June 14, 2004
From the desk of Jane Galt:Repeal the estate tax?
Matthew Yglesias has gotten a fair amount of linkage for his claim that "talking to a room full of Dalton alumni is pretty much the best case that can be made for the estate tax".
I attended a demographically similar institution somewhat to the north, and while my girlhood memories include recollections of some really repulsive conspicuous consumption, I'm afraid that my classmates offer one of the best cases I've seen for repealing the estate tax. To wit: none of their families seem to have paid any. Since the parents of children in New York City private schools are, without a doubt, the group upon which such a tax should fall, if it falls on anyone, this rather begs the question of which less tax-worthy groups are actually shouldering the burden.
There's also the fact that the estate tax may actually cost the treasury money, by giving parents such a strong incentive to transfer assets to children (who often get taxed at lower rates); and quite certainly costs the economy a great deal of money by a) spawning an entire tax-planning industry, full of people who would otherwise be productively employed b) causing people to shift resources to less valuable (but tax-preferred) uses and c) reducing the incentive of older, experienced workers to work beyond the point where they have accumulated enough assets to live out the remainder of their lives comfortably. (No, I'm sure Warren Buffet wouldn't stop working even if they took it all away. But what about the guy who owns your local convenience store?)
But really, the best argument is the rich, because they don't pay the damn thing. Only half the estate tax revenues come from that 1/10th of 1% who are really fabulously wealthy. The rest comes from schmoes who were careful--and too stupid to pay a planner, or keep their wealth in liquid assets. Is that really the sort of thing we want to tax at 55%?
Posted by Jane Galt at June 14, 2004 8:54 AM | TrackBack | Technorati inbound linksI'd add that the estate tax is repugnant for another reason: taxation without representation.
Surely the dead person no longer has any representation, even though it is their interests (the intended destinations of their legacy) that are in question.
I hope that was a joke. The estate tax is effectively paid by the heirs of the deceased, who are certainly represented.
I could care less about the estate tax: the estate tax is one of the less significant of the many problems with America's tax code. It gets the attention because it lends itself to great rhetoric.
Ah. Jane. You are making so much sense lately. :)
Me thinks that 90% of the people would like those who are the top 10% who have 90% of the wealth... to pay their accumulated wealth to the government at the rate of 90%.
Or maybe there is some middleground. How about getting the top 10% who have 90% of the wealth to pay 25% of their accumulated wealth to the government?
There is room for debate like there is on all issues but the current system with the bracket at 55% over $550,000 of wealth is broken.
Just think of all the good that could be done if all of the "tax planners" who really don't add much value to the economy could be doing something else. They could be doing:
1) Art
2) Teaching
3) something in construction - building something
4) coming up with the new "alternative fuel source" ;)
This is an argument that I've had for a long time. A simple flat tax of 20% with a huge personal exemption of $15,000 per dependant up to 3 would eliminate the "inflationary cost" of "tax preparers" and "tax accountants". It is an inflationary cost because if you look at the definition of inflation, it basically means that more money has to be paid for the goods and services renedered without gaining more in the goods and services. What is the value I ask? Almost none in my eyes.
It sounds like you're just saying that we should reform the estate tax so that the people who should pay it actually do pay it.
Sign me up!
It's a feel-good tax. The rich are getting there's, so goes the mentality that resists changing it. Me thinks there are two ways to make a case to get rid of this tax.
One is the SoCal real estate market. My 1300 sq ft condo has same floor plan listed for (oh, they use ranges of offers they will entertain now) $490K - $525K. If the real estate market levels out over the next 3-5 years, there will be thousands of regular families that get raped by this tax. Not only will it be repealed, but it will be repealed retroactively.
The other is if some enterprising numbers wonk would figure out what the tax costs to administer and what the cost to the economy of it is. Show us how we are cutting off our face to spite our nose. Good economics outweighs kicking the rich these days.
Jane, again you come up with a good topic only to be quite wrong in your argument.
I went to public high school, but met plenty of these trust fund babies in later institutions. I think it would be fine to tax the hell out of 'em, frankly. Last I checked, you didn't need much money once you were dead (perhaps someone who is dead can chime in and tell us differently?).
If you truly believe in repealing the estate tax, rather than say, closing loopholes (I am actually in favor of creating one - small businesses should probably be exempt if meeting certain conditions), then I imagine you are also in favor of broad social programs for the poor - such as a much more widespread welfare program. Repealing the estate tax is essentially welfare for the rich (their children did nothing to build that wealth, they just did a good job of picking their parents).
If what you want is an aristocracy which has no obligations for continuing to build wealth (and c'mon, is Paris Hilton really building wealth?), then repeal the estate tax. But don't do so arguing that it is fair or any crap like that. If what you say is true, the fair thing to do would be to close the loopholes. But that would require funding for the cops (IRS).
Pat, your tax system won't work. Forget the fact that subsidizing dependents should be capped at 2. What happens when the parents of 3 children suddenly make $46K? Then they get socked with $9200 in taxes? One answer: gradually introduce the hit - but then we are in exactly the same situation we are now, using a graduated/progressive income tax.
Isn't the true "estate tax" the stupidity and general uselessness of the children of the truly wealthy? I think they blow through their money far faster than the government could (although that's stiff competition).
Jane:
Of the five reasons that you list in favor of repealing the estate tax, three of them would seem to be addressed by tax reform that simplified the tax code but did not eliminate the estate tax. Specifically, if the tax code were cleaner, and the estate tax harder to avoid, you would have (a) fewer productive people working on tax dodges, (b)fewer distortions based on tax-preffered activities, and (c)fewer rich people able to avoid paying any taxes at all. None of this directly implicates the value of the estate tax, or even the level at which it is set (though, obviously, the higher it is, the harder people work to avoid it).
As to the other two (incentives to gift to kids, and disincentive to work longer), I'm just not convinced that there is a real negative effect. As it is, the rich have pretty good incentives to spend on their kids aside from the estate tax, and I think that's probably a pretty good thing. I'm not sure that the kids less productive use of capital (e.g., GHWB was PBK, GWB received gentleman's C's) is necessarily a bad thing for society. And, as to the older productive worker, I'm not sure I buy that either. We are pretty bad at evaluating merit outside of fairly broad bands, and I suspect that empirically you could find as many older people who hold on to a sinecure (e.g., some tenured professors) as productive older people who would be replaced by less productive people (or whose loss would occassion a productivity loss somewhere along the chain).
In short, I think the estate tax is a pretty good thing (for reasons not mentioned here), and that most discussions should focus on where we set the tax rate and to what level we exclude the estates.
Yes, Kevin, if rich people would just stop being what allowed them to earn riches in the first place, namely, highly effective in executing strategies, then they might be prevented from passing on their assets to their wastrel offspring. Maybe the sky will stop being blue at the same time.
In the real world, a tax which combines relatively high marginal rates with a target group of people who are highly effective in influencing others is doomed to introduce large dislocations and distortions into the economy, large enough to offset the presumable benefits of the tax. This is how the pre 1986 tax code was created,which led to the S and L crisis was created, among other numerous fiascos. Of course, the Bill of Rights could be repealed, thus limiting the ability of wealthy people to influence others, but there may be a few unintended negative effects associated with that as well.
BTW, the estate tax does not start until assets over $675K right now, and is set to go above $1M in 2006. I think it goes up to $2M after that. So if you kick the bucket now, Brad, assuming you have no mortgage left, your heirs would pay no tax on your condo. And if you have, say another $500K in assets, they would only pay $165K in taxes (assuming they are children, not grandchildren). Now, color me crazy but 16.5% on your assets does not sound like a really raw deal. You are now dead and don't need the money much; presumably you have been a good parent and have seen to that your children are educated. One would imagine they can fend for themselves, especially with $835K to split up. If they are incapable, isn't it the libertarian argument that they should be allowed to sink on their own?
I guess I don't understand - why does my dying entitle the state to any share of my belongings?
It seems like the government imposes this tax for the same reason that dogs lick themselves - because they can.
How many times should the same assets be taxed?
