EasyEd
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Post by EasyEd on Jun 6, 2006 12:05:50 GMT -5
"There are a myriad of ways to avoid having the government take 'your' money after you die. Though many die quickly and unexpectedly, most have some idea that their time is coming and can plan ahead by donating to charity, giving it away to loved ones ahead of time, etc."
Did you know there is a limit (very small) on how much you can give to your family without paying a stiff gift tax?
To clarify something else, when a person dies his assets go into his/her estate, a legal entity. The estate pays the estate tax, not the heirs. This is paid before anything passes on the heirs. In some states there is also an inheritance tax where the heirs pay taxes on what they inherit.
With liberals the message is always "the money has to come from somewhere". There is never any discussion of cutting spending, it's always tax something (income, inheritance, estate, whatever). And liberals always seem to assume that money belongs to the government rather than to people.
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Deleted
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Post by Deleted on Jun 6, 2006 12:28:45 GMT -5
"There are a myriad of ways to avoid having the government take 'your' money after you die. Though many die quickly and unexpectedly, most have some idea that their time is coming and can plan ahead by donating to charity, giving it away to loved ones ahead of time, etc." Did you know there is a limit (very small) on how much you can give to your family without paying a stiff gift tax? To clarify something else, when a person dies his assets go into his/her estate, a legal entity. The estate pays the estate tax, not the heirs. This is paid before anything passes on the heirs. In some states there is also an inheritance tax where the heirs pay taxes on what they inherit. With liberals the message is always "the money has to come from somewhere". There is never any discussion of cutting spending, it's always tax something (income, inheritance, estate, whatever). And liberals always seem to assume that money belongs to the government rather than to people. Who has the power to cut spending right now, has had that power for 6 years, and has done nothing about it? The "liberal" president? The "liberal" House? The "liberal" Senate? I don't like paying taxes either, but if our government decides to spend all this money (new federal agencies, war), you're right - they do need to either raise taxes or cut spending, or plant some really, really big money trees. Since the White House and Capitol Hill are both controlled by the Republicans right now, I'm not sure how you can talk about "the liberals" here. In the end the money DOES have to come from somewhere, and instead of thinking about creating revenue sources (whether by spending cuts or tax increases or whatever), this administration spends more money and takes in less. Not exactly a recipe for success.
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SoCalHoya
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Post by SoCalHoya on Jun 6, 2006 12:29:31 GMT -5
Yes, am aware of the $10k/year (may be higher now) non-tax limit. But moving forward with a trust is another option, or contributing to charity, a University (!!!) or other 501(c)(3)...
There are a lot of misconceptions about the estate tax out there. Most revolve around "losing family farms" or "double-taxation."
Anyway, easyed, I too believe that there are a lot of unnecessary programs funded with our tax money that should be cut. The question is always "which programs?"
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hifigator
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Post by hifigator on Jun 6, 2006 13:00:42 GMT -5
Yes, am aware of the $10k/year (may be higher now) non-tax limit. But moving forward with a trust is another option, or contributing to charity, a University (!!!) or other 501(c)(3)... There are a lot of misconceptions about the estate tax out there. Most revolve around "losing family farms" or "double-taxation." Anyway, easyed, I too believe that there are a lot of unnecessary programs funded with our tax money that should be cut. The question is always "which programs?" I think the limit is still ten thousand per person per year. I like your "solution" to avoid estate taxes by giving the assets away to charity. There's nothing wrong with giving to charities but if the goal is to avoid losing assets which have been earned through a lifetime of hard work, then giving them away is not a very palaltable solution ... even to charity. Lastly, your choice of "misconceptions" is interesting. So the fact that you think differently about the estate tax than others, makes their views wrong as they are based on misconceptions. Up until a few years ago, the top bracket for estate tax was 55%! That means for every Million dollars of wealth, the government would be entitled to $550,000 when the individual dies. As it is now, I think the first $2 milliion dollars of wealth are exempt from being taxed. In the year 2010, the estate tax disappears for a year altogether. To me this is an obvious "no brainer." This is a huge improvement! It