Fear 2011

[RedskinsDave]

Republicans need to run on this and this only this fall:

But as of midnight Dec. 31, the death tax returns — at a rate of 55% on estates of $1 million or more. The effect this will have on hospital life-support systems is already a matter of conjecture.
Resurrection of the death tax, however, isn't the only tax problem that will be ushered in Jan. 1. Many other cuts from the Bush administration are set to disappear and a new set of taxes will materialize. And it's not just the rich who will pay.
The lowest bracket for the personal income tax, for instance, moves up 50% — to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.
But the damage doesn't stop there.
The marriage penalty also makes a comeback, and the capital gains tax will jump 33% — to 20% from 15%. The tax on dividends will go all the way from 15% to 39.6% — a 164% increase.
Both the cap-gains and dividend taxes will go up further in 2013 as the health care reform adds a 3.8% Medicare levy for individuals making more than $200,000 a year and joint filers making more than $250,000. Other tax hikes include: halving the child tax credit to $500 from $1,000 and fixing the standard deduction for couples at the same level as it is for single filers.
Letting the Bush cuts expire will cost taxpayers $115 billion next year alone, according to the Congressional Budget Office, and $2.6 trillion through 2020.


This should do wonders for the economy. Have no fear though, it will all be blamed on the Party of No since clearly none of the ridiculous spending/bailouts/taxes/healthcare/taxes/fakejobs/taxes are Obama's fault.

[akhhorus]

Not to get picky, but the estate tax comment is untrue. In 2011, the Estate tax goes back to 2001 rules:


Over $1,000,000 but not: $345,800, plus 41 percent of the over $1,250,000 excess of such amount over $1,000,000.
Over $1,250,000 but not: $448,300, plus 43 percent of the over $1,500,000 excess of such amount over $1,250,000.
Over $1,500,000 but not: $555,800, plus 45 percent of theover $2,000,000 excess of such amount over $1,500,000.
Over $2,000,000 but not $780,800, plus 49 percent of the over $2,500,000 excess of such amount over $2,000,000.
Over $2,500,000 $1,025,800, plus 50% of the excess over $2,500,000.

Source (http://codes.lp.findlaw.com/uscode/26/B/11/A/I/2001)

More like 35ish percent for most of them.

The cap gains tax won't effect things much, the dividend tax will effect big holders of shares(if they don't reinvest), the worst part is not making the marginal tax rate increase uniform. As for the 01 tax cuts: something has to be done with them, they're the biggest source of the deficit over the next decade.

[BurgundyNGold]

Personally, I'm fine with letting the Bush tax cuts expire. They were irresponsible and reckless at the time and even moreso today.

The estate or "death" tax is something else. I figure that the money that every a person makes has been taxed at some point, at least once. Probably at the corporate level, then again at the income level. Investments get taxed for their profits, though you can get relief on losses. Since this money has already been taxed at least once, I don't see the morality in taxing it again, whether at a rate of 35% or 55% or even 1%. To me, it's an unfair second bite at the apple. I'd repeal the mortgage tax credit before I taxed a dead man's money a second or third time.

Let the Bush tax cuts expire and repeal the estate tax permanently. It seems like a reasonable political compromise and the right thing to do.

[akhhorus]

Personally, I'm fine with letting the Bush tax cuts expire. They were irresponsible and reckless at the time and even moreso today.

The estate or "death" tax is something else. I figure that the money that every a person makes has been taxed at some point, at least once. Probably at the corporate level, then again at the income level. Investments get taxed for their profits, though you can get relief on losses. Since this money has already been taxed at least once, I don't see the morality in taxing it again, whether at a rate of 35% or 55% or even 1%. To me, it's an unfair second bite at the apple. I'd repeal the mortgage tax credit before I taxed a dead man's money a second or third time.

Let the Bush tax cuts expire and repeal the estate tax permanently. It seems like a reasonable political compromise and the right thing to do.

I generally agree, but I have no problem with an estate tax for estates over 50-100,000,000 dollars. I would also trade the payroll tax for a carbon tax.

[shally]

Personally, I'm fine with letting the Bush tax cuts expire. They were irresponsible and reckless at the time and even moreso today.