But I'm mainly with Jane and the others who note that as long as the tax code allows for shelters, of course those with the most money will find a way to pay the least amount of taxes - because they can pay for the best advice. There is no way of fixing the estate tax without fixing the entire federal tax system. And how likely is that to happen?
Now, Scott, surely you didn't get through two years at the University of Chicago graduate school of business believing that it is possible to create a tax code that is
a) targeted enough to only tax the people we want
b) simple enough that a smart young fellow from Goldman Sachs can't figure out a way to "structure" sufficiently liquid assets around it
And you and I both know that the richer those people are, the more "sufficiently liquid" their assets get. It's not as if the estate tax is particularly loophole-ridden (compared to, say, the laws regulating corporations); much of the structuring consists of perfectly valid and legal things such as giving your money to another person or entity, setting up family-controlled non-profits that can be expected to pay your descendants a salary for serving as chairman, and so on. How would you deal these? Forbid parents to give their children money? Forbid them to set up foundations? Forbid their families from controlling the foundations they set up?
As far as I can see it, any tax with such a heavy marginal rate is going to fall disproportionately on people whose wealth consists of a single, illiquid asset -- exactly the sort of people that we don't, in general, want such taxes to fall on. Given the price of land these days, a family owned small business can easily fit the bill, particularly if you toss in a little life insurance and a modest single family home.
Given the rather large economic drag from estate tax avoidance activities, "eliminate the loopholes", when no workable plan for doing so is proposed, is simply an insufficient answer.
Scott
"but met plenty of these trust fund babies in later institutions. I think it would be fine to tax the hell out of 'em, frankly" - Can you see that is class warfare rhetoric that doesn't add much to the debate at hand?
"Repealing the estate tax is essentially welfare for the rich (their children did nothing to build that wealth, they just did a good job of picking their parents)." It is just a matter of fact that kids get inheritance from their parents unless the parents will it somewhere else. Your message "implies" that you'd be in favor of a 100% death tax otherwise the inheritance at whatever percent is "welfare". You do know what welfare is don't you? It's a transferrance from government not from someone who earned it....
"What happens when the parents of 3 children suddenly make $46K?" Read on for the answer Scott. But first let me say that comments like these point to your newness in the political arena of ideas. The answer: Dick Army's and everyone elses flat tax does not work like that. In your example it would be a 20% tax of $1,000 = $200. Why? $46,000-$45,000 = $1,000 in taxable income. Hope you understand now. It is the ultimate in compromising with people who want fairness and people who want a tax code that fits on a postage card as opposed to 1,000's of pages of tax code.
Un-candidate - You hit the nail on the head. The Paris Hilton's and the Kennedy children of the world will spend the inheritance down and have nothing to show for the WORK and SUCCESS that previous generations came to the table with. It is the darwinism / business cycle of family wealth. Books have been written about the cycle of family wealth and then the bust of future generations...
Some call you Timmy "In short, I think the estate tax is a pretty good thing (for reasons not mentioned here), and that most discussions should focus on where we set the tax rate and to what level we exclude the estates." Yes. Where do we set the rate. Some say 0%. Some want 80%. I kind of feel that making nice is a strategy so setting it at 20%-25% might be a compromise that both sides could live with. But I also sense that liberals would call me somebody that is "for the rich and against the poor". As a liberal would you do that Tim?
Scott - You are correct that the starting point rose from $550,000 to $675,000. There was a point in time where it was $50,000 (that was during WWII). In today's dollars $50,000 would be $15 million. Unfortunately the rate is $675,000 not $15 million and there will be a lot of NY'ers and CA'ers who will be affected by this transfer of wealth. This is why I laugh when I saw Hillary Clinton and Rick Lazio debating and Hillary Clinton was telling the audience that NY pays more to the federal government that it receives in services.... that it is a net loser in the federal picture by many percentage points. I laugh because it's policies that she and her friends advocate that make that happen.
Also Scott. It is sad to see small businesses have to sell or farmers have to sell in order to pay taxes because their father died. You are writing without much "feel" for what really happens in America because of the estate tax. You think it only affects the "dead" person but it isn't true. It just isn't.
Your quote "One would imagine they can fend for themselves, especially with $835K to split up." shows that you think the rich just have money sitting around ready to divy up. Most of the times assets have to be sold (like farms or businesses).
Also the libertarian argument (which you seem to be unaware of) is that government should be 20% the size it is today. Libertarians don't believe that the government should tax so much to begin with. You twisted that to be "well the government can levy a tax and then the libertarian argument is that the family can sink on their own based on that assessment." Did I get your sentiment right?
Estate taxes encourage productive workers to increase the length
of their careers: If I know that I'm going to pay a large amount of
tax on the wealth I'm leaving to my kids, it may take me until 65 to
decide I've accumulated "enough" wealth to retire. If passing that
money on is cheaper, I'll just quit at 60.
It seems to me there are incentives pushing the margin both ways, and
I'm not inclined to see a slam dunk case either way.
Only two classes really dealt with taxes, and neither in extreme depth (Micro and Macroeconomics). We were in the same Micro class; did you really think that one offered a deep treatment of the inefficiencies of all taxes? Huh - maybe if I had studied more.
At any rate, Jane, your point is fair, and one that I have probably used against you in other posts (or will). I will think about it more (or try to google an estate tax plan that gets the CORRECT rich people). (Another potential problem: estate taxing a fairly rich, relatively young family with children under 18 or 21.)
I still struggle with people like Parker above who claim to still have "belongings" after they are dead. What the hell are they using them for then?
Just wait until reincarnation is proven with quantum scale brainwave matches and comparing the lives and appearances of the matches. Then the deceased, especially if they are reborn into their own family, (perhaps as a great great grandchild) will seek restitution of their money from the government with the help of talented eastern lawyers .
To keep the law they'll have to rewrite the law as a tax employed on your wealth whenever you dispose of the body that earned it since 'death' will be a contested term.
But that's probably still a couple of centuries away. Being a lawyer in the future will provide a whole bunch of fascinating scientific and moral quagmires. Of course what else defines lawyers better than individuals with the utmost moral certitude?
;-)
Parents will give the money to their kids while they are still alive, unless they don't trust their kids.
It's a "dysfunctional family" tax.
Estate taxes encourage productive workers to increase the length
of their careers: If I know that I'm going to pay a large amount of
tax on the wealth I'm leaving to my kids, it may take me until 65 to
decide I've accumulated "enough" wealth to retire. If passing that
money on is cheaper, I'll just quit at 60.
It seems to me there are incentives pushing the margin both ways, and
I'm not inclined to see a slam dunk case either way.
Scott
"I still struggle with people like Parker above who claim to still have "belongings" after they are dead. What the hell are they using them for then?" The answer:
1) Creating goods or selling services with the business
2) Creating food
3) Sentimental value is in these assets (like pictures or antiques) and why is it the government's job to rip those things out of Parker's family's hands?
4) It's an investment as stock in a company that is benefitted by having that investment. If and when baby boomers die in mass that'll mean lots of selling of investments to pay the tax - that'll mean a small dip in the economy as corporations don't have that capital anymore for things like a new plant or research and development. That dip in the economy may only translate to 1% but that's more people that have to be on the government dole. Why create that situation? Why not just let people keep their job and then we don't have to rip the money from people to pay them benefits anyway.
By the way, How many times should income be taxed? It's taxed when earned. Then if you spend it it's taxed when spent. If you don't spend it it's taxed when you die which hurts your family more than the person who died.
Estate taxes encourage productive workers to increase the length
of their careers: If I know that I'm going to pay a large amount of
tax on the wealth I'm leaving to my kids, it may take me until 65 to
decide I've accumulated "enough" wealth to retire. If passing that
money on is cheaper, I'll just quit at 60.
It seems to me there are incentives pushing the margin both ways, and
I'm not inclined to see a slam dunk case either way.
oh dear - I reloaded the window a couple of times after posting. sorry about the junk repeats.
