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Bush & Sideshow have proposed an end to the so-called "Death Tax".

But, turn the proposal on its head. Perhaps we need to consider doing away with inheritance, instead?

Proposal: Why should we have Inheritance? Why should anyone in America simply be born to unequal advantage? Children of the wealthy already get plenty of perks: education, travel, introductions to influential people and networks, etc. Why should they get more for simply 'winning' some 'Birth Lottery'?

Instead, I propose the assets of an estate (when both spouses are dead) be put in a national pool. When a person reaches their majority (or some specified age) they are given their fair share from the pool along with all other eligible recipients for that year. It becomes their 'Grubstake' - something to get them started, for school or to start a business or buy some property....

Discussion: In reality, only the wealthy are ever asked to pay inheritance taxes and most of them find loopholes and get around it anyway. Bush's "Death Tax" is one more deceit from those who have made a high-art of lying and deception.

for example: Bush has said elimination of the "Death Tax" protects the family farm. However a reporter from the NY Post (interviewed on the O'Franken Factor) said he couldn't find evidence of a single family farm that has ever been threatened by inheritance taxes. He asked the Whitehouse. They couldn't come up with an example. He went to Iowa and asked farmers (including the farmers of one wealthy Republican county). They couldn't think of a single farm threatened by inheritance taxes. He asked Bush directly and Bush couldn't think of one.

What does that response remind you of?

QUOTE
Nope, not there. No, none over there."  -- G.W. Bush on WMDs



A 100% tax on assets (spousal rights and items of sentimental importance excepted) would permit all Americans to start out with something 'in their pocket', would not burden those with few or no assets, and would retain the incentive to make as much money as one can, since the shares in the pool would be larger.

how do you vote?
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Eeyore
I don't think we should take all inheritance from individuals. I am not sure the pool system would work, it really is more of an incentive to make sure every penny is spent before passing, and I could even see some legal device for distributing $$ before the taxman could get a hold of it.

I like the idea of turning the "Death Tax" on its head. The wealthier Americans have been doing better for the past twenty years, I saw no need for a tax break on inheritance or capital gains to "save" this group of people.

I think it is worse to tax earned wealth (by labor, employment, entrepreneurship) than it is to tax inheritance and capital gains.

So I vote no for the end of inheritance, but I definitely don't see any reason to tax my working wages and then not tax me when I get a bag of cash for the death of my parent.
redliner1989
I voted to preserve inheritance, but with taxation on some.

My thought. First, we tax income, for most that means working for a living, but we don't tax inheritance? To me that is a strange, not logical policy.

Perhaps we should exempt the first X amount of the inheritance, then a sliding tax on the remaining.
Azure-Citizen
QUOTE(redliner1989 @ Apr 25 2004, 12:32 PM)
Perhaps we should exempt the first X amount of the inheritance, then a sliding tax on the remaining.

Actually, we have that already. With regards to inheritance, prior to 1997, the first $600,000 was exempt (the federal estate tax of 18 to 55 percent applied beyond that). The Taxpayer Relief Act of 1997 set up a scale designed to increase the exemption, by raising it to $625,000 in 1997, then to $675,000 in 2000, then to $700,000 in 2002. It rose to $850,000 in 2004, and will rise to $950,000 in 2005, eventually coming to rest at $1,000,000 in 2006.

Thus, at present, if you only have $850,000 in estate assets, you will pay no estate taxes.

If a husband and wife plan accordingly and utilize an A-B Trust, they can effectively double this exemption, since there are two of them; hence, after 2006, they can actually pass up to $2,000,000 to their children without paying anything in inheritance tax. But they must execute that Trust while both are still living, otherwise they will lose the benefits of one-half of the exemption.

Does anyone know what percentage of the American public has more than $850,000 in assets to pass on to their heirs?
Artemise
Exactly, thats why the billing of this was called 'death tax' for the purposes of being intentionally misleading. Most people thought it was a great idea eliminating inheritance taxes without realizing that once again it only truly benefitted the nations most wealthy, a free pass.

I dont believe in doing away with inheritance. Many people in the country have worked hard to make sure that their children have a better life than they did, that they go to college and have something to help them through if they need it. Sometimes this is in the form of family business's, artwork, jewelry, real estate etc. Im not up for having that go into a pool, no way. It would be supremely unfair.

When you consider that we generally inherit pretty late in life, its not like its really such a windfall. ( My father inherited at 60 +, a modest home and savings, right around his retirement and he lives there now.) Not everyone is in the silver spoon brackets, and they will always find a way to keep their money, the people that would be hurt are the middle and lower brackets.

Oh to add one more thing...Im not interested in giving the government another means of managing our money, the disaster of S.S. shows that theyll just spend it all.
rebelkate
The Grubstake is an interesting idea - but I think the best way to do something like that would be to give everyone a certain amount to go towards education - and thats not just college, but money to help get through an apprenticeship or for technical training, etc.

But overall, I don't think entirely eliminating inheritance is the answer. I do support the old and current way, with no taxes on X amount and sliding tax past that. Since my grandfather just died this past month and left our family a large family ranch with several hundred head of cattle, I know that we still don't have to pay any estate taxes - because even with the large family farm, we don't hit the limit - and two, we planned well ahead. Just about all estate taxes can be avoided by good planning - like setting up family "coorporations" like Perot has done with his fortune. What would really threaten the family farm is health care - like if my grandfather had needed long term medical care in a nursing home, after only about two years he would have exhausted his savings and he would have been forced to liquidate all of his assets - including selling the farm on which his daughter and grandson now live! The entire family was getting prepared to take out some loans so we could keep the farm in the family... because unless we bought it at fair market value, there was no way to avoid losing the farm.

So, all this rhetoric about getting rid of the "death tax" is more smoke and mirrors to get in the way of issues that really threaten family farms.
CruisingRam
Now- you guys know I am no fan of GW and some of his boondoggles- but on the other hand- this money has already been taxed, sometimes several times, before the kids inherit it. Why does the goverment need another bite of the apple? The super rich will be able to hide this anyway- by transfering assets prior to death- limited partnerships etc- it is very easy to hit 850 thou for the average middle class due to housing prices, depending on your area.

I am for the total elimination of all inheritance tax- it is a very unfair tax since this money has been already taxed before in the form of income, capital gains etc.
Izdaari
Aye, CR has the right of it. The money's already been taxed six ways to Sunday and who earned it and has the right to dispose of as they wish? The government? I think not.

A counterproposal: How about a 100% tax on the assets of those who advocate a 100% tax on anyone else's assets? That would be the fairest tax of all I think.
Azure-Citizen
QUOTE(Izdaari @ Apr 25 2004, 11:13 PM)
A counterproposal: How about a 100% tax on the assets of those who advocate a 100% tax on anyone else's assets? That would be the fairest tax of all I think.

