# Why is an estate tax constitutional? **URL:** \ **Category:** Great Debates\ **Created:** [December 5, 2009, 8:32am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085 "2009-12-05T08:32:22Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [December 5, 2009, 9:30pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/41 "2009-12-05T21:30:46Z")
[http://www.rollingstone.com/politics/story/28418678/the\_death\_tax\_scam](http://www.rollingstone.com/politics/story/28418678/the_death_tax_scam) The Estate Tax allows billions to go to the heirs of the very, very wealthy. They are spending a fortune trying to get even bigger cuts . i agree there are no reasons to not believe the children of the wealthy heve earned freedom from taxes. They are pretty special and chosen by god. ---
**Author:** ![Rumor\_Watkins](https://avatars.discourse-cdn.com/v4/letter/r/d9b06d/32.png) [@Rumor\_Watkins](https://boards.straightdope.com/u/Rumor_Watkins)\ **Post date:** [December 5, 2009, 9:34pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/42 "2009-12-05T21:34:43Z")
> [@gonzomax](#): > > [http://www.rollingstone.com/politics/story/28418678/the\_death\_tax\_scam](http://www.rollingstone.com/politics/story/28418678/the_death_tax_scam) The Estate Tax allows billions to go to the heirs of the very, very wealthy. They are spending a fortune trying to get even bigger cuts . i agree there are no reasons to not believe the children of the wealthy heve earned freedom from taxes. They are pretty special and chosen by god. they’ve done a good job already - jacked up the estate exemption limits from 675k in 2001 to 3.5 million 7 years later. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [December 6, 2009, 12:28am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/43 "2009-12-06T00:28:43Z")
> [@MilTan](#): > > Person A buys $100,000 worth of stock, and sees it appreciate to $3M over the course of his lifetime. If he were to sell that stock and then bequeath the proceeds to his heirs, he would be taxed on $2.9M in capital gains (call it 20%, if A sells after 2011), which is $580K. But suppose instead he just lets his heirs inherit the stock itself. The heirs pay no tax, as the estate is less than $3.5M. Now things get magical: the cost basis of the stock goes up to $3M, so if his heirs immediately turn around and sell the stock, they pay _no taxes at all_. The entire capital gains of A’s stock have been shielded from tax liability. > > What people forget is that the estate tax hits the entire estate, which includes things like unrealized capital gains that have not yet been taxed. Arguing to eliminate the estate tax is arguing to allow huge quantities of money (e.g., the Walton estate, much of which is tied up in stock that represents unrealized capital gains) to be made absolutely tax free. The Walton heirs would never be double taxed on their inheritance; eliminating the estate tax means they won’t be taxed at all. Right, most of a Estate is capital assets- Real Estate, stocks and so forth. The gain on these assets has never been taxed. Rich dudes don’t really have a Scrooge McDuck Money Vault. It’s in various capital assets most of the time. Leaving it to your heirs is indeed a transfer, whereupon the gains need to be taxed. There are HUGE exemptions, assuring that only the super rich will pay anything. No “family farms” or “family homes” have to be sold off to pay the Federal Estate tax. ---
**Author:** ![Frostillicus](https://avatars.discourse-cdn.com/v4/letter/f/e9bcb4/32.png) [@Frostillicus](https://boards.straightdope.com/u/Frostillicus)\ **Post date:** [December 6, 2009, 3:59am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/44 "2009-12-06T03:59:11Z")
It cracks me up when people whine about a tax that they never, ever will have to pay. ---
**Author:** ![Mr.Lahey](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@Mr.Lahey](https://boards.straightdope.com/u/Mr.Lahey)\ **Post date:** [December 6, 2009, 4:03am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/45 "2009-12-06T04:03:56Z")
What makes you think it has to be constitutional? Probably 90% of what the government does is unconstitutional. ---
**Author:** ![whorfin](https://avatars.discourse-cdn.com/v4/letter/w/6f9a4e/32.png) [@whorfin](https://boards.straightdope.com/u/whorfin)\ **Post date:** [December 6, 2009, 4:15am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/46 "2009-12-06T04:15:44Z")
> [@Frostillicus](#): > > It cracks me up when people whine about a tax that they never, ever will have to pay. Especially as by whining, they’re distracted from realizing (1) that the revenue raised from the estate tax goes to benefit people like them (whether directly through aid, or indirectly through government services, and because without the estate tax, their tax burden will need to be higher to keep revenue the same), or (2) if they really want to cut taxes, pushing for a tax cut that will actually lower their taxes, rather than cutting a tax that less than 0.5% of Americans will ever pay. ---
