Estate Taxes

[michaeledward]

I do not believe I have a prejudice against wealth, either the possession of, or acquisition of.

You, of course, are entitled to your opinion.

 

[mrhnau]

I've not had alot of time to carefully read every arguement (been mega-busy), but I'll throw out some things.

There seems to be a revolt against these mega-millionaires. The Rockerfellas, Fords, Bill Gates, Waltons, Warren Buffet. We don't seem to like they make billions. However, these are the people who can easily afford to hide or manuever their cash into positions where they government won't be taking everything. These are also the people that donate billions to charities and such, employing thousands of people. These "evil billionaires" are the ones that have encouraged progress, came up with innovative ideas that made their fortures and left a legacy of growth and really lived out the American dream!

Now, there are a different class of people that fall into the estate tax group, especially with the number at 2 million. There are alot of small business owners and family farmers. These people tend not to have piles of cash laying around, owning yachts and such. They can hardly afford paying payrolls, much less hiring a lawyer to "hide" their assests like the mega-wealthy. They are not cash rich, but asset rich. Once you die, you have 9 months to pay off the debt owed to the IRS, or you are in legal trouble. As anyone who tries to sell alot of lands or businesses know, you can't get rid of things quickly, especially if you ask "full prices", which the IRS claims to know. Regardless of what you sell it for, they want money equal to their estimated value.

How can this happen? This is personal, but other examples out there exist. My dad bought a 130 acre plot of land around 20 years ago. About $800 an acre. Since that time, the price of the land has skyrocketed, going up to $5000 an acre. By local standards, this is a very small plot of land. I'm familiar with people who own and farm areas over 1000 acres. Same current land price. So, lets analyze this farmer and his family.

He employs his children and other family members. He owns 1000 acres at $5000 each, but has been in the family for generations, bought over 100 years ago for well under $1000 an acre. He owns farming equipment to perform his trade. Worth well over 1 million. So, though this farmer has trouble paying his bills, dependent on price of crops, drought, etc, he has a net value of over 6 million dollars, not counting his house or other possible assets (retirement, cars, ect). This guy dies. Taxable 4 million dollars. At last check, its taxes at 50% (please correct if this is wrong). Thats 2 million dollars in 9 months. How do you get it? Sell the equipment? The children can't take over the business. Sell the land? Then you can't apply your trade. Sell part of the land? Then who locally has 2 million in cash laying around to pay full market price, other than mega-coorperations? You either sell it to a huge corperation or slash the price to sell quickly, which means you sell more than half your land. The farmer had problems making ends meet with 1000 acres, how will the kids do with less than 500? When they die, the price of land will be going up again, and they face the same problem (assuming they die a good bit later).

Effectively, you are destroying the family farming business all across america. Same applies for any small business over a certain threshold. No wonder people are moving into the cities. They can't afford to stay in the country any more. With every passing generation, the farms get smaller. Taking away 1 billion in taxes from Bill Gates may be laughable, but taking 2 million from a struggling farmer is not funny. While my father does not fall in that category, I know many near where he lives that do.

Another thing that irks me, if things are not fixed. Things phase out in 2010, then go back to "normal" in 2011, right? [sarcasm] So, gee, I hope there are alot of farmer deaths in 2010. Better time your death right, or your family gets screwed! [/sarcasm]


Just on principle, I don't like the idea. A man works very hard his whole life to live out the American dream. If he succeeds too well, he gets overly punished. These millionaires don't have buckets of cash laying around, but its in assets. Houses, vacation homes, 401K's, stocks, bonds, CD's, just whatever they want. Upon death, much of it has to be liquidated. I guess most people think thats fine, as long as its not your personal stuff. What if YOUR dad did well? Or if YOU did well? Do you want the stuff you wanted your children to have to be sold to pay taxes? Want your Mom's engagement ring to be pawned to pay Uncle Sam? The house you lived in to be sold and you forced to move because of taxes? I think its kind of silly...

The only ones that really win here are the lawyers that make a living off of "hiding" wealth. They make a killing.