It is good to hear that you think that would be fair, given that in proposing a 100% tax on those who advocate a 100% tax on other's assets, you yourself would be taxed at 100% in such a scenario. rolleyes.gif

On a more serious note, this thread made me curious how many people are affected by the estate tax. From what I've been reading so far, the estate tax applies to approximately 2% of the population, with the other 98% falling under the minimum exemption amount. Put another way, the richest 2% of the population have assets sufficient enough at death that they are taxed, while 98% of the population is not affected by it. Some of the sites that quoted a statistic of 2% or less were:

http://www.asanet.org/media/taxes.html
http://www.ufenet.org/estatetax/ETWhoPays.html
http://ideas.repec.org/p/nbr/nberwo/6337.html

Has anyone else come across statistics on the percentage of Americans who are affected by the estate tax? I came across a couple pro- and anti- estate tax websites with several arguments for and against the estate tax, so there is probably some dissension on the issue.
CruisingRam
Once again- that 2% issue is like the 1% issue on the income tax- there is so much variation in that 2% in income/inheritence it is comparing apples and oranges. I have well over 2mil in assets- all real estate- due to the high property values in this state- but I am not of the 1% top income earners- my combined income is a bit north of 100k- but far short of the 350K of the 1%ers. Now- what kind of inheritence tax will my children pay vs Bill Gates? All the things I will be passing on to my children have been taxed- income tax and property tax- why is it fair to tax it once again?
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amf
QUOTE(CruisingRam @ Apr 26 2004, 02:17 AM)
Now- what kind of inheritence tax will my children pay vs Bill Gates? All the things I will be passing on to my children  have been taxed- income tax and property tax- why is it fair to tax it once again?

First of all, not all of your assets are taxed. Just those over a certain pretty high level.

Second of all, your kids don't pay the tax, your estate does (think of the "Corporate Personhood" thread and you'll see what I'm writing). If your estate's executor must sell some assets in order to pay the tax, that could happen, but it means you haven't done a good job planning your estate.

Third of all, I'm with the founders of this country on this: we don't need a permanent class of aristocracy. People who don't work for a living don't help our society; that's true for the poor as well as the rich. The inheritance tax helps keep a permanent aristocracy from forming and is a good thing.

The "death tax" is a great equalizer to keep the rich from being rich forever without putting more effort into it. I don't want my kids OR anyone else's kids to be able to lay around and do nothing productive for their entire lives. That's not good for the kids and it's not good for our nation.

And once you get to the level where your estate -- not you, since you would be dead, or your kids but your ESTATE -- pays taxes on the value of those assets, then estate planning is an absolute MUST and most folks at that level DO estate planning with a good accountant and lawyer. Same as they do tax planning.
CruisingRam
I see your point on this issue AMF- but, even as someone that doesn't shy away from the title of "liberal"- that seems pretty confiscatory to me- very close to an actual socialist tenet really. Do we really want that level of social engineering and taxation in our culture- now- I don't shy away from a certain tax level- and I am not one of these "end the income tax, repeal the 16th amendment types"- but I am a very good little capitalist though LOL- and the burden of taxes shouldn't be at the point that it stifles investment or capitalism- and this is darn close to that!
amf
QUOTE(CruisingRam @ Apr 26 2004, 07:59 AM)
... and the burden of taxes shouldn't be at the point that it stifles investment or capitalism- and this is darn close to that!

And how does taxing assets AFTER YOU'VE DIED stifle capitalism?

Our founding fathers were liberals?? Remember: they were the ones who didn't want an aristocracy based on inheritance. If we allow unfettered transfer of wealth from one generation to the next, that's exactly the effect we'll have created.

An example I left out of my first posting: do we really need MORE Paris Hiltons? laugh.gif
CruisingRam
But one of the most important tenets of the founding fathers was the pursuit of happiness- and one of the main human pursuits is to be able to leave our children in better financial shape than ourselves. Perhaps my pursuit of happiness is to leave as much money as I can to my children? And no amount of splitting hairs makes taking all money away from the children of a person and giving it to the goverment less than outright confiscation.
amf
QUOTE(CruisingRam @ Apr 26 2004, 09:28 AM)
Perhaps my pursuit of happiness is to leave as much money as I can to my children? And no amount of splitting hairs makes taking all money away from the children of a person and giving it to the goverment less than outright confiscation.

I'm not really going to argue the "you're dead, but you're happy" statement, but aren't ALL taxes outright confiscation? Aren't all government programs some form of social engineering? (Let's face it, without a department of roads in your state, concrete companies would go out of business; without government assistance, people living below the poverty line would likely starve, etc.)

Why is this particular tax so special that it can't happen?

Your kids will still be better off than if you died penniless, because the gov't only takes a portion of the assets OVER A CERTAIN AMOUNT. They don't take it all and they don't take it from your kids. They take it from your estate. If you intend for it to go to your kids, set up a trust to gift it to them over time. Do some estate planning!

But let's not create an aristocracy. I'm already annoyed at Paris Hilton (clearly). laugh.gif
CruisingRam
Paris Hilton of course make the best argument for the end of inheritance- without it she would just be another ho on hollywood and vine. But someone like Trump makes the opposite argument- his dad had a pretty succesful real estate thing going- but Donald grew it and made it an empire.

Yes- to a degree, all taxes are confisatory- however- to what degree we have taxes is what truly determines if we are socialist or capitalist. Does any European countries have a no inheritance policy? I have always thought it silly that US folks call western European countries socialist- since there is just as much chance of getting very rich there as here- but would no inherintence be the cross over that makes it a socialist system?
Amlord
Amf, you make it sound as if the Founders started this country with an inheritance tax...far from the truth.

According to the US Treasury Dept History of Taxes
QUOTE
I want to know about the origin of the Federal estate tax. Can you tell me when it became part of the tax code and the rationale behind it?

In 1916 Congress for the first time levied a tax upon the transfer of a decedent's net estate. The Committee on Ways and Means of the U.S. House of Representatives explained that a new type of tax was needed, because the "consumption taxes" in effect at that time bore most heavily upon those least able to pay them. The Committee further explained that the revenue system should be more evenly and equitably balanced and "a larger portion of our necessary revenues collected from the incomes and inheritances of those deriving the most benefit and protection from the Government."

The Committee recommended an estate tax rather than an inheritance tax because many states already imposed inheritance taxes. It felt that the estate tax helped to form a well-balanced system of inheritance taxation between the Federal Government and the various states and that an estate tax could be readily administered with less conflict than a tax based upon inherited shares.

Various changes in the estate tax provisions of law, as well as their repeal, have been proposed over the years, but the principle has been retained. Our office has available an excerpt from the Ways and Means Committee's report on the Revenue Act of 1935. The report reproduces a June 19, 1935, message from President Roosevelt to Congress advocating an inheritance tax, in addition to the estate tax. Although the inheritance tax proposal was not adopted, the message provides information on why the taxation of individuals' estates was considered appropriate.

The first federal estate tax came into being in the US in 1916.
As stated, this wealth has already been taxed when it was earned. If it is tangible property, it is taxed every year (locally) via property tax.

There is a myth being forwarded here of the "idle rich", a class of people who do exist, but are so minute as to make no difference in actual society. The Paris Hilton's of the world may get alot of press, but I assure you they do not make up any sizable percentage of the population.

Do away with the estate tax, a punitive tax on those who succeed in life.

The call for proper "estate planning" is particularly annoying, since you are advocating that people devise ways around the very system of taxes which you are advocating, while giving lawyers yet another way to suck money from people's wallets (or estates).
amf
QUOTE(Amlord @ Apr 26 2004, 10:28 AM)
Amf, you make it sound as if the Founders started this country with an inheritance tax...far from the truth.