**Author:** ![Kimmy\_Gibbler](https://avatars.discourse-cdn.com/v4/letter/k/bbe5ce/32.png) [@Kimmy\_Gibbler](https://boards.straightdope.com/u/Kimmy_Gibbler)\ **Post date:** [December 6, 2009, 4:17am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/47 "2009-12-06T04:17:34Z")
> [@Mr.Lahey](#): > > What makes you think it has to be constitutional? Probably 90% of what the government does is unconstitutional. Well, your assertion is 100% horseshit, at any rate. ---
**Author:** ![whorfin](https://avatars.discourse-cdn.com/v4/letter/w/6f9a4e/32.png) [@whorfin](https://boards.straightdope.com/u/whorfin)\ **Post date:** [December 6, 2009, 4:18am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/48 "2009-12-06T04:18:59Z")
> [@Mr.Lahey](#): > > What makes you think it has to be constitutional? Probably 90% of what the government does is unconstitutional. Whether something “has” to be constitutional is a little metaphysical for me (and you could certainly come up with forms of estate tax that are unconstitutional–say, one applied only to property in Iowa and Nebraska). However, I’m happy to stick with the fact that the federal estate tax IS constitutional in its current, and historical forms. I and others have pointed out specifically how the constitution allows it, and (something I learned from this thread) that the first estate tax passed in 1797, when most of the framers of the constitution were (1) alive, and (2) active in politics. So what do you have? Anything other than a bald assertion? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [December 6, 2009, 4:57am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/49 "2009-12-06T04:57:48Z")
> [@Frostillicus](#): > > It cracks me up when people whine about a tax that they never, ever will have to pay. Hey, any day now he’ll be selling his collection of SDMB postings to a publisher for a massive advance. If Sarah Palin can do it … ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [December 6, 2009, 5:05am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/50 "2009-12-06T05:05:11Z")
> [@beo.thuck](#): > > beh.. Government always wants more Perhaps the people also want more from government? ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [December 6, 2009, 5:14am UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/51 "2009-12-06T05:14:34Z")
> [@](#): > > If you build up assets and pay taxes on all of your revenue (income), why can the government take up to 45% of it when you die. There’s really no difference between that and taxing you on April 15th and then taxing you on April 16th on whatever is left over. > > In other words, when do assets become income? Have you ever read the Constitution? The government has the power to collect taxes. It says so in the Constitution (_The Congress shall have power to lay and collect taxes, duties, imposts and excises_). Seriously, the founding fathers would have been idiots to have created a government that couldn’t collect taxes. So the government can tax income, it can tax assets, it can tax you on April 15 and then again on April 16. Any of which might be a bad idea or poor politics but none of which is unconstitutional. ---
**Author:** ![Snnipe\_70E](https://avatars.discourse-cdn.com/v4/letter/s/b5a626/32.png) [@Snnipe\_70E](https://boards.straightdope.com/u/Snnipe_70E)\ **Post date:** [December 6, 2009, 4:12pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/52 "2009-12-06T16:12:41Z")
> [@Cliffy](#): > > Not really. The same dollar isn’t taxed twice – fed and state taxes are aggregated, but they come at the same time. And of course you typically get a state tax credit for what you paid in federal income tax, so it’s actually even less. > . > If you’re going to rail about how unfair the tax system is, you should probably understand something about it first. > > –Cliffy Uh Cliffy, I can not find on my state tax for where I can deduct what I paid in federal income tax. But on a scheduls A I can deduct what I paid in state income taxes. So I am getting a federal income credit (not tax credit) for what I paid in state income taxes. ---
**Author:** ![UltraVires](https://avatars.discourse-cdn.com/v4/letter/u/ecccb3/32.png) [@UltraVires](https://boards.straightdope.com/u/UltraVires)\ **Post date:** [December 7, 2009, 3:27pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/53 "2009-12-07T15:27:01Z")
I think the emotional aspect is what makes people upset about this tax. Dear old Dad dies and leaves the family farm to you, and the government wants to step in. You grew up on that farm and spent many days helping Dad. Dad built it from the ground up and now that he is gone he wants to leave it to you. But the government wants a piece? I just feel that is far too intrusive into a transfer between family members ---
