estate tax repeal

[loganmule]

The House of Representatives has passed a bill which would immediately repeal federal estate tax. I doubt that the Senate will follow suit, but it ticks me off that the it is getting greater acceptance and at some point in the future probably will happen.

Only the VERY rich will benefit, and it will be at the expense of the all of the rest of us. Currently, the tax only applies to taxable estates greater than $1.5 million, and this goes to $2 million next year. With estate planning, married couples can double up, so that the tax only hits them to the extent their marital property is greater than $3mil and $4mil, respectively.

The dirty secret about estate tax repeal is that it would eliminate stepped up basis and reinstate carryover basis. In other words, heirs receiving appreciated assets will have to pay capital gain tax, when currently there would be none. Let's say that a decedent's heirs inherited a farm which cost the decedent $100k, and they sold it for $1mil. If this was the only asset of the decedent, there currently wouldn't be any estate tax or capital gain tax. Following estate tax repeal, the heirs would be stuck with a $900k capital gain to pay tax on. Meanwhile, the mega rich would trade down from a 50% marginal estate tax rate to a 20% maximum capital gain rate.

Does anyone have a different take on the issue, and if so, what is the reasoning for it?

[Telluride]

I'm completely in favor of eliminating the estate tax.

Income is taxed. The income that you've already paid taxes for is used to purchase property, which is also taxed. When you die, the property is left to your heir who not only pays an estate tax, but then must also pay property tax for as long as he or she owns the property. How many times should the government be allowed to tax the same piece of income?

This is also a huge slap in the face of property rights. If a piece of property was legitimately purchased with legitimately earned money, why should the government be entitled to portion of its value?

[smooth]

Originally Posted by Galt

why should the government be entitled to portion of its value?

to encourage you to use it to produce rather than just sit on the plot.

[host]

Originally Posted by Galt

I'm completely in favor of eliminating the estate tax.

Income is taxed. The income that you've already paid taxes for is used to purchase property, which is also taxed. When you die, the property is left to your heir who not only pays an estate tax, but then must also pay property tax for as long as he or she owns the property. How many times should the government be allowed to tax the same piece of income?

This is also a huge slap in the face of property rights. If a piece of property was legitimately purchased with legitimately earned money, why should the government be entitled to portion of its value?

Our federal personal tax system has existed since 1913, and inheritance taxes were introduced in 1916. The federal government has been managed by a Republican administration for 4-1/2 years. In that time, a combination of Republican sponsered tax cuts have relieved the wealthiest Americans of an appreciable percentage of the taxes that they formerly paid. The tax system has been changed to tax earned income at higher rates than capital gains, and capital gains taxes on real estate profits on the sale of your personal residennce have been eliminated, except for some taxes on gains that exceed $250,000. This tax relief already has favored the wealthiest Americans who derive their income from non-wage sources.

The federal government has spending obligations that now exceed revenue by $500 billion annually, and there is no plan to cut spending or raise revnue, even though Republicans raised spending as they cut taxes. The present administration came into office with a federal budget that enjoyed a small surplus. The government borrows the $500 billion annual shortfall, and the federal debt in the last four years has risen from $5.5 trillion to $7.5 trillion, an increase of $2 trillion that you and your children are responsible to pay with interest. The government has eliminated the 30 year bond, and now finances the debt with instruments of a maximium ten years duration, with much of the debt exposed to the risk of rising interest rates, aggravated by the increased federal debt, and a runaway trade deficit that will climb to $700 billion annually this year. Borrowing costs for the government rise as both the federal and trade deficits must be financed by foreign investors who seek higher interest rates and low risk on their bond investments.

The president says that the U.S. is at war, and increased military, domestic security, and intelligence costs help make it inconcievable that federal spending will be cut.

Only the welathiest American families are subject to inheritance taxes and they have been paying them since 1916. Why are you so concerned about relieving these folks of these taxes? If they do not pay inheritance taxes at the current rate, you and the rest of us will owe a greater collective federal debt, at higher interest rates. Are you aware of the ways that the wealthy already minimize their inheritance tax exposure? There is a tax planning industry that wealthy people consult to help minimize the tax, They set up trust funds, bequeath charitable exempt contributions, scholarships, new hospital wings, museums, etc., named after them. My personal experience in owning and managing a family business was purchasing a "second to die" insurance policy on the life of the surviving parent who owned the real estate that our business operated from. The cost of the policy was lower than if it had to payout upon the death of one person past 60 years of age. Since the inheritance tax on the real estate value would only be due after the death of the second parent, since spouses are exempt from paying the tax on each other's estate value. Hence, the description, "second to die policy". The accountant for our business instructed my wife and I, as the business owners, to have our business issue a salary bonus to us that would pay the monthly policy premiums, an expense that was deductible to the business, including an addtion in the bonus amount to cover our increased income taxes on the salary addition from the bonus.

My point in sharing this is that your concern is misplaced. Your government has been taken over by tax cutters who seem more concerned with upsetting the past, balanced tax structure to further enrich their wealthy campaign contributors. This weakens the purchasing power of our currency and guarantees a rising debt obligation for your chidren.

Many of the wealthy do not want the tax repealed. Do your senators and congresspersons represent you, or only their wealthiest constituents. Examine their vote on the recent bankruptcy bill. Chances are, that if your representative is in favor of eliminating inheritance taxes, but has done nothing to reduce the rising budget and trade deficits, he also voted for the "bankruptcy reform" bill that was recently passed with no protection for the 50 percent of bankruptcy filers who experience a sudden illness that destroys their ability to earn income or to pay sudden medical expenses. Chances are, you also live in a state with an above average bankruptcy per household ratio. Stop listening to the rhetoric of representatives who do not vote for what is best for your family. If you are wealthy enough now to be concerned, I've given you tips on avoiding the tax. If you are not, why are you concerned? The accumulating federal debt and deteriorating purchasing power of your dollars is guaranteed, even with the help of inheritance tax revenue. You becoming wealthy enough to personally benefit from repeal is a dream or an ambition. Do not let politicians maniplulate you into voting against your own best interests, anymore.

http://faireconomy.org/press/2005/OregonAdpr.html
Media Advisory from United for a Fair Economy
For immediate release
Contact Michael Davoli, United for a Fair Economy, 503-381-8158
June 27, 2005
Prominent Oregonians Sign Newspaper Ads to Preserve the Federal Estate Tax
Ads Highlight Need to Keep "Fairest Tax of All"

SALEM, Ore.—Local supporters of the federal estate tax will redouble their efforts this week and next, as the U.S. Senate prepares to vote on full repeal of the estate tax before the July 4th recess.

WHAT:

50 influential Oregonians have signed their names to newspaper ads to appear in four papers across the state, urging Senator Ron Wyden to preserve the estate tax. They are available to do interviews on the topic. Supporters of the estate tax will also deliver a letter to Senator Wyden asking for a meeting, along with a Call to Preserve the Estate Tax signed by 100 prominent Oregonians. The ad is available at http://www.faireconomy.org/estatetax/oregon print ads.pdf.
WHEN:

The ads will run Monday, June 27 through Friday, July 1. Selected signers will be available for media interviews the week of June 27.

WHERE:

The Oregonian (June 27)
The Medford Mail Tribune (6/28)
The Bend Bulletin (6/30)
The Jewish Review (7/1)

WHO:

Prominent Oregonians (please see list of spokespeople below)

WHY:

The news from Washington, D.C., is that the U. S. Senate is likely to vote on the estate tax in the next several weeks. Senator Wyden is still undecided on how he will vote.

Will the GOP majority hold out for full repeal? Or will a bi-partisan reform measure emerge? Whatever the outcome, it will have an impact on Oregonians as well as Americans overall. Estate tax repeal would mean adding another $1 trillion to the national debt over the next 20 years. Estate tax reform, if it is reasonable, would mean affirming a progressive tax that would help solve our nation’s fiscal woes.

Paul Volcker, Alan Greenspan’s predecessor at the Federal Reserve, and Bill Gates, Sr., father of Microsoft’s founder, have called the estate tax the fairest tax of all, because it affects only multimillionaires well able to pay the tax--1% of the American population. This important debate is entering its final stages, and Senator Wyden’s undecided vote means Oregon has an important role to play.

United for a Fair Economy (UFE) is a national, nonpartisan, non-profit organization raising awareness that concentrated wealth and power undermine the economy, corrupt democracy, deepen the racial divide, and tear communities apart. For more information, see www.faireconomy.org.

[Marvelous Marv]

Originally Posted by loganmule

The House of Representatives has passed a bill which would immediately repeal federal estate tax. I doubt that the Senate will follow suit, but it ticks me off that the it is getting greater acceptance and at some point in the future probably will happen.

Only the VERY rich will benefit, and it will be at the expense of the all of the rest of us. Currently, the tax only applies to taxable estates greater than $1.5 million, and this goes to $2 million next year. With estate planning, married couples can double up, so that the tax only hits them to the extent their marital property is greater than $3mil and $4mil, respectively.