The first federal estate tax came into being in the US in 1916.

There is a myth being forwarded here of the "idle rich", a class of people who do exist, but are so minute as to make no difference in actual society.  The Paris Hilton's of the world may get alot of press, but I assure you they do not make up any sizable percentage of the population.

The call for proper "estate planning" is particularly annoying, since you are advocating that people devise ways around the very system of taxes which you are advocating, while giving lawyers yet another way to suck money from people's wallets (or estates).

I cut up a bit of Amlord's posting to respond to the pertinent points.

I said the founding fathers were against an aristocracy. No inheritance tax means that the only real impediment to that happening is being removed.

You mention the "idle rich" as being a small minority. And how small of a minority are the folks who actually PAY estate taxes? I'd say very similar.

And since when is estate planning a call to "device ways around" the tax? It's using the tax laws -- AS WRITTEN -- to plan for the long term viability of your assets. You're not getting around anything, but you're also not giving away more than you have to. If you're upset by estate planning, then we should eliminate all taxes (and our entire government in the process), because tax law has all kinds of ways for you to organize your assets so that you don't have to pay as much tax. And, no, I don't care for the "fair tax" plan either. I'm also not a huge fan of the deficit, as you'll recall.

And CR, I agree about The Donald: he took something and made it bigger. And his Dad paid estate taxes. So it's not out of the question for your kids to succeed on the stake you leave them.
AuthorMusician
I know the estate tax is meant to avoid an aristocratic class from forming in the US. Obviously, this has not worked as planned. A clear aristocracy has developed and continues to develop. Even in the relatively small town I grew up in, the class structures were so obvious that any reference to a "classless society" in the US was a big joke, even to children. You had your working class driving Fords and Chevys, your management class driving Fords and Chevys of newer varieties, and your rich class driving foreign sports cars and luxury sedans from Germany. There was also a good part of town, a not so good part, and a downright crummy part.

The decision to go to college for children was hardly on the radar screen for the working class. Nobody saved to send kids to college from that class. If kids did go to college, they did it on their own steam.

Contrast this with the German sedan families. Kids were expected to go to college, graduate, get a closetfull of business suits as a present, head off into the world of middle management, and claw on up the ladder of, in the common vernacular, success.

So what we have is an effect where the parents' success at making money tends to go toward the kids. Nothing wrong with that, eh?

But what happens when an empire is built and that goes to the kids? Well, if there's enough of an empire, people other than the kids run the show. Not so if the empire is more modest.

A million dollar empire really isn't all that much any longer. I am for taxing larger empires, over a billion dollars, and letting the more modest ones (like the Coors family empire) go to the kids so they can either sink or swim in the shark-infested waters. The reason I'm for taxing the big empires is that the money has likely escaped a good deal of taxation through tax shelters and possibly fudging on tax payments. Taxing at the end of the founder's life would help pay for the services -- national defense of the empire for example.

But this goes only to personal estates. Corporate empires wouldn't be touched, other than whatever precentage of that goes to the personal estate.

I know the anti-tax crowd is automatically against any forms of taxation. Fine. But in this situation, one needs to ask whether the empire in question has actually paid its fair share for the really expensive things that government does. Defense of the empire is one of those things.
yabbobay
If there is a 100% death tax...people will find ways around it...set up trust funds, gifts every year, etc...

A classless society is almost impossible to obtain...but when we accept that information...we can work on bridging the gap.

Anyway, I had to deal with my father's assinine behavior for x amount of years - damn right I should be entitled to something. biggrin.gif wink.gif
Doclotus
QUOTE
But let's not create an aristocracy. I'm already annoyed at Paris Hilton (clearly).
laugh.gif Too funny.

I have no issue with the tax as it currently stands. Though it does seem odd to me that income that has likely been taxed at least twice (first income, then as capital gains depending on growth source) would be taxed yet again. /shrug

Ending inheritance in general is a horrible idea. I put far greater faith in an individual's ability to waste money than the government's. At least the individual would get fair prices on stuff.

Doc
deerjerkydave
QUOTE(Doclotus @ Apr 26 2004, 06:07 PM)
I have no issue with the tax as it currently stands. Though it does seem odd to me that income that has likely been taxed at least twice (first income, then as capital gains depending on growth source) would be taxed yet again. /shrug

Ending inheritance in general is a horrible idea. I put far greater faith in an individual's ability to waste money than the government's. At least the individual would get fair prices on stuff.

Doc

I also find annual property tax to be even more cruel. Think about it, you pay tax (and a lot of it) every year on the same property. The same goes with automobile registration tax. You pay these repetitive taxes to maintain the privilege of property ownership. Huh? wacko.gif

The whole premise of a 100% inheritance tax and repetitive taxation smells of totalitarianism: where all rights, privileges, wealth, success, property, etc. are given to the people by the grace of government. And such a god-like government can give and take away at will and pleasure. Thanks, but no thanks.
amf
QUOTE(deerjerkydave @ Apr 26 2004, 02:42 PM)
The whole premise of a 100% inheritance tax and repetitive taxation smells of totalitarianism...

Ok, I'll bite: what 100% inheritance tax? Are you referring to the tongue-in-cheek proposal earlier in the thread?
Eeyore
QUOTE(CruisingRam @ Apr 26 2004, 12:17 AM)
All the things I will be passing on to my children have been taxed- income tax and property tax- why is it fair to tax it once again?

All money has been taxed, and taxed, and taxed.

This does not make it different if you are able to keep it and hand it to someone you like or love versus taking it and spending it. That money will be handed a sales tax, the revenue it generates for a business will help support a payroll, that will be taxes, a percentage of it may be reported as income for a business, which also is subject to taxation.

All taxation is confiscatory. I don't see why we don't have an issue with having our pay taxed, but then call it confiscation when we get money given to us and the government defines that as income.

I also think that a grave danger to our system is the vast accumulation of wealth that occurs for the few in modern industrial capitalism. So I see to reason to create protections for a moneyed class of capital owners. I prefer taxing capital to labor.

Were our class of capital owners being beaten down by the so-called socialist bent of capital gains taxes and inheritance taxes I could see worrying about providing better protections against taxation of the wealthy, but our present worries seem to be more about allowing our middle classes to hold onto health insurance and to retire with dignity after reasonable planning.

Also I see us as a consumption economy. So if we are going to hand out tax relief I think it should be where it will produce consumption (in our present situation, and this is probably consistently the more important side to stimulate since 1920) instead of savings. Obviously we have been doing pretty well in putting away savings if our fed rate is at 1%, capital is not necessarily in short supply if we are at 40 year lows on interest rates.

So I think it is a logic fallacy to call this a form of double taxation. When money changes hands it gets taxed. When it doesn't that is the exception, and it was granted to someone by the government (in our present system)
Hobbes
As long as we're turning the question on its head, let's take a look at the real question here, which is:

Why should the government confiscate any or all of the wealth accumulated by someone, when this wealth has already been duly taxed, simply because they died? What 'right' does the government have to this wealth? In essence, what is being proposed here is to modify everyone's will so that rather than being able pass inheritance on to those of your choosing, the government should step in and decide for you who that wealth should be distributed to. Unless of course there are 'exceptions', then what is being advocated is that the government should target only certain individuals for confiscation. Heck, why not only people of <insert race> should have their wealth confiscated upon death?