I took Erickson's tax class; it was a rich education in just how economically costly it is to try to make rich people and corporations pay their "fair share". Like most people I've seen who studied the matter, he thought that the corporate income tax probably cost the treasury more (in enforcement, tax preparation and planning costs, and deadweight loss) than it garnered in revenue; Gene Sperling, one of Clinton's economic advisors, said that he thought the same was true of the estate tax.
But more broadly, half the money investment banks make comes from telling companies how to a) cook the books so that they appear not to be violating their debt covenants, regulatory restrictions, credit rating agency criteria, and so on or b) avoid taxes. Not that I think the GSB is some unique repository of wisdom, but when you're pitting our classmates against an opposing team of people who weren't skilled or motivated enough to get plucked out of the IRS or the SEC for some more lucrative job, plus the well-meaning but underpaid, overworked, and often not-very-well-versed legislative aids writing tax law, I know who I'm betting on -- particularly when the best hope that the opposing team has of making it to the good life is getting a job with one of the firms they're supposed to be zealously opposing.
Pat -- your calculator's off. After inflation, 50K is about $550K in today's dollars. HOWEVER, keep in mind that in 1943, fewer people owned their own homes, and asset values hadn't been inflated by tax deductible mortgages, so the class of taxable people was probably smaller overall.
Every year a large number of small companies sell to large companies or liquidate to obtain funds to pay the impending estate tax. Thus estate taxes eliminate thousands of jobs every year. Reducing the number of small companies is harmful to the economy and stability of employment.
The Senator from Minnesota (who was on the tax committee) told me that the Treasury gets $20 billion dollars in annual revenue from the estate tax. But the estate tax costs the economy $50 billion in economic disruptions including the cost of legal fees, loss of jobs and the flow of funds into non-productive assets.
More proof that when the left wants to get revenge on the left, the poor are the ones who lose the most.
Sorry Pat, I did not understand your flat tax. That does make more sense, but is still going to seem bad for anyone making below say $70K w/ 3 kids. The relative jump in taxes for each thousand dollars will be very steep after that first $45K. Still would think that you would lose a significant amount of revenue, especially if that replaces payroll taxes as well. However, I still don't agree with it.
Perhaps my arguments are poor, but I am no tyro to political ideas.
I actually could envision the estate tax at 100% for certain portions of the population - inheritance IS welfare for the rich (as are many current tax loopholes, but that's beside the point).
If I understand the libertarian arguments from the pamphlets and web sites I have seen, then it goes something like this: no taxes except use taxes (I have read this from a libertarian party here in Texas), no welfare, no social security, government only to provide defense. So if inheritance IS welfare for the rich, a term which you might debate, wouldn't the libertarians be against it?
I discussed briefly the trustfund babies:
How is that class warfare any different than rich people lamenting that they are being soaked by the poor (which is similar to how Jane begins her argument)? She brought up the rich kids, I did not.
Finally, assuming inflation has been 6% for the past 50 years (it has been lower), $50K from the fifties would now be worth just under $1M. Which would make the exemption in 2006 above the exemption back then.
And I did talk (three times now) about finding a way for small businesses to be exempt (or mostly exempt). Also, if there are $1M in assets, and $165K in taxes why wouldn't they just borrow against the assets to pay the tax if the assets were illiquid?
Jake - what are you talking about? If small businesses sell to larger businesses and jobs are eliminated, shouldn't that have happened anyway? Can you provide a little more backup than the tax costs $50B annually?
Pat, to your latest post, when you die you ARE NOT STILL USING YOUR ASSETS. You are dead. Dead. You really don't need the money anymore. Perhaps the government does not have the best way to use it, but by imposing an estate tax, it encourages you to find the best use for that money before you die. Then when you are dead and again AREN'T USING it any more, it will go where you sent it. (I am talking charity here, not really your kids)
Jane - I didn't use my calculator. I simply quoted figures that I remembered from a January 2004 article at the Heritage Foundation. Seems I got the numbers a little wrong but not that far off.
I remembered wrong the following text within the article "The tax, set up to help finance World War I, had an exemption of $50,000 in 1916, which equals about $11 million in today’s dollars. It reached $14 million in today’s money in 1931 but then began to fall. It bottomed out at $356,000 in 1976 and had grown since, but it still lags substantially behind the growth of wealth."
So... 11 million in today's dollars when setup during WWI. In 1976 that went to $356,000 (whatever the actual amount was doesn't matter) in today's dollars.
Personally, I'd like to see the tax go. But if it doesn't go... will liberals intertain a compromise at 20% over 20 million? I'm not thinking they will.
Jane - did not take Erickson's class (we were in the same micro with Raith= though, weren't we?). I do also wonder about the corporate tax. I could potentially understand an argument that repealed corporate taxes if capital gains and dividend taxes were all rolled into the personal income tax.
But really, the best argument is the rich, because they don't pay the damn thing. Only half the estate tax revenues come from that 1/10th of 1% who are really fabulously wealthy. The rest comes from schmoes who were careful--and too stupid to pay a planner, or keep their wealth in liquid assets. Is that really the sort of thing we want to tax at 55%?
55% is a marginal rate, not flat rate. For someone with a $4M estate, the first $1M exempt the 55% falls only on the balance leaving a tax bill of 1.65M which is 41%. Hefty but not that far from what you would be paying if you happened to *earn* $4M in a particular year.
The tax was not so easy to dodge for the very wealthy. If it was, there would have been no incentive to abolish it. If you had $4M what would it matter if you had to pay $10K to 'plan' to save $1.65M?
I view it as a matter of equity. Why should the tax code treat different sources of income with different rates? If Bill makes $50K by working 40 hours a week as a plumber, Mary makes $50K by trading stocks and earning interest on investments, and Paris makes $50K when a rich relative dies and leaves her it....then in my mind they should all pay the same income tax.
In reality, though, so-called 'free market' types have decided that $50K earned from investing or waiting for your folks to die is somehow better than $50K earned other ways. I never followed this thinking. If you trust the free market then the market doesn't need the tax code's help to promote investment or anything else.
The answer: Dick Army's and everyone elses flat tax does not work like that. In your example it would be a 20% tax of $1,000 = $200. Why? $46,000-$45,000 = $1,000 in taxable income. Hope you understand now. It is the ultimate in compromising with people who want fairness and people who want a tax code that fits on a postage card as opposed to 1,000's of pages of tax code.
Yea well we can just keep the current system and make all the rates a fraction above 0% and achieve nearly the same effect. BTW, flat taxers seem to always ignore the fact that the 1,000's of pages of code are mostly devoted to deciding what is income....not computing the tax on it when you figure it out.
So... 11 million in today's dollars when setup during WWI.
You are forgetting that before the income tax, the Federal gov't relied heavily on tariffs. While they are mostly of trivial interest today, there was a time when the typical poor and middle income person may have paid as much as 20% of their income out in the form of higher prices for needed goods and staples.
Scott - I understand that it is your belief that "inheritance IS welfare for the rich" but many people think welfare is a transfer payment from government to something. Examples;
1) Personal welfare - transfer from government to an individual simply because the person doesn't work.
2) Corporate welfare - transfer from government to a new SF 49ers stadium. (This is wrong also. Whoever wants to take the risk should make that investment not taxpayers)
Transfer of money from parent to children is NOT welfare. The confiscation of that money and the amount of confiscation is the debate.... Libertarians would be opposed to the government confiscating the money in the first place and libertarians understand that inheritance isn't welfare. The premise that you are starting off with to insert a hypothetical libertarian position is incorrect.
Also, who would lend money to a borrower if the borrower planned to use the money to pay taxes? There would be nothing gained. It wouldn't be money used to enhance, invest, or for a capital improvement.
Also, also , you still don't seem to get it about the person dying and that family now has to suffer because people who think like you vote people in who cater to you. That family has to suffer because not only was there a death but now they have to contend to people taking their business and ruining it?
Your quote "when you die you ARE NOT STILL USING YOUR ASSETS. You are dead. Dead." shows the continued lack of understanding. It's not about the dead. It's about the value in removing assets, businesses, farms, and investments from a family (also as if they just had it lying around ready to divy up - many times they do have to sell).
