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Fiscal cliff: estate tax opinions?

Original post made by Chris Zaharias on Dec 28, 2012

Can someone who thinks the estate tax is a good thing tell me why they think so? As I'm examining fiscal cliff impacts, the estate tax exemption falling to $1M and the tax going to 55% seems downright criminal.

IMHO, the morality of the estate tax lies in its ability to ensure that no level of wealth is accumulated that effectively turns descendants into dynastic wealthy. My opinion is that the estate tax should continue to exist, but should apply only to levels of wealth that would otherwise allow the dying person to put his/her direct descendants in a position of not ever having to work.

Below that level is where the problems come into play. While various forms of estate tax have existed since ancient Egypt, typically the tax has only applied to wealth beyond $5-10M in today's dollars = roughly the threshold I mention above. With the fiscal cliff (short-term) and chronic deficit spending (mid/long-term), we who care need to make sure the majority doesn't infringe on the fiscal minority's right to fully pass on assets that, far from creating dynastic wealth, merely ensure that children and/or grandchildren have small nest-eggs to start their adult lives with.

Comments (52)

Posted by Sam, a resident of Midtown
on Dec 28, 2012 at 11:59 am

>no level of wealth is accumulated that effectively turns descendants into dynastic wealthy.

What is it any business of yours? As long as the wealth has been taxed once, it should not be double taxed through a death tax. Many family farms and businesses are at risk, because they must be sold off to cover the death tax. Warren Buffet supports this confiscation of inherited wealth, because he sells life insurance.

Double taxation is unamerican.


Posted by Chris Zaharias, a resident of Crescent Park
on Dec 28, 2012 at 12:34 pm

Sam, you've nailed my suburban, non-agrarian bias.

I think I agree with you as pertains to farms. But, it also seems to me that because the natural tendency of free societies is for there to be a pronounced accumulation of wealth among a very tiny majority, it is in society's interest to ensure that accumulation is countered by progressive taxation *beyond a reasonable point of wealth accumulation*.

That's my opinion, but I'm open to debating what that reasonable point is, and whether certain types of family business should be excluded for one reason or another.


Posted by Sam, a resident of Midtown
on Dec 28, 2012 at 12:56 pm

Chris,

I don't happen to share your concern about 'dynasty wealth accumulation'. That money won't be buried under a mattress, so it will be at work in the economy. Most such so-called dynasties fade away over the generations, becasue the children don't have the vision or work ethic to keep it going (think about H-P). Also, many of the rich contribute to foundations that give it away.

I think it is important to preserve inherited wealth, so that an automatic sale is not forced. The only tax on inheritance should be that which taxes previously untaxed wealth accumulation (usually an increase in land values). If my parents wanted to pass through an inheritance to me, and they have already paid all the capital gains, etc., why is that a problem for you?


Posted by Chris Zaharias, a resident of Crescent Park
on Dec 28, 2012 at 1:05 pm

Sam - the only reason I'd have a problem (and this is theoretical since I'm still researching the topic and can't say I have as of yet formed a definitive opinion) is *if* the natural tendency in free societies is for there to be a pronounced accumulation of wealth among a very tiny majority. If that were the case, then unless steps were taken to redistribute wealth, well, we'd have social unrest that would be worse than any negative effects from estate taxes.

To be clear, I only see this as a potential issue among those whose estates are $10M+ = money that makes inheritants permanently rich.


Posted by Bernard, a resident of Atherton
on Dec 28, 2012 at 1:31 pm

Start with some misconceptions: Not all wealth is taxed the first time.

Want a list of millionaires who paid little or no tax on their income?

How about Romney? 40 million, only paid only 13% on it. Set up a $100 million trust for his boys (100 mill, so far) that wasn't taxed.

Or Mitt's Cayman Island and Swiss bank accounts -- they're there for a reason. There was also a reason that when Mitt gave McCain 23 years of returns, John McCain shuddered and chose Palin as the better candidate. Think about that for a minute. Sarah Palin over the 2012 nominee, because the tax returns were so bad.

That's the reason Mitt only released two years (still incomplete) instead of the 12 years his father released.

Other straw man: "becasue the children don't have the vision or work ethic" -- that has nothing to do with tax policy.

Also: Warren Buffett sells candy, too. And Coke. And Mickey Mouse. And WFB CD's. Don't be obsequious.


Posted by Chris Zaharias, a resident of Crescent Park
on Dec 28, 2012 at 2:14 pm

Bernard - interesting point about why McCain may have chosen Palin over Romney.


Posted by Sam, a resident of Midtown
on Dec 28, 2012 at 2:33 pm

Tax rates are what they are, when the investments were made, and when they were resolved. If the taxes were paid once, they should not be paid twice, when the investor dies.