There seems to me a reasonable course of action here. If you truly believe that this is a sound and proper plan, then modify your will to stipulate that all your wealth be donated to the government. But don't try and decide for the rest of us what we should do with our savings.
Sleeper
This just looks like another form of "jealousy of the rich". This is getting rather old.. I mean, how many ways can you whine/complain about it?

My family on both sides were not rich and neither were their parents. And now that I have become successful in my life, I will be dammed if some government bureaucracy is going to tell me I cannot give my children and grandchildren a life I never had when I was growing up.

Edit to add: What about a spouse? How would a spouse be any different than offspring. My wife no longer works(infact she only worked one year after we married). If say I pass away 10-12 years down the road and only I have worked, how would it be different if I will all my assests to her. To the people advocating a 100% inheritance tax, how would that be different than giving to my children?
quarkhead
First, let's get a few facts about the estate tax:

In 2004, individuals are exempt from the tax on moneys up to 1.5 million, for couples, 3 million. By 2009, this figure will go up to 3.5 million for individuals, 7 million for couples. Businesses and farms have further exemptions. Currently, with planning, a business can pass up to 5 million tax free, farms up to 8 million. Now, for those whose fortunes go beyond that, remember that the exemption is still there. An individual wishing to pass on 2 million will only be taxed on 500,000 - the first 1.5 million is still exempt.

Of course, as is the case with our complex tax system, even this is not the whole story. In 2004, the top rate is 48%, however, after the exemption and other deductions are used, the effective average rate is much lower. In 2001, when the top rate was 55%, the average effective rate was 19%. Furthermore, this does not apply to spouses.

Given the distribution of wealth ownership in America, it is the top 2% who pay the estate tax. But even that is a bit deceptive. In 2001, over half of all estate taxes were paid by 3,502 people - the top 0.14%.

In 2003, estate tax brought in about 20 billion dollars. Get rid of it, and the cost of public services falls more and more heavily on poor and middle class tax payers. Bush has certainly given lie to any Republican ideals of shrinking government, so that money must come from somewhere. People can whine and complain all they like about how unfair the estate tax is, but the truth is that repealing it is just going to make their own tax burden greater.

Now, philosophically, the American "experiment" was founded in no small measure as a reaction against the inherited aristocracy of Europe, and the vast inequality of wealth there. There are several beliefs, all quite American, which led to the creation of the estate tax.

1.The hereditary transfer of concentrated wealth is incompatible with American values and democratic aspirations. FDR said, "Great accumulations of wealth cannot be justified on the basis of personal and family security Such inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of the generation which established our government.

2.Society played a significant role in the creation of individual wealth and therefore had some claim upon the wealth of the very rich. Theodore Roosevelt proposed an inheritance tax in 1906, and said, "The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government. Who benefits the most from our system's protection of wealth and property?

So let's recap this. The movement to repeal the estate tax is a movement which serves the interest of 6 million people - but really mainly benefits fewer than 4,000 people. That's a pretty small minority, for such a big deal to be made of it. I see that the same people scoffing at this tax in this thread are aften the same people who scoff in the other direction when the "rights" or privileges of small minorities are brought up.

Lastly, the whole "double taxation" bit is bogus. As money gets passed through the economy, it gets taxed at various points. My taxed wages, for example, will get taxed again when I buy something at the store. Furthermore, and specifically dealing with the estate tax, the majority of large fortunes are in the form of unrealized capital gains, which, if not for the estate tax, would go untaxed even once.

You don't pay any estate taxes if you donate your fortune to charity. The estate tax is fair. It applies to those able to pay it, and it encourages nonprofit donations.

Sleeper, your comment is particularly inept, seeing as such poor folks as Warren Buffet, George Soros, and William Gates, Sr. are all opposed to the repeal of the estate tax. This isn't about jealousy of the rich.

Hobbes, I can see your point, but its idealistic - this applies to all taxation. And getting rid of progressive taxation would be a huge blow to this country, a blow that would shock even those who are opposed to it. Because you do that, and you will starve the states. The states will raise taxes, and those taxes will fall disproportionately on the poor and the middle class. Right now, the top 1% of people in this country own close to 50% of the wealth. You think that's a disparity? Getting rid of progressive taxation would make this look like a picnic.

edited to add a response to sleeper's edit: leaving your fortune to your spouse has not been, nor is it being proposed to be, subject to the estate tax. Gotta get the facts, my friend. And really, no one is advocating a 100% inheritance tax. There is no movement for it. The main bulk of people opposed to repeal, are advocating reform - raise the limits to 3.5 and 7, don't get rid of the whole thing.
Azure-Citizen
Good post for substantive debate, Quarkhead. thumbsup.gif

The figures I quoted in one of my earlier posts were definitely wrong, having been based off the changes made by Tax Payer Relief Act of 1997. As you've indicated, the Tax Relief Act of 2001 amended them again, to which I'd like to add one or two additional comments. All of this reminds me how rarely I do estate planning... whistling.gif

Here is what the current estate tax law provides:

(Year of Death - Exemption Amount - Rate of Tax beyond that Amount)
2003 - $1 million - 49%
2004 - $1.5 million - 48%
2005 - $1.5 million - 47%
2006 - $2 million - 46%
2007 - $2 million - 45%
2008 - $2 million - 45%
2009 - $3.5 million - 45%
2010 - Estate Tax Completely repealed
2011 - $1 million - 50%
2012 - $1 million - 50%
2013 - $1 million - 50% and so on...

So if someone dies in, say, 2007, the first $2,000,000 in their estate passes tax-free, and anything above that amount is taxed at a rate of 45%. If they had $3,000,000 in their estate, their heirs would receive approximately $2,550,000 while the Government would collect $450,000 in estate taxes.

If the same person were to die in 2009, their entire estate of $3,000,000 would pass tax-free.

Here is where it gets really interesting. If they die in 2010, there is no estate tax for that year, period. It is completely repealed. If you are a billionaire and you die, you could pass the whole thing to your kids and they will get the entire lump sum.

But the very next year... the rates return to the original 2003 level of just $1,000,000, and stay that way thereafter.

Why does this work this way? Apparently, the way the law was debated and created in Congress, it was meant to be temporary, not permanent. I think they did it in order to see what consequences actually play out with tax revenues and the economy (testing their theories), but that is 100% speculation on my part.