**Author:** ![MilTan](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@MilTan](https://boards.straightdope.com/u/MilTan)\ **Post date:** [December 7, 2009, 3:39pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/54 "2009-12-07T15:39:28Z")
Really? If Dad tries to give you the farm while he’s alive, you’ll have to pay a gift tax on it. Why should it be any different if the transfer happens after he’s passed? ETA: Also, the whole “family farms are getting torn apart” canard has been debunked repeatedly. Tell me why the Walton children should get all of Papa Sam’s stock (including its massive capital gains) tax free. ---
**Author:** ![whorfin](https://avatars.discourse-cdn.com/v4/letter/w/6f9a4e/32.png) [@whorfin](https://boards.straightdope.com/u/whorfin)\ **Post date:** [December 7, 2009, 3:43pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/55 "2009-12-07T15:43:57Z")
> [@jtgain](#): > > I think the emotional aspect is what makes people upset about this tax. Dear old Dad dies and leaves the family farm to you, and the government wants to step in. You grew up on that farm and spent many days helping Dad. Dad built it from the ground up and now that he is gone he wants to leave it to you. > > But the government wants a piece? I just feel that is far too intrusive into a transfer between family members Well, that’s not a constitutional problem. Also, let’s point out that (as of the most recent numbers I can find, [http://www.nass.usda.gov/Charts\_and\_Maps/Land\_Values\_and\_Cash\_Rents/farm\_value\_hist\_chart.asp](http://www.nass.usda.gov/Charts_and_Maps/Land_Values_and_Cash_Rents/farm_value_hist_chart.asp)), the average farm land value is $2,100/acre. So if you have any kind of competent estate planner, (and so can use the full $7m of exemption from both parents) you have to have a farm with more than than 3330 acres of land to be hit by the estate tax. That’s a big farm. Now let’s be reasonable, and say a third of the value of the farm is machinery. That’s still a 2100 acre farm. And half of all farms in america (and, i would argue, most, if not all small family farms) are far less than that size. [http://www.ers.usda.gov/AmberWaves/November07/DataFeature/](http://www.ers.usda.gov/AmberWaves/November07/DataFeature/) So the concept that the estate tax primarily hurts Farmer Bob who wants to leave his hundred acres to his children is just false. Further, the emotional side of it (people having to sell some of their land) only hits people with very valuable farms, and not a lot of cash (so they have to sell property to pay the estate tax). And I would suggest that you don’t get a great big farm by being bad at farming–so that people with farms hit by the estate tax aren’t the cash-poor people who are the focus of the emotional anti-tax appeals. Further, farmers are the recipients of a lot of federal aid–so that they are almost certain to get more in subsidies than they pay in tax. I’m skeptical of an anti-tax argument that champions people who are the recipients of substantial amounts of federal benefits–they reap the rewards of higher federal revenue. But those are policy arguments–and there is a pragmatic argument for the estate tax for small farmers. The above statistics suggest that your average poor, family farmer is way better off with an estate tax–since it probably won’t hit him, but will provide revenue that will help keep farm subsidies high. On the other hand, getting rid of the estate tax provides little benefit (as either your average poor, family farmer won’t be hit at all, or will be taxed only on the amount his farm value exceeds $7m) whereas the loss of revenue will almost certainly lead to a cut in his federal aid. My guess is that you asked any small family farmer “would you rather keep your federal subsidies, and have to pay tax on the amount the value of your farm exceeds $7m when you die, or lose the subsides and the tax?” the answer would be almost unanimous in favor of the estate tax. ---
**Author:** ![whorfin](https://avatars.discourse-cdn.com/v4/letter/w/6f9a4e/32.png) [@whorfin](https://boards.straightdope.com/u/whorfin)\ **Post date:** [December 7, 2009, 3:52pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/56 "2009-12-07T15:52:25Z")
> [@MilTan](#): > > Really? If Dad tries to give you the farm while he’s alive, you’ll have to pay a gift tax on it. Why should it be any different if the transfer happens after he’s passed? > > ETA: Also, the whole “family farms are getting torn apart” canard has been debunked repeatedly. Tell me why the Walton children should get all of Papa Sam’s stock (including its massive capital gains) tax free. Exactly. If you want to protect family farms, let’s double the exemption—or, to round up, say a $15 million exemption, and then raise the rate above that