The dirty secret about estate tax repeal is that it would eliminate stepped up basis and reinstate carryover basis. In other words, heirs receiving appreciated assets will have to pay capital gain tax, when currently there would be none. Let's say that a decedent's heirs inherited a farm which cost the decedent $100k, and they sold it for $1mil. If this was the only asset of the decedent, there currently wouldn't be any estate tax or capital gain tax. Following estate tax repeal, the heirs would be stuck with a $900k capital gain to pay tax on. Meanwhile, the mega rich would trade down from a 50% marginal estate tax rate to a 20% maximum capital gain rate.

Does anyone have a different take on the issue, and if so, what is the reasoning for it?

If this is as you say, it's certainly highly deceptive.

Do I understand you correctly that if the "estate tax is repealed," the above farm owners will wind up paying texes that they would not have incurred under current law?

[Marvelous Marv]

Originally Posted by smooth

to encourage you to use it to produce rather than just sit on the plot.

Getting taxed out of a family farm doesn't strike me as an appropriate method of "encouragement."

[j8ear]

Repeal the DEATH TAX...

No taxation without respiration!!!!

The whole notion of an estate tax, as it must be reframed by the thieves who inacted it, is so absurdly disgusting that I really have trouble grasping how anyone, regardless of the rhetoric, talking points, class envy, and declarations that only the rich will benefit, can support this.

Well, I guess I can, since essentially IT IS all about class envy and redistribution of success to the least productive. And this in a nut shell is what the entire repertoire of the left consists of.

Talk of oppression, unfair advantage, do nothing silver spooners is nothing more then subterfuge and misdirection, and essentially enslaving the base to the power hungry, know-it-all, holier then thou, elite's of the politically privledged class.

Shameful,

-bear

[smooth]

Originally Posted by Marvelous Marv

Getting taxed out of a family farm doesn't strike me as an appropriate method of "encouragement."

My response saw Galt's question as a philisophical interest in how the government could levy taxes on property. Specifically, although I didn't limit my response, I was referring to property taxes the government levies every year.

Your comments above the line you posted to me indicate that you aren't aware of the current facts and legislation relating to estate tax law. The claim that small, family operated farms are being taxed off their plots by estate taxes is an emotional appeal from corporate interests that I am unable to find any evidence of. If people were particularly worried about the plight of the family farmer, they would direct their attention to the tactics of agribusiness and the recent changes in bankruptcy law--but they don't and I question the basis of their concern.

Reshaping Federal Transfer Taxes: 1976 to the Present During the late 1960s and early 1970s loophole closing preoccupied tax reformers. These efforts culminated in a 1976 tax bill that overhauled estate taxation, giving us the system we still have today. Perhaps the biggest change was combining the previously separate exemptions for estate and gift taxes and transforming them into a single, unified estate and gift tax credit.

The 1981 tax bill brought some relief. The top rate went from 70 percent to 50 percent, and an increase in the unified credit took a lot of smaller estates--those under $600,000--off the tax rolls. But, after that, the search for revenue to close budget deficits led to more than a decade of bills that largely increased estate taxes.

In 1997, Congress provided some relief with the first increase in the unified credit since 1987. Gradual increases, which began in 1999, are slated to raise the unified credit to $1 million by 2006.

The Economic Growth and Tax Relief Reconciliation Act of 2001 was the first step toward totally eliminating the death tax. It provides for a scheduled phase-out of rates and an increase in the unified credit, finally repealing the tax for calendar year 2010. Unfortunately, the provisions sunset in 2011 and the estate tax reverts back to the 1997 law with a top rate of 55 percent and a unified credit of $1 million.

-- http://www.heritage.org/Research/Taxes/bg1719.cfm

Estate Tax Malarkey

Misleading ads exaggerate what the tax costs farmers, small businesses and "your family."

June 6, 2005

Modified: June 6, 2005

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Summary



In TV and radio ads two conservative groups greatly overstate the burden that the federal estate tax puts on heirs to a family farm or business.

One ad claims the federal estate tax "can bury your family in crippling tax bills," which is untrue for nearly all of those who will see the ad, including the large majority of farm and business owners. Both ads claim the estate tax is a "double tax," which is only partly true, and mostly false when it comes to very wealthy families.

We take no position on whether the estate tax should or should not be repealed permanently. The claims made in these one-sided ads, however, present a misleading picture of who is actually affected by the tax.
Analysis



The American Family Business Institute and Free Enterprise Fund launched a TV and radio ad campaign May 10 that targets potential swing votes in the Senate for full repeal of the estate tax. The group said it will run different versions of the 30-second and 60-second ads in Montana, South Dakota, North Dakota, Maine, Arkansas, Louisiana, Nevada and New York as part of a $15 million campaign leading up to a Senate vote expected before the August recess.

American Family Business Institute Radio Ad "Nightmare"

Announcer: You work hard all your life. You pay your taxes and play by the rules, and, yeah, you're proud of what you've accomplished. You'd like to leave your family farm or business to your kids. It's a legacy, something they can hold onto. It's the American dream, right? But the IRS death tax can turn that dream into a nightmare. When you die, the IRS can bury your family in crippling tax bills. It can cost them everything. What's worse, the death tax is a double tax on all you've worked to build. The death tax is wrong. It's unfair. And this year, Montana's family business owners and farmers have joined together to kill this unjust tax, before it destroys one more family legacy. It's time for Sen. Max Baucus to stand with Montana family businesses and farms and vote to end the death tax.

"Your Family"?

Contrary to ad's claim that "your family" might be crippled, the vast majority of families actually are not affected by the estate tax. In fact, less than 3 percent of deceased adults in 2002 had estates subject to the tax, according to the nonpartisan Urban-Brookings Tax Policy Center and figures from the IRS.

And though the ad focuses on family farms and businesses, the truth is that very few actually pay the estate tax. The Tax Policy Center projects that roughly 440 taxable estates were primarily made up of farm and business assets in 2004.

And even considering estates for which farming or business was a sideline, the Center found only 7,090 taxable estates for 2004 that included any farm or business income. That's still just 38 percent of all taxable estates. The fact is that repealing the estate tax entirely, as the ad advocates, would benefit mostly non-farmers and non-business-owners.

The ad would have been accurate had it said that "some families" are affected.

"Cost Them Everything?"

Far from imposing tax bills on farms and businesses that "cost them everything," the average estate tax paid by all farm and business estates in 2004 was just under 20 percent of the value of the estate, according to calculations by the Tax Policy Center.

The effective rate was far less for smaller estates. Of the 440 taxable family farm and business estates in 2004, two out of five paid an average rate of only 1.6 percent. These were taxable estates valued at less than $2 million.Very large estates valued at over $20 million paid at an average effective rate of just over 22 percent, a hefty tax bite but well short of "everything."

These effective rates are not to be confused with the top rate, which is currently 47 percent. But that marginal rate applies only to what is taxed, and currently the first $1.5 million of an estate is exempt. The Tax Policy Center's figures are an average effective rate on the entire estate, including any proceeds of life insurance. The taxable portion is often reduced further through charitable contributions or special provisions that allow most farms to reduce the taxable value of their real property by 40 to 70 percent of market value.

The following table shows how many taxable farm or business estates fell into various size categories, the average amount of tax and the effective tax rate they paid, according to the center's calculations:

Taxable Farm or Business Estates, 2004


Number of Returns


Average Tax (thousands)


Average Rate

Under $1 million 0 $0 0.0%
$1 - $2 million 190 $26 1.6%
$2 - $3.5 million 60 $190 7.5%
$3.5 - $5 million 40 $449 12.0%
$5 - $10 million 80 $1,322 19.3%
$10 - $20 million 50 $2,832 22.9%
More than $20 million 30 $23,442 22.2%
All 440 $2,238 19.9%

Source: Tax Policy Center, Table T04-0163
Note: Number of returns rounded to nearest multiple of ten.

These 440 taxable estates are those for which farm or business assets made up at least half the total value of the estate. They represent only 2 percent of all 18,800 taxable estates in 2004.

Worth noting is that family-owned farms and closely held businesses already receive special treatment under current law. Heirs who agree to keep the farm or business assets within the family for 10 years after death can reduce the taxable amount of the estate by 40 percent to 70 percent. And if the farm or business is at least 35 percent of the gross value of the estate, payments can be spread out over 14 years.

