Eliminate the Estate Tax?

[MTAtech]

Quote:

[The] House Republican leaders have scheduled a vote this week to abolish the estate tax permanently. Under a wacky provision of the 2001 tax cut designed to disguise the law's full cost, Congress voted to make the estate tax go away in 2010, but come back in full force in 2011.

With so many other taxes around, it's hard to understand why this is the one Congress would repeal. It falls, in effect, on the heirs to the wealthiest Americans. Fewer than 1 percent of the people who died in 2004 paid an estate tax, and half the revenue from the tax came from estates valued at $10 million or more. full column

I've said it before, the agenda of the Republicans in power is to shift the burden of taxes away from those that live off of money to those that work for it - and this is a prime example.

To pre-empt those who may say, "yea, but the people that died already paid the tax on that money," let's look at a typicial example, the dead person purchased stock all throughout their life and left the stock to children. For argument sake, let's say the average price paid for that stock was $20/share. Yes, the parent paid tax on the $20/share. However, at the point of death, that stock was worth $60/share. Nobody ever paid taxes on the $40 difference. Those are unrealized gains. (Most of Bill Gates' billions has never been taxed. He was issued initial shares when Microsoft went public and the shares have appreciated ever since. The shares are only taxed when sold.)

Under what Congress is proposing there would be no tax at all. This means that dynasties can pass wealth from generation to generation without that money ever being taxed. Considering that working people pay so much of their money in taxes, it sure doesn't seem fair that the billionaires get a free ride.

[ShawnD1]

I can see what you're getting at, but you really shouldn't tie the Microsoft example into all of this. The only way you can tax somebody is when you know exactly what you are taxing. You can't tax an investment that is continually changing in value. It only has a constant value at the time you sell it; hence taxation when you sell.

[MTAtech]

Shawn,
What I meant by the Microsoft example, is that when Bill and Melinda die, their children will receive a tax-free inheritance of $50+ Billion dollars in stock - stock that was never taxed. The children could then live off the dividends, which are now tax-free due to the 2001 tax bill and pass the principal on to their children in purpetuity.

[Epidemic]

So farmer john who inherited his property from farmer ted, who inherited his farm from grampa bubba ... who originally purchased it from the king, wills his farm to his son but when the tax bill comes due the multi million dollar estate is chopped up into 5,000 1/8 acre postage stamp properties.

Pop saves his whole life and dies pre-maturely leaving an estate worth a million in property and businesses. leaving his kids with a 500,000 dollar tax bill. they then are forced to sell.

inheritance tax is not only good for the rich, it is really good at keeping middle income folk from becoming rich. It is also not too bad at destroying family businesses and farms. MTA thanks for your support of giant agri-business. Oh yeah that is right Agri-business does not pay estate taxes.

Personally I think it feels kinda dirty to tax ones estate at 20 -39% all your life and then tax it again so that the kids can't get a good start in life. So not only did they suffer through the hard years when dad was working 18 hour days, Not only did they suffer through the times when the mortgage kept them from having new shoes. now when it comes time to reap a family business that dad or mom built from the ground up the government makes you have to chop up the last part of dear old pop.

I like the way you think MTA.

[Pexster]

Epi, while it's true that such things have occurred, it's quite rare. A more common thing to consider is that if Bush has his way, there will be no estate tax, no capital gains tax, and no dividends tax. Thus, Joe Q. Mayflower IV can live his entire life without a job, clipping coupons, while not contributing one dime in taxes (other than sales taxes on his yachts).

I think this would be wrong, and I believe that there are ways to keep the scenario you present from occurring.

[MTAtech]

First of all, estate taxes don't 'keep middle income folk from becoming rich' because if you are middle income, you don't pay estate taxes. Under the old law, one million was excluded. The Dems want to raise that to $3.5 Million.

The argument for farmers is nonsense because the family farm went the way of the passenger pigeon during the Reagan Admin. This is what Bill Gates, Sr. has to say:

Quote:

Proposals to reform the tax have been blocked since 2000 by the "all or nothing" repeal lobby, which understands the peril of not having smaller estates as camouflage. Once exemptions rise above $3 million, it becomes impossible to find a credible and photogenic farmer or restaurant owner who will complain about what opponents call the "death tax." It's hard enough to find them now. The pro-repeal American Farm Bureau was asked to produce an example of a farmer who had lost a farm because of the estate tax. It could not identify a single one. http://www.thenation.com/doc.mhtml?i=20030127&s=gates

Bill Gates founded Microsoft with relatively little investment (cost) and was issued shares when Microsoft went public. Those shares are worth in the neighborhood of $50 billion. However, Gates has sold only a fraction of his shares. Thus, the bulk of his wealth is appreciated value that nobody was taxes.

Assuming that the Republicans get their way, when Bill and Melinda die, their children will receive a tax-free inheritance worth billions, which were never previously taxed. The children could then live off the stock dividends, which are now tax-free, due to the 2001 tax bill that eliminated taxes on dividends. At Microsoft’s current dividend yield of 1.30%, that is $650,000,000 per year, tax-free.

When the children die, the original principal passes on to their descendents, tax-free, in perpetuity. So there we have it, if the Republican Congress gets their way, the richest family on the planet will live like royalty and never have to pay any taxes. Dynasties will be able to pass wealth from generation to generation without their wealth contributing to pay for any government services.

[TOAD6147]

Epi always the drama queen..er king.

[Derek Smalls]

Quote:

Originally Posted by MTAtech

Shawn,
What I meant by the Microsoft example, is that when Bill and Melinda die, their children will receive a tax-free inheritance of $50+ Billion dollars in stock - stock that was never taxed. The children could then live off the dividends, which are now tax-free due to the 2001 tax bill and pass the principal on to their children in purpetuity.

I have to ask, have you ever been on the other end of the spectrum in this problem? My father-in-law passed away in 2003 and let me tell you how little is left after the government gets done. That little had to go to satisfy debts too. It takes a bad situation and turns it completely ugly. I know this is just one scenario, but it's one that a lot of people will inevitably find themselves in.....

[Harold7]

So exactly what is an "estate tax" other than government confiscation of private porperty and redistributing it to others?

Why exactly do you care if the wealthy (or anyone for that matter) passes their estate to their heirs without the government taking a cut... what business is it of yours?

Why is it the responsibility of the Gates family (to use your eample, MTAtech) to have the wealth they built over the years confiscated to fund government services... just because they have wealth to steal?

Doesn't that really mean that the Gates family really owns nothing and that what they have is whatever the government allows them to keep?

Is anyone's private property safe when the redisributionists decide you have too much and others don't have enough?

Is it the proper role of government for government to be the final arbiter of who has too much , who has too little and for government to be the great equalizer of wealth and property?

[MTAtech]

I've been on the other side. Since my parent's assets did not exceed a million bucks, we didn't have any federal liability. As far a debts, I think it is fair that the money that children get comes after the debts the parents owe.

Harold7,
Taxes are the dues we pay. Without them, we don't have a democracy or a safe place to live. If you think that taxes in general is confiscation of your property, so be it. Go live on a island in the ocean and fend for yourself.

Since we established that taxes are necessary, it's my business, as it is yours, that tax burden be divided equitably. Why should the richest people on the planet not have to pay anything towards paying for government expenses and thus leave that burden to the rest of America to pay for?

If these people pay nothing then ordinary workers bear the entire burden of the government. Does not the military protect these rich folk? Do they not benefit from having their employees educated at government expense? Do they not use the highways? Do they not use the air traffic system? Do they not use the courts? Are not their yachts built and shipped by rail, which is subsidized by the government?

If they do, it is fair that they should help pay their way.