is a bit simplistic to think of assets merely as being the property of the elder. Most of us want to provide for not just ourselves but our children and our children's children as well. When you deny "double taxation" exists because the inheritor hasn't paid the taxes on the item yet you are being a bit naive don't you think? The tax is on the item and it has been paid at least once. Just because it hasn't been paid by this particular individual is meaningless. If you stop and think about it two seconds this will be perfectly clear. In business there are essentially 3 types of ownership -- sole-proprietorship, partnership and corporation. As anyone who has been through any degree of business education, the 2 largest differences (advantages/disadvantages) of these types of businesses are liability versus taxation. A sole-proprietorship or a partnership have the tax benefit of being "singly taxed" in most cases. That is to say that the profits are the same as the income. The biggest drawback is liability. The owner(s) have virtually unlimited liability for business debts. That means if someone trips on your carpet and sues you, theoretically you as the owner could lose personal assets like cars, boats, airplanes etc... Whereas in a corporation your liability is limited to your business interest. Basically you can lose your investment but that is all. The biggest disadvantage is that business revenues are doubly taxed. The corporation pays an income tax on its profits. Then the employee is taxed an income tax on his salary. That is what makes it doubly taxed. In most cases it isn't the same person paying tax twice, but it is the same monies being taxed twice. Compare that with an inheritence. The assets have already been taxed in some fashion ... then are taxed again as part of an estate. As for your last point, I agree that there is a tremendous amount of waste in our government and oodles of programs which should be cut or eliminated all together.
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TBird41
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Post by TBird41 on Jun 6, 2006 13:25:34 GMT -5
Thanks for that lovely insight socal, although quite frankly, I'm just impressed you know how to spell "myriad." And a case of mistaken identity, I think. SoCalHoya 85 is the one with the inability to spell.
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EasyEd
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Post by EasyEd on Jun 6, 2006 13:26:28 GMT -5
Cam, I have already said that I blame Bush and the Congress for overspending but I've also said that Bush is not a conservative. He and the Congress are liberals on spending. The only difference between them and the liberals on the other side is that the only solution ever offered by the other side is through taxes. Why not have both sides first take a look at the spending side. Why should you have to pay for putting in brick sidewalks in my hometown? Or me pay for a mural on your levee? Or a museum to country music? Or any of the other "pork" you and I are paying for? Until we do a real scrub on spending, including getting the federal government out of things it has no business being in, I don't want to hear about tax increases, estate or otherwise.
And, I want to see both parties belly up to the problems of Medicare and Social Security spending. You may not have liked his proposal but at least Bush had the political courage to propose something on Social Security. Where are the other Republicans and Democrats? The silence is deafening.
And I'm talking to Bush and the Congress, Democrat and Republican.
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Deleted
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Post by Deleted on Jun 6, 2006 13:27:31 GMT -5
"It is a bit simplistic to think of assets merely as being the property of the elder. Most of us want to provide for not just ourselves but our children and our children's children as well. When you deny "double taxation" exists because the inheritor hasn't paid the taxes on the item yet you are being a bit naive don't you think? The tax is on the item and it has been paid at least once. Just because it hasn't been paid by this particular individual is meaningless."
So, when my parents pass on and I inherit a sum of money, that money should come to me totally untaxed? Isn't that money - in a way - income for me? In a capitalist society that values hard work, entrepreneurship, and pulling oneself up by one's bootstraps, allowing untaxable income for people just because their parents were wealthy sounds like a paradox to me. As a good capitalist American, I should be out there earning that living the same way my parents and grandparents did. Anything I inherit from them should be gravy. And - not to start a class war here - this only benefits those who have money in the first place. Good government involves doing what's best for the majority of your population. While we all want to provide for our heirs someday, I'm guessing J. Wellington Snobbington III will still be just fine if he only gets $10 million of daddy's money instead of $20 million. And the President for whom he voted will have a few more dollars to spend for the good of the country.