"Double Tax?"
Both the radio and TV ads call the estate tax a "double tax," which is only partly accurate. It is true that some portion of a taxable estate might be made up of cash that was taxed before, when it was earned as income. But many estates are made up of stocks, bonds, real estate or other holdings that have appreciated greatly in value over the lifetime of the person who owned them. The owner didn't pay taxes on that profit during his or her lifetime because they weren't sold and the profits weren't turned into cash, or "realized." Furthermore, heirs who inherit such appreciated assets won't have to pay tax on that unrealized profit either. The estate tax is the only tax that applies to such unrealized capital gains.
Furthermore, such unrealized, untaxed capital gains make up more than one-third of the average estate, according to a study by economists James Poterba of the Massachusetts Institute of Technology and James Weisbenner, who was on the staff of the Federal Reserve Board when the study was published in 2000. Weisbenner is currently at the University of Illinois at Urbana-Champaign .
Their study estimated that unrealized capital gains made up 36.3 percent of the value of all estates in 1998. That would make the "double tax" claim 63.7 percent true, and just over one-third false.
For very large estates it is mostly false. The study also found that estates worth more than $10 million were 56.4 percent made up of unrealized, untaxed capital gains.
The Poterba-Weisbenner study was first released as a working paper by the National Bureau of Economic Research, a nonpartisan organization of mostly academic economists, and later published by the Brookings Institution. We have found no study disputing these findings. In fact, they may be understated. For one thing the authors couldn't find any way to estimate the unrealized capital gains on art work or other collectibles, which can make up a sizeable part of some estates. More importantly, the very richest Americans aren't covered by this study, because the Federal Reserve Board survey on which the study is based doesn't include them. It is quite likely the averages are even higher for billionaires, whose fortunes are often built on appreciated stock or real estate that would go untaxed at their death but for the estate tax.
Emotional Appeals
The ads make some emotional appeals worth noting. The TV ad feature World War II veterans from the popular HBO series “Band of Brothers,” while an announcer tells viewers that these men “paid taxes all their lives” and are now being subjected to a "nightmare" tax. Actually, of course, WWII vets are no more likely than anyone else to be subject to the estate tax when they die. The estates of veterans and non-veterans alike owe tax only on amounts exceeding $1.5 million. That goes up to $2 million next year.
The radio ad also characterizes the tax as the "IRS death tax." Opponents of the estate tax have long used the term "death tax" even though it is wealth, and not death, that is being taxed. Adding "IRS" to the mix makes it sound as though the unpopular tax collectors were responsible for enacting it, and not elected members of Congress.


Sources

Leonard Burman, William Gale, and Jeffrey Rohaly, "Options to Reform the Estate Tax," Urban-Brookings Tax Policy Center, Tax Policy Issues and Options No. 10, March 2005.

Tax Policy Center, Table T04-0164, "Current-Law Distribution of Gross Estate and Net Estate Tax By Size of Gross Estate, 2004: Returns With Any Farm or Business Assets."

Tax Policy Center, Table T04-0163 , "Current-Law Distribution of Gross Estate and Net Estate Tax By Size of Gross Estate, 2004: Farms and Businesses."

Leonard Burman and William Gale, "The Estate Tax is Down, But Not Out." Urban-Brookings Tax Policy Center, Tax Policy Issues and Options No. 2, December 2001.

Scott Weisbenner and James Poterba, “The Distributional Burden of Taxing Estates and Unrealized Capital Gains at Death,” Rethinking Estate and Gift Taxation, eds. W.G. Gale, J.R. Hines, and J. Slemrod (Washington: Brookings Institution, 2001) 422-449.

-- http://www.factcheck.org/article328.html

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Page 1
Americans for a Fair Estate Tax * 1742 Connecticut Avenue, NW * Washington, DC 20009 * 202.234.8494 * ombwatch@ombwatch.org
The Estate Tax and its Impact on Family Farms and Small Businesses
The estate tax is the most progressive tax in place in the United States tax code. It is the federal
government's only tax on accumulated wealth. It helps reduce concentrations of wealth and power.
Permanently repealing this tax will greatly widen economic inequality.
Myth:
Many average Americans people are hurt when forced to pay the estate tax.
Reality: 98 of every 100 people who die face no estate tax whatsoever. Only the super-wealthy – the
richest 2 percent of Americans – are subject to the estate tax. By 2009 when the exemption
level rises to $3.5 million, it is estimated that less than one-half of one percent of Americans
will have to pay the estate tax.
------------------
Myth:
Repeal of the estate tax will not hurt the government’s ability to support vital services and
programs.
Reality: In 2010 the estate tax is scheduled to be repealed for one year. This tax break is fiscally
irresponsible. The Congressional Joint Committee on Taxation found that repeal will cost the
federal government $56 billion in 2010. From 2001 – 2021 it will cost the government $980
billion in lost revenue. Everybody will pay for this tax cut through either increased tax burdens
in the future, or cuts in beneficial services affecting federal programs, including farms,
ranches, and rural communities.
ESTATE TAX IMPACTS ON FAMILY FARMS
Myth:
Many family farmers and small business owners are forced to pay the estate tax.
Reality: Most family farms and small business owners do not meet estate tax eligibility thresholds.
The USDA’s Economic Research Service reported that the average farm household net worth
ranged from $576,400 for small farms to $1.5 million for very large family farms. The estate
tax already exempts $1.5 million of all estates, and the exemption level rises to $3.5 million by
2009 (double for couples). The New York Times has reported that the American Farm Bureau
could not cite a single case of a family farm lost due to the estate tax.
A recent Federal Reserve Survey of Small Business Finances indicates that the average net
worth of small businesses is $702,566. Only 4 percent of small businesses have a net worth
of more than $3.5 million, the amount exempted from taxation by 2009, thereby exempting 96
percent of all small businesses.
In fact, family farms and small businesses already receive special deductions, valuation
schedules, and long term payment options when taxed. Estate taxes are not the reason many
businesses fail when passed on.
Page 2
Americans for a Fair Estate Tax * 1742 Connecticut Avenue, NW * Washington, DC 20009 * 202.234.8494 * ombwatch@ombwatch.org
Myth: Repeal of the estate tax will alleviate the tax burden on farms.
Reality: Taxes may actually increase with repeal.
As the Agriculture Department’s Economic Research Service has found, “a small number of
farm estates may actually experience a tax increase or owe capital gains taxes even though
they would not have been subject to Federal estate or capital gains taxes under prior law.”
(Ron Durst, James Monke, and Douglas Maxwell, “How Will the Phase out of Federal Estate
Taxes Affect Farmers,” USDA Economic Research Service, Agriculture Information Bulletin
No.751-02, Feb., 2002).
For example, a valuable farm property that is heavily mortgaged may not be subject to any
estate tax under current law, but still subject to capital gains tax under the “carry-over basis”
rule if it were sold by an heir. That rule was added as part of the repeal legislation.
Similarly, some farm widows might be subject to capital gains tax under this “carry-over basis”
rule if they sold some or all of the farm even though under prior law widows had to pay no
estate or capital gains taxes.
---------------
Myth: Reforming estate tax laws will still subject small businesses and farms to the estate tax.
Reality: Reform can help to further protect farmers and small businesses, while still taxing the super-
wealthy.
Family farms and small businesses can be protected against unfair estate taxation through
common sense reform and simplification, such as raising exemption levels high enough that
virtually all will be exempt. The National Farmer’s Union recognizes this and supports reform
of the estate tax as opposed to repeal. Raising the exemption for these family-owned
enterprises to $4 million ($8 million for couples), as then- Senator Daniel Patrick Moynihan
proposed in 2000, would have exempted almost all family-owned farms and reduced the
already small number of family businesses subject to the tax by nearly three-quarters.
(http://www.cbpp.org/6-17-03tax.htm)
Americans for a Fair Estate Tax believes family farms and small businesses should not have to pay
estate taxes. However, there are many solutions to alleviating the burden to those businesses through
reform options without fully repealing the tax. Pushing full repeal in order to protect family farms and
businesses rather than considering the number of reform options that would adequately protect those
businesses is fiscally irresponsible. The estate tax should be reformed, not repealed.

--http://www.ombwatch.org/budget/pdf/impactonfarmsandbusinesses.pdf

[smooth]

Options to Reform the Estate Tax

Under current law, the estate tax is reduced gradually through 2009, repealed in 2010, and then reinstated in full force in 2011. Few expect things to actually play out that way.

The president and many members of Congress would like to repeal the tax permanently, and many would like to do so before 2010. Repeal would be expensive, however: immediate repeal would reduce revenues by over $400 billion over the next decade. Even making repeal permanent as of 2010 would cost $270 billion in the next 10 years. Repeal would also be regressive, would reduce charitable giving by over $15 billion a year, and would invite significant tax sheltering. It would increase the concentration of wealth, and may increase the political power of a wealthy elite.

Critics of the estate tax counter that it burdens small farms and businesses with confiscatory tax rates, discourages work and thrift, and retaxes money taxed under the income tax. In fact, few small farms and businesses appear to be subject to the estate tax, although many families may undergo costly planning to avoid it. The empirical evidence on saving behavior is ambiguous: The tax may discourage work and saving for people subject to it, but it has the opposite effect on heirs who—expecting smaller bequests—choose to work harder and save more. And while the tax may "double tax" income in some cases, much of the wealth subject to estate tax was earned through untaxed capital gains and so has never been subject to the income tax.

In contrast to repealing the tax, retargeting the estate tax to very wealthy households and lowering its rates would blunt much of the criticism against it while retaining many of its advantages. This brief explains how the estate tax works and examines who is affected by it under current law. It discusses how reform would affect tax revenues, the distribution of tax burdens, farms and small businesses, and charitable giving and bequests. A concluding section discusses ways to reduce the tax's complexity.

Background

According to federal law, the executor of an estate must file a federal estate tax return within nine months of a person's death if the gross estate exceeds an exempt amount—currently $1.5 million. The exempt threshold has been phasing up and tax rates have been phasing down since 2001, when the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) enacted a gradual phaseout of the tax.1 After a scheduled elimination in 2010, the estate tax returns in 2011 with an exemption of $1 million and a top statutory rate of 55 percent.