The estate or "death" tax is something else. I figure that the money that every a person makes has been taxed at some point, at least once. Probably at the corporate level, then again at the income level. Investments get taxed for their profits, though you can get relief on losses. Since this money has already been taxed at least once, I don't see the morality in taxing it again, whether at a rate of 35% or 55% or even 1%. To me, it's an unfair second bite at the apple. I'd repeal the mortgage tax credit before I taxed a dead man's money a second or third time.

Let the Bush tax cuts expire and repeal the estate tax permanently. It seems like a reasonable political compromise and the right thing to do.

+1 i am with you on this one

[shally]

I generally agree, but I have no problem with an estate tax for estates over 50-100,000,000 dollars. I would also trade the payroll tax for a carbon tax.

unfortunately, we will probably get BOTH.. plus some kind of VAT in the future..

Krauthammer has suggested that after this fall, Obama will call Congress back into lame duck session to enact some unpopular taxes by people who are going home anyway...

[RedskinsDave]

unfortunately, we will probably get BOTH.. plus some kind of VAT in the future..

Krauthammer has suggested that after this fall, Obama will call Congress back into lame duck session to enact some unpopular taxes by people who are going home anyway...

Why not? He prefers to conduct business this way. Shady as it gets.

[akhhorus]

unfortunately, we will probably get BOTH.. plus some kind of VAT in the future..

Eh..I doubt it. Ending the wars+reining in the 2001 tax cuts cuts the budget problems dramatically long term. If they're going to do a VAT, it should be fairly small and on big ticket items or a very small VAT on stock share sales. Actually if you had a 0.01% VAT on individual stock sales, that could raise a ton of revenue with all the automatic share buying/sales.

Krauthammer has suggested that after this fall, Obama will call Congress back into lame duck session to enact some unpopular taxes by people who are going home anyway...

They might determine what to do with the 2001 Tax cuts, but only because they're due to expire(and that might just be to have a 1 year extension of some of them). Its hard to get major legislation through during a lameduck session. A lot of defeated/retiring members go home and it becomes much easier to filibuster a bill. The only example I can think of is Clinton's Impeachment in 98.

[Keino]

I have no sympathy for heirs of rich people who were too cheap to properly plan their estate so as to avoid estate taxes.

[RedskinsDave]

I have no sympathy for heirs of rich people who were too cheap to properly plan their estate so as to avoid estate taxes.

I don't have an issue with taking something or phasing it out but 55% or 35% is insane since that money has been taxed over and over already.

I do agree that there are somewhat easy ways to avoid paying the tax but its the principal to me.

[justinskins]

I don't have an issue with taking something or phasing it out but 55% or 35% is insane since that money has been taxed over and over already.

Arguments about "double taxation" are generally fatuous because all money is taxed multiple times before it ends up in any given situation. In general the point of such arguments is simply to exempt a certain class of people from paying taxes on part of their income. Hence the dividends tax is a "double tax" because corporate income taxes have already been paid on the profits that are divided into dividends. In my opinion such an argument is a paper-thin rationalization of allowing the investor class to pay lower income taxes than the rest of society (a benefit they already get in a limited way from the lowered long-term capital gains tax).

The only sound argument against the estate tax is that it can place an undue burden on small family businesses (which, like all businesses, can be capital intensive). The way to fix this problem is to make the cap on the estate tax fairly high, or to make a specific exemption for the transfer of a small business (up to a certain size) from one family member to another.

As for the payroll tax, I believe I read that Obama wants to suspend some of the increase in the lower brackets.

[Keino]

I don't have an issue with taking something or phasing it out but 55% or 35% is insane since that money has been taxed over and over already.

I do agree that there are somewhat easy ways to avoid paying the tax but its the principal to me.

I do agree with you and BNG that the estate tax is taking a 3rd or 4th swipe at the apple, but I cannot get upset over it when there are mechanisms in place to avoid it or otherwise drastically reduce ones liability due thereunder.

As a principle, sure I get the angst. As a practical matter, however, it affects less than 2% of the population (if I recall correctly) and can largely be avoided even when assets exceed the thresholds.