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Deleted
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Post by Deleted on Jun 6, 2006 13:34:54 GMT -5
Cam, I have already said that I blame Bush and the Congress for overspending but I've also said that Bush is not a conservative. He and the Congress are liberals on spending. The only difference between them and the liberals on the other side is that the only solution ever offered by the other side is through taxes. Why not have both sides first take a look at the spending side. Why should you have to pay for putting in brick sidewalks in my hometown? Or me pay for a mural on your levee? Or a museum to country music? Or any of the other "pork" you and I are paying for? Until we do a real scrub on spending, including getting the federal government out of things it has no business being in, I don't want to hear about tax increases, estate or otherwise. And, I want to see both parties belly up to the problems of Medicare and Social Security spending. You may not have liked his proposal but at least Bush had the political courage to propose something on Social Security. Where are the other Republicans and Democrats? The silence is deafening. And I'm talking to Bush and the Congress, Democrat and Republican. I think you and are aren't too far apart on our thinking - in fact, I pretty much agree on all fronts in this post. EVERYONE is to blame here, but it takes more political courage than most are willing to show to fix things. I also spend a lot of my professional life working with Europeans who generally pay 50% or more in taxes, so I get pretty riled up when Americans complain about our tax burden. But that's just me.
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Post by AustinHoya03 on Jun 6, 2006 13:44:30 GMT -5
Estates include everything you own - real estate, automobiles, stock, bonds, mutual funds, savings accounts, etc. To own any of these you have to earn money which is taxed (income) at the federal, state and local levels. In addition, you pay sales taxes when you buy some of them. To own property you pay a yearly real estate tax to the state/countylocality. In my locality, if you owned a $1M home you would pay about $10,000 every year just to own it. In many states you also pay personal property tax on automobiles, boats and airplanes. You pay taxes every time you buy and sell stocks, bonds or mutual funds. To say that what's in the estate is not taxed previously can only be said by someone who has not had to pay them him/herself and it's only an academic exercise for them. I am not a "rich" person and what I have I have worked for. It belongs to me, not the federal or state government. They have already taxed what I have every time I breathed. Nothing gives the government the right to take some or all of that when I die. ed, you are completely right on all the facts. (I wrote my post after a long day yesterday and I guess I had hifi's scenario containing solely real property in my head). Obviously any cash sitting in a bank account is indeed double-taxed. Same goes for proceeds from securities. I think your argument that real property is bought with taxed income is stong, to boot. I don't really buy the local property tax argument, because that's a state/local tax and not a federal tax. For the record, I think local property taxes are more of a problem for most Americans than the federal estate tax. The former creates financial difficulties for living, breathing Americans who are retired, disabled, etc.
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afirth
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Post by afirth on Jun 6, 2006 13:48:31 GMT -5
Thanks for that lovely insight socal, although quite frankly, I'm just impressed you know how to spell "myriad." And a case of mistaken identity, I think. SoCalHoya 85 is the one with the inability to spell. Wow, my bad. Clearly I should have had more coffee at work this morning, I'm running on 2 hours of sleep. My apologies! I should have known that SoCalHoya 85 wouldn't have posted that statement in a thread like this anyway
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Boz
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Post by Boz on Jun 6, 2006 14:00:55 GMT -5
I find this discussion taxing. . .
. . .BA-ZING!!!!!
(I'll be here all week...the 10 o'clock show is completely different from the 7 o'clock)
Fun with font sizes...YAY!!!
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nodak89
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Roy Roy Royyyyy!!!
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Post by nodak89 on Jun 6, 2006 14:06:20 GMT -5
While we all want to provide for our heirs someday, I'm guessing J. Wellington Snobbington III will still be just fine if he only gets $10 million of daddy's money instead of $20 million. I, for one, can't wait for the groundbreaking of the J. Wellington Snobbington III Arena and Convocation Center.