So, there are a few categories of people this affects. Small business owners. Farmers. Mega-rich - large/medium business owners. Those inhereting the money. Those wise in dealings (bought land early in growing places, invested wisely). [sarcasm] So, lets screw them all! I don't have that much money, neither should they! Yay communism! I hate Bill Gates and Warren Buffet lets destroy small businesses and the farmers while we are at it! Yay! [/sarcasm]

Fixes: Eliminate the Estate Taxes. Period. No more. You get taxed enough while you are alive, Uncle Sam should not try to pick your pocket while you are in the grave. Either that or set the limit VERY high. Even so, the filthy rich might have the cash to get around it still. Lawyers still do well, just not as many of them.

I do not believe I have a prejudice against wealth, either the possession of, or acquisition of.

I'll call BS. Read what I wrote and tell me this is a just tax. You want to single out the filthy rich, the Paris Hiltons and Gates. You can't do this without raping the rest of America that has done moderately well. In todays society, 2 million ain't that hard to come by. Buy a house in Miami 30 years ago. Invest in Starbucks at the right time. Buy a house in California 30 years ago. Buy some farm land in a growing area. Buy Intel at the onset. Geez... Go pick up a magazine selling expensive houses. They ain't hard to find.

 

[michaeledward]

So, the discussion as become an attack on Me personally, and how I hate rich people, rather than a discussion of Estate taxes.

Wonderful.

The Government reported today how wealthy people in this country are hiding money in a 'Black Box' of offshore accounts to the tune of 60 Billion dollars. Nice.

I submit this article... to rebut some claims made in earlier posts.

http://www.americanprogress.org/site/pp.asp?c=biJRJ8OVF&b=860671

 

[mrhnau]

So, the discussion as become an attack on Me personally, and how I hate rich people, rather than a discussion of Estate taxes.

Wonderful.

When you make a claim about yourself personally, such as

I do not believe I have a prejudice against wealth, either the possession of, or acquisition of.

how would you like me to respond? I added the bolds.

You sure do take things personally Make a -personal- statement, expect a -personal- answer.

The Government reported today how wealthy people in this country are hiding money in a 'Black Box' of offshore accounts to the tune of 60 Billion dollars. Nice.

I don't blame them. HOWEVER, farmers don't have tons of cash laying around. They can't hide their farms offshore, their tractors, or their houses.

 

[elder999]

So, the discussion as become an attack on Me personally, and how I hate rich people, rather than a discussion of Estate taxes.

Wonderful.

Pretty certain that you probably don't hate anyone. You seem like a reasonable enough fellow, and I agree with you on the repeal of the Estate Tax-just not the fact of it. Our government can't afford to cut any revenue right now.

Interestingly, both Roosevelts, Teddy and FDR, agree with you about this in principle as well-in fact, a surprising number of wealthy people have supported the same position throughout U.S. histrory, and there has been an Estate tax in one guise or another since the 19th century.

At any rate, it's not you so much as your statements about the wealthy that are prejudicial and inflammatory, as though they and their property need to be subjected to a different set of rules, because they have so much, and their heirs have done nothing to earn it other than being born.

For example:

Paris Hilton ... has she done anything for society, other than that night vison film?

Now, I'm no fan of hers, and if you look to her mother you'll see that she didn't fall too far from the tree, but it seems to me that she's making money as a model, a TV star and a singer-all of which are certainly indictments of our society, if you wish, but not her-if someone could make a profit in this country selling doggie doo-doo in a paper cup, well, they would. In any case, she's making her own money, and her contrubution to society is immaterial: while I was raised to feel obligated about such a thing, and others are or come to the feeling as well, there is nothing in this country we both were born in that says that such a thing is necessary-she can say "let them eat cake" all she wants to, and so can her parents. THe alternative being, of course, that she be reduced to something befitting her talents-giving up her inheritance and becoming a crack whore, perhaps, and thus an equally loathsome blight on society than the one she is now....

While I haven't checked, I believe there are places in the world where you can do just that. Generally, there is an accompanying title with this ability ... things like 'Lord', 'Duke', and 'Prince'.