The estate tax allows deductions for transfers to a surviving spouse, charitable gifts, debts, funeral expenses, and administrative fees. About 90 percent of married decedents who file estate tax returns avoid the tax entirely, largely because of the unlimited spousal deduction. Aunified credit exempts taxes on the first $1.5 million of taxable transfers in 2005 (including gifts made during life and transfers at death), a figure scheduled to rise to $3.5 million in 2009. In addition, the valuation of assets can often be discounted through careful tax planning, so the effective exemption far exceeds the statutory amount for many estates (Schmalbeck 2001).

Family-owned farms and closely held businesses receive especially generous treatment under the estate tax.2 Farmers and small business owners may reduce the value of their real estate using a special formula as long as their heirs maintain its use as a family-owned farm or business and do not sell it to a nonrelative for at least 10 years. Special use valuation can reduce the value of the real property portion of most farms by 40 to 70 percent of its market value. In addition, estates in which farm and business assets make up more than 35 percent of the gross estate may pay their estate tax in installments over 14 years at reduced interest rates. Only interest is due for the first five years. In 2003, the interest rate on the first $493,800 of estate tax was 2 percent; the interest rate on amounts above that was 45 percent of the interest rate that applies to underpayment of tax (which was 4 percent for the third quarter of 2004).


Notes from this section

1. Burman and Gale (2001) provide more background on the EGTRRA estate tax changes and the economic issues raised by that legislation.

2. See Durst, Monke, and Maxwell (2002) for a detailed summary of rules that affect farmers. (Most also apply to family-owned businesses.)

-- http://taxpolicycenter.org/publicati...nt.cfm?ID=9218

[host]

Originally Posted by j8ear

Repeal the DEATH TAX...

No taxation without respiration!!!!

The whole notion of an estate tax, as it must be reframed by the thieves who inacted it, is so absurdly disgusting that I really have trouble grasping how anyone, regardless of the rhetoric, talking points, class envy, and declarations that only the rich will benefit, can support this.

Well, I guess I can, since essentially IT IS all about class envy and redistribution of success to the least productive. And this in a nut shell is what the entire repertoire of the left consists of.

Talk of oppression, unfair advantage, do nothing silver spooners is nothing more then subterfuge and misdirection, and essentially enslaving the base to the power hungry, know-it-all, holier then thou, elite's of the politically privledged class.

Shameful,

-bear

No, what is "shameful" and un-American is the intentional gutting of what was
as recently as five fiscal years ago, a federal revenue and spending situation that was in balance, with what we have today. What you rail against is a policy of rolling back taxes that the wealthiest Americans, compared to the pre-Reagan "reforms", were already rolled back from a bracket as high as 90 percent on some of their income, to no more than 40 percent before the present, shortsighted plan to intentioanlly bankrupt the federal government with the goal of making it impossible for it to meet it's "social contract" with American workers, in place since the post disaster of the 1930's depression.
Read Grover Norquist's comments on this subject:

http://www.pbs.org/now/transcript/tr..._norquist.html
BILL MOYERS: You're on record as saying, my goal is to cut government in half in 25 years, to get it down to the size where we can drown it in the bath tub. Is that a true statement?

GROVER NORQUIST: No. The first part is an accurate statement of exactly what we're trying to do. We've set as a conservative movement a goal of reducing the size and cost of government in half in 25 years, which is taking it from a third of the economy down to about 17 percent, taking 20 million government employees and looking to privatize and get other opportunities so that you don't have all of the jobs that are presently done by government done by government employees. We need a Federal government that does what the government needs to do, and stops doing what the government ought not to be doing.

That has not happened. Instead, the administration did not respond in it's fiscal policies to the realities of a mild recession, and the 9/11 attacks that resulted in huge shortfalls in government revenue. For the first time in modern history, the tax cutting agenda was blithely and stubbornly fully implemented with an intent to ignore $500 billion annual federal deficits that resulted.

None of the questions that I asked in my last post have been answered in subsequent that simply take one side of the argument, ignoring the facts that no attempt has been made to decrease non-military federal spending, and no plan is proposed to deal with the rising debt or the permanent situation of large deficits and the increasing portion of federal revenue that will be required just to service the interest costs of the increased borrowing. The cost of oil has barely risen versus gold, which sold at $257 per oz. in the summer of 2001, while oil was priced at $30 per bbl. Gold is $425 and oil is $60 today, arguably because the dollar has been undermined by $2 trillion in new federal debt accumulated in the last four years, along with an increase in trade related debt of another $2 trillion.

Your advocacy for further tax relief for the top one percent is curiously misplaced. Why such concern for them. Many of the wealthiest Americans are not interested in what you are advocating. If you entertain ambitions of somehow joining their ranks, why not concern yourself with the fiscal mess that you and your heirs are already partly responsible to pay for, instead of advocating for further tax cuts that will diminish tax revenue even further?

I outlined in my last post how easy it is for heirs to institute tax deductible measures through life insurance protection to pay inheritance taxes on inherited business related property. Repeating your protests to the current tax policy without offering solutions to the current federal fiscal and monetary crisis is irresponsible, and coincidentally oft repeated by folks who support Bush's war on terror, but offer neither their sons or their money in pursuit of the "cause of freedom".

[j8ear]

Originally Posted by host

No, what is "shameful" and un-American is the intentional gutting of what was as recently as five fiscal years ago, a federal revenue and spending situation that was in balance...

Nothing shameful about it, imho. There are very few spending situations that couldn't benefit from a healthy gutting, balanced federal revenues or not.

The Governor's failed [understandably so, in this culture of entitlement, hand-outs, success demonization, and liberal (and lately 'conservative' sloughing at the governement trough] goals not withstanding.

A federal revenue and spending situation that was in balance? Not that is quite amusing. Thank you for that. Spending that is 'balanced' against demonstrably flawed predicted revenue streams is nothing of the sort, I'm afraid.

-bear

[j8ear]

Originally Posted by host

Repeating your protests to the current tax policy without offering solutions to the current federal fiscal and monetary crisis is irresponsible, and coincidentally oft repeated by folks who support Bush's war on terror, but offer neither their sons or their money in pursuit of the "cause of freedom".

There is NO fiscal crisis. Period. There is a crisis of continuing to spend money on failures. TIME AND TIME AGAIN.

We don't need the money to begin with.

Here's an insight....Stop spending money on failures.

-bear

[host]

Originally Posted by j8ear

Nothing shameful about it, imho. There are very few spending situations that couldn't benefit from a healthy gutting, balanced federal revenues or not.

The Governor's failed [understandably so, in this culture of entitlement, hand-outs, success demonization, and liberal (and lately 'conservative' sloughing at the governement trough] goals not withstanding.

A federal revenue and spending situation that was in balance? Not that is quite amusing. Thank you for that. Spending that is 'balanced' against demonstrably flawed predicted revenue streams is nothing of the sort, I'm afraid.

-bear

Your amused reaction notwithstanding, that was the fiscal status quo. You advocate anarchy because your approach is simplistic and ignores the current fiscal crisis. You resent spending programs that you find personally offensive, but you only touch on situations like needless spending on unneeded military facilities, primarily in otherwise distressed areas in southern states, and pork spending on items only justified by the political expediency of republican legislators in the federal government. Revenues were in balance with spending whether you approve their sources, or not.

The hidden "tax" on all of us now is the newly created debt caused by increased spending and tax cut exacerbated reduction in the revenue stream.
Current fiscal policy has resulted in diminshed spending power of the dollar and an increased portion of the federal budget that is obligated to pay the interst on $2 trillion in new debt in just four years. You protest against a tax that only the wealthiest havr been paying since 1916, and they still managed, in spite of the tax, to double their share of total national wealth since 1970.

You make no allowance, in your singleminded advocacy for further tax relief for the richest few, on the effect of reduction to the status quo, or about the merits of spending programs that you do not focus on, or find less repugnant than the ones that you have been indoctinated against by rhetoric of leaders you admire, as in the tired "cadillac driving, welfare queen".

You offer no consideration of the influence of the wealthy anf their lobbyists, the clout of their corporate control, their political contributions, their tax lawyers, accountants, and the advertising that they can afford to puch their agenda. They are not impacted by pension fund failures, and their consolidation of wealth in America has increased from 17 percent in 1970 to 34 percent now, a consolidation that took place largely in spite of pre-Bush era tax "reform". You are short on specifics and on fairness. Just as there are no dead bodies of people refused care due to a lack of medical insurance, littering the entrances to our hospitals, it must be that all seriously ill people are treated, despite their means or insurance coverage. All will be fed. clothed, and housed, despite your campaign for drastic cuts. You'll succeed only in making the poor beg for what they receive in a more dignified manner currently, and you may even increase costs as you increase anxiety and uncertainty among the needy. We do not fund enough mediacl clinics for the uninsured now, so a $40 treatment for symptoms of a child's sore throat is morphed into a $450 emergency room visit, the provider of last resort, paid for by the taxpayer.