I hope this thread does not devolve into a political screed. Comparing Romeny wealth to JFK wealth might be fun, but not very instructive.


Posted by Bill, a resident of Barron Park
on Dec 28, 2012 at 3:11 pm

> If the taxes were paid once, they should not be paid twice, when the investor dies.

So, by that logic, I shouldn't have to pay any payroll taxes, because my employer already pays business taxes? And, our customers shouldn't pay sales taxes because the both of us already pay income taxes?

Taxes get applied to events. Death is an event that triggers estate taxes. The concept that anybody is "paying twice" is completely non sequitur.


Posted by Bernard, a resident of Atherton
on Dec 28, 2012 at 3:16 pm

"Tax rates are what they are"

Yes, for most Americans. For you, probably. Sounds like for Chris, also (with all due respect, Chris.)

"Tax rates are what they are" - not so much, for some of my neighbors.

Apparently you don't want to discuss facts, like Romney, on his $40 million in income, only paid only 13% on it. Set up a $100 million trust for his 5 sons, that wasn't taxed. We can talk about his one hedge fund son he bankrolled with millions, along with his rolodex, taking advantage of the carried interest loophole, the one perfectly tailored for hedge fund investors.

"If the taxes were paid once, they should not be paid twice"

What facts will you accept? A list of millionaires who pay zero in income tax?


Posted by Sam, a resident of Midtown
on Dec 28, 2012 at 3:35 pm

>So, by that logic, I shouldn't have to pay any payroll taxes, because my employer already pays business taxes? And, our customers shouldn't pay sales taxes because the both of us already pay income taxes?

Your employer pays taxes on profits. You pay income taxes, based on your net income. You pay payroll taxes for your own entitlements. If you have already paid your income/wealth taxes, why should your children need to pay twice on what you pass down to them, through your will?

Using your logic, your kids should pay gift taxes, when you buy them a birthday present. Or when you pay for their college tuition. Or when you help them with a down payment on their first home.

Stealing money from the successful is a fool's dream...without the successful, there will be no success for anybody.




Posted by Bernard, a resident of Atherton
on Dec 28, 2012 at 4:24 pm

Cliches and platitudes, geez-louise!

Before estate taxes we had the robber barons of the twenties.

After estate taxes? The United States had the greatest growth of the middle class EVER -- envied by everyone around the world.

The decline of the middle class began in the 70's, accelerated in the 80's.

Now Sam wants to put more room between the uber-wealthy and the rest of America.

Actually, Sam from Midtown wants to put more space between hard working Americans and the offspring of the uber-wealthy, the ones he said are "the children don't have the vision or work ethic to keep it going."

We're talking about a Paris Hilton, sitting around the pool, opening brokerage statements. How does that help America stay strong?

How about a list of millionaires that didn't pay pay taxes? Third time I offered, you don't seem interested.
Can't imagine why........


Posted by Sam, a resident of Midtown
on Dec 28, 2012 at 5:06 pm

>How about a list of millionaires that didn't pay pay taxes?

I will allow you to provide that list, because I am not aware that it exists.

What laws did they break? If they paid the taxes they owed, why should their next generation need to pay, again? Whatever the tax laws are, there should not be a double hit.

Let me look at it this way: Why should I kick ass to develop wealth, if I can just slide by with less effort to provide for my immediate family. I prefer to be able to provide for my great grandchildren...that is a dream I can dream. If I have no such dream, then it is not worth the effort. When my dream is over, so is yours.


Posted by Marie, a resident of Midtown
on Dec 28, 2012 at 6:10 pm

Marie is a registered user.

For anyone who believes that the estate tax will be allowed to return to $1M and 55%, I have a bridge to sell you. The last time this came up, Congress finally enacted the current rules, the following year. They then allowed people to elect which rules they wished to follow, the old rules or the new ones for that one year.

The current estate tax rules have broad popular support on both sides of the aisle and amongst the general public. My advice: do not make any estate planning decisions, particularly ones that are costly to undo, based on the current laws lapsing.


Posted by Bernard, a resident of Atherton
on Dec 28, 2012 at 6:14 pm

First Sam cries "double taxation" and then, knowing anyone can post links to stories of the thousands of millionaires who did not pay income taxes, suddenly changes to "What laws did they break?" Don't spin so fast that you get dizzy, Sam.

Then: "Why should I kick ass to develop wealth"

Ummm, golly, shucks, that's a tough one, ummm, maybe to enjoy the benefits? Or are you going to be like the bozo's in the South who say they're not going to make more than $250K because of the new taxes?

How dumb is that?

Seriously, I doubt, from what you are typing, that you will ever hit the estate tax. Your house and savings will fall beneath the level it kicks in, whatever level the future holds.