[RedskinsDave]

Arguments about "double taxation" are generally fatuous because all money is taxed multiple times before it ends up in any given situation. In general the point of such arguments is simply to exempt a certain class of people from paying taxes on part of their income. Hence the dividends tax is a "double tax" because corporate income taxes have already been paid on the profits that are divided into dividends. In my opinion such an argument is a paper-thin rationalization of allowing the investor class to pay lower income taxes than the rest of society (a benefit they already get in a limited way from the lowered long-term capital gains tax).

The only sound argument against the estate tax is that it can place an undue burden on small family businesses (which, like all businesses, can be capital intensive). The way to fix this problem is to make the cap on the estate tax fairly high, or to make a specific exemption for the transfer of a small business (up to a certain size) from one family member to another.

As for the payroll tax, I believe I read that Obama wants to suspend some of the increase in the lower brackets.

They don't come close to paying lower income taxes, they pay a lower percentage. They pay 10-20 times the amount of overall taxes when all is said and done.

There is nothing remotely fatuous about the argument. It is fatuous to act like just because people are successful or their family has money that they should repeatedly pick up the tab for the people who leach off the system. I don't come from any kind of money and don't expect to make the kind of coin that would put me in any situation where I would have to worry about these issues but I still don't think it is fair for the government to keep sticking their hands in a cookie jar because the jar is big.

[justinskins]

They don't come close to paying lower income taxes, they pay a lower percentage. They pay 10-20 times the amount of overall taxes when all is said and done.
This is correct, they pay a lower percentage on some capital gains, not a lower amount overall. My apologies for the mistake.

It is fatuous to act like just because people are successful or their family has money that they should repeatedly pick up the tab for the people who leach off the system.
It depends on what you believe constitutes "leaching off the system." I suppose abuse of federal welfare payments would count (although that has become much more difficult since the 90s). Then again, federal expenditures cover a lot of things. Are poor people who use Interstate highways or visit federal parks leaching? How about those who get federally-backed education loans? Or those who simply enjoy the safety provided by the national military? Or, in the not too distant future, those who are able to afford health insurance with partial federal subsidies in a federally regulated marketplace?

Personally, I don't see why anyone needs the inheritance money anyway. (The only exception, as noted above, is a small family business that passes from generation to generation as a means of making a livelihood.) I don't expect to receive any substantial amount of money from my parents when they pass on, and I can't see why anyone else should either. After I left college I made a decision to support myself and I don't plan to need some big payday in middle age. And that's the justification for the estate tax: individuals should have to do something productive to support themselves instead of living off the largess of previous generations.

I still don't think it is fair for the government to keep sticking their hands in a cookie jar because the jar is big.
Unfortunately the money needs to come some from somewhere. Eliminating the estate tax means increasing taxes elsewhere, cutting spending somewhere, or raising the deficit. Since neither party has shown itself very adept at cutting spending, continuing the elimination of the estate tax will simply drive up the deficit at a time when the economy is turning around and we need to be considering ways to approach a surplus in the (hopefully) better years to come.

[RedskinsDave]

Personally, I don't see why anyone needs the inheritance money anyway.

Because it is their family's money. It doesn't belong to anyone else, certainly not the government.

[justinskins]

Because it is their family's money. It doesn't belong to anyone else, certainly not the government.

By that logic the government could never tax anything.

[RedskinsDave]

It has already been taxed, many times.

[justinskins]

It has already been taxed, many times.

What hasn't?

[RedskinsDave]

Is this a circle? You make the argument that things are taxed because they should be taxed no matter how many times they are taxed and I make the point that things are over-taxed only to have you ask "what hasn't?"

I don't think it is right to repeatedly tax things or take people's money because they are wealthy. You don't have a problem with any of this and probably dislike wealthy people out of jealousy. I respect the fact that someone in their family, possibly themselves, has made a fortune and they should be able to hand it off to their family if they want to without fear of the government taking half of it.

