Ah, well that’s totally different. So you would support eliminating the step-up basis?
Because it seems to me you really have to have one or the other - either tax the transfer and step up the basis (what we do now, mod certain exemptions) or keep the original basis and tax the sale of the asset.
I’d be fine with the latter if you also taxed cash transfers (minus the exemption) as ordinary income.
Ah. So the selection of one’s parents is the way “the market” decides who deserves to be wealthy.
I had no idea there was a parentage market, or that it worked that way. Thanks for enlightening me.
Just to play your silly game a bit: Do you or do you not have an argument for why it shouldn’t be? We haven’t been treated to one yet. Your own party’s constant sermonizing is consistent with saying it would be a good thing. :dubious:
So whaddaya got?
I’m not sure. I go back and forth on that. For instance, with someones home it isn’t right for them to owe huge amounts of taxes on it when their grandmother bought it back in the 1950’s for $20,000. It puts people in a position to have to keep the home or owe huge taxes if they sell.
I was more gearing my comments to a raise in value that would have been taxed normally, like stocks, which is why I used them as my example.
A good way to avoid this with homes would be to allow the transfer of the “two years out of the last five” rule to transfer to the inheritors of the home. That way, as long as grandma lived in the house for two years in the five before she died you could get $250K tax free.
I’m open to details, but at least these sorts of discussions are based on the existing tax rules, and not some arbitrary death tax of 55% that you are slapping people with.
Why? Cash isn’t an investment that’s gained in value, so why tax it?
Plus, this is the easiest one to avoid. If grandma has 500K in the bank in a savings account it’s a lot easier to liquefy that without paying taxes on it than it is to sell a $500,000 house or stock.
Let people hand the cash over for free.
So the pastor said to the rich guy, “You can’t take it with you, you know.” And the rich guy replied “Then I’m not going!”. The old ones are still good.
:rolleyes:
When come back, bring argument.
Slightly off topic plug: Kurt Vonnegut, in his fine work, God Bless You, Mr. Rosewater did more to expose the moral fallacy of inherited wealth than any ten pages of our best debates. Joe Bob **'luc **says “Check it out!” (Sorry, no chop-socky…)
I’m summarizing *your *“argument”. No wonder you’re abandoning it.
“Let the market decide who adds value and reward them accordingly.” That sounds like an argument in favor of the heirs starting over from scratch. Then they can be rewarded by the market just like anybody else.
Well, two reasons, one philosophical and one practical.
The philosophical one is that, from the point of view of the recipient, a cash inheritance is functionally equivalent to salary (with the added feature that you don’t even have to work to earn it). Since we tax earned income I don’t see why we shouldn’t tax another cash transfer.
The practical one is that we have to get tax revenue from somewhere, and I think that estate taxes after a large exemption is one of the least “painful” ones in the sense that it doesn’t effect anybody’s quality of life, their spending habits, their work habits, etc.
The problem, of course, is that if you tax cash transfers but not real estate or other assets then folks will just convert all cash to other forms prior to death. So it’s probably moot.
In the end I think it’s unwise to allow for massive generational transfers of wealth and land, so the fact that every couple of generations there’s a tax bill to be paid doesn’t really bother me.
Just how many multi-millionaires with dementia have heirs unwilling to help? I’m sure the offspring, out of the kindness of their hearts, will gladly find expert lawyers & accountants to ensure that as much as possible of the estate will be passed on. To them. Their generosity will probably extend to setting up living wills & powers of attorney, so the old folks will not linger too long in this vale of tears…
If the old coots have no heirs, who cares?
Many years ago I got in an argument with someone who said that Hardee’s made their biscuits from scratch. “They do!” she insisted. “My sister works there, I know!”
I’ve eaten Hardee’s biscuits. I’ve also made biscuits from scratch. I called shenanigans.
We went back and forth for a minute or two until she finally sighed in exasperation. “I’ve seen it,” she told me. “There’s a big barrel in the kitchen labeled ‘Scratch,’ and she makes the biscuits from that mix every morning!”
When you talk about a farmer’s kid who gets a “good chunk of cash after taxes” using that money to buy a new farm, and call that “starting from scratch,” it makes me think of that barrel.
What’s a death tax? I thought we were talking about the Estate Tax, you know, so that rich people cannot avoid taxes by gifting away all their possessions with no consequence yet still have de facto control over it.
Once you figure out what we’re talking about, please come back, bring pie
I am not a trusts and estates lawyer but these I Dig It trusts are a pretty common device (this is the first time I’ve heard them referrede to asI Dig It but whatever).