What about Paris Hilton? Sitting around the pool, opening brokerage statements. How does that help America stay strong? Do you think her great grandchildren shouldn't have to work either, only sit around the pool and open statements before they go clubbing? Generations of Hiltons, all clubbing, without appropriate garments.

Conrad must be spinning in his grave.


Posted by Anon., a resident of Crescent Park
on Dec 29, 2012 at 12:36 am

From the website Fair Economy Org

LINK: Web Link

>>What is the estate tax?
The estate tax is a tax on the transfer of assets at death (inherited wealth). It applies only to large accumulated fortunes.

When someone dies, his or her assets (the "estate") are distributed to heirs. If the total value of the estate is larger than the tax-exempt amount, an estate tax is imposed on the portion above the exemption before the remaining assets are distributed. Any amount given to a spouse or charity is tax exempt.


>> How large does an estate need to be to be taxed and what are the rates?
Since 2002, the estate tax has been paid only by millionaires. Rates have varied, since the Bush Tax Cuts of 2001 and 2003 resulted in frequent changes to the estate tax exemption and rate.

The individual estate tax exemption—the amount of money an individual can pass to heirs tax free—has been as low as $1 million in 2002 and as high as $5 million in 2011. The exemption is effectively doubled for married couples who engage in basic estate planning.

Rates on the amount above the tax-free exemption have varied from 55 percent to 35 percent. Below you can find a table listing the estate tax exemption and rate since 2002.


>> Who pays the estate tax?
The estate tax is reserved only for society's wealthiest elite. In 2009, just one-quarter of one percent (0.25 percent) of all estates were expected to owe any estate tax at all.


>> What about farms and small businesses?
Very few family farms and small businesses are affected by the estate tax. The Congressional Budget Office estimates that with a $2 million exemption, only 123 farms per year in the U.S. would owe any estate tax, and the number of small businesses is similarly small. In 2001, the New York Times reported that American Farm Bureau Federation (who was in favor of repealing the estate tax) could not cite a single case of a family farm lost due to the estate tax.

>> On average, those few small business and farm estates will owe only 14 percent of the estate, so it is unlikely they will have to sell the business or farm. Plus, they can spread any payments over 14 years. They also benefit from special use valuation, and minority interests and marketability discounts.

Moreover, gutting the estate tax would actually hurt family farms. The estate tax helps make family farms more competitive against mega-scale agriculture, because it moderates ever-larger concentrations of wealth and economic clout. Repeal of the estate tax or exempting farms completely will only encourage further concentration of farm ownership, which reduces competition. An unlimited exemption for farm assets could create a giant loophole from the estate tax because wealthy individuals who expect to owe estate tax could use much or all of their wealth to buy farms before they died.


>> How much does the estate tax raise every year?
The estate tax raises billions of dollars each year. The estate tax, at 2002-2009 rates and exemptions, raised $15-26 billion per year. The variations are due to the changes in exemption and rates caused by the Bush tax cuts, as well as fluctuations in the overall economy that affect the value of assets like stocks and real estate. The table below summarizes estate tax revenue since 2002, using IRS data and an estimate by the Tax Policy Center.


>> Why is it important to preserve a strong estate tax?
Weakening the estate tax would mean billions of dollars in tax breaks each year for the exclusive benefit of multi-millionaires. The responsibility of paying taxes for public services will shift from millionaires to low- and middle-income taxpayers. A strong estate tax is one of the best remedies for economic inequality because it reduces dynastic wealth and helps ensure more broadly shared prosperity.


>> What makes for a good estate tax?
A strong estate tax law will have a graduated rate structure that taxes very large fortunes at a higher rate and an exemption that results in 98 percent of Americans paying no estate tax. A strong estate tax would raise substantial revenue for our government.


Posted by Chris Zaharias, a resident of Crescent Park
on Dec 29, 2012 at 8:58 am

But then there's the question of the Depardieu Effect. Would those for the estate tax concur that our estate tax laws need to be competitive with those of other countries in order to prevent those affected picking up camp & taking residency in another country?


Posted by Sam, a resident of Midtown
on Dec 29, 2012 at 9:32 am

>What about Paris Hilton? Sitting around the pool, opening brokerage statements

The money is at work in the market, thus creating new business opportunities and jobs. Paris is pissing away her life, but that is her problem...just proves my point that dynasties are not forever.

>Very few family farms and small businesses are affected by the estate tax.

Wrong! The small farms and businesses are only protected, because they are forced to buy life insurance (from people like Warren Buffett). This indirect tax consitutes a triple taxation.