[justinskins]

Is this a circle? You make the argument that things are taxed because they should be taxed no matter how many times they are taxed and I make the point that things are over-taxed only to have you ask "what hasn't?"
My point is simply that such arguments about double taxation would forbid all kinds of tax collecting that we are accustomed to. Your paycheck is taxed by the Federal and State governments; then if you spend that money, it gets taxed again by the state sales tax. If you buy an airplane ticket, you have to pay the federal security tax out of your already-taxed income. If you give a large sum of that income away to someone else, you have to pay a tax on it as a gift. Then you have to pay your state property taxes on your car or house from your income. Should we eliminate all these taxes but one?

I suppose it might be possible to base the entire tax system in this country on the principle that "nothing should every be taxed twice." Perhaps by having a VAT to the exclusion of all other taxes. But I'd suggest that such a tax system wouldn't be that fair, wouldn't accomplish any of the goals the tax system sets out to accomplish, and might make it difficult to raise sufficient revenue.

I don't think it is right to repeatedly tax things or take people's money because they are wealthy.
Seeing how certain financial transactions are what is taxed, it's hard to imagine any tax regime under which the wealthy wouldn't end up paying more, except a head tax.

You don't have a problem with any of this and probably dislike wealthy people out of jealousy.
I'm not sure why you are bringing my supposed personal motivations into this. I do have to admit, however, that I would rather enjoy being wealthy someday. Does that make me jealous?

I respect the fact that someone in their family, possibly themselves, has made a fortune and they should be able to hand it off to their family if they want to without fear of the government taking half of it.
And I don't see why anyone should be wealthy because someone in his family is. He hasn't earned it.

[RedskinsDave]

My point is simply that such arguments about double taxation would forbid all kinds of tax collecting that we are accustomed to. Your paycheck is taxed by the Federal and State governments; then if you spend that money, it gets taxed again by the state sales tax. If you buy an airplane ticket, you have to pay the federal security tax out of your already-taxed income. If you give a large sum of that income away to someone else, you have to pay a tax on it as a gift. Then you have to pay your state property taxes on your car or house from your income. Should we eliminate all these taxes but one?

This is what is called a straw man argument.

I suppose it might be possible to base the entire tax system in this country on the principle that "nothing should every be taxed twice." Perhaps by having a VAT to the exclusion of all other taxes. But I'd suggest that such a tax system wouldn't be that fair, wouldn't accomplish any of the goals the tax system sets out to accomplish, and might make it difficult to raise sufficient revenue.[quote/]

We are talking about one particular tax, not all of them.

[quote]Seeing how certain financial transactions are what is taxed, it's hard to imagine any tax regime under which the wealthy wouldn't end up paying more, except a head tax.

Again, we are talking about one tax and one tax only.

I'm not sure why you are bringing my supposed personal motivations into this. I do have to admit, however, that I would rather enjoy being wealthy someday. Does that make me jealous?


And I don't see why anyone should be wealthy because someone in his family is. He hasn't earned it.

Is there a rule where someone has to "earn" their fortune? Who makes the call whether it was earned or not? If I win the lottery do I have to give it to the government because all I did was buy a ticket and I am quite sure rich people have done more than that?

[justinskins]

We are talking about one particular tax, not all of them.
The problem is that the argument you are using to attack this particular tax could be used to attack any number of other taxes, until only one remains. Since I am unwilling to accept that result, I am unwilling to accept your argument. That's called a reductio ad absurdum.

If I win the lottery do I have to give it to the government because all I did was buy a ticket and I am quite sure rich people have done more than that?
The lottery is a corrupt institution that prays on the poor and desperate. The state has no business being involved in it. And I would go further to say that people who make their money by wagering on games of pure chance, or by hustling marks out of their cash, also don't deserve what they have.

Also, if all a rich person did was inherit a vast fortune, he did in fact do even less than buy a lottery ticket.

[RedskinsDave]

Ah, so you have zero intention of discussing the issue and prefer to toss out horse crap inanities. I am done.

[Ibleedburgundy]

BNG, AKH, Shally, your estate tax arguments don't make any sense. That money is changing hands. It matters not that somebody else paid taxes on it once upon a time - that can be said for virtually any chunk of money anywhere. For example when I pay my gardner to mulch my lawn, using your argument, it would be unfair for my gardner to pay income taxes because I already paid income taxes on that money. The only difference is whether or not my gardner and I are related. So what if we are?