Your "there" ain't "there", bear, unless you intend to preside over an America where a minority steps over the dying, dead, and starving in the streets, because we achived the tax "fairness" and spending cuts that complete the consolidation of national wealth to the already welathiest few, as you seem to champion.

[j8ear]

Aside from your flawed assertion of a 'fiscal crisis' now or that a balance ever existed in the past, you make some interesting points.

I tend to agree that the wealthy get wealthier, however, the poor also get wealthier as a result.

About the money needed or used to secure additional wealth, I also agree. I do not however believe this to be a problem.

I agree that problems exists about influence and the money needed to secure it, but think this is a problem not of the wealthy or successfuls making, but instead a shortfall of our political system in general. One I do not know a better solution for. I do know, and history shows us abundantly, that wealth redistribution and collectivism, does not work, and in fact exacerbates the problem of 'poverty' [which in itself is relative].

I do not believe that we have a poverty problem in the US, that needs to be solved.

Finally, while understandable the 'ideal' that the wealthy have no problem thriving without their forfeitures of accumlated and already taxed assets upon death, it is, in my opinion, obscene, to use this reality as a justification for the tax. In other words, it doesn't matter what it does or doesn't solve....it's just the notion that this was proposed and enacted that I find shameful.

Again and as usual...I am but JAFO,

-bear

[Telluride]

Originally Posted by host

Only the welathiest American families are subject to inheritance taxes and they have been paying them since 1916. Why are you so concerned about relieving these folks of these taxes?

Just because a law has been around for a long time and only targets a relatively small group of people doesn't mean that it's morally defensible. I am "concerned about relieving these folks of these taxes" because I disagree with this type of taxation.

Originally Posted by host

If they do not pay inheritance taxes at the current rate, you and the rest of us will owe a greater collective federal debt, at higher interest rates.

In that case, it would be a good idea to cut foreign aid and social program spending to compensate for the lost revenue.

Originally Posted by host

Are you aware of the ways that the wealthy already minimize their inheritance tax exposure?

I'm not familiar with the rules of estate taxes, so I don't know how wealthy people avoid paying them. But I wouldn't be surprised to learn that some of those who are opposed to this property confiscation are looking for ways to protect themselves from it.

Originally Posted by host

My point in sharing this is that your concern is misplaced. Your government has been taken over by tax cutters who seem more concerned with upsetting the past, balanced tax structure to further enrich their wealthy campaign contributors.

I happen to disagree with this aspect of the tax structure.

Originally Posted by host

This weakens the purchasing power of our currency and guarantees a rising debt obligation for your chidren.

I don't have children.

Originally Posted by host

Many of the wealthy do not want the tax repealed.

Repeal the estate tax anyway. Anyone who wants the government to get a chunk of their wealth when they die can probably specify a donation to the bureaucracy of their choice in their will, cant they?

Originally Posted by host

If you are wealthy enough now to be concerned, I've given you tips on avoiding the tax.

By building museums and new wings in hospitals? So people should be expected to give their money away in order to keep it from being confiscated?

Originally Posted by host

If you are not, why are you concerned?

Because it's wrong.

Originally Posted by host

The accumulating federal debt and deteriorating purchasing power of your dollars is guaranteed, even with the help of inheritance tax revenue.

So why screw people over in an attempt to avoid the inevitable?

Originally Posted by host

You becoming wealthy enough to personally benefit from repeal is a dream or an ambition. Do not let politicians maniplulate you into voting against your own best interests, anymore.

What if I believe that individual rights are my best interests?

[cyrnel]

Farms, please. That's a narrow, romantic load from both sides of the fence and only serves to cluster people in feeble arguments over unimportant details. Anachronistic, our heritage, conglomerates, subsidies, ad nauseum.

The truth is any individual's business with a paper value over the threshhold is subject to the knife. Doesn't matter if it's sustainable as a profitable business after being gutted. Doesn't matter if operations are dependent on family (discount) labor which can't be supported after losing 60% of its potential. Only the paper value matters.

Wake up. Because spending is out of control for whatever reason doesn't make it right. Because special interests want funding doesn't mean it's right to decimate these businesses. Taxes out of line are out of line. If you're saying it's okay to sacrifice the few who created paper wealth but weren't savvy enough to play the system, then say so and realize you're just as guilty as the other players. Also realize you aren't nailing the people you wish you were.

It's oft-repeated throughout history. Status quo has little to do with justice, but it does pave a smooth road to sticking the other guy.

[smooth]

Originally Posted by Galt

What if I believe that individual rights are my best interests?

If you believed that individual rights are your best interest, wouldn't you support a 100% inheritence tax?

What individual right do you have to your parents' property and wealth?

[loganmule]

Originally Posted by Marvelous Marv

If this is as you say, it's certainly highly deceptive.

Do I understand you correctly that if the "estate tax is repealed," the above farm owners will wind up paying texes that they would not have incurred under current law?

Under HR 8, this would be true. Before it passed in the House, an alternative proposal was voted down. It would have retained stepped up basis, and would have set the unified credit exeption amount high enough that only .03% of Americans would be subject to the tax (single estates greater than 3 mil, married greater than 6 mil, changing to 3.5 mil and 7 mil after 2009. Here's a link discussing it:

http://www.ombwatch.org/article/articleview/2790/1/337

[guy44]

Whatever you think of the estate tax, please don't tell me that family farms are at risk:

SPINNING THE MYTH....Remember all those poor heartland families who were supposedly being forced to sell the family farm when dear old dad died? The Congressional Budget Office went looking for them, but came up emptyhanded:

"The number of farms on which estate tax is owed when the owners die has fallen by 82 percent since 2000, to just 300 farms, as Congress has more than doubled the threshold at which the tax applies, the Congressional Budget Office said in a report released last week.

All but 27 farmers left enough liquid assets to pay taxes owed, the budget office found, although it hinted that the actual number might be zero.

....President Bush, the American Farm Bureau Federation and the National Cattlemen's Beef Association have asserted that the estate tax is destroying family farms. None, however, have cited a case of a farm lost to estate taxes, although in June 2001 Mr. Bush said he had talked to such farmers."

June 2001 was four years ago. If there were even one single family farm that had been lost to the estate tax during that time, I'm pretty sure Bush would have found it by now. As an expert quoted by the Times said, "this is a myth that has been well spun."

The CBO report is here if you want to peruse it yourself.

Link.

Here's the report.

[Telluride]

Originally Posted by smooth

If you believed that individual rights are your best interest, wouldn't you support a 100% inheritence tax?

How does allowing the government to confiscate one's property promote individual rights?

Originally Posted by smooth

What individual right do you have to your parents' property and wealth?

We don't have a right to our parents' property. Neither does the government. But if somebody dies without any kind of will specifying who gets what, their property has to go somewhere. There needs to be a default heir in these situations, and next of kin works fine for me. People tend to want to leave their possessions to people they love and care about, and people usually care more about friends and family members than a bunch of bureaucrats they've never met. There's also the fact that friends and family members may have some idea of what the deceased would want done with certain possessions or all of their property in general.

[smooth]

Originally Posted by Galt

How does allowing the government to confiscate one's property promote individual rights?

It ensures everyone starts out on equal footing.
By arguing for inheritance rights, you are supporting a system that people receive possessions as a result of what their parents earned, rather than what they individually earned themselves.


I'm not the first person to argue that individual rights depend on everyone starting out equally from birth...and it seems like common sense to me that wealth gained by birthright has little to do with the individual's achievements.

It doesn't matter if there is a will or not. You asked what if you believed that individual rights were in your best interest...only by making sure that everyone starts out in the economic race with $0 dollars in his or her pockets does the system secure that one's success will be based on one's own endeavors and achievements rather than those of a wealthy benefactor.

[Telluride]

Originally Posted by smooth

It ensures everyone starts out on equal footing.

This has nothing to do with individual rights.

Two points I'd like to make:

1) I've yet to hear of an idea to ensure an equal start in life that didn't involve a violation individual rights; usually in the form of property confiscation. You don't guarantee individual rights by violating them.

2) Ignoring the issue of individual rights for a moment...There is no way to ensure that everyone starts out on equal footing. Some people are smarter or more attractive than others. Some people had better parents who did more to encourage the values of hard work and the importance of an education. There are factors that can't be controlled.

Originally Posted by smooth

By arguing for inheritance rights, you are supporting a system that people receive possessions as a result of what their parents earned, rather than what they individually earned themselves.

This does not violate individual rights in any way.

Originally Posted by smooth

I'm not the first person to argue that individual rights depend on everyone starting out equally from birth...and it seems like common sense to me that wealth gained by birthright has little to do with the individual's achievements.

Individual rights and individual achievements are not the same thing.

Originally Posted by smooth

It doesn't matter if there is a will or not. You asked what if you believed that individual rights were in your best interest...only by making sure that everyone starts out in the economic race with $0 dollars in his or her pockets does the system secure that one's success will be based on one's own endeavors and achievements rather than those of a wealthy benefactor.

The presence of a wealthy benefactor does not violate individual rights in any way.