The whole thing plays havoc with estate planning, however, for anyone with a sizable estate contemplating death in the next 10 years (say, $5 to $10 million). Just think, if you die near the end of this decade, you may pay very little estate tax (or none at all); but die the following year, and almost half of the estate will disappear in taxes. What a strange position to be in. huh.gif

As Quarkhead pointed out, all of this really only applies to a very small group of people. It is estimated that their are currently 293 million people living in the United States. If half of all the estate taxes in 2001 were paid by just 3,502 people, then completely repealing the estate tax will benefit an extreme minority (the wealthiest of all Americans) at a cost of billions in tax revenues. Maybe if we didn't have the deficit, I'd be more sympathetic. hmmm.gif

Sleeper, if you're interested, you can avoid many inheritance and probate questions simply by structuring the assets in the marriage. If you own a home with your wife, joint tenancy ensures that upon your death, she already owns it; it does not "pass" to her as inheritance. Same thing with all your marital assets; if a bank account is in both your names, it belongs to both of you and if you die, her interests survive yours and it is not part of your estate. Vehicles (cars, boats, airplanes, etc) can be put in joint title. All of these things are reciprocal in that if she predeceases you, you would have everything instead.
Sleeper
QUOTE
edited to add a response to sleeper's edit: leaving your fortune to your spouse has not been, nor is it being proposed to be, subject to the estate tax. Gotta get the facts, my friend. And really, no one is advocating a 100% inheritance tax. There is no movement for it. The main bulk of people opposed to repeal, are advocating reform - raise the limits to 3.5 and 7, don't get rid of the whole thing.



What I am asking is: What is the difference? What is the difference between a spouse in a marriage who has not worked in 10+ years getting the inheritance and the children getting the inheritance? If you are saying that the offspring should be taxed on the inheritance, why not the spouse? The spouse did not work for it either. Why should the spouse be entilted to a tax free inheritance.

Also what about life insurance policies. I can buy a $1,000,000 life insurance policy for my children and if I die they get all of it tax free. I am surprised we don't have some kind of uproar about that. mad.gif
quarkhead
QUOTE(Azure-Citizen @ Apr 27 2004, 10:26 AM)
Here is what the current estate tax law provides:

(Year of Death - Exemption Amount - Rate of Tax beyond that Amount)
2003 - $1 million - 49%
2004 - $1.5 million - 48%
2005 - $1.5 million - 47%
2006 - $2 million - 46%
2007 - $2 million - 45%
2008 - $2 million - 45%
2009 - $3.5 million - 45%
2010 - Estate Tax Completely repealed
2011 - $1 million - 50%
2012 - $1 million - 50%
2013 - $1 million - 50% and so on...

To clarify - these are the rates for a single taxpayer. For couples, double each amount.

QUOTE
Why does this work this way? Apparently, the way the law was debated and created in Congress, it was meant to be temporary, not permanent. I think they did it in order to see what consequences actually play out with tax revenues and the economy (testing their theories), but that is 100% speculation on my part.


Could be. But we do know that Bush and some Republicans would like to make that repeal permanent. Many people believe that it was easier to pass this temporary bill, and then work to make it permanent - much like the other tax cuts Bush has enacted. Indeed, since this gradually-reducing law was passed, there has been a battle in congress each year - in which, so far, permanent repeal has been voted down. I figure the thinking is, this gives them almost a decade to fight this battle, and they are relying on it squeaking by one of those years. After all, is it any coincidence that more than a few members of our hallowed Congress have fortunes in excess of these amounts?

QUOTE
Sleeper, if you're interested, you can avoid many inheritance and probate questions simply by structuring the assets in the marriage. If you own a home with your wife, joint tenancy ensures that upon your death, she already owns it; it does not "pass" to her as inheritance. Same thing with all your marital assets; if a bank account is in both your names, it belongs to both of you and if you die, her interests survive yours and it is not part of your estate. Vehicles (cars, boats, airplanes, etc) can be put in joint title. All of these things are reciprocal in that if she predeceases you, you would have everything instead.


Good advice, but let me reiterate, so it is clear: the estate tax does NOT apply to fortunes being handed to spouses or to charities.

I can see how the estate tax is philosophically very American. We have always purported to stand for the ideal that wealth in a free market is the consequence of one's labours and abilities. And even with a 50% tax on amounts over 1 million, what are the children of the wealthy getting? Let's say you have an estate worth 4 million. Your daughter, as heir, gets: 1 million tax free, plus another 1.5 million. I fail to see how this impoverishes the next generation. Indeed, were I of such wealth, I would greatly fear the possibility that my children would be simply the "idle rich." The values I give my children are the same, no matter what my income is - you must earn that which you receive, whether love, money, or friendship.

QUOTE(sleeper)
What I am asking is: What is the difference? What is the difference between a spouse in a marriage who has not worked in 10+ years getting the inheritance and the children getting the inheritance? If you are saying that the offspring should be taxed on the inheritance, why not the spouse? The spouse did not work for it either. Why should the spouse be entilted to a tax free inheritance.


I see what you are saying here, but there are a few differences. Under normal conditions, the spouse is of, at least roughly, the same age as the holder of the fortune. Plus, who knows how much the spouse has contributed to the context of the fortune-making? My wife earns a lot of money in her field, but her doing so would be much harder, if not impossible, were it not for me being home with the children. But since the law does not tax spousal inheritance, the point is somewhat moot. Indeed, your argument could be easily made to say we should reform the estate tax law to include spouses, rather than as an argument to get rid of it altogether.

QUOTE
Also what about life insurance policies. I can buy a $1,000,000 life insurance policy for my children and if I die they get all of it tax free. I am surprised we don't have some kind of uproar about that.


But why? There is no real uproar about having more than 1 million being exempted from the estate tax. It seems to me you are attempting to paint this debate as being between those who think all inheritance should be taxed (or abolished), and those who think none of it should be taxed. That is far from the truth. I have not seen any organizations pushing for 100% tax on estates, nor for broadening the law to include all inheritance, regardless of amount. The real public debate continues to be between those who think the law is fine, or needs reform (the most common reform being to raise the exemption to 3.5/7), and those who think the whole thing should be abolished. So, I don't know why you say you are surprised, unless it is your way of trying to paint those on my side of the debate as proponents of total taxation all the time.

Edited to add: I do realize that the debate for this thread was, why not tax inheritance at 100% - I was merely pointing out that this is not a part of the public debate on the matter. And as for that proposal, I am against it in any case.
Sleeper
But really my whole point is that I will most likely won't be leaving those millions you are quoting Quark. I will be one of the ones(or my children) will be hit hardest. It will probably be in the five to seven hundred thousand range. What about the people like me who are effected most by the current taxing structure?
quarkhead
QUOTE(Sleeper @ Apr 27 2004, 11:33 AM)
But really my whole point is that I will most likely won't be leaving those millions you are quoting Quark. I will be one of the ones(or my children) will be hit hardest. It will probably be in the five to seven hundred thousand range. What about the people like me who are effected most by the current taxing structure?

Perhaps you haven't been reading closely enough, sleeper. There is no estate tax on the amounts you are talking about. The exemption means you do not pay the tax on monies up to the amount of exemption. You would have to be leaving your children (curently) over 1.5 million for the tax to even kick in, and even then, only the amount over 1.5 million would be taxed.

This won't hit you hardest - it won't hit you at all!
Azure-Citizen
QUOTE(quarkhead @ Apr 27 2004, 11:57 AM)
QUOTE
Sleeper, if you're interested, you can avoid many inheritance and probate questions simply by structuring the assets in the marriage. If you own a home with your wife, joint tenancy ensures that upon your death, she already owns it; it does not "pass" to her as inheritance. Same thing with all your marital assets; if a bank account is in both your names, it belongs to both of you and if you die, her interests survive yours and it is not part of your estate. Vehicles (cars, boats, airplanes, etc) can be put in joint title. All of these things are reciprocal in that if she predeceases you, you would have everything instead.