Posted by Bernard, a resident of Atherton
on Dec 29, 2012 at 10:44 am

S from Midtown still rants about double taxation, when we all know that great wealth is frequently not taxed, and frequently taxedat far reduced rates.

"The money is at work in the market, thus creating new business opportunities"

Wrong. Money in the stock market is gambling money, not investing in new business opportunities. When Paris Hilton moves her money from a mutual fund invested in stocks to another, or buys more Exxon stock, it does not create new businesses, nor jobs.

">Very few family farms and small businesses are affected by the estate tax."

S from Midtown disputes this statement, despite real world evidence from the CBO. "only 123 farms per year in the U.S. would owe any estate tax, and the number of small businesses is similarly small. In 2001, the New York Times reported that American Farm Bureau Federation (who was in favor of repealing the estate tax) could not cite a single case of a family farm lost due to the estate tax."

That just blows a hole in Sam's attempt at debate.

"could not cite a single case of a family farm lost due to the estate tax."




Posted by Sam, a resident of Midtown
on Dec 29, 2012 at 11:03 am

>Money in the stock market is gambling money...

Wrong, again. Teh stock market is te seconday market for initial investors. It is the way the risk takers get their investment money, when the private company goes public. It is also a way for companies to raise capital, in order to expand.

The reason that small farms and businesses are not, in the end, lost to estate taxes is because they are forced to buy life insurance, in order to pay the estate tax, if they want the enterprise to stay in the family. I personally know of two specific cases where this was the case.

>we all know that great wealth is frequently not taxed...

If the wealth produces income or capital gains, and it is brought into this country, it is always taxed. Provide an example to the contrary...then report it to the IRS.


Posted by Gary, a resident of Midtown
on Dec 29, 2012 at 12:32 pm

[Post removed by Palo Alto Online staff.]


Posted by Bernard, a resident of Atherton
on Dec 29, 2012 at 5:28 pm

S from Midtown says this is wrong: Money in the stock market is gambling money...

Anyone trading any Fortune 500 stock, or the thousands of other stocks, is not investing in the company. If I sell a million shares of Exxon and S buys that million shares, Exxon does not see a dime. No jobs are created.

So for Paris Hilton to trade mutual funds and sit by the pool before clubbing, she adds no value, other than to the stockbroker and banks fleecing her.

----------------

"If the wealth produces income or capital gains, and it is brought into this country, it is always taxed."

Oh, how quaint an opinion, no matter how wrong. Wow, they have you well programed to believe all the wealthy folk are tax paying job creators!

**** "In 2009, six tax filers among the country's 400 richest tax filers owed absolutely nothing in federal income taxes.

**** Not a penny.

**** This, despite the fact that those six filers belong to a group whose average adjusted gross income clocked in at $202.4 million, according to new IRS data."

So quaint. Who knew literate people actually bought into the noise that the uber wealty are just like you and your neighbors?!? Let's look a little further:

"The chart below from the Tax Policy Center shows the distribution of federal income taxes paid by income level in 2011.

It contains a number of interesting factoids, including the following:

**** 7,000 people made more than $1 million but paid no income tax.
**** 22,000 people made between $500,000 and $1 million but paid no income tax.
**** 81,000 people made between $200,000 and $500,000 but paid no income tax.
**** 381,000 people made between $100,000 and $200,000 but paid no income tax.

**** So that's 491,000 Americans who made more than $100,000 a year who paid no income tax."

S, you need to rethink double taxation as an argument.

I told you early in this thread all about Romney's 13%, his Cayman accounts, his Swiss bank accounts..... And you just went along with the silly concept of double taxation.

NOTE THIS: The rich are not like you, your family, your workmates and your friends. They have written different rules for themselves. That's why they buy politicians like you buy Christmas ornaments. And they hire very good storytellers to dupe you, like Frank Luntz and the whole team at Fox.

It obviously works.

Sam: "When my dream is over, so is yours."

Your dream? or the fantasy world you live in?


Posted by Sam, a resident of Midtown
on Dec 30, 2012 at 9:43 am

When no no U.S. income tax is paid there are solid reasons, like buying tax-free municipal bonds, giving to charity, foreign investments (on which taxes are paid to the foreign entity), etc.

Web Link

You need a better argument than that you have thus far provided, Bernard.




Posted by D MacDonald, a resident of Professorville
on Dec 30, 2012 at 10:21 am

6 taxpayers, avg $200 million in income paid no tax

7,000 with million dollar income paid no tax

How is it double taxation with so many not paying tax?

That's lame, Seaan.


Posted by Sam, a resident of Midtown
on Dec 30, 2012 at 11:35 am

>How is it double taxation with so many not paying tax?

The subject is estate taxes, where double/triple taxation is a fact.