The best way to have the money spent is by keeping it in the economy. The economic value of dollars spent by the private sector is greater than the economic value of the government taking it and spending it. Did you know that? or not?
I tend to buy both the efficiency arguments against the estate tax and the social policy arguments for it, which leads me to think that we'd be better off either treating transfers by gift or inheritance as realization events that would trigger capital gains to the donor/decedent or as taxable income to the recipient. You'd still have valuation issues to fuss with, but moving the issues into the income tax system would still be significant simplification.
"Parents will give the money to their kids while they are still alive, unless they don't trust their kids. "
In France there is a limit how much money parents (and grandparents) can give to their kids precisely to stop this kind of transfer of wealth.
"Inheritance is welfare for the rich" isn't an argument; it's a slogan for your next People's Revolutionary Committee meeting. It's about as accurate as saying that breast milk is welfare for infants (and then assuming Libertarians should be against breast feeding).
As noted above, people only have an estate to be taxed because they earned it, and paid tax on it then. Why should leaving your money to your children at death be treated differently from leaving it a charity or giving it your children when your alive?
As far as I can see it, any tax with such a heavy marginal rate is going to fall disproportionately on people whose wealth consists of a single, illiquid asset -- exactly the sort of people that we don't, in general, want such taxes to fall on. Given the price of land these days, a family owned small business can easily fit the bill, particularly if you toss in a little life insurance and a modest single family home.
Which lead to a long and unsuccessful effort by the GOP to find the mythical 'small businessman' hurt by the estate tax. This is also why there's such a large exemption on estate income....so a $1M business can be passed along with nearly no taxes....which also explains the high marginal rate once you move beyond the exemption (if the rate is 55% and the exemption $1M, a $2M estate is only taxed at a rate of 27.5%...much less than $2M in earned income would be taxed at).
I sympathize with the large, illiquid estate. I'm sure some solution can be found that rectifies that problem if the large exemption doesn't. But Jane, doing so is actually economically inefficient. Allow me to illustrate with an absurd example.
Support your aunt millie owns a dairy farm in Manhatten, next to Trump Tower. Because land is so valuable, this farm is worth $150M but because milk is such a sorry business, it only makes profits of $75K per year. When aunt millie dies, she leaves it to you. Now you would love to keep the business intact but how to pay nearly $75M in estate taxes. Unfortunately, $75K per year is not much of a cash stream to secure a $75M loan. You may have no choice but to sell the farm to Donald Trump who will make it into an office tower earning (let's say) $15M a year (a 10% annual return).
In this extreme case, we can understand Jane's sympathy for the illiquid asset holder but economically that asset would be better off liquidated. Of course, if the dairy farm was making a few million per year in profits it would be a lot less illiquid and Jane could probably find a way to finance the estate taxes while preserving the farm. In either case it's not a bad deal for someone who did nothing but wait for their relative to die.
DaveL, that is exactly how tax on death is treated in Canada. There is a deemed disposition of all assets, with the potential for capital gains taxes to be triggered. There are also limited exemptions, such as for agricultural land being willed to a child or spouse. Of course, our income tax system is explicitly based on EARNED income, with things like lottery and gambling winnings also not taxable, so we're working from a slightly different premise.
As noted above, people only have an estate to be taxed because they earned it, and paid tax on it then. Why should leaving your money to your children at death be treated differently from leaving it a charity or giving it your children when your alive?
Imagine you owned a business and let your daughter work at managing it when you got to be too old. You agreed to pay her by transferring 10% of that ownership per year. Your daughter will pay income tax on that even though you 'earned it' & even if it is difficult for her to raise the cash to pay the tax. If you die 5 years later and leave the balance to your son, then your son will get 50% of the company, having done nothing but paying no tax.
Thanks. I'd heard that Canada did something similar, but don't know any details.
Sean E -
"It's about as accurate as saying that breast milk is welfare for infants (and then assuming Libertarians should be against breast feeding).
This had me busting up laughing. It's what I was trying to say but this is more eloquent. :)
Boonton -
In your example, you acted as the "dictator" who arbitrarily decided that Aunt Millie can't have her son who has worked on the farm for the last 20 years keep the farm. You decided that "economically that asset would be better off liquidated". This is the ultimate definition of big government.
Why is it others peoples "freedom" to choose to "elect" people who will "determine":
1) How much we really "need" to earn.
2) How much we really "need" to pass on to our loved ones.
3) How much of a home we really "need"
4) How much of a car we really "need"
This is the basic difference between a liberal/progressive and conservative/libertarian. Sure taxes should be levied as the constitution requires the federal government to function and perform certain tasks. Conservatives and libertarians believe that the government has overstepped the tasks that were outlined that it should perform. And while doing so, liberal "leaders" keep trying to "earn" votes by telling voters that the rich don't pay enough and make awful class warfare arguments.
I like the topic because it really is illustrative. Thank you Jane for picking this one.
Pat, yes, currently the best way for money to be spent is in the hands of the private sector. But it does not mean that government can't put it there. For instance, taking the money from estates and paying it out as research grants ultimately helps us all.
Transferring the money to the children IS welfare; we can just agree to disagree on that one though (yer wrong). And I guess I don't get it; when you are dead you really get nothing from having more money. You don't. Let me know after you die though.
Plenty of banks will lend you money. If you are really willing to put up $800K in assets to secure a $165K loan, I would give you the money and you could make paper mache of dubya with it for all I care. Go ahead and default; if I can get a quarter on the dollar, I have made my bank $35K. Recently Regal Cinemas issued debt to explicitly use the money to pay out to shareholders. That money wasn't making more theaters or popcorn. Obviously someone was willing to give it to them.
OK, someone has died and the family suffers that loss; they still did not EARN the money. It could potentially do a greater good as a transfer to the government (if it uses it to fund research) or if given to charity directly (rather than say children of the deceased pissing it away on horses or tobacco stocks).
In your example, you acted as the "dictator" who arbitrarily decided that Aunt Millie can't have her son who has worked on the farm for the last 20 years keep the farm. You decided that "economically that asset would be better off liquidated". This is the ultimate definition of big government.
Not so fast here! First, where did the 'dictator' come from? A democratically elected gov't chooses a tax system. How is that dictatorship? Are you aware that the word has a definition?
Second, how is this different than a person who is unable to pay their property tax? A tax lein is created and eventually the person will lose their property to foreclosure after a tax auction. Now because a person dies such an action magically becomes the height of injustice while it's perfect ok when it happens every day to people who are alive?
Third, my statement about economical efficiency is neither big gov't or dictatorship. If you have an asset (land let us say) that is making $75K per year as a dairy farm but it can make $15M as an office building, then it is more efficient for the asset to be turned into the office building. In my example, it isn't the gov't that is doing this but the person who inherits the property. They choose it is in their interest to sell the property to Donald Trump rather than chip in $75M of their own money to keep it going. (OK, maybe they don't have any choice because they don't have $75M to spare but so what? Many people are 'forced' to make certain choices in a free economy because they don't have the money to escape them).
My point was simply that if you wanted to design a tax policy that made it easy for Aunt Millie's heirs to keep the dairy farm going, you do so at the cost of economic growth. This is no different than saying that policies designed to preserve the 'family farm' with subsidies and protectionism do so at the cost of economic efficiency.
It's remarkable how the people who want it repealed wildly exaggerate the effects - 55% on the first dollar!
Yeah, right.
Conservatives and libertarians believe that the government has overstepped the tasks that were outlined that it should perform.
That's a fair argument but not relevant to the issue at hand. If you think the gov't should stop doing X,Y, and Z and lower taxes then go ahead and advocate that. But as long as taxes exist they should be uniform unless there is good cause for them not to be. My thinking is that a person who makes $50K in income from working should be taxed equally with a person who makes $50K from investing or $50K because someone died and gave it to him. If you are going to tell me the person who made $50K because their relative died should be taxed at 0% then I'm going to want to know why I'm taxed when I earn my money! Saying the gov't is too big doesn't cut it! If that's the case then share the tax savings with all 3 types of income earners!