I agree that 55% is excessive though. I would prefer the percentages to be similar to income tax percentages. Cap gains should also be taxed just like income, because it is income.

[Ibleedburgundy]

Dave, you need to stop going to Michelle Malkin and investor's business daily.

Many other cuts from the Bush administration are set to disappear and a new set of taxes will materialize. And it's not just the rich who will pay.
The lowest bracket for the personal income tax, for instance, moves up 50% — to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.


This is just plain false. There is zero chance congress doesn't extend the Bush tax expenditures for the 10% bracket, the 25% bracket, and the 28% bracket, as well as the child income tax credit expenditures.

I agree with you though, the Republicans are definitely ahead to continue to lie about it and tell their financially illiterate base Obama's gonna take yer money.

They go on to say how much eliminating the Bush tax expenditures will cost tax payers. That is also a false statement, not backed up by their CBO citation. The Bush tax expenditures are piled on the deficit and the national debt. If you eliminate them, the debt gets smaller. The tax payer is going to pay that money one way or another eventually.

[BurgundyNGold]

BNG, AKH, Shally, your estate tax arguments don't make any sense. That money is changing hands. It matters not that somebody else paid taxes on it once upon a time - that can be said for virtually any chunk of money anywhere. For example when I pay my gardner to mulch my lawn, using your argument, it would be unfair for my gardner to pay income taxes because I already paid income taxes on that money. The only difference is whether or not my gardner and I are related. So what if we are?
Once money gets to the bottom level, the individual, it should have been taxed to its limit. Only once that money enters back into the commerce chain through investments or purchases (like your gardener transaction) should it be subject to taxation again.

I agree that 55% is excessive though. I would prefer the percentages to be similar to income tax percentages. Cap gains should also be taxed just like income, because it is income.
Capital gains is income and should be taxed. The money is "working" by generating additional revenue. That additional revenue should be taxed. However, if the principle balance or a house or a farm or even some money is sitting under a mattress is passed along as part of an estate, it should not be taxed. The money never "worked". If the heirs sell the farm or the house, it will be taxed as capital gains. If, however, they keep it in the family, they should only be subject to applicable property taxes.

[Keino]

IBB, I think it slightly different though. Look, you can't take it with you, so the next best thing is to leave it to your children for the benefit of future generations of your own family. If I accumulate wealth (no matter how much) and I have paid all the requisite taxes on that wealth, then as a principal, I should be able to pass that wealth, unencumbered, to my heirs, without my heirs having the Government take 1/2 or even 1/3 of that because they are counting it as income.

Now, having said all of that, as I indicated earlier in the thread, as a practical matter, these can be largely avoided by retaining a competent Estate Planner, shifting assets into Trust (Not unlike Cheney's divesmtent of his Haliburton interest) and using the legal mechanisms in place for this very purpose. This is why I cannot get outraged about the Estate Tax. As a principal, I oppose it, but the reality is that it can be avoided with just some minor planning.

[BurgundyNGold]

I do agree with you and BNG that the estate tax is taking a 3rd or 4th swipe at the apple, but I cannot get upset over it when there are mechanisms in place to avoid it or otherwise drastically reduce ones liability due thereunder.

As a principle, sure I get the angst. As a practical matter, however, it affects less than 2% of the population (if I recall correctly) and can largely be avoided even when assets exceed the thresholds.
Aside from the aspects of principle, that percentage is going to change dramatically. Once the Baby Boomers start dropping off and leaving their estates to their children, you're going to see a lot of $1M estates. Shoot, get your own retirement number and tell me if it comes in under $2M. Mine doesn't. And that's not including real estate holdings.

http://www.ingyournumber.com/

I don't consider either of us rich, so when people make arguments about how one the rich are affected and it could very well possibly affect me, I know it's buls**t propaganda.

[BurgundyNGold]

IBB, I think it slightly different though. Look, you can't take it with you, so the next best thing is to leave it to your children for the benefit of future generations of your own family. If I accumulate wealth (no matter how much) and I have paid all the requisite taxes on that wealth, then as a principal, I should be able to pass that wealth, unencumbered, to my heirs, without my heirs having the Government take 1/2 or even 1/3 of that because they are counting it as income.