They actually do call me a title like that in Ghana, and a few others in a few other places, but that's neither here nor there-the fact is that this equivocation of inherited wealth with royalty and all it connotes is prejudicial, or perhaps, hyperbolous-I'm no more "royal" in this sense than Oprah Winfrey; I'm an American citizen, quite simply, just as she is, and I have far less money......

My country was established in a manner in which each generation is able to undertake efforts for itself, and to step away from the inherited positions within society. While this ideal is never going to be reached, we have put in place, mechanisms to prevent the creation of a stratified, oligarchy.

So is what you're saying here that real Americans earn their keep, and inherited wealth, and all that you imply it entails (not really sure I have any inherited "position" in this country that wields the sort of influence you fear; in fact, I'm sure that I don't), runs counter to some sort of ideal-that those who inherit wealth are a subversion of the American dream, rather than beneficiaries of it?

In my country, if you are a man of modest needs and wants, you can pass every cent you earn to your progeny. Enjoy.

Yet, in your country, if you are the heir of someone of more than modest means (never mind your "needs and wants," as I posted earlier, I live much more modestly than my means-my needs and wants are generally satisfied) then you are somehow obligated to surrender a large portion of those means, for the benefit of-what? The government? Or to "even the playing field?" Sociological handicapping?

I posit, the Estate Tax is in place to prevent the accumulation of wealth in the hands of a few families. With wealth comes power, to influence politics, communities, and business. Working to restrict that concentration of power, is a valuable, and I believe uniquely American, endeavor.

Well, no-the Estate tax is in place to generate revenue. It hasn't prevented the accumulation of wealth, and it never will, as I've demonstrated more than once. As for "power to influence politics, communities and businesses," I think those are also the bailiwick of
any citizen that has a mind to, and the will to garner support, at least they are in my country. My parents marched on Washington and Selma back in the Sixties, and it wasn't their money or anyone else's that changed things.

One relavant fact.
Why Pays an Estate Tax?

In 2006, the wealthiest 0.27% of Americans are the only ones who pay estate taxes.
For more than 99 out of 100 citizens, this discussion occurs only in the theortical arena. If you are one of those .3% of Americans who will be effected by this program, please let us know.

Well, I have been, and, should I be alive when my mother passes away, I will be again. Somehow, though, your mind is made up in spite of what those whom it has affected have to say.

By the way, your number is absolutely incorrect by a factor of 100:

In its current form, the estate tax only affects the wealthiest 2% of all Americans.

Seen here.

In any case, it affects anyone who inherits a gross-based on various IRS calculations and exemptions, of $1million or greater-some of the allowances are for surviving spouses, small businesses and farms, and others are based on a reduction of value from the IRS's "true market value" calculation to something that takes into account things like depreciation or liabilities and mortgages. In any case, once the estate has been determined to have a net value of $1 million or greater, it's subject to this tax-and, in a country where a bungalow in Downey, Ca is "valued" at $750,000, it isn't such a significant number for even the merely middle-class anymore; it is eminently achievable. In this case a of small businesses and farms, BTW, the current exemption is $820,000-enough to often offset the inheritance burden, but not always.

Most who are subject to this tax, need not work at all. Their wealth is inherited. Somewhere in their lineage, someone earned and acquired that wealth, but it does not need to be those who are subject to this tax.

I would posit that most who are subject to this tax do work, whether they appear to you to need to or not. Somehow, though, it seems to me that you think that they should be what some might see as effectivelhy penalized for inheriting the fruits of their forebears labors?

Instead, that wealth would pass unhindered to the progeny of those who created the wealth (Paris Hilton). That way lies 'Oligarchy'.

Do you really think the likes of the Paris Hiltons of this country (and, believe may, there are much worse than she running amok without TV cameras as we speak-Paris loves her cameras) are going to run the country because they've inherited wealth? That congressmen and senators are going to be influenced by an underfed, undereducated, sexually trivial bimbo because she owns a few hotels?