value to 60%. I’d be fine with that–it taxes Sam Walton’s kids heavily, and deals with the “small, family farms” worth more than $7 million and less than $15 million. And I would argue that if your farm is worth more than $7 million, it’s hard to believe it’s a small family farm (but there might be a few)–more than $15 million, it’s certainly not a small family farm. Also, I’ve pointed out, farmers should love federal revenue–since a lot is spent on farm subsidies. They should be in favor of an estate tax (maybe with a higher exemption)–since a lot of the money raised will come from the super-rich, and will go to them. ETA: my problem with the emotional argument, as I and others have pointed out, is it’s just plain based on false premises. I am against taking away half of Farmer Bob’s small farm when he dies–we should let him leave it to his kids. But that just isn’t what the estate tax does–It leaves Farmer Bob’s farm alone, and takes a bunch of Sam Walton’s and Bill Gates’ shares–while still leaving their children (or whoever inherits) with more money than a small farmer will ever see in his life, plus the bag it came in, plus the train the bags came in, and so on and so forth. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [December 7, 2009, 6:52pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/57 "2009-12-07T18:52:54Z")
> [@](#): > > I think the emotional aspect is what makes people upset about this tax. Dear old Dad dies and leaves the family farm to you, and the government wants to step in. You grew up on that farm and spent many days helping Dad. Dad built it from the ground up and now that he is gone he wants to leave it to you. > > But the government wants a piece? I just feel that is far too intrusive into a transfer between family members I’ve always felt the emotional aspect was more akin to “Somebody a few generations back made a fortune and with any luck nobody in our family will never have to do a useful day’s work again. How dare society suggest that the benefits I have be related to my efforts?” ---
**Author:** ![garygnu](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/garygnu/32/2924_2.png) [@garygnu](https://boards.straightdope.com/u/garygnu)\ **Post date:** [December 7, 2009, 7:10pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/58 "2009-12-07T19:10:19Z")
I’d like to point out that it’s entirely possible to set up your estate so that it avoids the estate tax, and the entirety of probate, too. ---
**Author:** ![Sinaijon](https://avatars.discourse-cdn.com/v4/letter/s/dc4da7/32.png) [@Sinaijon](https://boards.straightdope.com/u/Sinaijon)\ **Post date:** [December 7, 2009, 7:23pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/59 "2009-12-07T19:23:54Z")
> [@MilTan](#): > > . Now things get magical: the cost basis of the stock goes up to $3M, Isn’t this an effect, not a cause? IE, the cost basis goes up because the estate has already been taxed at the market value of the stock when it was transfered? Otherwise you’d be hit with the estate tax when the stocks are transfered, and then capital gains again when you sold. If you eliminated the estate tax, you’d also eliminate the cost basis adjustment when the stocks are transferred, and simply pay capital gains instead. ---
**Author:** ![MilTan](https://avatars.discourse-cdn.com/v4/letter/m/71e660/32.png) [@MilTan](https://boards.straightdope.com/u/MilTan)\ **Post date:** [December 7, 2009, 10:44pm UTC](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085/60 "2009-12-07T22:44:29Z")
> [@Sinaijon](#): > > Isn’t this an effect, not a cause? IE, the cost basis goes up because the estate has already been taxed at the market value of the stock when it was transfered? Otherwise you’d be hit with the estate tax when the stocks are transfered, and then capital gains again when you sold. Except that the estate tax exempts the first $3.5M of the estate, so in this case no taxes are paid on those capital gains. But you’re right that part of the tradeoff with the estate tax is that there is the free cost-basis step up. I’m not arguing against the cost-basis step up, just pointing out that it allows quite a lot of income to be shielded from tax liability. > [@](#): > > If you eliminated the estate tax, you’d also eliminate the cost basis adjustment when the stocks are transferred, and simply pay capital gains instead. It’s not clear to me that this is what people want to do when they eliminate the estate tax. And even if they do, it amounts to a massive tax cut for the wealthy (from a 45% marginal rate down to a 20% marginal rate) and a massive tax increase for the middle class (from a 0% rate – thanks to the high exemption – to a 20% rate). [Previous page](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085.md?page=2) [Next page](https://boards.straightdope.com/t/why-is-an-estate-tax-constitutional/520085.md?page=4)