Scott -- interestingly enough, that's about how I think taxes should be structured. An emerging Chicago consensus? ;-)
Boonton - :) Sure if Boonton was elected :) But he wasn't. So in the hypothetical he was a "dictator". :)
Property Taxes - Yes. And they are too high also. That's why in CA you got the tax revolution of Proposition 13. :)
"My point was simply that if you wanted to design a tax policy that made it easy for Aunt Millie's heirs to keep the dairy farm going, you do so at the cost of economic growth. This is no different than saying that policies designed to preserve the 'family farm' with subsidies and protectionism do so at the cost of economic efficiency." We can transfer this thinking to property taxes also. We as big government people can arbitrarily decide that it is at the "cost of economic growth" to not have a high property tax because then old people who bought their homes long ago and are now paying more in property tax then they paid on the house payment have to move because they can't afford the tax anymore. Their moving can be considered by the likes of you to be a positive for the economy because then new owners and developers can come in and own the land.
This is why I tend to love libertarians.... Because conservatives generally only want to see a "slight" decrease in the size of government (yet this hasn't happened in over 50 years and they are called extremists). I like libertarians because they understand how totally OPPRESSIVE government has become and how costly it is and yet progressives/liberals want an even bigger government (health care system, stem cell research provided by the fed, etc. etc.)
So, Scott thinks the government will dispose of my estate in a more useful fashion than I can direct through my will, and will pick out more deserving recipients than I ever could by designating my heirs. It is the governments last chance to force me to be good, after all.
Why do I doubt the ability of government to doe this? Oh, yeah - that pesky history thing.
But, since the government is so wise, why not have them take it all? Indeed, why wait for me to die to confiscate my assets?
But, just to make sure, let's try this on Scott's possessions first.
"A slave is just someone with a 100% tax rate."
And yes, if possible I will come back from the grave to bring this up with Scott personally...
Boonton - your post at at June 14, 2004 04:43 PM totally makes sense. That's why I have advocated a compromise tax at 20%-25% over 20 million. The point is .... this is crucial... ready ... the wealth was accumulated from income that was already taxed. You are advocating a second tax. I understand that it is so-called "income" going to someone else.. but it was income that was taxed already.
We as big government people can arbitrarily decide that it is at the "cost of economic growth" to not have a high property tax because then old people who bought their homes long ago and are now paying more in property tax then they paid on the house payment have to move because they can't afford the tax anymore.
This type of thinking does get transferred to property taxes. In NJ, for example, property taxes tend to be rather high but there are special exemptions for property that is used for farming. The economic effect is that some land that would have been used for commercial or residential use ends up being used for farming not because that makes economic sense but because the property tax savings alters the equation enough to make it worthwhile.
No doubt someone had a sympathetic story of the farmer who couldn't farm because his land was worth 'big city' prices & he couldn't pay the associated property taxes that came with it.... This isn't libertarianism. If property taxes are the way we decide to fund gov't then special exemptions for people we feel sorry for (like farmers) come at the expense of economic efficiency.
My point was simply that Jane's sympathy for the large estate of a illiquid asset may be well meaning but it's not economic efficiency.
Correct me if I am wrong, but the entire social point behind the estate tax is to prevent the formation of trans-generational oligarchies, isn't it? In general, I would agree that the estate tax is not proving very effective in this regard. Various methods of avoidance mentioned by others here can be veiwed as money buying influence (foundations, gifts), and that influence positioning later generations for income opportunities not open to the populace at large.
I don't think anyone here would object too strongly to Bill Gates, Larry Ellison or Warren Buffet being extremely rich, as they started with very little. No one seems to to object to Paris Hilton too much, as she is clearly spending herself out of her position (although possibly not within her own lifetime). Some ire seems to be directed at trust-fund babies, leaving the rest fall on those who simply manage their inherited wealth and position.
I've been toying with an idea for some time in this regard, but haven't seen it mentioned seriously anywhere (although I haven't looked). The biggest difference between the Gates/Hiltons and the trust-fund/managers is the degree of equity change over time.
A small annual levy on total net worth would hardly have dented Gates, Ellison or Buffet when they were building their companies (and doing the most good), and I doubt Paris would even notice it among her other expenses. But it would fall very heavily on both the trust fund babies and those who manage inherited wealth. Equity valuation would remain a huge problem, and the politics of the issue would be explosive, but you could mitigate some of the politics by offerring to scrap the estate tax as part of the package deal.
Has anyone seen any serious discussion of such a scheme, or is there some other problem with it that I have failed to see? I am curious.
The valuation problem seems like a deal killer to me for a wealth tax. It's a huge problem with the estate tax, which is a one-time shot. Doing it every year would be awful.
As far as limiting the influence of accumulate wealth, the estate tax itself may only make a small dent in estates but the foundations it creates are pretty effective. More than a few right-wing commentators have noted that many foundations created by the super-rich of the old days have drifted far from their owners vision. The Ford Foundation, for example, isn't printing & distributing the Protocols of the Eldars of Zion like Henry Ford did....
Jane, I do like your tax plan!
Parker, once I am dead (hopefully not for a long, long time), the government can have what is left. If we set the rate at 100%, but allowed people to will their $$ to charity, then they could find a worthwhile and perhaps more efficient place for their cash.
Yes, the evaluation would be extremely difficult, but perhaps not as difficult as at first glance. People manage to pay property taxes on the residences, which are nearly impossible to value fairly in the absence of an actual sale. As the tax is levied on the assets themselves, not their change in value, there's no leverage (unlike capital gains and corporate taxation). The big problem would be with privately held companies, esp. service-oriented firms, where potential future income determines the value of the asset more than any tangibles.
As an aside, there'd be a very peculiar downward pressure on equities prices, if a market valuation approach were used.
One of the big probalems with the estate tax is trying to evaluate the worth of an asset that hasn't changed hands or otherwise been fairly evaluated in decades. Property taxes get around that by using largely static assessments. The year-to-year evaluation would be simpler than the one-time estate tax evaluations because you'd mostly be filing changes from the prior year. After serveral annual adjustments accumulated into an unreal evaluation, an audit would hopefully straighten the matter back out. I am fairly sure the system would settle into some form of workable equilibrium.
Whether or not it would be a MEANINGFUL equilibrium is a separate issue altogether.
Scott -
And I will defend to the death (well, yours - but to the death!) your right to make that decision about your assets.
I'm still disgruntled about you thinking that either you or the government should be able to make that decision for me, about my assets.
Or if not actually disgruntled, VERY far from being gruntled...
Once you are dead if "the government can have what is left" then I hope that the liquidation of your insurance policy and business and home isn't something that your family wanted or "needed" to survive (even just enough to get through college). The short sightedness continues. :( You keep referring to "the dead one" but it is the family that has to pay this.......
But oh how you'd love to dictate as I can tell by this comment "If we set the rate at 100%, but allowed people to will their $$ to charity, then they could find a worthwhile and perhaps more efficient place for their cash." Geeez. Let your feelings flow. My vote will cancel out yours... Anyone else that'll vote to help us smaller government types win?
Parker,
I tried in a post at 3:10 to help ya.
He has a certain mindset. I wish someone arbitrarily decided that Scott has too much time on his hands and what does he "need" with all that time so that he could be assesed a time tax so that he'd use it more productively or give more of his time to charity. :) :) :)
After a quick review of the Instructions for Form 706, it was clear that the 2003 threshold was $1,000,000 (page 1 - Item B). Also, this will rise in various stages, so if you're at death's door in the calendar 4th quarter, an extra effort to make it to January 1st is well worth the effort.
For those who take the time to study the mechanics of the tax, the real obstacle to collection is the variety of valuation methods. For example, the farm and small business properties only get special treatment if the real estate is more than 50% of the gross estate value. In other words, the working capital to make it useful is what goes to the government. Somebody had to stay up late to come up with that, I'm sure.
And then there is the alternative value dilemma, should the immediate sale of one portion of the portfolio dictate how the entire estate is valued? Once you elect, you have to measure everything again six months after the victim has left the fruited plain. And if you elect, you have to spread it all out on 706 so the IRS can decide what you're trying to get away with. Columns are easy to add.