Avoidance of income tax, in order to pay direct and indirect taxes of another kind, is explained in the link I provided above. Jealousy and envy are not good substitutes for facts and reason.




Posted by neighbor, a resident of Another Palo Alto neighborhood
on Dec 30, 2012 at 3:07 pm

What right does the federal government have to take all this money? It will be wasted. I have very little confidence that our tax dollars sent to Washington are well utilized. We are in an era of over-taxation in general.


Posted by lowest taxes, a resident of Charleston Meadows
on Dec 30, 2012 at 9:22 pm

Over taxation???????

Name a time that federal income txes have ever been significantly lower.

Lower under Nixon? Ike? Ford? Reagan?

Hardly.


Posted by Perspective, a resident of Greater Miranda
on Dec 31, 2012 at 5:43 am

Sam: I agree with you. The bottom line is that there is a disconnect between those who are envious and greedy and want to take whatever they can from those who have earned the money, already paid the taxes owed on it, and then die. Heaven forbid that the dead person is able to pass on the money to either charities or kids or anyone else they wish..it belongs to "the people'.

It is immoral to simply take from those who have already paid their due, just because they are dead. I don't care how much it is, whether it is a billion bucks or 100 bucks, nobody else has the moral right to just take it. But, those who find no problem with simply taking money from others will not agree.


Posted by lowest taxes, a resident of Charleston Gardens
on Dec 31, 2012 at 9:53 am

Perspective uses the double taxation, alreadypaid taxes fallacy also.

What about the families with $200 MILLION in income that paid NO taxes?

As I asked earlier, when have Federal taxes been significantly lower?

Return to Clinton spending, Clinton balanced budgets.

Clintons 23million new jobs and Clinton tax rates.

Proven by history.


Posted by Sam, a resident of Midtown
on Dec 31, 2012 at 10:31 am

>Clintons 23million new jobs and Clinton tax rates.

Clinton benefitted from the dot.com boom. Most of the increased tax revenues came from bonuses paid on Wall Street. Does anyone see a new dot.com bonanza in sight?

>What about the families with $200 MILLION in income that paid NO taxes?

Irrelevant to the estate tax issue. See my comments, above.




Posted by lowest taxes, a resident of Charleston Gardens
on Dec 31, 2012 at 10:56 am

Families making $200 million in income in ONE year without paying any income tax is totally relevent when Sam and perspctive use the double taxation argument.

Notice they deflect to some strange greed and envy strawman.

Clinton spending and Clinton tax rates = balanced budgetand 23 million jobs. If you think that's not relevent due to a booming economy, then let's spend like Reagan and Bush to prime the economy - Reagan tripled the debt and Bush doubled it.


Posted by Crescent Park Dad, a resident of Crescent Park
on Dec 31, 2012 at 11:31 am

I enjoy a good debate as much as the next guy - I prefer that it doesn't get personal or drops into finger pointing/social class bickering. So I hope that my remarks are not taken personally.

Reading the thread, IMHO the frustration vented has more to do with the income tax system than the estate tax rate.

I don't have the time to research who paid taxes or what effective rate they paid. But clearly the problem is the current tax code. Fix that and the estate tax in its current form could be/should be eliminated.

I would prefer to see a stepped flat tax system, with a minimum income floor set in place. I don't know what the minimum income should be - perhaps $50,000. Someone could probably give a more educated answer.

Then the government would set 3-5 steps of flat rates. Each rate would apply to all types of realized income --- salary, interest, stock sales, real estate sales, investment sales. Only deduction (with a cap) would be for charitable donations (i.e., Red Cross, schools, etc. - not political parties, PACs, etc.). No capital gains rates, etc.

I would eliminate the graduated tax process that is in place today - where your first (example) $100 is taxed at 28%, the next $100 at 30% and so on. The applied tax rate would be against total income, no matter the source.

I would eliminate the mortgage deduction - if you set the tax rates correctly, the net effect should be the same as if we had the deduction.

I am also a firm believer in that once income is taxed, it should not be taxed again. Just like how you measure the value of a stock and pay the tax on the profit/sale of said stock, then you've paid your tax. The same should apply to an estate. When an estate is transferred - if there is a tax, it should be based on the "profit" on those assets as they are assigned and realized by the individual benefactors of the estate.

For example. Let's say my parents purchased a stock for $10. The stock transfers to me at a market value of $100. But I do not sell the stock --- there is no realized income, there should be no tax. If I choose to sell the stock, I am taxed at my current day rate (based upon my individual income level) and for the profit I realize from the original $10 basis of the stock.