[smooth]

You might benefit from dispensing with the caricatures of liberals you are currently employing--they won't serve you very well in this discussion. What I have to say aligns very cleanly with classical theories on the importance of individualism. I don't know what you are basing your ideas on, but mine are well supported by classical philosophy, classical liberal ideology, and a long history of law and society scholars recognizing that individual rights are a means to guarantee space for personal achievement and encourage citizens to adhere to the social contract--not an end in and of themselves. As I write, you'll start to see how threads of these notions have been incorporated into traditional conservative thought. Whether conservatives can actually adhere to them in practice is a very problematic issue, especially since maintaining wealth and power is core to one sector of the current conservative political party, yet inconsistent with our cultural beliefs in rugged individualism and the importance of freedom to participate in a fair system...

To reiterate, I don't see personal rights as an end in and of themselves; rather, as a means to ensure equality and one's ability to come to the market and engage in the social contract with full knowledge that everyone is subject, and adhering, to the same rules. To guarantee full participation, I would argue that one needs to be secure in the knowledge that one's success depends on one's actions, not the actions of others.

The things you listed: intelligence, looks, and values, are personal traits. I don't understand how you came to the conclusion that you can ignore individual rights. The theories I read that would speak to this issue argue that equality requires a level social playing field. Then individual traits are played out on that field and the best person wins...

Usually, the conservative's response is that we ought not to guarantee equality of outcome; this is the first time I've heard someone say that we ought not to even establish equality at birth...

It's going to be difficult to describe a coherent course of action according to current conservative party ideals mainly because the platform itself contains logical inconsistencies and attempts to bind divergent classes under one belief system--necessary because the economiclly and politically powerful are few in number but our system secures its legitimacy via the voting public. These inconsistencies and irreconcilable differences between the interests of those divergent classes comes to light in various facets: most recently in the immenent domain case...and it's starting to play out in this discussion...that one's ability to do what one wants, to express one's freedom, can somehow be truncated from one's wealth and power...

I don't see how your negation of everything I wrote explains your position to me very well. I would find this conversation more stimulating if you explained why you believed the way you do, how you came to your conclusions, rather than merely refuting what I wrote. So far, I see your comments as running afoul of both classical liberal and conservative ideology in regards to the individual's place in society and the importance of individual achievement.

[The Truth]

Originally Posted by smooth

What individual right do you have to your parents' property and wealth?

This statement indicates that you have not grasped the concept.

A much more cogent question would be, "What right does the government have to confiscate your life's work upon your death, thereby preventing you from passing it on to your children and grandchildren?"

[loganmule]

Smooth, your posts on this have been excellent, although admittedly you have been preaching to the choir. I, too, would like for Galt to provide sound reasons for his position.

Given the disparity existing between the very rich and all of the rest of us, the reality is that the very rich are going to shoulder a higher tax burden. This may be seen as "unfair" to the rich, but there simply won't be enough money to fund government otherwise. My take on this is that we should look at taxation options which are efficient, in the sense of encouraging people to work to support themselves and acquire personal wealth, so that the government (i.e, we the people) don't have to bear that cost.

I wrote to my U.S. Senators, Bayh and Lugar, both of whom supported estate tax repeal, to ask them to oppose it this time around. Here's what I wrote to each of them:

"Dear Senator Bayh:

I am writing to request that you oppose estate tax repeal, and if politically viable, to suggest an increase in it to affect the wealthiest Americans.

What the House of Representatives did still shocks me, particularly when a reasonable compromise was offerred as an alternative. My hope is that the error won't be repeated in the U.S. Senate.

I'm a conservative attorney who does estate planning, among other things, and in that capacity, I see some good reasons for imposing tax on the estates of the very wealthy (pick a number...10 mil or whatever). First, the person who made all that money is dead...there's no deterrent to a corpse to take money back in taxes if he made too much. Second, the repeal would reinstate carryover basis...problematic for practitioners, and a burden on those who otherwise wouldn't be paying anything (eg, estate consisting only of 1 mil in farm ground having a basis of 100k results in 900k capital gain to heirs upon sale, which would be avoided entirely by current stepped up basis). Third, the bottom will drop out of charitable giving (currently, it's easy to tell a client in the maximum bracket that a charitable gift will have no net cost to the heirs). Finally, there is the inefficient "rich kid" syndrome...lots of times second and third generation heirs live on and spend down their inheritance, when maybe they otherwise would be motivated to do something.

Neither does it make sense politically to repeal the estate tax. As you know, the exemption amount already is $1,500,000.00, and this will increase to $2,000,000.00 next year, if the law remains unchanged. Only a handful of people in my county have a sufficient level of wealth to need estate tax planning at that level, and most of them are able to minimize, if not eliminate, the potential tax on their estates. In light of this, it's hard to view estate tax repeal as anything other than a break for the very wealthy at the expense of the little guy, who then would potentially incur capital gain tax on an inheritance.

Estate tax has been referred to as a form of socialism, but that can be said of all "progressive" taxes imposing a greater burden upon the wealthy, eg, graduated income tax rates. Some redistribution of wealth is necessary, and given the extreme gap between the few of great wealth and the many in the middle class or below, generating enough taxes to fund our government must be progressive. The object should be to opt for a system of taxation which is efficient and provides incentives to workers. I'd rather have lower income taxes during my lifetime and incur a substantial tax on my estate (eg, graduated to 70% or more) above a reasonable amount. Does it make sense to be able leave your family a generous inheritance on a tax free basis (eg 10 mil), knowing your estate will take a huge tax hit above that, but enjoy less tax during lifetime in the bargain? Absolutely, in my opinion.


I appreciate your allowing me to share with you my thoughts on the estate tax issue. Please consider them, for what they may be worth, when you are called upon to take a stand for Hoosiers on the question of repeal."

Here's what Bayh wrote back:

> Thank you for contacting me about the estate tax. I
> appreciate your thoughts on this important matter.
>
> I believe the estate tax can discourage investment and hard
> work. It can also have a harmful effect on family-owned
> businesses and farms. Hoosier families should be able to pass
> along their farms or small businesses to the next generation, rather
> than being forced to sell them to pay the estate tax. It was for these
> reasons that when the permanency of the estate tax repeal came up
> for a vote in the Senate in June of 2002, I was one of nine
> Democrats to vote in favor of full and permanent repeal. At that
> time, there was a projected surplus of $1.6 trillion from 2003
> through 2012, making the elimination of this tax compatible with
> balanced budgets and preserving Social Security and Medicare.
>
> As you know, the fiscal condition of this country has
> deteriorated sharply since that point. The most recent
> Congressional Budget Office estimates project a federal deficit of
> $368 billion during Fiscal Year 2005. The return of structural
> deficits on the eve of the Baby Boom retirement is a deeply
> troubling development that requires immediate attention on both
> sides of the aisle. While I continue to support the goal of
> permanently repealing the estate tax, I will evaluate the
> accomplishment of this goal in light of the current fiscal condition
> of this country.
>
> Thank you for contacting me. I hope the information I have
> provided is helpful. My website, http://bayh.senate.gov, can
> provide additional details about legislation and state projects that
> may be of interest to you. I value your input and hope you will
> continue to keep me informed of the issues important to you.
>
> Best wishes,
>
>
>
>
>
>
> Evan Bayh
> United States Senator


Not to let his statement about the potential harm to Hoosier farmers and small businessmen go unchallenged, I wrote again:

"Senator Bayh:

Thank you for your reply.

I know of your position on the estate tax repeal. Your reasons for supporting it are valid, and need to weighed against the grounds suggesting a potential net benefit in retaining it in some form.

I suggested a $10mil unified credit exemption amount. In my experience, this would be sufficient to exempt Hoosier farmers and small business owners, so that their estates could pass intact to their heirs. While anything over $10 mil isn't "small," in my opinion at least, additional protection could be afforded to Hoosier farmers and businessmen in the form the the special use valuation, family owned business exemption, and installment payment of tax. As for discouraging investment and hard work, studies demonstrate that productivity and time spent working generally decline, as individuals attain sufficient wealth to amply provide for themselves and their families.

Total repeal of estate tax, with the reinstatement of carryover basis, clearly favors the very rich (and therefore the very powerful) over the other 99% plus Hoosiers. The few holding extreme wealth get to trade down to at most capital gain rates upon the disposition of property, while all other Hoosiers end up exposed to taxable gains on inherited property which otherwise would pass tax free to them, even under the relatively low current $1.5mil exemption amount.

I agree with you that in a time of huge deficit spending, cutting taxes would be imprudent, and shouldn't be considered until our government can be operated at a true surplus (i.e., surplus funds without borrowing from social security tax revenue). Should that time come, however, I would ask that you carefully weigh the adverse impact which estate tax repeal would have upon the vast majority of Hoosiers.

Thank you again for your consideration of my thoughts on this matter."


Give Bayh credit for responding again, this time with the generic "thanks for your input, I'll carefully consider it" message.

Estate tax impacts only a very few, but they have LOTS of money, and the political power that goes with it. In a perfect world, I would hope to see the exemption go up to somewhere between 5mil and 10mil, indexed for inflation, with an increase in the graduated rate to a higher maximum, e.g., 70%. In the world we live in, it will be a victory to simply prevent repeal.