When it's all said and done, the arbitrary choices made over the years to prop up the logic for the death tax have become the most compelling arguments against it. What's the point of arguing about the reasons for it if the sheer enforcement issues would make the Sons of Liberty gag?
I happen to come from one of those extremely wealthy families who would benefit by the demise of the death tax. My parents earned it, I did not.
We give a great deal to charity. In fact, upon my parent's death, I expect the vast majority to go to charitable foundations.
Nevertheless, one of the things that we do with that wealth is invest in technology start ups.
Today, we fund more than a few young, ambitious programmers, allowing them to live their dreams of starting companies with nothing but a good idea and their programming talent.
We could have funded many more entrepreneurs, except we have to manage our tax liabilities, etc. which requires - are you ready? - not just a staff of lawyers and financial managers, but a consultant whose job it is to audit and oversee the advisors.
Next time you're writing DHTML or Java, think about how fulfilling it would be to get seed money for your start up. Remind yourself that the pagan god of profligate liberalism thinks it has BETTER ways of spending that money. Then get back to work in your cube, my friend.
All I have is personal anecdotal evidence. My family had a small farm in Southern California. Between pickers and packers, at the height of the season we employed 150 people. When my father in law died, we had to liquidate the land to pay the inheritance tax. All of those people are now unemployed.
TLL -
You mean the government did not continue to operate the farm, or substitue equivalent wealth-creating activity?
I'm shocked! Shocked, I say!
And still not gruntled at all...
Sorry Parker, the land was sold to a developer and there are lots of overpriced houses where there used to be acres of oranges. As for what the government did with the money, your guess is as good as mine.
Pat, the dead one is the one who had the money. OK, the family has to pay the tax. BUT THEY did not have money before it was willed to them. They are merely paying tax on income they received without working for it. I am unconvinced that the family members who receive the windfall is worse-off for paying the tax.
Also, we both might need that time tax...
I hope the money is not something my family needed either (used to be a system for taking care of families with dependent children called AFDC - believe that is gone).
TTL, not sure what the status of the orchards finances were prior to the sale. May or may not have been possible to borrow to pay the taxes. However, I will venture to guess that the new homes did provide jobs for 150 or so people, as well as create quite a bit of wealth for the developer.
Jeff, you got a sister? You wouldn't want to get rid of the tax code and put that consultant out of business, would you?
Nevertheless, one of the things that we do with that wealth is invest in technology start ups.
Wasn't one of the reasons behind the tech bubble because there was an excess of capital chasing around too few good ideas?
Also, if someone has gained wealth from investing, then yes, they are definitely contributing a good deal to our economy through the wise choices they are making. But the heir hasn't demonstrated anything.
Personally, I'm not sure what to think yet, but the 100% estate tax idea does sound appealing. Capitalism thrives the most when it has the widest pool of talent to choose from, and rewards people for succeeding, incentivizing them towards thing they do best. Having rich kids opt out of production and arbitrarily given the job of allocating large sums of capital seems like a huge loss for our country.
I'm not saying the government would do better, or claiming there isn't serious flaws with the idea. But realistically, the government wouldn't get the money. Instead, wealthy people would spend down their wealth first. This money would go right back into the economy into goods and services (raising the stakes for those competing for those dollars). This would also address the problem of excess capital -- a problem we still have if there's a real-estate bubble.
In France there is a limit how much money parents (and grandparents) can give to their kids precisely to stop this kind of transfer of wealth.
Posted by Andrew Boucher
There is also, BTW, a lower limit on how much parents can leave their offspring. That is, it is not possible to totally disinherit one's children.
Scott, not to belabor the point, but the 150 people who worked for me did not get the jobs building the houses. The cash flow from the orchard operations were enough to provide a nice living for us, but not enough to carry the debt burden of the estate tax. But don't worry, the balance has been redeployed and were doing fine. But the farm that had been in the family for over 100 years is gone. Partially due to poor financial planning, but also that real estate prices went higher than the value of thelife insurance we had allocated to pay the tax. We probably would have eventually sold out to the developers anyway, but I resent the fact that my hand was forced by this tax.
Our government has an insatiable appetite for revenue. If it moves, tax it. If it doesn't move, tax it. Even if you can't see it or feel it, tax it. Then, when it dies, tax it again.
Government will never give up the multitude of obvious and hidden taxes it levies in favor of a simpler system, because its total take would be far more obvious. It will never give up withholding, for the same reason.
The government wrings its hands about the low savings rate in our economy; but, it taxes savings, making them far less attractive. The message of the estate tax is to spend or give away everything in excess of the exclusion; effectively, use it or lose up to 55% of it.
My conclusion: if it's going to disappear down a rat hole, I am going to pick the rat hole!
There seem to be many words wrangled to little outcome in this thread. The fundamental problems with the estate tax have been given: the extremely wealthy don't pay it, the 'loophole' by which they avoid it is the generally flawed structure of the tax code, and that leaves the middle-class and upper-middle class unfairly shouldering the burden. In that case the ubiquitous inheritance whipping boy, the Obscene Wad of Lucre, does not necessarily apply and the tax can affect the deceased party's assets in ways that arguably have an unnecessary distoritionary impact on the economy.
Furthermore, discussing the value of one's accomplishments strictly in terms of apportionable economic value is perversely offensive. Is everyone here who argues on those lines really so detached from the concept of a "heritage"? Not all who fall into good fortune after an elder's decease are spendthrift floozies wildly distributing their windfalls (and, ironically, returning them into the economy by some semblance of market forces rather than government fiat), and people who have aquired that kind of money most likely did so without paying significant inheritance tax -- see previous.
Where, exactly, is the pragmatic argument for maintaining or attempting to expand the inheritance tax? Maybe there is one, in fact; but I haven't seen it yet. Too much of the pro-tax thought train here, at present, seems to argue either from untenable ideals, or else something vaguely resembling envy. I'm not aware that e.g. Paris Hilton's windfall wealth inhibits me from leading a productive life, but at the same time, if she ever bought a cell phone there is a good chance it was assembled by a company that uses Agilent test and measurement hardware in the manufacturing stage, and the purchase of said hardware helped provide a paycheck to my paternal relation. Funny how an economy unhindered by odious levels of social burden tends to works that way...
As it happens, I work in cellular infrastructure, and on one contract a couple of years ago, I used Agilent test and measurement equipment to help a major national provider upgrade their network in my area, thereby sending money in anony-mouse's general direction. I also have a Kevin Bacon number of three, but that's irrelevant here.
I picked my ancestors poorly enough that the "welfare" I received when my parents passed away was enough to make repairs on my home which made it more livable but did not actually increase its value. My feelings regarding the estate tax are therefore philosophical rather than personal. I think it will be a loss to the entire nation that most of the remaining family businesses going back to before the American Revolution will have to be liquidated when the current generation of owners passes. I also think it was exceptionally ugly, in the 2000 Presidential campaign, that the savings from estate tax reform were represented numerically as benefiting the deceased rather than the heirs.
I'm from the Detroit area. Lots of small tool-and-die shops doing part work for the Big Three there, and my father was one of the GM employees who dealt with them. It's quite common for them to be family buisnesses with millions in capital and millions in cash flow but profits best measured in upper tens or lower hundreds of thousands.
You know what happens when the owner dies and leaves the shop to his son? An estate of $21 million, of which $20 million is the shop and its machine tools and the rest is the family's big home and a few cars, plus a bill for $11.5 million in estate taxes.
Usually, the result is that the shop has to borrow a lot of money and now has to make regular payments on a huge debt burden. (Sure, they often sell the shop -- to a guy who has to borrow the money to buy it.) Generally, the buisness now barely breaks even in good times and loses money in recessions. A good number go bankrupt because of this, and you've just taken a score of $30-$60k/year employees and dumped them out of their jobs.