If it were oil wells, well, maybe-but it's really corporate influence that you need to fear on that front, and not at all the wealth of individuals-the barn door on that one, BTW, was shut behind the fleeing horses in the form of corporate citizenship-since corporations became entities entitled to the same rights as people, their influence has grown into just the sort of thing that you're speaking against, and something that Founders would have detested far more than inherited wealth itself.

But, really, Steve Forbes does not need to run a magazine, or for President, or do anything. His grandfather, or great grandfather made a mint, and Mr. Forbes can live off of it.

Yet, he, as do many others, does do those things-as is his right as a citizen-just as doing nothing and living off his wealth might be. Somehow, though, what you say here seems to be an indictment of Mr. Forbes, as in, "how dare he be in a position to do whatever he wants because his forebears made it that way."

No, Michael, I don't believe for a minute that you're prejudiced against the wealthy, or wealth, but I don't think for a minute that you have a great understanding of them-and your statements not only demonstrate this, but are, by their nature, prejudicial.

 

[Rich Parsons]

Cuz I'm standing on my head ... and thinking out my ***.

Of course, you are correct. Although, I was 100% certain when I typed that crap I was saying what I meant, not what I said.

Actually, I think it may be the sequence of variables there ... although irrelevant to the equation, ... I listed X first, you listed Y first.

Thanks .. Good catch.

MichaelEdward,

I apologize for the dyslexia and the confusion. I now understand where you began.

Let me think about some of the other equations floating around in here and then reply.

:asian:

 

[FearlessFreep]

The Government reported today how wealthy people in this country are hiding money in a 'Black Box' of offshore accounts to the tune of 60 Billion dollars. Nice.

This is one of the reasons I'm against many of the various taxes on varioues spurious things (like Estate Taxes, Capital Gains, God Knows What Else)

The Government sees some action and wants a piece of the aciton ,so they tax it. People don't like to be taxed, so they try to find ways, legal, semi-legal, and less than legal, to hide the money or otherwise keep it from being taxed. So the IRS has lawyers to further refine the tax code to try to get ahold of the money and investigators ti find the money and the people trying to keep the money hire accountants and lawyers to figure out how to ide the money in increasingly clever ways, hopefully without going to jail.

So a whole mess of people do *nothing* with their lives but play the shell game of 'hide the money/ find he money/ tax the money/keep the money'. A game that has no connection to producing anything, growing anything, creating anything, contributing anything but is merely an artifact of the tax system.

For every Paris Hilton one could complain that they don't contribute anything to society, how many people don't contribute anything to society but shuffle papers of abstractsions of other peices of paper(money) trying to hide it or find it in a vicious circle of our own creation. At least Paris Hilton keeps us entertained and spends a lot of money. The tax code just generates waste in a game of hide and seek

The reason I don't like the estae tax s that it's such a waste of energy and resources

 

[michaeledward]

submitted for your consideration ...

http://mediamatters.org/items/200608010004

On the July 28 edition of Fox News' Special Report with Brit Hume, Washington Post columnist Charles Krauthammer falsely claimed that the estate tax "penalizes a lot of small businesses" and could leave the "heirs" of a "small-business owner" with "nothing." In fact, the estate tax affects very few small-business owners, and the highest marginal estate-tax rate is 46 percent.

And this is an interesting quote from the same article. Please note the number of businesses vs number of businesses affected.

Congressional Budget Office report found that based on an analysis of 1999 and 2000 estate-tax returns, only 135 family-owned businesses would have owed any estate tax at the current exemption level of $2 million. By contrast, about 4.5 million active businesses with assets under $5 million filed income-tax returns in 2002, according to the IRS.

 

[mrhnau]

Estate Tax on Wiki

Great article, gives pros and cons for both arguements. Also interesting are the tables with max tax rate and actual tax rates. Very interesting read. Does not seem to have any motive (unlike alot of other articles offered here).

One great quote:

A study of the 18,800 taxable estates taxed in 2004 found 7,090 which had any farm or business income. Of those, there were 440 estates in which half or more of its assets were the value of farms and/or businesses. The effective tax rate on the 440 estates studied in detail never averaged more than 23%

Note, 18k taxable estates, and 7k were farm/business related. 440 were similar to the arguement I made earlier in this thread. Thats not a trivial number, especially when you are one of the 440 (or 18k).