[host]

The seeds for revolution:
http://www.nytimes.com/indexes/2005/...ational/class/

[roachboy]

tacqueville was right about estate taxes. in democracy in america, he pointed to them as the single most important mechanism in the america of the 1830s that worked to prevent the formation of an economic aristocracy.

the right seems to prefer the idea of an economic artistocracy and presumably each conservative likes to think him or herself as an aristrocract, to pretend that the class interests of that aristocracy line up with theirs. it is the political version of a society for creative anachronism event in which everyone gets to pretend to be a baron.

tocqueville was fascinated with the american democratic experiment, which he argued you could still see operating in the 1830s. it was of course threatened from a number of sides: by urban capitalism, by religious belief and the inability of americans to separate religion and politics, etc--but it was still operational when he wrote--for him, any of these threats could swamp that experiment from the inside--from the outside, the experiment would be definitively ended by the formation of an economic aristocracy.
and that is what the right is advocating across the flimsy veil of their opposition to inheritance tax.

of course tocqueville's america is long dead. in a sense this fight over inheritance tax is simply a symbolic nail in its coffin. the political implications of abolishing the estate tax never seems to cross the mind of any of the conservatives who argue for it--all you get is a version of their general dislike of taxes, nested within the usual rightwing incoherence about the social and political functions of taxation/redistribution of wealth.

the right seems to prefer a kind of neofeudal set up instead of even the last vestiges of democracy...wealth passes across generations, and it therefore entirely private--so the concentration of wealth becomes moot as a political issue--that is what the political implications of this would look like to me.

i dont know what the petit bourgeois right is thinking carrying water for the hyper-wealthy on this question. except insofar as such portage is just one of the things that serfs do for their masters.

[Telluride]

Originally Posted by smooth

You might benefit from dispensing with the caricatures of liberals you are currently employing--they won't serve you very well in this discussion.

To which "caricatures" are you referring?

Originally Posted by smooth

What I have to say aligns very cleanly with classical theories on the importance of individualism.

But not individual rights.

Originally Posted by smooth

I don't know what you are basing your ideas on, but mine are well supported by classical philosophy, classical liberal ideology, and a long history of law and society scholars recognizing that individual rights are a means to guarantee space for personal achievement and encourage citizens to adhere to the social contract--not an end in and of themselves.

I'm basing my ideas on a rational definition of individual rights, and I believe that individual rights and freedom are the desired outcome in and of themselves.

Originally Posted by smooth

To reiterate, I don't see personal rights as an end in and of themselves; rather, as a means to ensure equality and one's ability to come to the market and engage in the social contract with full knowledge that everyone is subject, and adhering, to the same rules.

And therein lies your problem. You are insisting that two imcompatible concepts - individual rights and forced economic equality - are somehow compatible. You can't have it both ways. A free society based on individual rights guaratees no equality other than equality under the law. A society that uses property confiscation to guarantee economic equality by definition cannot guarantee individual rights. Which do you want?

Originally Posted by smooth

To guarantee full participation, I would argue that one needs to be secure in the knowledge that one's success depends on one's actions, not the actions of others.

Just out of curiousity; how do you feel about welfare programs?

Originally Posted by smooth

The things you listed: intelligence, looks, and values, are personal traits.

I mentioned this to point out that you simply can't guarantee that everyone starts out on equal footing, even with the presence of socialist programs to confiscate the property of parents. Like it or not, some people are simply better equipped - due either to inherited traits or upbringing - to succeed in life.

Originally Posted by smooth

I don't understand how you came to the conclusion that you can ignore individual rights.

I don't understand how you came to the conclusion that I'm ignoring individual rights by opposing the confiscation of private property.

Originally Posted by smooth

The theories I read that would speak to this issue argue that equality requires a level social playing field. Then individual traits are played out on that field and the best person wins...

The goal of individual rights is to preserve freedom, not equality.

Originally Posted by smooth

Usually, the conservative's response is that we ought not to guarantee equality of outcome; this is the first time I've heard someone say that we ought not to even establish equality at birth...

Where did your previous debates take place? Unless all of your debates on this topic have occurred in extreme left wing environments, I'd be very surprised to hear that someone could spend any significant amount of time arguing for the complete abolition of inheritance without ever hearing a single word of opposition.

As I said before, the only way you can establish economic equality at birth is by massive violation of individual rights (property rights). That is unacceptable.

And, for the record, I'm not sure that it's accurate to label me a conservative.

Originally Posted by smooth

It's going to be difficult to describe a coherent course of action according to current conservative party ideals mainly because the platform itself contains logical inconsistencies and attempts to bind divergent classes under one belief system--necessary because the economiclly and politically powerful are few in number but our system secures its legitimacy via the voting public.

The person who claims that confiscation of private property to ensure economic equality is compatible with individual rights is now complaining about someone else's logical inconsistencies?

Originally Posted by smooth

I don't see how your negation of everything I wrote explains your position to me very well.

I thought the explanation was pretty clear. You argument was based on the idea that forced economic equality at birth was somehow compatible with and necessary for individual rights. I pointed out that it isn't, since forced economic equality at birth can only be achieved by violating one's individual right to pass on his or her property to another.

Originally Posted by smooth

I would find this conversation more stimulating if you explained why you believed the way you do, how you came to your conclusions, rather than merely refuting what I wrote.

I already explained how I reached my conclusion: property confiscation to ensure economic equality is not compatible with individual rights. Given the choice between the two concepts, I'd prefer individual rights. What other explanation are you looking for? Some kind of life-changing event that made me prefer capitalism to socialism?

Originally Posted by smooth

So far, I see your comments as running afoul of both classical liberal and conservative ideology in regards to the individual's place in society and the importance of individual achievement.

I believe that individual achievement is important, but should not enforced at the expense of individual rights...which seems to be what you're proposing.

[Telluride]

Originally Posted by loganmule

Smooth, your posts on this have been excellent, although admittedly you have been preaching to the choir.

Confiscating private property to ensure economic equality is incompatible with individual rights. Any argument that claims otherwise is irrational. You can guarantee absolute economic equality or you can guarantee individual rights in economic matters. You can't do both, so which do you want?

Originally Posted by loganmule

I, too, would like for Galt to provide sound reasons for his position.

I'll ask you what I asked Smooth: What sort of "reason" are you looking for? My arguments against the estate tax are and have mainly been based on individual rights (property rights). What more of an explanation do you want?

Originally Posted by loganmule

Given the disparity existing between the very rich and all of the rest of us, the reality is that the very rich are going to shoulder a higher tax burden. This may be seen as "unfair" to the rich, but there simply won't be enough money to fund government otherwise.

The amount of funding necessary for a government to perform its duties depends on what a government's duties are. Generally speaking, what role do you feel government should play in our lives? What services should it offer, if any?

[loganmule]

Originally Posted by Galt

I found Smooth's posts to be completely irrational. Confiscating private property to ensure economic equality is incompatible with individual rights. You can guarantee absolute economic equality or you can guarantee individual rights in economic matters. You can't do both, so which do you want?

I'll ask you what I asked Smooth: What sort of "reason" are you looking for? My arguments against the estate tax are and have mainly been based on individual rights (property rights). What more of an explanation do you want?


The amount of funding necessary for a government to perform its duties depends on what a government's duties are. Generally speaking, what role do you feel government should play in our lives? What services should it offer, if any?

You stated that "you can guarantee absolute economic equality or you can guarantee individual rights in economic matters." This is simply untrue. When indivduals consent to be members of a society, subject to government authority, there must be a "taking" to pay the freight, and it will either be in the form of taxes which are progressive or regressive in nature. Whether or not it's seen to be "equal" depends on whose ox is getting gored. How do you distiguish estate tax from income tax, where the government is "confiscating" a third or your income? You evidently don't get that some compromise of one's individual rights is the price paid for living as a member of a society of individuals.

As for your reason for estate tax repeal being based upons an individual's property rights, you ignore the fact that all taxes amount to "confiscation" of one's individual property. At the risk of putting words in Smooth's mouth, we'd like to know why you prefer other forms of taxation over estate tax, which in essence you have done, because the money to fund government activities has to come from taxes assessed on the individuals comprising the governed society.

Finally, my opinion on the role of government is irrelevant, it being a given that there are certain essential functions of government. What good would it do for me to tell you about my views on government funding of more controversial programs, when things like defense spending are mandatory? (my apologies, if you are an anarchist, but then you wouldn't be on a computer, paying tax as part of your user fees, and subject to FCC jurisdiction...you instead would be communicating with me via carrier pigeon).

[Telluride]

Originally Posted by loganmule

You stated that "you can guarantee absolute economic equality or you can guarantee individual rights in economic matters." This is simply untrue.

How is it untrue? Explain to me how you can guarantee that everyone is economically unequal without taking property from the wealthy?

Originally Posted by loganmule

When indivduals consent to be members of a society, subject to government authority, there must be a "taking" to pay the freight, and it will either be in the form of taxes which are progressive or regressive in nature. Whether or not it's seen to be "equal" depends on whose ox is getting gored.

Not all taxation is incompatible with individual rights. Taxation to pay for the military, police/fire departments, prisons, court systems, etc. are perfectly acceptable, since these institutions exist for the purpose of protecting individual rights.