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hifigator
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Post by hifigator on Jun 6, 2006 14:08:00 GMT -5
"It is a bit simplistic to think of assets merely as being the property of the elder. Most of us want to provide for not just ourselves but our children and our children's children as well. When you deny "double taxation" exists because the inheritor hasn't paid the taxes on the item yet you are being a bit naive don't you think? The tax is on the item and it has been paid at least once. Just because it hasn't been paid by this particular individual is meaningless." So, when my parents pass on and I inherit a sum of money, that money should come to me totally untaxed? Isn't that money - in a way - income for me? In a capitalist society that values hard work, entrepreneurship, and pulling oneself up by one's bootstraps, allowing untaxable income for people just because their parents were wealthy sounds like a paradox to me. As a good capitalist American, I should be out there earning that living the same way my parents and grandparents did. Anything I inherit from them should be gravy. And - not to start a class war here - this only benefits those who have money in the first place. Good government involves doing what's best for the majority of your population. While we all want to provide for our heirs someday, I'm guessing J. Wellington Snobbington III will still be just fine if he only gets $10 million of daddy's money instead of $20 million. And the President for whom he voted will have a few more dollars to spend for the good of the country. Precisely. (The bold faced part) The wealth has already been taxed. We really are combining two separate arguments though. The first is simply a view of government. I am with ed in that we need to scale back government dramatically. The problem is that for all the people who "agree" on that point by admitting such, the politicians are reluctant to actually follow through with it. And I understand why to a degree. Everyone is seemingly for cutting funding to "others" but reluctant or unwilling to cut funding to themselves. It works that way with the politicians as well. Even if they are elected on a platform of cutting taxes and resisting new governmental expenditures, when it comes time to make that vote they see the carrot to be rewarded for jockeying for your share of the pie, not for making less pie. That is more the paradox. The Republicans are in theory the party of less government but unfortunately they have failed miserably in that regard. Some of this can be explained because of the war on terror, but not nearly all. The fact that Clinton left Bush a surplus, though true is a bit misleading. In the nineties we experienced the tech boom and the economy skyrocketed. Hagar the Horrible or Elmer Fudd could have been a "successful" president under such circumstances. Accordingly, the follow up crash started in Clinton's last 18 months. And 9/11 exacerbated the recession. Bush deserves some credit for helping to respur the economy but I think he loses all these points on other areas. In any case, the point here is that we have 2 issues. The first is what is our view with regard to taxes in general. The second is what do we think about the Estate Taxes in particular. I am for lowering taxes in general, even at the "expense" of governmental programs. I think the government is invoved in far too much of our daily lives and injects itself in our daily lives in far too many areas. With regards to the so called death tax, I think it is an especially bad idea. We should encourage people to make something of themselves. We should encourage people to build a nest egg. We should encourage people to save and invest. And lastly we should not try to teach people that "you can't take it with you." We should encourage people to see the benefit of a life of prosperity in the form of providing for their kids and grandkids. I just have a real problem with the philosophy that you are supposed to work your whole life and make something of yourself. But when you die, we are going to take away a fourth to a half of everything you have accomplished. What possible sane rationale supports this statement: "Mr. 'X' died, so now the government should take 'y%' of Mr. 'X' lifetime achievements."
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Deleted
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Post by Deleted on Jun 6, 2006 14:14:24 GMT -5
FYI, based on the tables from two years ago the gift tax exemption should be around $12,000 by now. I believe it was set to rise a grand a year until 2010 when it goes to hang in the balance...
As far as raising revenue, Congress is charged with coming up with any number of ways to raise revenue. Why not a national bake sale? Door to door selling Thin Mints and Tagalongs? Recruit hotties everywhere and start a car wash?
As for the estate tax debate, its simply semantics when you get down to it: are we taxing Mr. X's previously taxed wealth? Or are we taking the income of his distributees? So very, VERY interesting!!!
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SFHoya99
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Post by SFHoya99 on Jun 6, 2006 14:42:29 GMT -5
With liberals the message is always "the money has to come from somewhere". There is never any discussion of cutting spending, it's always tax something (income, inheritance, estate, whatever). And liberals always seem to assume that money belongs to the government rather than to people.