Meanwhile, while a buisness built by a father around sixty hour weeks on shop floors goes bankrupt as the son works sixty to keep it going, the grandchildren and great-grandchildren of Kennedy and Rockefeller live it up on inherited wealth. Do any of you actually believe a Congress with Edward M. Kennedy and John D. Rockefeller III in it is going to actually pass a loophole-free inheritance tax?
At the very least, the idle rich have the time and the money to court politicians, while the tool-and-die shop owner has neither. Whom do you think any inheritance tax will hit harder?
Jane,
Just curious, how do you know what kinds of taxes your classmates' parents were paying? Is this something trust fund babies discuss at the lunch table?
In my opinion, the estate and gift taxes should be repealed, and inherited property and gifts should be treated as ordinary income to the recipient. Simply add a line to the 1040 for inherited/gifted cash. If it's something other than cash (say, a business, or a Renoir), then the new owner's cost basis would be zero, and any proceeds would be fully taxable if and when the property is sold.
This seems fair and sensible to me. It would be a step toward simplifying our crazyquilt tax code, reduce the cost of tax planning and compliance, and make an end run around all of the "double taxation"/"death tax" objections to the estate tax.
Jane gets one point exactly right. The truly rich don't actually pay the estate tax. Family trusts and charitable trusts mean that a bit of planning magics those assets away from the taxman and allows subsequent generations to enjoy tax free asset growth while still controlling those assets. The existence of those trust fund babes show that it is, at a certain level of wealth, a purely voluntary tax.
There was a great exposition of this on sci.econ (yes, Usenet still exists) which I link to in my post:
http://timworstall.typepad.com/timworstall/2004/06/matthew_yglesia.html
One question: I think the estate tax has been around since the 1960's at least. How much of Joe Kennedy's money have the Feds had since his death?
"In France there is a limit how much money parents (and grandparents) can give to their kids precisely to stop this kind of transfer of wealth."
Does it work, or are there loopholes?
If it works, good for them. I'm not against estate taxes in general. I'm just don't see the point of taxes that don't work.
"If you're going to do something, do it right"
think it will be a loss to the entire nation that most of the remaining family businesses going back to before the American Revolution will have to be liquidated when the current generation of owners passes. I also think it was exceptionally ugly, in the 2000 Presidential campaign, that the savings from estate tax reform were represented numerically as benefiting the deceased rather than the heirs.
Sorry, it appears that I must have hit post too soon. I intended to reply to the above quote but I lost my post...
"In France there is a limit how much money parents (and grandparents) can give to their kids precisely to stop this kind of transfer of wealth."
In France there is also stagnant growth and high unemployment.
The idea that estates are like income to the recipient is absurd. It was income to the person who EARNED it, but once it is earned, it should be theirs to keep and do with as they please. If you want to tax estates at 55% or 100%, you should also want to tax at the same rate private school tuition, SAT prep classes, summer camps and everything else these "trust fund babies" get from their parents that some other kids don't. (Maybe we should give every kid an IQ test and levy a special tax on those that inherited good genes too?)
Also, the idea that eliminating the estate tax will lead to an aristocracy is equally absurd. There seems to be wide agreement that the estate tax in its current form doesn't really tax most estates, yet there doesn't seem to be a lot of "trust fund babies" when compared to overall wealth in the country. This was in a WSJ article today: "A 2002 study by Capgemini found that more than half of the high-net-worth individuals in the U.S. were "new money," or self-made millionaires. Inherited money is declining as a share of wealth in the U.S., according to the study, accounting for less than 20% of high-net-worth individuals in 2002."
Finally, the wealthy already bear a disproportionate burden when it comes to taxes. Currently, about half of the population pays over 95% of all federal income taxes yet they earn no where close to 95% of the income. Once the other 50% of the population that pays basically no income tax starts paying their share (which will never happen), then we can consider estate taxes but until then the estate tax should be eliminated.
I really doubt that the estate tax will be repealed anytime soon. Many of the folks who call themselves "progressives" have a blind and unshakeable belief that redistribution of the wealth is in itself fundamentally good. Its not a means to an end so much as an end in itself. Trying to disabuse them of this notion by reason and evidence is futile. Its like trying to convince the Pope that God does not exist.
The idea that estates are like income to the recipient is absurd. It was income to the person who EARNED it, but once it is earned, it should be theirs to keep and do with as they please.
Those who EARNED it are free to do what they please. What you should not be allowed to do is receive income tax free while people who earn their income are taxed. Go back to my example of the business owner who let's his son work at the company and 'pays' him by giving him an ownership share each year. The son would have to pay income tax on this each year since it is earned income. The other son who just waits for the father to die and inherits the balance pays zero tax even though it is as much income to him as it is to the first son.
I really doubt that the estate tax will be repealed anytime soon. Many of the folks who call themselves "progressives" have a blind
Talk about blind, the estate tax was repealed in Bush's tax cut. The repeal phases it out so it will be entirely gone by 2009 or 2010 (I think 2010). Like all of Bush's tax cuts, it has a sunset provision that returns everything to the original status quo after 2010 (or maybe 2011, check with your accountant before killing off any rich relatives).
Talk about blind, the estate tax was repealed in Bush's tax cut. The repeal phases it out so it will be entirely gone by 2009 or 2010 (I think 2010). Like all of Bush's tax cuts, it has a sunset provision that returns everything to the original status quo after 2010 (or maybe 2011, check with your accountant before killing off any rich relatives).
Then its not really gone, is it? Its just been hit with a tranquilizer dart. The very fact that the proponents had to include a sunset provision in order to get it passed tends, in my humble slanted view, to reinforce what I said earlier.
There is a strain of thinking that does consider redistribution of the wealth as an axiomatic good, which is not subject to refutation or dispute, and this view is held by many of the folks who "serve us" in our government.
tcobb has really hit the nail on the head. There are certain liberals (Kennedy and Kerry and their ilk)who really truly think that people exist to serve the government and not the other way around. Income redistribution via the estate tax helps them fuel their desired class warfare and it keeps a certain % of the population who are dependant on their government handouts voting for them.
Then its not really gone, is it? Its just been hit with a tranquilizer dart. The very fact that the proponents had to include a sunset provision in order to get it passed tends, in my humble slanted view, to reinforce what I said earlier.
Actually the reason it included a sunset provision was so Bush could claim his tax cuts would not create unmanagable deficits. The CBO has to project deficits based on current law and not make assumptions about likely policy changes in the future. Few people expect the sunset clause to be triggered.
tcobb has really hit the nail on the head. There are certain liberals (Kennedy and Kerry and their ilk)who really truly think that people exist to serve the government and not the other way around. Income redistribution via the estate tax helps them fuel their desired class warfare and it keeps a certain % of the population who are dependant on their government handouts voting for them.
yea yea, aren't you with the same group that is saying the estate tax doesn't hit the rich? or that it doesn't raise much money? You can't have it both ways, if the estate tax is so trivial among taxes then how is it funding all this income redistribution?
One could say that the move by Republicans to abolish taxation on inherited income & capital gains plays perfectly to their sterotype. Everyone who makes their income thru working gets taxed under the Republicans. Everyone who makes their money playing the stock market or waiting for rich relatives to die doesn't get taxed :)
No politician will make this argument but we have stumbled upon a pretty good argument for the estate tax on this list; the estate tax frees up capital in the economy. The orange tree farm is a perfect example. Here you had old capital locked down in an activity that was not as productive as a housing development (if this wasn't the case, the developer Tassled Loafered Leech sold out to would have kept growing oranges on the land). The estate tax pushed the new owners to sell the capital to an investor who was willing to make it more productive.
Ohhh ho! You Cry! How dare I suggest the gov't tax people to improve the economy?! Guess what friends, that is what you are advocating when you demand lower taxes for 'savings', capital gains, 401K's etc. The argument there is that those things improve the economy therefore they should be taxed at a lower rate (or not taxed at all).
Well, that's all well and good except for the person who doesn't want to save, wants to make his money working a 9-5 job and then spend it all on the weekend. He gets taxed because you statists types happen to think the economy and him would be better off if he saved a bit more! So much for personal freedom....
What's that phrase from the Bible? Pluck out the beam in your own eye....?