 

[elder999]

submitted for your consideration ...

http://mediamatters.org/items/200608010004



And this is an interesting quote from the same article. Please note the number of businesses vs number of businesses affected.

Yeah, but you forgot to factor in one thing-the number of businesses affected is proportional to the number of business owners that died.-in other words, while some-odd million (4.5) business owners filed tax returns for the years noted, most if not all of them were likely alive in the year afterward-the comparison is specious, obviously.

 

[michaeledward]

Yeah, but you forgot to factor in one thing-the number of businesses affected is proportional to the number of business owners that died.-in other words, while some-odd million (4.5) business owners filed tax returns for the years noted, most if not all of them were likely alive in the year afterward-the comparison is specious, obviously.

You are correct, except that I did not forget to factor anything, I submitted that article for review. Blame the authors for mis-matching data.

4.5 million business owners.

Estimated average lifespan of business owner - 75

4,500,000 / 75 = 60,000 estimated deaths.

60,000 estimated deaths ... vs ... 440 small businesses subject to Estate Tax of an average of 23%.


The point is .... damn near NOBODY has to pay Estate Tax.

 

[mrhnau]

You are correct, except that I did not forget to factor anything, I submitted that article for review. Blame the authors for mis-matching data.

4.5 million business owners.

Estimated average lifespan of business owner - 75

4,500,000 / 75 = 60,000 estimated deaths.

60,000 estimated deaths ... vs ... 440 small businesses subject to Estate Tax of an average of 23%.

faulty logic, bad math. This assumes there is an even distribution of deaths from age 0 to 75. Also assumes that a 1 year old can own a business.

Lets also get your idea of a business owner. I can go and get a business liscence for around $200 total. I officially own a business. Would I get counted in your estimates? I know several people (family and friends) that own a business. Few of them are rich. Some of them are though, if you count assets.

The point is .... damn near NOBODY has to pay Estate Tax.

Then why are you so desperate to keep it? If it generates SO much money, and we simply will fall apart if it disappears, the money comes from SOMEONE. You telling me the Paris Hiltons and Bill Gates of the world are the only ones dying w/ money?

 

[mrhnau]

Lets knock this one around....

Fix the limit that Estate taxes kick in. Lets pull out an arbitrary number, lets say 10 million. Adjust this number based on inflation every year. Since the government likes to employ people, hire some people to consider the situation of each case, since there are so few per year (numbers from previous post seem to indicate such). Ask some questions, like "would this destroy a family farm", "force a business to be sold for less than real value", or "force a family to move from their homes to pay the bill". If this is the case, then either repeal or reduce the tax. This fixes a couple of things... Those just sickly full of money still need to pay (close loopholes if you want). Those eeking out a living but full of assets (farmers, small business owners barely making it) get a break. Just because your house/land goes up in value, it may keep per with inflation and not bite you later.

hows that for a solution? Still get some tax revenue w/out the risk of destroying small businesses and farmers. Almost everyone is happy (except for the mega-rich perhaps)

Also, what number would be reasonable? Is 10 million too high? 50? 1? Should it be regional? For instance, a ranch in Texas ain't worth nearly as much as in California. Should the limit be based on local cost of living?

 

[elder999]

You are correct, except that I did not forget to factor anything, I submitted that article for review. Blame the authors for mis-matching data.

4.5 million business owners.

Estimated average lifespan of business owner - 75

4,500,000 / 75 = 60,000 estimated deaths.

60,000 estimated deaths ... vs ... 440 small businesses subject to Estate Tax of an average of 23%.


The point is .... damn near NOBODY has to pay Estate Tax.

60,000 estimated deaths, what, per year? the data from your post contradicts that. Whatever it means, all of those people are going to die, someday, and somebody is going to inherit their stuff, depending upon how they structured it.

