Why should the feds get a piece of my hard earned wages? Why should I be double taxed when I use my hard earned wages to buy something? Or, when I make a large gift to somebody (limit is 14k!)? I’m not pro-tax, but I don’t get the special aversion some people have to inheritance tax. I hate all taxes, but in choosing among evils I don’t get why the inheritance tax is worse than income tax, sales tax or property tax.
Completly agree with Higgmond on reasons for setting up trust. These reasons were the trigger for my setting one up.
But he forgot the best reason for the young and unattached. It sounds bitchin’ to the potential hook-up. No Veyron to flash? No problem. Just mention you will be a little late because “I am busy changing title in my investment accounts to the name of my revocable trust.” Low cost; high return.
And come up with a cool name for the trust. Don’t name it the “Goes to Eleven Family Trust Dated xx.” like I did. Boring . Something like “The Canyonero Land and Catlle Trust.” or “BSD Action and Reaction Trust.”
^ Respect.
One particularly reprehensible part of the estate tax is that it allows vultures (cough Warren Buffett cough) to prey on entrepreneurs whose estates need liquidity to pay the estate tax. Warren has made a career out of picking up companies on the cheap when highly-valued but illiquid estates receive Uncle Sam’s tax bill. Warren comes in and offers to pick up the stock with his fake-a$$ “awww shucks” demeanor, but the reason the estates need to sell the companies or the stock is a completely artificial construct. Crony capitalism at some of its worst.
So, you’ve busted your ass to create a thirty million dollar business, paid your taxes along the way. Your fifty years old. The business just recently took off. Haven’t given your death much thought. To damn busy. You’re getting the kids involved. They love it. This has been your life’s dream to create a business that can be passed onto your heirs… You and your wife die in a plane crash. Dream over. Only bidders want full control for less than twenty. Forced into a distressed sale. Most long term employees are let go. Yep, if I were king, I’d be knocking on your door for my cut the day after your parent’s die. They should of had the foresight to gift some of the business to the children when it wasn’t worth anything. Silly country folk and they have more money than most after all. In fact, I don’t think they really earned it. The best tax methods are those that can be “played” the most, and therefore end up affecting similiar cases much differently, like the estate tax. Those that are based on commerce, income, sales, tariffs, are silly in comparison. I really don’t know why people get worked up. Why do they care, if they don’t have more than ten million. Silly people…
I don’t get your argument, it is just a long paragraph of sarcasm.
First, anytime you hear “how would you feel if” (or any of its variants), there’s a 95% chance that you’re about to hear some bullshit. But I digress…
Second, it depends.
If the government is taking 40% of Alice and Christy’s money (who are wealthy through absolutely no merit of their own), putting it in a fund for education and giving my kids Pell Grants so they can go to school and compete with Alice and Christy, then yes, I’m perfectly okay with them making themselves a 40% owner of somebody else’s business.
Do I want them to do it to mine? Obviously not. But they’re already a 15% owner of my business every year. Plus, the state owns another 8.25% of what I buy (other than food). Not to mention the 23.8 cents per gallon I pay at the pump, plus the myriad other taxes that are passed through to me by businesses.
I understand the point that a wealthy person should have the right to distribute his money to whomever he wants with limited tax impact. I get the moral argument. But I also get the other moral argument, which is that the lack of an estate tax also creates dynastic wealth, and adds to the income disparity between the haves and the have nots.
And let’s face it–if Alice and Christy can’t survive on 65% of the amount remaining over $5m, then…my heart bleeds for them.
I’m glad to be in the minority.
How is this the same thing as the death tax? I don’t get it.
The only difference is timing. When you die, the government is going to make your heirs pay 40% of the value of the business, so why not just take it from you when you reach an age where you’re close to dying anyway? Why wait until you’re dead? For that matter, why wait until you’re close to dead? Let’s just have the government be a 40% equtiy holder in every business from day one and give them a put exercisable upon your death.
Obviously, I’m suggesting that the business is worth far more than $5MM.
I think that there are good points on both side of this, but I lean toward some form of tax. I understand that they worked very hard to build enough to pass on, but at the same time it’s an unsustainable system that perpetuates economic disparity. The amount of money left over from large estates after tax is still larger than most people will earn in their lifetime. It will still be a large enough inheritance to live off interest. So while I respect the hard work of the previous generation I don’t feel bad if their child who was given every opportunity (education, connections, etc) can’t survive on their own. Without the estate tax there would be an indefinite lineage of people who hold no accountability for their own future. This is destructive to the fabric of society and creates a fuedal ownership system.
I think people are upset because it’s their money and they don’t know where it’s going. What if when the tax is called upon it doesn’t go to the government. What if you could designate where you wanted it to go? You could give to space exploration, your states education system, research to cure something anything that forces to the money to reenter the economy for positive benefit of society. I support their right to use their money as they see fit, but I don’t support the accumulation of wealth just for the sake of it. In this way you’re not passing down wealth, but you’re passing down social capital to the children. They can be proud that they’re helping society and join the board to oversee how it’s deployed.
estate tax freeze is where its @
I’d rather we focus on bringing the bottom earners up than bringing the top down just for the sake of equality. Sure, it’s a lot easier to take than to make, but that’s no reason to steal a huge chunk of someone’s net worth simply because they die.
Don’t get me wrong, I don’t believe estate taxes should be zero (the government has to pay its bills somehow). 40% is a bit excessive though, and because it is so high, it creates incentive for people to go to great lengths to avoid it. That is inefficient in my mind. Perhaps I’m giving accountants and lawyers too much credit, but I think society overall would benefit more if less of their time was devoted to setting up GRATs, FLPs, and all that other crap that exists solely to minimize estate taxes. Maybe I’m wrong, but I suspect that if the estate tax were reduced to 5% or 10%, a lot of wealthy families would simply accept the fact that they have to pay it and not bother wasting so much time and energy trying to avoid it.
Republicans really know how to brainwash people on this issue. If you’re given money you didn’t earn you should be taxed at a higher rate (e.g. lottery, inheritance, etc). Taxes are not fun but they’re necessary so we might as well apply them in areas that will have least impact on economic growth.
Then the tax on lottery winners should be zero. They have a spectacular record of spending every dime of their winnings. That’s consumerism at its finest.
I live in the heart of a Republican stronghold, and it’s incredible just how pig-headed many of them can be. I know a few people who received inheritances in the eight figures, then they run around proclaiming to anyone who will listen that “I built this business, so Obama can kiss my ass.”
Then they go to the local country club where they can discuss business with other Republicans and try to gather as much wealth as they can.
I’m not hating on capitalism or the pursuit of riches, but to some people, the world is not enough. They believe they have a God-given duty to ensure that their kids never have to work a day in their life.
This I agree with. See my comment about Canada’s no estate tax. When you do not have estate tax assets don’t end up being locked in a trust, so the heirs can spend willy nilly and recirculate the money into the economy. Estate taxes make sense to me on the face of it, but the secondary effects of locking assets up in tax shelters decreases their efficiency.
I disagree with your previous statement that the estate tax is the same as taking 40% of a business from somebody who is living. An inheritance is a transaction where money is transferred, typically, from a parent to a child. It is not arbitrary, anymore than a birth is arbitrary. And, you are taxing the heir, not the person who earned the money. The person who earned the money is dead.
People like to bring up the social engineering argument on estate taxes, but I think that misses the point. If I make a gift to somebody over $14k it will be taxed. Why should inheritance be different?