Now, having said all of that, as I indicated earlier in the thread, as a practical matter, these can be largely avoided by retaining a competent Estate Planner, shifting assets into Trust (Not unlike Cheney's divesmtent of his Haliburton interest) and using the legal mechanisms in place for this very purpose. This is why I cannot get outraged about the Estate Tax. As a principal, I oppose it, but the reality is that it can be avoided with just some minor planning.
You make a good argument, but I just can't get past the principle. I shouldn't have to employ caveat emptor with my own government. They're not a shifty credit card company and when they start operating like one, it's time to change how the government is doing business. In this case, the estate tax needs to go.

[Keino]

You make a good argument, but I just can't get past the principle. I shouldn't have to employ caveat emptor with my own government. They're not a shifty credit card company and when they start operating like one, it's time to change how the government is doing business. In this case, the estate tax needs to go.

I think you play caveat emptor with your government regardless of the estate tax in other areas of life.

[BurgundyNGold]

I think you play caveat emptor with your government regardless of the estate tax in other areas of life.
I think that's a good policy in general, but I don't think it should be acceptable. I especially don't subscribe to the theory that if you're dumb enough to get hoodwinked by your government, you're dumb enough to accept the consequences. If the government was going to subscribe to such hypocrisy, it wouldn't bother to spend billions on health care, jobless benefits, TARP mortgage relief, etc for folks who should be doing the caveat emptor thing in other areas of their lives but have chosen not to.

[Keino]

I think that's a good policy in general, but I don't think it should be acceptable. I especially don't subscribe to the theory that if you're dumb enough to get hoodwinked by your government, you're dumb enough to accept the consequences. If the government was going to subscribe to such hypocrisy, it wouldn't bother to spend billions on health care, jobless benefits, TARP mortgage relief, etc for folks who should be doing the caveat emptor thing in other areas of their lives but have chosen not to.

If someone pays a ton of mortgage interest, but then chooses not to take the Mortgage interest deduction, thereby increasing their tax liability, is that a problem with the rule, or a problem with the person applying the rule?

Why should the estate tax be any different? Yea, it's there, but there is a clear, easy to follow road map for avoiding it, for, I might add, a nominal cost given the type of assets we are discussing to even be subject to the tax. In every endeavor, people are expected to perform their own due diligence, so anyone getting stuck with this tax was either careless or lazy in performing their due diligence.

If we are talking theoretical, I am with you and Dave. One should be able to pass ones assets to ones heir without the Govt. coming in and taking a piece. But the reality is that the tax affects such a small percentage of people it is almost not worth discussion.

[BurgundyNGold]

If someone pays a ton of mortgage interest, but then chooses not to take the Mortgage interest deduction, thereby increasing their tax liability, is that a problem with the rule, or a problem with the person applying the rule?

Why should the estate tax be any different? Yea, it's there, but there is a clear, easy to follow road map for avoiding it, for, I might add, a nominal cost given the type of assets we are discussing to even be subject to the tax. In every endeavor, people are expected to perform their own due diligence, so anyone getting stuck with this tax was either careless or lazy in performing their due diligence.
Because there is a difference between an advertised and promoted credit and a much maligned tax that requires you to play accounting games to keep most of what's yours. You're talking like people are able to keep all of their money -- tax free for the inheritors -- if they just set up a trust. Sure, the trust might not pay the estate tax, but don't the people who stand to inherit just end up paying capital gains from the assets funneled through the trust?

If we are talking theoretical, I am with you and Dave. One should be able to pass ones assets to ones heir without the Govt. coming in and taking a piece. But the reality is that the tax affects such a small percentage of people it is almost not worth discussion.
If a 40 year old woman makes $80K for her household and she wants to retire at 62 with an annual salary $60K through age 85, she has to save $1.6M. If she gets hit by a bus at 65, a good deal of that $1.6M is going to be left and, being more than $1M, is subject to the tax. Does the fact that she saved and did without before the age of 62 make her "rich" at 62? Hell no. I don't know about you, but I think there will be a lot more than 2% of the population in this boat in the next 10 years. They shouldn't be screwed for being ignorant in the ways of accounting. It's their effing money, leave them the eff alone.

