Tax Reform, a Series: The Estate Tax

[fj1200]

A proposal by fj:

Eliminate the Estate Tax. No surprise there if you've not been ignoring my posts. However, I would also add:

Eliminate the step-up in basis currently provided for at time of death and make the gains subject to taxation at the cap gain rate when the asset is sold. Asset would also continue to be taxable as it generates dividends, interest, business income, etc.

Benefits:
Eliminate compliance costs
Eliminate the need for families to liquidate assets to pay tax
Business continuity without need to liquidate
A more democratic method of taxation that eliminates a class-based rationale
Free-up capital to be invested without regard to death of owner

This is also discussed as an Inheritance Tax here:
http://www.heritage.org/research/reports/2010/07/the-economic-case-against-the-death-tax



A note: while I do like the Fair Tax I'm more or less talking about simplification of the current system which the FT would obviously do away with.

[SassyLady]

A proposal by fj:

Eliminate the Estate Tax. No surprise there if you've not been ignoring my posts. However, I would also add:

Eliminate the step-up in basis currently provided for at time of death and make the gains subject to taxation at the cap gain rate when the asset is sold. Asset would also continue to be taxable as it generates dividends, interest, business income, etc.

Benefits:
Eliminate compliance costs
Eliminate the need for families to liquidate assets to pay tax
Business continuity without need to liquidate
A more democratic method of taxation that eliminates a class-based rationale
Free-up capital to be invested without regard to death of owner

This is also discussed as an Inheritance Tax here:
http://www.heritage.org/research/reports/2010/07/the-economic-case-against-the-death-tax



A note: while I do like the Fair Tax I'm more or less talking about simplification of the current system which the FT would obviously do away with.

Currently setting up trust so that my heirs are protected. Haven't ironed out the details ... but will probably need to buy some type of insurance that will pay the tax so they don't have to liquidate assets.

[red states rule]

I have a better idea

Eliminate the ENTIRE TAX CODE and go with a flat tax of 10% on your GROSS EARNINGS. No deductions period

If you make $20,000/yr you pay $2,000 in income tax

If you make $2,000,000/ yr you pay $200,000

Now I know the bleeding hearts will cry how the "poor" are having to pay such a huge amount and that would not be fair

Here is the reason behind my idea

We have half the country that does not pay any Federal Income Tax - so when the politicans demand those who are paying must pay more those who pay nothing so not care. They will not have to pay more so they have no objection

But if they are watching TV and some politican wants to raise taxes another 5% they will yell at the TV "No way. I can't afford it"

With a flat tax for everyone, it will be harder for politicans to raise taxes instead of cutting spending - which is the real answer

[bullypulpit]

Unless you make more than $350,000 a year, you've got nothing to worry about. Unless your estate is worth more than $1million, you have nothing to worry about. <a href=http://www.ctj.org/pdf/estatetax2010.pdf>IRS data</a> shows that only about 0.6% of deaths result in an estate tax liability.

But that's just a side bar. The purpose of the estate tax is to prevent the formation of an aristocracy, where money pools in the hands of a few, powerful families to the detriment of the rest of society. Estate taxes prevent, as Jefferson put it, "....an artificial aristocracy founded on wealth and birth, without either virtue or talents.... The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy." We already see this happening with a handful of plutarch wannabes. SO stop your whining about estate taxes. Unless you're amongst the richest citizens of this country, they aren't an issue. And, of course, unless you really want to live in a plutarchy.

[CSM]

The real aristocracy in this country is the Congress. Lifelong members who think they are above the populace, beyond the law, and entitled to rule.

[SassyLady]

Unless you make more than $350,000 a year, you've got nothing to worry about. Unless your estate is worth more than $1million, you have nothing to worry about. IRS data (http://www.ctj.org/pdf/estatetax2010.pdf) shows that only about 0.6% of deaths result in an estate tax liability.

But that's just a side bar. The purpose of the estate tax is to prevent the formation of an aristocracy, where money pools in the hands of a few, powerful families to the detriment of the rest of society. Estate taxes prevent, as Jefferson put it, "....an artificial aristocracy founded on wealth and birth, without either virtue or talents.... The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy." We already see this happening with a handful of plutarch wannabes. SO stop your whining about estate taxes. Unless you're amongst the richest citizens of this country, they aren't an issue. And, of course, unless you really want to live in a plutarchy.