Estate taxes exempt the first FIVE million of your estate and the rest is taxed at a top rate of 35%.
The way some rich people get away with not paying estate taxes is cheating.
Romney seems to have valued a lot of valuable things at zero or near zero when they were contributed to a trust.
The I Dig It trust is just an intentionally defective grantor trust.
Normally when you put thigns in a trust for your heirs you make it irrevocable and those assets are no longer yours. The trust pays its own taxes and when you die, the trust is not part of your estate subject to an estate tax, it just goes to the beneficiaries. The benefit is that you can gift your kids $15K (or whatever the annual limit is) without paying a gift tax and it grows inside of the trust and might be worth several time that initial 15K when you die.
An intentionally defective grantor trust arbitrages differences between the tax law and the estate tax law so that the assets of the trust still belongs to Romney for income tax purposes but do not belong to Romney for estate tax purposes. So Romney (and not the trust) pays taxes on the income inside the trust but the assets of the trust are shielded from the income tax and the estate tax.
This is a loophole that Obama has proposed closing in the past but, well, he’s been having trouble with getting stuff through the house.
What concerns me about Romney’s estate planning is the value he put on the assets he contributed to the trust in the first place. Hedge fund managers frequently put their carried interst in these trusts and value them at ZERO. IOW, 20% of the upside on a gazillion dollar hedge fund is valued at zero so you can put a LOT of stuff in teh trust, a lot more than you are supposed to. They place all sorts of artifical meaningless restrictions on the assets they put into the trust and claim that the assets are virtually worthless because of the restrictions.
I asked you first.
I was trying to keep the scope of the discussion down but I guess that’s not possible. If you want to know my position why don’t we start with Romney’s? That’s pretty good and I’ve already posted it in it’s entirety upthread.
You are taking one line from something I said and twisting it beyond recognition. You know this.
You’ll need one hell of a blender.
I address that in the next sentence:
“Let the market decide who adds value and reward them accordingly. Let those people keep their wealth and pass it on to their heirs.”
Do you not read the whole thing?
Why take away the wealth every generation? Just for fairness? Then we’re back to the roads and bridges analogy. Generation Y didn’t build them so why do we let them use them to drive to work?
Life makes the unprepared pay in many, many ways. Make a will before you’re senile. Plan your estate as you accumulate it. The estate tax can’t be made into a safeguard for procrastinators, people who are afraid of lawyers, people who can’t make a decision, etc. And I say this as someone who has more than one dead relative who said “I want you to have . . .” while writing no will, so that all of their property went first to a recent spouse and then to his/her heirs.
shrug Their choice.
Amen.
Nitpick, here. You are paying for the highway system. Federal gas tax is a bit more than 18 cents per gallon, and there can be State and Local gas tax as well. In addition, State Propositions will often help fund specific expansions or rebuilds.
You don’t just plonk down “The Highway System” and walk away. It has to be continuously maintained or it falls to rubble. Entropy is a bitch. Maintenance is necessary, but since maintenance is not sexy there is a minor industry whose mission is to constantly remind politicians that maintenance is necessary and must be funded.
The latest federal appropriation is MAP 21. Don’t ever feel guilty about the roads you drive on. You are paying for them. You can be grateful that earlier folks paid to start them, but they have passed you that baton.
There’s scratch and there’s scratch. I’d prefer $1M+ and ditching the suburbs. Those candy asses move next to a dairy and then complain that they can smell cow manure. Suburb/farm zoning fights don’t really say much about estate taxes.
Besides the legal provisions already mentioned, I think you can incorporate a farm, or form a partnership. That would put it beyond any particular person’s death. It would also give descendants experience running the place. Of course, you have to trust your descendants.
The complaint about estate taxes isn’t about how much a person can give to their heirs. It’s about how much a person can keep sole and complete control of right up until the last breath, and then cede to their heirs only when Death Itself pries it from their fingers. Not quite as noble or generous a thing.
We tax income and other transfers of wealth, true. But generally not between families.
When someone works they get paid a salary and pay a tax. When they spend that money the person their paying generally pays a tax.
However, when someone gives their kid an allowance he doesn’t pay a tax. If a stay at home dad takes money out of the family account (earned by his working spouse) he doesn’t pay a tax.
Government taxes transactions. Families moving money around isn’t something that’s normally taxed.
Not always. People die suddenly. Not everyone plans. Some assets like real estate are hard to liquefy.
This is what it all comes down to. Who owns things? Is it individuals and families? Or some collective society that will level the playing field every generation or so for all to be equally poor? That’s the heart of the debate.