Good advice, but let me reiterate, so it is clear: the estate tax does NOT apply to fortunes being handed to spouses or to charities.

Agreed, the estate tax does NOT apply to spousal inheritance. What I was getting at was that regardless, spouses can easily structure marital assets with rights of survivorship such that they would not be a part of the decedents estate and would not apply anyway. This is also an easy way to avoid the hassles of probate, which is very attractive for couples with assets in the $50,000 to $500,000 range.

At the risk of complicating things further, it should be noted that if you still want to make use of the maximum double exemption in passing on assets to children, beyond the transfer of assets to the surviving spouse (who obviously, is going to die someday, too), you need to do some advance planning or one-half the value of the double exemption is lost. For example, if a couple has several million in assets and one dies, leaving everything for the other, then years later, when the surviving spouse dies and leaves everything to the children, his or her exemption amount is the single exemption amount. The opportunity for a double exemption has been lost. To take advantage of the double amount, the spouses could have entered into a Trust when both were still living, into which they would transfer all marital assets. In the terms of the Trust, they specify that when one partner dies, the assets are to go to the children, but that the surviving spouse has the use of the money for living (until they die themselves). After the surviving spouse dies, the double exemption amount applies on the assets that will now pass to the children.

Of course, I'm pushing the actual debate farther off topic with these points. I'll stop there and recommend that anyone who is interested contact a professional estate planner. smile.gif
Sleeper
QUOTE(quarkhead @ Apr 27 2004, 02:11 PM)
QUOTE(Sleeper @ Apr 27 2004, 11:33 AM)
But really my whole point is that I will most likely won't be leaving those millions you are quoting Quark. I will be one of the ones(or my children) will be hit hardest. It will probably be in the five to seven hundred thousand range. What about the people like me who are effected most by the current taxing structure?

Perhaps you haven't been reading closely enough, sleeper. There is no estate tax on the amounts you are talking about. The exemption means you do not pay the tax on monies up to the amount of exemption. You would have to be leaving your children (curently) over 1.5 million for the tax to even kick in, and even then, only the amount over 1.5 million would be taxed.

This won't hit you hardest - it won't hit you at all!

Ahhh, but I don't plan on dying before 2010 when the exemption on the first 1.5 million will be gone. And if our democrat friends are back in control I can assure you it will revert back to what it was back in 1994 when my close friend's mother died and he had to pay nearly 50% taxes on his inheritance of about $500,000. (which was including home, stocks and liquid assests)
Azure-Citizen
QUOTE(Sleeper @ Apr 27 2004, 01:56 PM)
QUOTE(quarkhead @ Apr 27 2004, 02:11 PM)
This won't hit you hardest - it won't hit you at all!

Ahhh, but I don't plan on dying before 2010 when the exemption on the first 1.5 million will be gone. And if our democrat friends are back in control I can assure you it will revert back to what it was back in 1994 when my close friend's mother died and he had to pay nearly 50% taxes on his inheritance of about $500,000. (which was including home, stocks and liquid assests)

Since 1981, the minimum exemption amount was $600,000. Would you mind clarifying and expanding the example of your friend?

Separately, if you'd like to assure Quarkhead that the Democrats will likely decrease the exemption back to 1981 levels, you might want to cite some evidence. As far as I know, neither party has shown any interest in the last 30 years in decreasing the minimum exemption amount. Even if they did, your assets are in the 500-700k range; I am still having trouble understanding why you say you would be hit the hardest(?). hmmm.gif
Walter
QUOTE(Azure-Citizen @ Apr 25 2004, 12:20 PM)
QUOTE(redliner1989 @ Apr 25 2004, 12:32 PM)
Perhaps we should exempt the first X amount of the inheritance, then a sliding tax on the remaining.

Actually, we have that already. With regards to inheritance, prior to 1997, the first $600,000 was exempt (the federal estate tax of 18 to 55 percent applied beyond that). The Taxpayer Relief Act of 1997 set up a scale designed to increase the exemption, by raising it to $625,000 in 1997, then to $675,000 in 2000, then to $700,000 in 2002. It rose to $850,000 in 2004, and will rise to $950,000 in 2005, eventually coming to rest at $1,000,000 in 2006.

Thus, at present, if you only have $850,000 in estate assets, you will pay no estate taxes.

If a husband and wife plan accordingly and utilize an A-B Trust, they can effectively double this exemption, since there are two of them; hence, after 2006, they can actually pass up to $2,000,000 to their children without paying anything in inheritance tax. But they must execute that Trust while both are still living, otherwise they will lose the benefits of one-half of the exemption.

Does anyone know what percentage of the American public has more than $850,000 in assets to pass on to their heirs?

With the median house price in California now exceeding $300,000.00 and with the huge expansion of IRA's and 401k's (both are available to pass on to dependents), the taxation point is way too low.

Further, a family business that is successful almost always involves sacrifice and hard labor by the family, not just mom and/or dad.

Under the proposed plan (100% tax), that effort is destroyed if, say, mom and dad are killed in an armed robbery of their, now successful, restaurant or grocery. In addition, the business closes and all employees lose their jobs. (Unless, of course, the government is able to continue operations.)

Oh, and the kids who have been working hard to keep that business going and who made it a success. What is left for them? Nothing.

If the 100% tax proposal were implemented, only a fool would consider building his own business from a standing start.

In other words, it would devastate the economy, which is built on small business and entrepreneurial spirit.
Walter
QUOTE(quarkhead @ Apr 27 2004, 10:57 AM)
QUOTE(Azure-Citizen @ Apr 27 2004, 10:26 AM)
Here is what the current estate tax law provides:

(Year of Death - Exemption Amount - Rate of Tax beyond that Amount)
2003 - $1 million - 49%
2004 - $1.5 million - 48%
2005 - $1.5 million - 47%
2006 - $2 million - 46%
2007 - $2 million - 45%
2008 - $2 million - 45%
2009 - $3.5 million - 45%
2010 - Estate Tax Completely repealed
2011 - $1 million - 50%
2012 - $1 million - 50%
2013 - $1 million - 50% and so on...

To clarify - these are the rates for a single taxpayer. For couples, double each amount.


Nope.

If A and B are married, have an estate worth $3 million, and A dies, B gets the estate tax free. If B dies later or simultaneously, the estate is taxed on the value over $1.5 million (2004). There is no doubling effect.

There are avoidance measures available to couples (an exemption trust, for example) that can mitigate the exemption in an estate worth $3 million or less) but it must be created well before the death occurs.

(The rules can be different in multistate situations and/or non-CP states. Check with your tax adviser.)
quarkhead
QUOTE(Walter @ Apr 27 2004, 01:24 PM)
QUOTE(Azure-Citizen @ Apr 25 2004, 12:20 PM)
QUOTE(redliner1989 @ Apr 25 2004, 12:32 PM)
Perhaps we should exempt the first X amount of the inheritance, then a sliding tax on the remaining.