Point is, the IRS says that 2% of the population is liable for this tax and the US population is 300,000,000. 2% of 300,000,000
is 6,000,000-the population of a large city,of course, they also don't die in that number every year, but they're hardly "damn near NOBODY," unless,of course, you think of "the rich" as "nobody.":idunno:

 

[psi_radar]

I didn't read the replies to this since I have a definitely biased point of view. My dad worked really hard his whole life to pass down a legacy to his kids. We might fall into that small bracket. To me, that inheritance means I don't have to worry about my autistic son ever worrying about his next meal after we're gone. I probably will not be able to do as well financially as my father. My father lives simply, I do too. All we want is what he saved for us, and ultimately, for my child, whose care will cost quite a bit over his lifetime after we're gone. Is it to much to ask to pass down the money you've saved over the years to your kids, regardless of the amount?

 

[michaeledward]

I didn't read the replies to this since I have a definitely biased point of view. My dad worked really hard his whole life to pass down a legacy to his kids. We might fall into that small bracket. To me, that inheritance means I don't have to worry about my autistic son ever worrying about his next meal after we're gone. I probably will not be able to do as well financially as my father. My father lives simply, I do too. All we want is what he saved for us, and ultimately, for my child, whose care will cost quite a bit over his lifetime after we're gone. Is it to much to ask to pass down the money you've saved over the years to your kids, regardless of the amount?

Why are you waiting for your father to die?

I hope that both you and your father are aware that he can gift a portion of money to you each and every year he is alive, right? If you have siblings, he can similiarly gift them a portion of his legacy. I'm pretty certain that he can gift money to your child as well. Also, if your father is still married to your mother, she can gift a not insignificant amount of money to you, your siblings, and (maybe) your children each year - even if it was money your father earned. (a benefit to marriage)

As, I think, elder666, would point out, have your father visit an experienced attorney. There are steps that can be taken to minimize the effect of the Estate tax. Most likely, a short conversation will allow your father to avoid the Estate Tax all together.

I say 'most likely', because most people with assets commonly talked about when discussing the Estate Tax pay ZERO Estate tax to begin with.




P.S. - I hope that I never refer to money as a 'legacy'. I hope that my children receive a legacy from me that consists of love, action, hope, peace, patience, discipline, integrity, kindness, brotherhood and optimism. These traits, I think, are far more valuable than any assets we pass on to our progeny.

 

[psi_radar]

Why are you waiting for your father to die?

P.S. - I hope that I never refer to money as a 'legacy'. I hope that my children receive a legacy from me that consists of love, action, hope, peace, patience, discipline, integrity, kindness, brotherhood and optimism. These traits, I think, are far more valuable than any assets we pass on to our progeny.

Hey M.E,

There are indeed gifts you can give your children ($11,000) tax free per year, and there is also a way to provide special needs trusts, but the fact is, no matter how rich you might think you are, a debilitating disease can incur a nearly unfathomable amount of cost. My father has parkinson's, so I don't blame him for keeping whatever ready assets he has for his own treatment, without investing a lot of his liquidity in my son.

I don't know what world you're living in, but a lot of mine depends on finances. It's moot that kindness, brotherhood, love, etc. is a necesstity. So is food and lodging. My son will likely outlive me by 40+ years. I'm doing my best to take care of him, and it'd be great if my inheritance is intact to pass to him and his caregivers.

 

[michaeledward]

Hey M.E,

There are indeed gifts you can give your children ($11,000) tax free per year, and there is also a way to provide special needs trusts, but the fact is, no matter how rich you might think you are, a debilitating disease can incur a nearly unfathomable amount of cost. My father has parkinson's, so I don't blame him for keeping whatever ready assets he has for his own treatment, without investing a lot of his liquidity in my son.

I don't know what world you're living in, but a lot of mine depends on finances. It's moot that kindness, brotherhood, love, etc. is a necesstity. So is food and lodging. My son will likely outlive me by 40+ years. I'm doing my best to take care of him, and it'd be great if my inheritance is intact to pass to him and his caregivers.

In almost every likelyhood, your inhreitance will pass to him intact.

One of the legacy attributes that I hope will pass from me, to the generation that follows me, is hard work.

Dean Warmer said it best, "Fat, Drunk and Stupid is no way to go through life, son".