To the original post about preventing heirs from gaining a position of "never having to work". I understand the frustration with the privileged idiots that exist in our society. But I would never want to live in a country that devolves to an authoritarian state where it is required that "all people must work". Besides - given the lack of talent and work ethic that Paris Hilton possesses - I would rather have her live off of daddy, than to be unemployed and living off of me pulling welfare and unemployment checks. ;-)


Posted by Sam, a resident of Midtown
on Dec 31, 2012 at 12:04 pm

> But clearly the problem is the current tax code. Fix that and the estate tax in its current form could be/should be eliminated.

The various tax loopholes were put in place to incentivize something. For example, tax-exempt municipal bonds were devised by Congress in order to support the sale of local city bonds, so that those municipalities could pay a lower interest rate on those bonds. Many rich people buy these bonds, becasue they are relatively secure, and the return is not taxed. If you want to get rid of such incentives, that is fine, as long as you understand the consequences. The end result might be that cities cannot fund their various needs, through the bond market (currently subsidized by the rich bond buyers, really just a displaced tax on the rich). Also note: Anybody, rich or poor, can buy a tax-free muni bond.

This thread was, originally, about the estate tax. Wealth should not be taxed more than once...that is unamerican.


Posted by Crescent Park Dad, a resident of Crescent Park
on Dec 31, 2012 at 6:07 pm

So instead, muni bonds pay a higher interest rate as the incentive. And still provide the typical guarantees of payment. No tax free, but instead a higher (taxable) payout. If engineered correctly - the net benefits to both parties would be the same.


Posted by Sam, a resident of Midtown
on Dec 31, 2012 at 6:47 pm

>So instead, muni bonds pay a higher interest rate as the incentive. And still provide the typical guarantees of payment. No tax free, but instead a higher (taxable) payout. If engineered correctly - the net benefits to both parties would be the same.

Doesn't work that way. The people who buy muni bonds pay a higher price for them, which means a lower interest rate for the cities which issue them...which helps to insure a guarantee of payment. If you want to eliminate that equation, then you need to realize that cities will be in deep doo-doo, and the gurantees of payment will be diminished. There is no free lunch. Congress set up the tax-free muni funds, in order to attract capital for our municipalities. The bottom line is that the rich people end up supporting the cities and towns, through the bond market. Why should they be taxed twice for their investments, once they hand over their tax exempt gains to their next generation?

Double taxation is unamerican. So is triple taxation.


Posted by musical, a resident of Palo Verde
on Jan 1, 2013 at 11:59 pm

Looks like the $5M estate exemption survived, but with rising Federal tax rate on the excess.


Posted by D MacDonald, a resident of Professorville
on Jan 2, 2013 at 10:37 am

"rates will rise from 35 percent to 40 percent for estates valued at over $5 million dollars, however the Republicans did succeed in building in a provision which allows the amount of the exemption (currently five million dollars) to be indexed to the rate of inflation."

Nice to know Republicans recognize indexing; one assumes they will allow indexing on programs for the working poor, not just the ultra wealthy.

Yeah, right.

So the GOP won a lot while entering with little leverage. I guess we get the schadenfreude of watching Bonheer and Cantor duke it out for a month, maybe even full GOP civil war?


Posted by Sam, a resident of Midtown
on Jan 2, 2013 at 2:57 pm

There should be no estate tax, whatsoever, because it is double/triple taxation. Any estate taxes will hurt cities and towns in America. On the other hand, the $5M exemption is better than the $1M exemption.


Posted by D MacDonald, a resident of Professorville
on Jan 2, 2013 at 3:02 pm

Sam keeps saying the same thing, despite evidence that shows his statements to be untrue.

"because it is double/triple taxation" yet we show evidence of many millionaires paying exceedingly low rates, and in many cases, no income tax whatsoever on multi-million dollar incomes.

Then the absurd claim: "Any estate taxes will hurt cities and towns in America"

Whatever.

It's 5 million, at 40%.


Posted by Sam, a resident of Midtown
on Jan 2, 2013 at 3:57 pm

>because it is double/triple taxation" yet we show evidence of many millionaires paying exceedingly low rates, and in many cases, no income tax whatsoever on multi-million dollar incomes.

It is difficult to get through to the ideological types. A very rich person can pay no U.S. income tax, whatsoever, if he/she buys only muni bonds. Such a rich person is subsdizing our cities and towns. Why should the estate be taxed, again, if the taxes have already been paid, directly or indirectly? Would you prefer that the rich not invest in muni bonds? Or invest their money outside of the USA?


Posted by D MacDonald, a resident of Professorville
on Jan 2, 2013 at 4:08 pm

The 4 families with $200 million in annual income, that paid NO income taxes did it all in muni bonds?

Yeah, right.