Actually, we have that already. With regards to inheritance, prior to 1997, the first $600,000 was exempt (the federal estate tax of 18 to 55 percent applied beyond that). The Taxpayer Relief Act of 1997 set up a scale designed to increase the exemption, by raising it to $625,000 in 1997, then to $675,000 in 2000, then to $700,000 in 2002. It rose to $850,000 in 2004, and will rise to $950,000 in 2005, eventually coming to rest at $1,000,000 in 2006.

Thus, at present, if you only have $850,000 in estate assets, you will pay no estate taxes.

If a husband and wife plan accordingly and utilize an A-B Trust, they can effectively double this exemption, since there are two of them; hence, after 2006, they can actually pass up to $2,000,000 to their children without paying anything in inheritance tax. But they must execute that Trust while both are still living, otherwise they will lose the benefits of one-half of the exemption.

Does anyone know what percentage of the American public has more than $850,000 in assets to pass on to their heirs?

With the median house price in California now exceeding $300,000.00 and with the huge expansion of IRA's and 401k's (both are available to pass on to dependents), the taxation point is way too low.

Further, a family business that is successful almost always involves sacrifice and hard labor by the family, not just mom and/or dad.

Under the proposed plan (100% tax), that effort is destroyed if, say, mom and dad are killed in an armed robbery of their, now successful, restaurant or grocery. In addition, the business closes and all employees lose their jobs. (Unless, of course, the government is able to continue operations.)

Oh, and the kids who have been working hard to keep that business going and who made it a success. What is left for them? Nothing.

If the 100% tax proposal were implemented, only a fool would consider building his own business from a standing start.

In other words, it would devastate the economy, which is built on small business and entrepreneurial spirit.

Well, let's look closer at that - because I agree with you, this type of thing should not harm family businesses.

According to United for a Fair Economy:
QUOTE
According to the IRS, of the 2.3 million people who died in 1998, only 776 left an estate with business assets equal to at least half the total estate. Put another way, only three out of every 10,000 people who died in 1998 had significant business assets. A recent Federal Reserve study found that the average small business is worth $702,566, well below the level at which estate taxes kick in.


Now, I agree with you that 100% taxation on all inheritance would be a horrible idea. However, even if you took the present system, and said that everything over the exemption amount were to be taxed at 100%, it would still not affect most small businesses and entrepreneurs.

Currently, family businesses have certain protections, dealing particularly with the estate tax. They can value their assets at less than market rates, and they can pay the estate tax off over 14 years at 2% interest. We should also remember that the "family" businesses pushing for repeal here the strongest are little family businesses like Mars Candy, Gallo Wines, and the Seattle Times.

Another tidbit from UFE, about family businesses:
QUOTE
In 2000, 2001, and again in 2002, the Senate rejected reform proposals that would have instantly tripled the basic family business exemption to $4 million for individuals and $8 million for couples. This reform, combined with routine succession planning, would have protected virtually all family-owned enterprises. Unfortunately, few small business owners knew about these reform options. By taking an all-or-nothing attitude, and refusing to compromise on reforms that would immediately protect family businesses, pro-repeal forces have shown that they care more about their ultra-wealthy patrons than truly small businesses.


QUOTE(sleeper)
Ahhh, but I don't plan on dying before 2010 when the exemption on the first 1.5 million will be gone. And if our democrat friends are back in control I can assure you it will revert back to what it was back in 1994 when my close friend's mother died and he had to pay nearly 50% taxes on his inheritance of about $500,000. (which was including home, stocks and liquid assests)


Correction - as it stands now, what will happen in 2011 is this: there will be a 1 million (single) exemption, and a tax of 50% after that. So if, at that point (assuming that plan is in place, which seems doubtful), you die and leave your children 2 million, they will receive 1.5 million (1 million untaxed, 1 million taxed at 50%). It won't even be that bad - as I pointed out before, the effective average tax paid is less than that, through wise financial planning.

edited to add:
QUOTE(walter)
If A and B are married, have an estate worth $3 million, and A dies, B gets the estate tax free. If B dies later or simultaneously, the estate is taxed on the value over $1.5 million (2004).  There is no doubling effect.

There are avoidance measures available to couples (an exemption trust, for example) that can mitigate the exemption in an estate worth $3 million or less) but it must be created well before the death occurs.


It's not that I don't believe you, but then tell me why the IRS has two categories for the estate tax - single, and couple? Indeed, the couple exemption is double the single exemption. My guess is, it's all how you have your assets gussied up. A smart rich woman will do the proper financial planning to have her fortune assets jointly held by herself and her spouse.
Walter
quarkhead...

Let's stipulate that:

1. Your factual statements are accurate.
2. The historical facts are proximate to future facts.

Then what?

Then the only reason for a 100% estate tax is to promote class envy, (i.e., to penalize successful people and their fortunate legatees) and not to fatten the government's coffers. There's not enough potential revenue even to cover the cost of administration (forensic accountants, appraisers, etc., etc.)

That's called Socialism.
quarkhead
QUOTE(Walter @ Apr 27 2004, 02:13 PM)
quarkhead...

Let's stipulate that:

1. Your factual statements are accurate.
2. The historical facts are proximate to future facts.

Then what?

Then the only reason for a 100% estate tax is to promote class envy, (i.e., to penalize successful people and their fortunate legatees) and not to fatten the government's coffers.

That's called Socialism.

Please, don't misunderstand my argument. I said plainly, I think that the 100% inheritance tax is a "horrible idea."

I then stipulated that, at the present exemption rate, even if you were to tax at 100% above that, most people in this country would be unaffected. Please do not make out my position to be something other than what it is.

But, since we are arguing a totally theoretical idea, your "only reason" isn't really so. Another reason could be a society, a free market society, desired their economy to be a complete and absolute meritocracy. Rise as far as you can, no hindrances - but that's what everyone has to do, in every generation. It wouldn't have to be socialism. Indeed, it's a vast misunderstanding of socialism to think it requires some sort of 100% taxation - but that is grist for a different mill.
Julian
I think that inherited wealth that was itself in herited should be taxed at 100% (heck, 150%!), and inherited wealth that has been earned by the testator should be taxed at marginal amounts, if at all.

There is nothing wrong with leaving wealth created by your own hand to your living relatives, friends, or charities and so on. Indeed, one might say it is a natrual extension of family life, and in many ways laudable.

What I do despair of is the creation of dynasties - if you fritter away your inherited wealth and do not add to it during your lifetime, why should your children benefit because some long-dead ancestor worked hard? Inherited wealth of this type is anti-meritocratic and pernicious and I am absolutely opposed to it in every facet - property, money, businesses, and so on.
Hobbes
Quarkhead,

Very excellent synopsis (as usual). I see a semantic point in one of your statements, which I think gets to the heart of the debate here:

QUOTE
You don't pay any estate taxes if you donate your fortune to charity. The estate tax is fair. It applies to those able to pay it, and it encourages nonprofit donations.


The point has to do with the difference between 'fair' and 'just'. Often one is used when the other is meant, and they have quite different meanings in the context here.

Fair:
a. Having or exhibiting a disposition that is free of favoritism or bias; impartial: a fair mediator.
b. Just to all parties; equitable: a compromise that is fair to both factions.