Can we stop with labels? Ed, you give me no credit -- my very first post did indeed address cutting spending.
However, my point is discussing "estate taxes" as somehow fundamentally different and separate from other taxes is silly. And if you really want to hold onto your money longer, the method you'd choose is 100% estate taxes and no income/sales tax.
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hifigator
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Post by hifigator on Jun 6, 2006 16:04:06 GMT -5
With liberals the message is always "the money has to come from somewhere". There is never any discussion of cutting spending, it's always tax something (income, inheritance, estate, whatever). And liberals always seem to assume that money belongs to the government rather than to people.Can we stop with labels? Ed, you give me no credit -- my very first post did indeed address cutting spending. However, my point is discussing "estate taxes" as somehow fundamentally different and separate from other taxes is silly. And if you really want to hold onto your money longer, the method you'd choose is 100% estate taxes and no income/sales tax. I disagree. I see your point to a degree but I think there is more to it than that. Yes, there is the simple "tax-government services" question that we have in any tax case. But I think there are more component to this issue. One is the double taxation question. As has been made perfectly clear, in most cases the assets in question have already been taxed at least once. Secondly there is the question of what does taxing accumulated wealth do in general? It discourages people from accumulating wealth. I contend that to be a bad thing. There is also the (in my mind negative) incentive to use it all up before you die ... a sort of modern day carpe diem approach if you will. Lastly there is the effect of pressure against the ability to create a family estate. There is absolutely nothing wrong with trying to create an ongoing family estate which transcends generations. There is absolutely nothing wrong with wanting to provide everything from braces to insurance to college educations for your heirs 2, 3, 4 or more generations down the road. That should be viewed as a noble gesture not a penalized luxury. Again, I think there are additional concerns which would apply to an estate tax specifically as opposed to most other taxes in general. I say that the assets have already been taxed at least once. You say that the inheritor hasn't paid any tax yet. Well in a since he has. Because were it not for the initial tax, then his inheritence would be greater. In this regard whoever has the asset at any given time has essentially paid the tax. Isn't that how it "should" be ... at least if we accept the legitimacy of taxes in the first place? Lastly consider it this way. A parent buys a candy bar. He pays the sales tax for it. He is entitled to eat the candy since he has paid the tax for it. But suppose he gives it to his son? His son hasn't paid any tax on it, even though the item itself has been taxed. Using the new ownership principle, for lack of a better term, he should have to field a tax burden directly as well. Fundamentally, I just don't see the big picture of the argument. I have paid my dues and put out my efforts. I have now acquired these items and have paid the prevailing taxes on them. If I want to consume the entire wealth myself then that is fine. But if I want to share it with someone else then the government should get some of it. Where ... WHERE is such a justification? What am I missing?
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Post by Nitrorebel on Jun 6, 2006 18:12:23 GMT -5
"WHERE is such a justification? What am I missing."
Some people actually believe, shock, gasp, that there are more needy people, who due to various disadvantages are struggling on their own. Rawls' Difference Principle comes to mind: A policy that makes the best-off in a society better off is only just if it doesn't make the poorest in a society worse off. While the estate tax doesn't actually do this directly, the opportunity cost of rescinding it directly worsens the plight of the poorest, because of the lesser amount of tax revenue.
Also, public goods, merit and demerit goods are basic market failures - and this is a theory taught by neo-liberal macro-economists. Very few economists actually believe the market operates flawlessly at all times. In the absence of market provision for such things as schools, roads, street lamps, the environment, cigarettes, etc, the only realistic alternative is for the government to step in. However, that can only happen if the government has tax revenues to provide these services. Rawls' Difference Principle is a prime ethical reason for a progressive taxation rate, as well as things such as the capital gains tax or the estate tax that "burden" the rich.
I'm not saying this is the only way to think about taxation, but it is one view propagated by many political theorists and economists. So the real questions when discussing taxation in general should be the consideration of market failures, and the validity one assigns to that concept.