[skin4ever]

Once money gets to the bottom level, the individual, it should have been taxed to its limit. Only once that money enters back into the commerce chain through investments or purchases (like your gardener transaction) should it be subject to taxation again.


Capital gains is income and should be taxed. The money is "working" by generating additional revenue. That additional revenue should be taxed. However, if the principle balance or a house or a farm or even some money is sitting under a mattress is passed along as part of an estate, it should not be taxed. The money never "worked". If the heirs sell the farm or the house, it will be taxed as capital gains. If, however, they keep it in the family, they should only be subject to applicable property taxes.

Agreed. I would add that a step up in basis would also be appreciated, but since we are talking govt taxing i doubt that happens.

[Keino]

Because there is a difference between an advertised and promoted credit and a much maligned tax that requires you to play accounting games to keep most of what's yours. You're talking like people are able to keep all of their money -- tax free for the inheritors -- if they just set up a trust. Sure, the trust might not pay the estate tax, but don't the people who stand to inherit just end up paying capital gains from the assets funneled through the trust?

I am not sure about that. I don't think the beneficiaries of a trust are subject to capital gains, but I honestly do not know. It's a fair point if true.


If a 40 year old woman makes $80K for her household and she wants to retire at 62 with an annual salary $60K through age 85, she has to save $1.6M. If she gets hit by a bus at 65, a good deal of that $1.6M is going to be left and, being more than $1M, is subject to the tax. Does the fact that she saved and did without before the age of 62 make her "rich" at 62? Hell no. I don't know about you, but I think there will be a lot more than 2% of the population in this boat in the next 10 years. They shouldn't be screwed for being ignorant in the ways of accounting. It's their effing money, leave them the eff alone.

It sucks that she got hit by a bus, but if she is sophisticated enough to save $1.6 Million on her own, then she should be sophisticated enough to take the requisite measures to ensure that those monies are not subject to the estate tax. Under your scenario, as I understand it, it is only the .6 part of the 1.6 that would be subject to the taxation. So, again, I have a hard time feeling bad for an heir getting 1.3 million as opposed to 1.6 million when there were mechanisms available to protect all 1.6 million.

[BurgundyNGold]

I am not sure about that. I don't think the beneficiaries of a trust are subject to capital gains, but I honestly do not know. It's a fair point if true.
As I understand it, the trust only exists to disperse the assets in a predertermined fashion. In this way, they sidestep the estate tax because the assets are in a trust that cannot die until it is closed down, presumably when all of the assets have been dispersed. This can be many years after the person died, because it might be set up to give payments over decades to inheritors. The trust pays taxes, just not the estate tax rate. So either way, you're paying taxes on money you've already earned.

As for inheritance, I do not think there is a Federal tax on that but many states still do.

It sucks that she got hit by a bus, but if she is sophisticated enough to save $1.6 Million on her own, then she should be sophisticated enough to take the requisite measures to ensure that those monies are not subject to the estate tax. Under your scenario, as I understand it, it is only the .6 part of the 1.6 that would be subject to the taxation. So, again, I have a hard time feeling bad for an heir getting 1.3 million as opposed to 1.6 million when there were mechanisms available to protect all 1.6 million.
You don't have to be very sophisticated to put X number of dollars into a savings account or a Roth IRA. With direct deposit, you can do it automatically. This is the extent of what most people do for retirement (if they're lucky). More people still pay no attention to estate planning beyond their will (once again, if they're lucky).

[Keino]

You don't have to be very sophisticated to put X number of dollars into a savings account or a Roth IRA. With direct deposit, you can do it automatically. This is the extent of what most people do for retirement (if they're lucky). More people still pay no attention to estate planning beyond their will (once again, if they're lucky).

I agree. That was kind of my point. It doesn't take a genius to plan your estate.

[BurgundyNGold]

I agree. That was kind of my point. It doesn't take a genius to plan your estate.
Both of those options are taxable at the estate tax rate. And this is before other assets (like homes) are valued.

[Keino]

Both of those options are taxable at the estate tax rate. And this is before other assets (like homes) are valued.

Yes if you don't plan your estate.