The estate tax has done more to destroy farming families than any other economic force in this country.

When most of an estate is tied up in land and equipment and not liquid assets.....the heirs have to sell the assets to pay the tax.

Example: my estate is worth over $3M but I only have about $500K in liquid assets. The first $1M is non-taxable .... but the other $2M gets taxed. What is 50% of $2M? A little over $1M....so something that has been in the family for generations has to be sold to satisfy the tax man.

I could give a $%!# about aristocracy .... I want my family to inherit what we've worked hard for.

BTW ... the numbers above are examples only and do not reflect my own situation.





According to the IRS literature, an estate tax filing need only be made if the value of an estate exceeds the following amounts:

2005: First $1,500,000 in assets
2006-2008: First $2,000,000 in assets
2009: First $3,500,000 in assets

In addition, the maximum estate tax rate applied to the amounts in excess of these figures are as follows:

2005: 47 percent
2006: 46 percent
2007- 2009: 45 percent

In 2010, the estate tax rate drops to zero percent; if you die in that year, your heirs would not pay taxes, even if you passed on $20 billion! One caveat: Congress ensured that the law sunsets in 2011. That is, on January 1st, 2011, the estate tax rate will return to its pre-Bush levels.

Practically speaking, this means the difference between dying on December 31, 2010 and January 1, 2011 can mean 55 percent of your estate if you are person of means!

http://beginnersinvest.about.com/od/estatetax/f/estatetaxrate.htm

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[fj1200]

Unless you make more than $350,000 a year, you've got nothing to worry about. Unless your estate is worth more than $1million, you have nothing to worry about. <a href=http://www.ctj.org/pdf/estatetax2010.pdf>IRS data</a> shows that only about 0.6% of deaths result in an estate tax liability.

But that's just a side bar. The purpose of the estate tax is to prevent the formation of an aristocracy, where money pools in the hands of a few, powerful families to the detriment of the rest of society. Estate taxes prevent, as Jefferson put it, "....an artificial aristocracy founded on wealth and birth, without either virtue or talents.... The artificial aristocracy is a mischievous ingredient in government, and provisions should be made to prevent its ascendancy." We already see this happening with a handful of plutarch wannabes. SO stop your whining about estate taxes. Unless you're amongst the richest citizens of this country, they aren't an issue. And, of course, unless you really want to live in a plutarchy.

Didn't take the time to bother reading the proposal did you?

Since the estate tax is easily enough avoidable for the uber wealthy how does it prevent the formation of your "artificial aristocracy"? Who are those "plutarch wannabes" anyway? Add in the job destroying nature of the estate tax how does it help the peasants that rely on jobs for their livelihood?

You should also note that I didn't propose the elimination of all taxes, merely a shifting of the type of taxation.

[Pagan]

I have a better idea

Eliminate the ENTIRE TAX CODE and go with a flat tax of 10% on your GROSS EARNINGS. No deductions period

If you make $20,000/yr you pay $2,000 in income tax

If you make $2,000,000/ yr you pay $200,000

Now I know the bleeding hearts will cry how the "poor" are having to pay such a huge amount and that would not be fair

Here is the reason behind my idea

We have half the country that does not pay any Federal Income Tax - so when the politicans demand those who are paying must pay more those who pay nothing so not care. They will not have to pay more so they have no objection

But if they are watching TV and some politican wants to raise taxes another 5% they will yell at the TV "No way. I can't afford it"

With a flat tax for everyone, it will be harder for politicans to raise taxes instead of cutting spending - which is the real answer

I disagree, zero income tax. Income tax's are harmful and destructive, it should be 10% "sales tax" with medical and food expenses exempt. That way one is taxed on what the spend and it would be an incentive to "invest".

[SassyLady]

I disagree, zero income tax. Income tax's are harmful and destructive, it should be 10% "sales tax" with medical and food expenses exempt. That way one is taxed on what the spend and it would be an incentive to "invest".

Do you think that would generate enough tax to support our infrastructure and defense?

[Pagan]

Do you think that would generate enough tax to support our infrastructure and defense?

Yep, you cut out the zillions of exemptions for those who own the politicians I'd say we'd have enough to have streets paved in Gold ;)