That obviously doesn't cancel out Ed's points about pork, which is very relevant, but actually more a failure, IMO, of the way legislation is passed in the US (with the numerous sub-clauses added to large bills, which is where the pork stems from; NOT from actual legislation enacted to pass the pork), as well as the unequal representation of states in the Senate, which unfairly strengthens the position of smaller states and disadvantages the bulk of the population, who live in the large states but somehow also only have 2 Senators representing them. It is NOT, IMO, a reflection of ideology. No economist of any view-point along the spectrum I have read ever propagated building bridges in Alaska or airports in small towns. Art is a little more complex, since art can be seen as a market failure since very few can afford to buy art, and so if run by the market, most people would never be able to appreciate it without state funding. If one doesn't think pieces of art aren't worth being seen, then of course, it would be considered pork.
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SoCalHoya
Golden Hoya (over 1000 posts)
No es bueno
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Post by SoCalHoya on Jun 6, 2006 19:05:21 GMT -5
And there I was, thinking, "I've been called stupid before, but a bad speller?"
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tgo
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Post by tgo on Jun 7, 2006 10:40:09 GMT -5
Some Death Tax Facts Currently the death tax produces less than 1% of federal revenues annually. Compliance costs more than that for estate planning, etc. Capital gain revenue derived from heirs selling inherited assets (at the decedent's tax basis) will more than make up for a death tax revenue loss. Small business owners, farmers and ranchers have to spend billions on insurance ($13 billion per year estimate) to protect their heirs. This is a dead-weight loss to the US economy. Whose money is it anyway? is a ridiculous argument given that the country shelters you nightly. you summed up the basic problem with socialist thought in this line. i would argue that my existance is not owed due to the benevolence of the government.
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hifigator
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Post by hifigator on Jun 7, 2006 12:48:50 GMT -5
"WHERE is such a justification? What am I missing." Some people actually believe, shock, gasp, that there are more needy people, who due to various disadvantages are struggling on their own. Rawls' Difference Principle comes to mind: A policy that makes the best-off in a society better off is only just if it doesn't make the poorest in a society worse off. While the estate tax doesn't actually do this directly, the opportunity cost of rescinding it directly worsens the plight of the poorest, because of the lesser amount of tax revenue. Also, public goods, merit and demerit goods are basic market failures - and this is a theory taught by neo-liberal macro-economists. Very few economists actually believe the market operates flawlessly at all times. In the absence of market provision for such things as schools, roads, street lamps, the environment, cigarettes, etc, the only realistic alternative is for the government to step in. However, that can only happen if the government has tax revenues to provide these services. Rawls' Difference Principle is a prime ethical reason for a progressive taxation rate, as well as things such as the capital gains tax or the estate tax that "burden" the rich. I'm not saying this is the only way to think about taxation, but it is one view propagated by many political theorists and economists. So the real questions when discussing taxation in general should be the consideration of market failures, and the validity one assigns to that concept. That obviously doesn't cancel out Ed's points about pork, which is very relevant, but actually more a failure, IMO, of the way legislation is passed in the US (with the numerous sub-clauses added to large bills, which is where the pork stems from; NOT from actual legislation enacted to pass the pork), as well as the unequal representation of states in the Senate, which unfairly strengthens the position of smaller states and disadvantages the bulk of the population, who live in the large states but somehow also only have 2 Senators representing them. It is NOT, IMO, a reflection of ideology. No economist of any view-point along the spectrum I have read ever propagated building bridges in Alaska or airports in small towns. Art is a little more complex, since art can be seen as a market failure since very few can afford to buy art, and so if run by the market, most people would never be able to appreciate it without state funding. If one doesn't think pieces of art aren't worth being seen, then of course, it would be considered pork. That is a nice little story you tell there but you totally ignored my question and took it entirely out of context. I asked what is the justification for the government stealing some of my assets if I elect to share them with others? REmember if I consume the wealth entirely on my own then there is not additional tax, but if I decide to share the wealth with my children/grand children etc... then there is the additional tax. All you did was explain the fundamental issue of tax vs governmental services. Incidentally my opinion will drastically differ from yours on that issue as well.
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