$200 million in income FOR A SINGLE YEAR, with no income taxes paid is $200 million that Sam thinks shouldn't be taxed when it is passed on to the trust fund babies and club girls, such as Paris Hilton. They need every cent, just to buy undergarments.

Sam: "Would you prefer that the rich ... invest their money outside of the USA?"

You mean like Mitt Romney and his Cayman Island and Swiss Bank accounts?

Anything over 5 million is taxed at 40%.

Done.

No matter how much Sam wants to defend Paris Hilton.


Posted by Sam, a resident of Midtown
on Jan 2, 2013 at 4:26 pm

The Paris Hilton argument is colorful, and even a dumb blonde sexist joke, but it has nothing to do with actual investment criteria. Paris spends, but she does not directly invest, from what I can tell; her great grandfather invested. It is best to think about how he thought, not her.


Posted by D MacDonald, a resident of Professorville
on Jan 2, 2013 at 4:31 pm

Sam: it's important to think of Paris and the trust fund babies, club girls, etc... because that's who you are protecting.

Not middle class working Americans, but the heirs of Conrad Hilton like Paris Hilton. And the Waltons, of course.

Anything over 5 million is taxed at 40%.

Done.


Posted by Sam, a resident of Midtown
on Jan 2, 2013 at 5:02 pm

> it's important to think of Paris and the trust fund babies, club girls, etc... because that's who you are protecting.

Paris Hilton is a distraction for those who need a distraction.

Investment decisons are the important thing. It might be that the $5M exemption on estate taxes is the best that be obtained, in the current political context, but it is fiscally irresponible. There should be no estate tax.

Just let Paris go buy her expensive diamonds somewhere, and become another Jackie Kennedy. It is not important.


Posted by D MacDonald, a resident of Professorville
on Jan 2, 2013 at 5:11 pm

Sam: Then why do you keep shilling for the trust fund babies like Paris Hilton and the Walton offspring? (the Mars kids, too.)

Do you think all the money Paris spends at the clubs was taxed when Conrad created it? Nope. Much of it was protected through various chicanery and loopholes, as was the stock inherited by the Walton offspring. Much was never taxed once, let alone the double or triple taxation that Sam whines about.

Same sort of thing that the 4 families with $200 million in annual income, that paid NO income taxes did.

Anything over 5 million is taxed at 40%.

Done.


Posted by Sam, a resident of Midtown
on Jan 2, 2013 at 5:29 pm

>Do you think all the money Paris spends at the clubs was taxed when Conrad created it?

No, and it should not have been. Paris paid her club taxes and sales taxes, as she bought her toys and boys. Completely irrelevent argument.

The essential issue is about how capital is best spent to promote the best productivity in our economy. Estate taxes inhibit such productive growth.


Posted by D MacDonald, a resident of Professorville
on Jan 2, 2013 at 6:04 pm

">Do you think all the money Paris spends at the clubs was taxed when Conrad created it? No, and it should not have been."

So nothing should ever be taxed? At creation? Sale? Gift? Transfer? Death?

Go Dubs! Beat the 2nd LA team!!



Posted by Anon., a resident of Crescent Park
on Jan 2, 2013 at 6:07 pm

> The essential issue is about how capital is best spent to promote the best productivity in our economy.

True, so pipe the heck down about Paris Hilton and other distracting arguments.

> Estate taxes inhibit such productive growth.

False, the estate tax is important now for at least two reasons.

1. The government needs revenue, we are in debt to the point that we are going to be joining the USSR as a failed collapsed super power if we do not get our house back in fiscal, and democratic order. ALL of the arguments against the estate tax have been dishonestly created and engineered to sway people to believe that the estate tax is bad for the average person in America, when the fact is that almost no one is affected by the estate tax, and those that are, are certainly not hurt by it, nor is the economy. The US is far too plutocratic ... leading to ...

2. The estate tax should function as a way to stir up the society and prevent the building of political dynasties .... just like we see now that tax rates have been lowered long enough to see that the long term effects of this is POISON on our political system, and has led not only to disproportionate power of the rich and corporations but legal abominations and corruptions that increase the powers of these dynasties even more, and are leading to the "kicking away of the ladder" for the middle class to rise politically and economically.

Above I posted a link and the reasons the estate tax is more important than ever, read it, and ignore most the specious arguments you hear here about how the estate tax kills jobs or economic growth that are not based on reality, or based on bad partisan and classist analyses.


Posted by Crescent Park Dad, a resident of Crescent Park
on Jan 3, 2013 at 1:17 pm

According to the NYT (2/2012), the 2013 Federal budget will be approximately $3.7 Trillion. Current forecasts show revenue to be only $2.8 Trillion.

Anon's data for estate tax showed the upward range at $23B. Let's just use that figure for this example --- $23B in estate taxes is only 0.8% of total projected revenue in 2013.

