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.
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.
It cracks me up when people whine about a tax that they never, ever will have to pay.
What makes you think it has to be constitutional? Probably 90% of what the government does is unconstitutional.
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.
Well, your assertion is 100% horseshit, at any rate.
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?
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 …
Perhaps the people also want more from government?
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.
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.
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
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.
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), 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/
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.
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.
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?”
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.
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.
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.
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).