Just:

a. Consistent with what is morally right; righteous:
b. Suitable or proper in nature; fitting

(Notice even the dictionary got the terms a bit confused, using one if definition of the other).

Basically, in the context here, fair would be applying equally to all parties, while just would be applying according to one's ability to pay. I think those in favor of such taxes are arguing it is 'just', while those arguing against are saying it isn't 'fair'. As these terms are different, these viewpoints are not mutually exclusive (ie, one can believe it is both just and unfair). Maybe therein lies the common ground?
Curmudgeon
QUOTE(redslider @ Apr 25 2004, 01:43 PM)
Proposal: Why should we have Inheritance? Why should anyone in America simply be born to unequal advantage? Children of the wealthy already get plenty of perks: education, travel, introductions to influential people and networks, etc. Why should they get more for simply 'winning' some 'Birth Lottery'?

Instead, I propose the assets of an estate (when both spouses are dead) be put in a national pool. When a person reaches their majority (or some specified age) they are given their fair share from the pool along with all other eligible recipients for that year. It becomes their 'Grubstake' - something to get them started, for school or to start a business or buy some property....

Hmmm... Estate planning is not a completely new idea.

Even with a 100% inheritance tax, if we are wealthy enough, we human beings are smart enough that we would find a way to see that our children had more than a fair share if we chose to.

My father used to tell me the story of why our surname had a unique spelling. A bastard son of one of the Kings of England managed to get an "inheritance" from the King, Title, land, money, etc. that he could use only during his lifetime, but which would revert to the royal family on his death. Nothing could be passed directly on to his heirs. As a member of the House of Lords, he managed to pass a law that only his sons and their lineal descendants could spell their name that way. Then shortly before his death, he donated his personal library to one of the major universities with the proviso that anyone whose name was spelled that way could attend college at no cost. "If you had been born in England," he would tell me, "you could attend college for free." It's the sort of story one takes with a grain of salt, of course. hmmm.gif

At my older brother's wedding however, one of the guests said to us, "I'd never noticed before how your last name was spelled. I used to be a Dean at..." We were informed that four centuries or so later, the books that had originally been donated to the University constituted in their own right, one of the most valuable libraries on the planet; and yes my dad's tale was true. w00t.gif

When my grandfather (a lifetime auto worked) died, my mother's sisters inherited a million dollars each, while the balance of the estate was set aside in a trust fund that would pay certain of my mother's expenses while the funds lasted. If she were ever to inquire about the balance in the trust fund, the balance was to be donated to a charity which she absolutely detested. tongue.gif

Someone on the TV the other day was advising, "If you invest your first five million at 7%, that gives you nearly $1,000 a day to live off. That's enough for nearly anyone, except my son, to live on." rolleyes.gif That may be practical advice for someone who has more than 5 million dollars, but for many of us, that advice only becomes practical if we hit the lottery.

QUOTE
If all the rich people in the world divided up their money among themselves there wouldn't be enough to go around.
Christina Stead (1903 - 1983), House of All Nations (1938) "Credo"

I think my daughter will be pleased if I leave enough behind to cover my burial expenses. My wife has made me commit to outliving her...
Hobbes
Julian:

QUOTE
if you fritter away your inherited wealth and do not add to it during your lifetime, why should your children benefit because some long-dead ancestor worked hard?


Counter-question: Why should children not even vaguely related to this long dead ancestor then receive the benefit? What right do they have to these funds? To me, the real question here is quite simple--all monies in an estate have already been taxed. The government has absolutely no right to confiscate any of it, for any reason, to give to anyone. It is that person's money, they can do with it what they please.
kalabus
I wish you wouldnt have anotated that C was Bush's answer. You know that the republicans will pick it just because.

I like how the inheritance tax has been called the" death tax". I mean who wants a tax on death? Its like calling pro-choice people pro-murder people. Absolute propaganda. Collecting tax's isnt a bad thing. You cannot eliminate every single tax. I am not for ending personal inheritance of course I am not a commie but this tax is a minor thing. I dont understand how Bush wants to keep spending while simultaneously eliminating sources of revenue.
Ardent Muse
Hobbes, you nailed it!!! I was just gonna say that (in bold) myself! ;

"Counter-question: Why should children not even vaguely related to this long dead ancestor then receive the benefit? What right do they have to these funds? To me, the real question here is quite simple--all monies in an estate have already been taxed. The government has absolutely no right to confiscate any of it, for any reason, to give to anyone. It is that person's money, they can do with it what they please."

Absolutely! and furthermore, shouldn't a parent (automatically) want and have the responsibility to provide a better life & better opportunities for his/her children? And what justifies the government taxing it twice just because it "has a new owner"? The money or estate has already been taxed. Task Accomplished! Should the government be allowed to tax every gift one receives for Christmas or his/her birthday?! Heck no! It's a gift just as an inheritance is - a family legacy of hard work passed on from one generation to the next, something that's earned in a (blood-relative) collective sense. No one should say "I should have some of that money just because I'm not as financially advantaged as you are", OR say that the government should have the right to take it away in order to "distribute it more fairly". That person WORKED HARD for the money they earned, it's theirs, and not "public property" to be divvied up among envious malcontents. THEY did the work- it's theirs, period. Should they then come to the one expecting a piece of the pie and say, "hey, now it's YOUR turn! YOU earn lotsa money so I can have a cut of what YOU earn!" D'ya think that person's gonna "return the favor"? Probably not.

Nope. Nope. Nope. I think the question posed in the pole was prompted out of sheer jealousy ("take from the rich and give to the poor because life's not fair" strikes a chord in my mind).
Julian
QUOTE(Julian @ Apr 28 2004, 01:53 PM)
I think that inherited wealth that was itself in herited should be taxed at 100% (heck, 150%!), and inherited wealth that has been earned by the testator should be taxed at marginal amounts, if at all.

There is nothing wrong with leaving wealth created by your own hand to your living relatives, friends, or charities and so on. Indeed, one might say it is a natrual extension of family life, and in many ways laudable.

What I do despair of is the creation of dynasties - if you fritter away your inherited wealth and do not add to it during your lifetime, why should your children benefit because some long-dead ancestor worked hard? Inherited wealth of this type is anti-meritocratic and pernicious and I am absolutely opposed to it in every facet - property, money, businesses, and so on.

Ardent Muse & Hobbes - fine, I agree, as my original quote indicates.

But your core argument (one works hard in part to give a better life to one's children, and one pays tax on earnings during one's lifetime) only holds for someone who dies and leaves their earned estate to their friends and relatives.

Someone who inherits all their wealth and lives off it their whole life has a much more tenuous claim to be able to pass that wealth on to further generations when they themselves die. For such cases, I think inherited wealth that was itself inherited should be taxed at 100%, and inheritances that were earned by the testator themselves should not be taxed at all (with a linear sliding scale in between).

Heirlooms (property that is lived in by the beneficiary and generates no rental income, jewellery, antiques, art, and so on) should be tax-free to inherit but liable to 100% tax if they are ever sold by beneficiaries.

Basically, what this type of inheritance tax regime would be trying to do is to eliminate the idle rich. Welfare systems already try to eliminate the idle poor - what is so much nobler about idleness in the rich that we don't also want to discourage it, as a society?

Do you think you could support this type of tax regime?
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