By the way; the only equal tax would be flat tax, where the same percentage of everyone's income is taken in taxes.

Originally Posted by loganmule

How do you distiguish estate tax from income tax, where the government is "confiscating" a third or your income?

I mentioned it in my first post of this thread. The estate tax allows the government to levy an never-ending series of taxes on the same chunk of money.

Originally Posted by loganmule

You evidently don't get that some compromise of one's individual rights is the price paid for living as a member of a society of individuals.

You evidently don't get that it doesn't have to be to the extent that it is today.

Originally Posted by loganmule

Finally, my opinion on the role of government is irrelevant, it being a given that there are certain essential functions of government.

Define "essential". If you want to confiscate people's property to fund government programs and policies, it would be nice of you to explain what you want the money spent on.

Originally Posted by loganmule

What good would it do for me to tell you about my views on government funding of more controversial programs, when things like defense spending are mandatory?

Because unlike defense spending, many other government policies don't have anything to do with protecting the rights of its citizens.

Originally Posted by loganmule

(my apologies, if you are an anarchist, but then you wouldn't be on a computer, paying tax as part of your user fees, and subject to FCC jurisdiction...you instead would be communicating with me via carrier pigeon).

When I first read this sentence, I thought you wrote "antichrist" instead of "anarchist".

Thankfully I'm not an anarchist (or an antichrist). These debates would take forever if we had to communicate with carrier pigeons. Plus it would be difficult for other TFP members to participate.

[pan6467]

Personally, anything I inherit I didn't work for so why should I be entitled to recieve it tax free.

My father worked hard to get what he got and I respect him for it. If anything, I would rather have a closer relationship to my father than the idea that I may inherit a lot upon his death. That won't make up for the yers we have fought and not been close.

I find it funny how people can argue that SS something people paid into, were promised, worked hard for and deserve is a government entitlement and they shouldn't get it, yet inheritence, something by virtue of what it is, has not been worked for by the individual (in 95% of the cases) and those people are entitled to every penny tax free.

The GOP sells the middle class a bill of dreams that only the very rich will ever capitalize on.

Like I said before, the government can have every freaking penny of my inheritence. What I work for and make on my own is more important to me. What I'll get won't bring me happiness.

Most of the kids I grew up with will have their inheritences spent before they get them on drugs, alcohol, cheap women, cars and things that are social statements. I can't see very many investing it into small companies to help employment and increase the tax base.

[loganmule]

It looks as if you and I will have to agree to disagree, Gault.

I went back to your original post, and found no cogent argument to support your position. Over 99% of estates don't result in tax liability to begin with, and many of those that do incur the tax because of UNTAXED property appreciation, as has been pointed out. Also, only certain types of property are taxed merely by virtue of one's ownership of it (generally, real estate; occasionally, intangibles). If you make the right choices about the kinds of property you own, only income on it or any gain on its sale is subject to tax. As for the double tax argument, we're already stuck with that...in fact, most taxpayers pay more in regressive taxes with after-tax dollars than they pay on their income (think sales taxes and excise taxes, for example).

I think individuals pay too much tax. I believe that politicians of all stripes are poor stewards of our tax revenue, both in terms of the programs funded and with regard to inefficient spending. None of that matters. A budget will be approved, and it will need to be funded. All kinds of taxes are levied, and if the estate tax on those who are very rich is eliminated, the lost tax revenue will need to be made up somewhere else. Under these circumstances, I'm happy to see the estate tax remain in effect. Multi-millionaires may take issue with me (you must be one of them, Gault), but all us little folk don't want to have to take up the tax slack so that the rich can get richer.

[moosenose]

Originally Posted by smooth

It ensures everyone starts out on equal footing.
By arguing for inheritance rights, you are supporting a system that people receive possessions as a result of what their parents earned, rather than what they individually earned themselves.

What you are advocating is theft. Sure, it's gussied-up, but it's theft all the same.

Why does the government have the right to take stuff that they didn't earn? The government is supposed to work for the people. Your structure has all the people working for the benefit of the government. That's often referred to as Fascism or Communism, depending on the reasons given for the theft.

[pan6467]

Originally Posted by moosenose

What you are advocating is theft. Sure, it's gussied-up, but it's theft all the same.

Why does the government have the right to take stuff that they didn't earn? The government is supposed to work for the people. Your structure has all the people working for the benefit of the government. That's often referred to as Fascism or Communism, depending on the reasons given for the theft.

Hmmmmm.... how exactly does government help the poor get educated to advance in society, or maintain roads, or police, or fire, or defense, or healthcare and help feed those who can't do for themselves. Or to pay for the administrators and programs we need?

If government does not tax or does not tax enough...... how do we pay for government to work for the people?

You may not see a need for Education or healthcare or police or whatever, but the majority may and so taxes become a necessity.

[moosenose]

Originally Posted by pan6467

You may not see a need for Education or healthcare or police or whatever, but the majority may and so taxes become a necessity.

You are not talking "some taxes", you're talking confiscating EVERYTHING that a person produces in their lives and does not consume before their death. It's slavery, plain and simple.

[pan6467]

My view, I didn't work for it. Do they have a right to the money my father leaves me? Yes. Do they have a right to the land, businesses, stocks and bonds? Depends, are they giving fair assessments of the land and businesses? If so, then yes they have every right to a portion of them.

My father started from dirt poor to become a very wealthy man. He did so with government help, student loans, apprenticeships, a good education, small business loans, HUD loan for our first house, student loans and grants for my sister and I so he didn't have to foot the bill all himself, and unemployment when he was laid off, when he first started and so on.

Should those oppurtunities be repaid? ABSOLUTELY.

How are they repaid? By giving back to the government that allowed and helped him to achieve all he had.

He may have had the drive without the government's help but he would never have achieved what he did without that help. Nor would Bill Gates, nor4 would Steve Jobs.... and so on.

To say I have a right to everything and the government should take nothing is greedy and fucked up, becauise the government HELPED HIM and after he is gone, it's his duty to repay the government to help others...... He's very conservative but even he understands this fundamental principle. We can never be so greedy as not to repay and pass down the oppurtunities we were given, or we will decay and the society that we love today will be gone tomorrow.

[moosenose]

Originally Posted by pan6467

To say I have a right to everything and the government should take nothing is greedy and fucked up, becauise the government HELPED HIM and after he is gone, it's his duty to repay the government to help others...... He's very conservative but even he understands this fundamental principle. We can never be so greedy as not to repay and pass down the oppurtunities we were given, or we will decay and the society that we love today will be gone tomorrow.

What you are saying is that your father believes that the State is entitled to all of the results of his labor, and he has no right to say what happens to the assets that he worked to create or save. You are not talking about the government taking a PORTION of his estate, you are talking about the government taking ALL of it. Let me ask you this: who is going to pay for your father's funeral when he dies? Because if his funeral expenses are coming out of the windfall that his death is going to give the Government, the Government may decide that he doesn't NEED the perpetual care or that fancy headstone, they can throw his body in an oven and save themselves a few thousand dollars.

One of the VERY basic tenets of our system of government is that the government is there to serve the people, NOT that the people are there to serve the government. And with what you were talking about with the "level playing field" of everybody starting out with no assets from their parents, that's EXACTLY what you are advocating....that the wealth of an individual, built up over the lifetime of the individual through the individual's efforts, is ultimately the property of hte Government.

[loganmule]

Moosenoose, you are stirring the pot, and I'm cool with that...free exchange of ideas and all. However, all taxes can be viewed as theft, by your definition...for every dollar I spend, the government "steals" a nickel in sales tax. But it isn't really theft, because all of us who choose to remain here and submit to our government's authority and protection impliedly consent to pay assessed taxes to fund govenment activity.

The issue is whether the estate tax is so patently unfair, when viewed in the context of all other "unfair" taxes, that we should do away with it. I don't think so. You are entitled to your opinion, but let's not misquote others or the tax itself. pan6467 is saying that his father accepts that having acquired wealth with the help of government benefits (and therefore our tax dollars), he's o.k. with giving SOME of that back...but NONE of the first $1.5 mil in 2005 ($2 mil in 2006), and not even half of the excess above that amount, under current law.

The goverment may be here to serve us, but it can't do that for free. Under the current estate tax structure, a multimillionaire decedent will leave a multimillion dollar estate for his heirs, and the 99% or more of us who aren't multimillionaires won't pay anything. I invite you to explain how this result is so inequitable, as compared with other taxes imposed upon us, to compel estate tax repeal.

[moosenose]

Originally Posted by loganmule

The issue is whether the estate tax is so patently unfair, when viewed in the context of all other "unfair" taxes, that we should do away with it. I don't think so. You are entitled to your opinion, but let's not misquote others or the tax itself.

Pan stated at 07-10-2005 07:13 PM:

Like I said before, the government can have every freaking penny of my inheritence. What I work for and make on my own is more important to me. What I'll get won't bring me happiness.

I don't think I'm misquoting him, he's made his position clear. He would support a 100% death tax. I don't see how the clause "the government can have every freaking penny of my inheritence.(sic)" can be interpreted any differently.