Honestly, I think we can all agree that estate taxes are hardly the answer to solving our federal budget deficit issue.

I'm not passing judgment on the arguments on who paid or did not pay taxes and at what income level. It's easy to point out the data and criticize those individuals. What none of us know, is why they paid $0 in taxes. As just as disgusting as it may seem to some of you, it is equally possible that they have tax losses (can carry back up to 5 years I believe, not certain, but close enough) that offset any income taxes for the last year.

Unless you peel back the onion, you're not always going to have the data you think you have.


Posted by trust fund club, a resident of Woodside
on Jan 3, 2013 at 2:21 pm

"current" forecasts? from a year ago? There's been a years worth of legislation by the 112the congress since that article.

"Honestly, I think we can all agree that estate taxes are hardly the answer to solving our federal budget deficit issue."

So we should blow a bigger hole in the deficit? Add another $23 billion to the deficit? Just so Paris Hilton and the new generation of trust fund leeches can go clubbing?

(Anon - obviously, I like the Paris example!)


Posted by Crescent Park Dad, a resident of Crescent Park
on Jan 4, 2013 at 7:17 am

I can look for more recent data. But the point is that whether the data is 10 months old or 10 hours old, our Federal budget is way out of control in terms of deficit spending.

My other point is that the estate tax (at any level) will not solve the greater issue.

Should we worry about less than 1% of tax revenue or should we worry about a 25% annual revenue deficit ($970B) and that 50% of our annual budget is for Medicare, Medicaid and Social Security? I'm not saying we cut those benefits. However, without changes in either accumulation, costs or processes - those benefits will certainly take over the budget to the point that that nothing else can be funded.

This is not Dem vs GOP issue. This is a issue that affects all of us together.


Posted by Alfred, a resident of Atherton
on Jan 4, 2013 at 10:55 am

The deficit is NOT an issue -- the Feds just told us that when they passed tax cuts that will pile another $4 trillion onto the debt.

Look at the pork in the tax bill, just to name a couple: tax breaks for NASCAR tracks and Hollywood.

While the GOP wanted more deficit busting tax cuts, the Democrats supported most of it.

I take issue with one program mentioned: Social Security has never added a dime to the deficit. It's valid for 20 years, with 75% of the benefits there for the next 100 years. A simple fix for that would be to remove the cap on wages, currently around $110k per year. A very regressive tax as it stands. One simple fix and you can remove SS from any deficit discussion.

Back to the deficit: anyone who voted for this bill, or voted no because they wanted more tax cuts, is not a serous person to be listened to on the issue of the deficit. That includes Sam, who wants a bigger deficit so the ultra wealthy can give even more tax free cash to their "ne'er-do-wells".

Clinton's budget surplus's and great economy, lost to Bush's deficits and slow economies.

Proof: 155k jobs last month. Web Link


Posted by Anon., a resident of Crescent Park
on Jan 4, 2013 at 8:07 pm


The big trick pulled on all Americans! ....

WE TREAT BILLIONAIRES LIKE MILLIONAIRES ! ! !

This is my newest slogan ... and what is says is that we keep higher income people incentivized to resist tax increases that would be responsible and beneficial by lumping them in with the super-rich, ultra-weathy, .01% or the 400 people who own as much as the rest of the country combined ... however you want to describe them.

For example, it costs a lot to live in Palo Alto, and even though someone might well be a millionaire, a top rate doctor, lawyer, developer, small-business owner ... whatever ... when they live in Palo Alto they do not have tons of money left over if they live an affluent life.

It's hard to say affluent people are "stretched" ... exactly, but they are not necessarily greedy or corrupt because they want their taxes to be as low as possible since they live in a competitive place where prices are high.

Compare a top small-business owner with some of the financial class or corporate executives who make tens of millions or even more and you begin to see why this mess about taxes and the budget has developed over time. The, let's call them "billionaires" even though they might not be, have lassoed the millionaires and motivated attached them permanently to their camp, a camp that at this point is impoverishing the whole rest of the country.

This is the biggest covert secret trick and it costs no money, there need be no political advertising, no speeches, nothing to align the interests of the well off
with the interests of what are basically the "plutocracy".

The answer in my opinion is to get rid of tax brackets altogether and device a mathematically continuous function that is the same for all income, working and investment income that is progressive, and more so all the way to the very top. A function that would intersect the Y-axis at some living wage income where taxes would begin and continue upward until some maximum tax rate decided by how much deficit/debt we have.

This system would motivate the plutocracy to solve problems efficiently in order to lower their taxes - not to try to jettison responsibility to the bulk of Americans and inspire greed, underhandedness and corruption.


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