capital gains tax upon disposal.
The estate tax is a Congress-sanctioned method of having the rich pay the capital gains taxes for the middle class and poor. The middle class and below transfer their appreciated assets to their heirs without any tax consequence at all. They override the capital gains tax by being under (soon) a million dollars in net worth at death. To pay for this exclusion, the rich are smacked with a death tax on their assets.
And the heirs don’t pay taxes on this money, the decedent pays the taxes, a second time on the same money/assets that they paid income taxes, property taxes and luxury taxes on all their life.
Originally posted by spoke-
The money isn’t falling out of the sky. The parent decided to save and transfer his/her wealth to their heirs instead of spending it all. It isn’t income to these heirs, still, it is taxed to the decedent as a punishment for looking out for their children. You find that fair how?
Originally posted by jshore
Well, you hit it on the nose. The government is providing an incentive for you to invest your savings in other companies in hopes of spurring economic growth. The entire tax code is full of exceptions and deductions for behavior that the U.S. government wants us to value. There are even bigger breaks for investing in minority companies, computer start-up companies and entrepreneur companies. There are exceptions to capital gains tax if you do steps A,B,C and D. It’s all about the government’s attempts to get us to invest how they think we should invest and about special interest groups buying their exceptions through political donations.
*Originally posted by jshore *
First, it is not the government’s place to decide whether I give to charity. There are already tons of incentives for charitable contributions in the tax code. The CRT is just lovely if you don’t mind working your entire life to give everything you built to a charity instead of your children. There needs to be a mid-ground somewhere.
The 4 million to 6 million argument is kind of silly don’t you think? They want to leave everything they earned to their children. It is NOT the government’s money to come in and grab. You make it sound like the federal government taking 55% of a decedent’s previously taxed assets is petty. Then add the State’s cut, sometimes another 10%. Add in lawyers and accountants and trustees and sales commissions and investment counselors for another 5%… wow, you can work all your life and leave 30% of everything you built to your children.
Then sell everything you bought or created in your lifetime, house, boats, cars, stocks, companies, because the middle class and working poor need a capital gains tax break when they die. Estate tax is the most unfair tax law on the books, it is a punishment for dying wealthy with no redeeming values whatsoever. Unless a capital gains tax break for the middle class and poor is a redeeming value.
No. Although the 706 (estate tax return) reports the decedent’s SSN, the estate has its own taxpayer idenfication number. It pays income tax on income it earns, at trust rates (which are the same as individual rates, but compressed, so that the 39.6% rate is reached at $7,500 in income). I have no idea what you mean by “at the decedent’s basis on asset sales” - any item owned by the estate has as its basis the value on the decedent’s date of death. If an asset is sold the day after the decedent’s death, assuming the market hasn’t moved, no capital gains tax is payable.
Originally JAG
Yes, but you can give me $10,000 and neither of us pays tax. I’ll email you my address.
I don’t get this. What about my nieces and nephews? What about the daughter of my best friend? What about in-laws? Either eliminate it or don’t. The gift and estate taxes really either live together or die together. If you eliminate the estate tax but repeal the gift tax only for “immediate family members”, I’ll just wait till I die to leave you your money. So there.
Originally JAG
Forget about the step-up for a minute. Solely addressing the issue of "double taxationignoring forgetting for the moment at what rate) investment gains that have not previously been taxed.
JAG
They tried this in the 70s. It was called “carryover basis”. It didn’t work - it was an absolute administrative nightmare, and everyone agreed that it was not a viable system of taxation. Thus, the estate tax stayed in place.
JAG
So, someone with $10 million has to pay some tax, but her heirs still get over $5 million (with the unified credit and graduated rates). And you – and the Republicans (see, I told you I’d return to the OP) – think it’s fairer to have that family keep its $10 million while 100 families with $100,000 each pay capital gains tax on assets they’ve invested (probably with a lot more difficulty than someone who’s managed to accumulate $10 million)? It may be “fair” to the decamillionaire; it is unfair to the others. All taxation is redistribution of wealth. This one happens to be based on wealth. I have no problem with it.
Wow. Look, if I have saved $5 million, my kids are likely to get about 60-65% of it, thus putting them, from day 1, in the top 2% of wealth-holders in the nation. And that’s with an estate tax. To me, maybe it’s unfair. To our society, which is after all what government is supposed to be governing, it seems eminently fair. I’ve provided for my kids; I’ve also helped our society by providing the government with funds necessary to carry out its functions. You can’t say that my estate tax dollars “pay for” a capital gains break for the middle class - might as well say my income taxes do that. Estate taxes go to the government’s general coffers, and are used for all government spending. It’s fair societally, and I think the problem is that you’re looking at it from an individual perspective. (Like saying that the chances of winning the lottery are a million to one. Maybe my chances are 1:1,000,000; if there are 1 million tickets sold, the chances are 1:1 that there will be a winner.)
No, most states take no more than the federal credit for state death tax, so the net effect on your heirs is 0. That’s 0.
When I said that these massive inheritances are “income” to the heirs, I obviously was not using “income” in the technical IRS sense of the word. It is income in the sense that it is money “coming into the possession” of the heirs. But you are quibbling over semantics and ignoring the larger issue:
Where is the logic in arguing that someone who works to earn their money should be taxed, while someone who receives money through inheritance should not? Of the two, which is more “worthy” of being tax-free?
[quote]
And the heirs don’t pay taxes on this money, the decedent pays the taxes, a second time on the same money/assets that they paid income taxes, property taxes and luxury taxes on all their life.
[quote]
Again you are quibbling over details and ignoring the larger picture. Sure, the IRS actually collects the money from the Estate rather than the heir, because it is more convenient to do it that way. But “the decedent” isn’t being taxed. What is being taxed is the transfer of wealth. Whether the tax hits before or after title to the wealth changes hands is a meaningless technicality.
From the perspective of the heir, the money most certainly is “falling out of the sky.” Not literally of course. But the fact is that the heir did not earn that money. To the heir, it is a windfall. Nobody is being “punished.” The transfer of wealth is being taxed, and quite rightly so.
I am still trying to understand why a wage earner who works for his money should be taxed, but an heir who didn’t work for his money should not.
[Malcolm]
The Republicans are trying to pull a fast one on the American people. Don’t let them pull the wool over your eyes.
[/Malcolm]
Let me ask a hypothetical about thesuper-rich. (That would be Bill Gates.) It’s a bit of a tangent – I’m trying to get a handle on your thinking.
Depending on the value of MicroSoft stock at any given instand, Bill is worth Somewhere between 50 and 85 billion dollars. For my question it really doesn’t matter what number we use so let’s just use 70 billion.
CNN suddenly puts up a MicroSoft corporate jet is “missing” and that it’s believed that Bill is aboard. Sometime this evening it’s confirmed that the MicroSoft CEO has died in a plane crash.
Now someone is going to inherit 70 billion dollars in the form of approximately 100 million shares of MicroSoft stock.
How do you propose that the heir(s) come up with 40 billion dollars?
But with gift taxes, there’s no way to do that.