TR thought the estate tax would provide turnover among the wealthiest, thereby preventing the appearance of a permanent aristocracy of wealth.
In fact, it has the opposite effect.
There is a limit to how much one can spend without buying assets whose value remains or increases.
See the movie "Brewster's Millions" for a comic treatment of the difficulty of spending large amounts of money and having nothing to show for it.
If a person takes ten mill from the bank and buys a house with it, his total assets have not changed.
Food, partying, travel, and other upkeep which is consumed and disappears, take an increasingly smaller portion of estates as the estates get larger. Eventually, you'd have to run thousand-dollar bills through the shredder to keep the estate from growing, no matter how wildly you party.
Those who are up-and-comers are in no way in the same situation. Splitting an estate of three million three ways means three kids get a mill, probably when they're in their sixties. If they each lose, say, a quarter to Uncle Sugar, they're going to have $750k each, yielding maybe $45,000 a year. It is unlikely to grow by much before their death, upon which each of their kids get $250k each.
On the other hand, consider an estate of $25,000,000 losing half to Uncle, and leaving, say, $8 mill to each of three kids. That will generate maybe $400,000 annually. If any kid is so imprudent as to buy, say, jewelry after all the food and booze he or she can pack away, it's not consumed. It's part of the estate. That $8 mill will grow, and at 3% net after expenditures of consumables, will double in 24 years.
The estate tax, then, keeps the near-rich on the outside.
No turnover because of estate tax, although other factors may apply.
So TR's primary goal is gone.
Revenue is minimal, and, as some have noted, probably negative after the shucking and jiving that goes on to avoid estate tax.
That leaves the strongest reasons, envy and resentment. You'll note how fast Kevin Drum hopped on that one.
Crap. You know what they say about preview.
I meant, in the above, an estate of $50 mill, the two-bits mentioned is what is left over after taxes.
I used $50 mill for no reason but that a tabloid headlined a few years ago that that's what the Kennedy who crashed his airplane left.
Revenue is not really minimal. If it was then there would be no real movement to repeal the estate tax and no industry to avoide it. After all, if the total savings was so small why bother hiring accountants & lobbyists?
What's interesting is that the tax seems to encourage the turnover of capital. The very rich are often quite liquid and can cash in stocks, bonds etc. to pay off an estate tax bill. This was also the idea behind cutting the capital gains taxes....someone sitting on an asset (like land that is currently used for oranges) would be encouraged to sell and take their profits. The capital (or land) would then be 'freed up' in the economy to find its most productive use.
It's hard to say the rich are or are not turning over. As the economy grows, there are more rich people & capital turnover almost certainly opens up more potential slots among the rich by increasing wealth in general. IMO, the best argument for the estate tax is that income should not be exempt from taxation unless you are willing to bite the bullet and advocate replacing all income taxes with something else.
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Boonton -
the estate tax frees up capital in the economy. The exact opposite happens.... When people have to sell assets, businesses, investments to give to the government capital is divested to give to the least efficient distributor of capital. If the money was just left to the children, the business would be intact, the investment to the corporations would be intact (for the corporation to do with that capital what it wishes), the farm would be intact, the family heirlooms would continue to be in the family, the liquid assets would be spent by the children.
The children spending the money on whatever, does far greater good for the economy then the government subsidizing whatever it shouldn't be subsidizing (usually the government subsidizes things that wouldn't survive in the market place or laziness or art that nobody wants etc etc.
I wasn't talking about schools and libraries and the firefighters for a reason. The states do not collect on the estate tax. The states provide these things without this "death of your family member" tax.
Ohhh ho! You Cry! How dare I suggest the gov't tax people to improve the economy?! Basic Economics (Economics 101) is the key here. The act of taxation by the government puts a DRAG on the economy, it doesn't improve the economy. There are certain government programs that can provide some benefit to the economy like 1) the protection of the nation helps the economy 2) the assurance of a justice system that works 3) certain rules and regulations (the simpler the better) that guide commerce 4) spending on productivity not laziness (for example DOD research) 5) education of all the school kids.
But those benefits (if you add up the cost of those programs) and services provided by the government do not come close to the extreme drain on the economy by the amount of taxation to fund all of the programs that the government SHOULDN'T be spending money on. YES, So how dare you say it? It's fine if you say it but it points out that you don't understand economics 101. When you take money from the private sector to fund the public sector that is removing money from people and corporations. When you do that there is less money for the people and corporations to spend to improve, hire people, research, give raises, spend money on home improvements, spend money on whatever.
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Hope you learned. :) :)
Boonton
Here's another way to look at it....
If the government taxing people improved the economy as you suggested, then how come the government doesn't just tax us at the rate of 100%?
Because nobody would want to work only to provide that income to the government and then hope the government gives them back 50cents to the dollar in services.
Obviously the government needs to provide services so it has to tax something. In past posts, references have been made to Lauffer's curve. It is the graph or understanding that there is a certain percentage point at which the government can take in the MOST revenue. After that point the tax is so onerous that the government actually takes in LESS revenue even though the percent of tax is increased. This applies to all taxes like: 1) luxury tax 2) income tax 3) death (estate) tax 4) property tax etc.
But another understanding of taxes is that as one tries to ratchet up that percentage scale of taxation on the people or corporations, the more you do so the more of a drag on the economy. This is indisputable.
Scott also seems to not understand this. He seems to come from the perspective that all money is the governments and that any money that is passed on to children is "welfare".
Boonton, call me a doctrinaire free-marketeer, but I'm not really buying the argument that taxing capital at a 55% flat rate is somehow good for capital deployment. Yes, you've caused the Tassled Loafer Leech to relinquish his family farm to the higher service of California's upper middle class. The same tax, however, is taking 55% out of other people's assets and giving it to the government -- thus reducing the overall pool of capital. As Pat in CA has pointed out, if this were such a marvelous idea, we could unleash a whirlwind of economic activity by taxing everyone on their assets once a year. What you would get, of course, is people declining to save, because you've reduced the return on savings--something that is presumably already occuring now, as seniors opt to consume their wealth rather than pass on 45% of its value to their heirs.
Lowering the overall level of savings and investment is not generally thought to be a winning strategy for improving your economy's performance.
If the government taxing people improved the economy as you suggested, then how come the government doesn't just tax us at the rate of 100%?
If all taxation is a drag then why not tax at 0% and let those 'needed' services be financed thru debt? Because, in theory, there is an optimal tax rate where drag from taxation is minimized AND drag from inflationary deficits are also minimized.
the estate tax frees up capital in the economy. The exact opposite happens.... When people have to sell assets, businesses, investments to give to the government capital is divested to give to the least efficient distributor of capital.
In the examples given, people are not giving the gov't capital. Rarely does the gov't directly aquire capital (mainly in cases of tax leins and seizures). In the examples cited, capital (meaning goods used in the production of goods & services) was sold to investors in order to pay the estate tax....which functions in the examples as very similar to an income tax. In my hypothetical, Aunt Millie's heirs sold her dairy farm to Donald Trump who converts it into an office building. In the RL example, land that was used for growing oranges was sold to a developer who built luxury homes. In both cases we see capital going from one agent who was using it to generate a sub-optimal return to another agent who used to to maximize the return.
Yes taxation is a drag but only in the sense that all taxation is a drag on the economy. Creating a special exemption from taxation is an additional drag, though. Consider the consequences of taxing income but NOT taxing estates (at least up to the $1M+ figure). Instead of passing on family businesses during their lifetime to their kids (which would generate taxable income for th kids), the incentive is for the founder to hold onto the business no matter how old and senile he becomes. Clearly there must be some economic cost to this perverse incentive! How many family businesses would be better run if they were gradually transitioned to the next generation rather than letting the kids wait for an orgy of wealth to hit them tax free once grandpa kicks the can!
The idea that estates are like income to the recipient is absurd. It was income to the person who EARNED it, but once it is earned, it should be theirs to keep and do with as they please. If you want to tax estates at 55% or 100%, you should also want to tax at the same rate private school tuition, SAT prep classes, summer camps and everything else these "trust fund babies" get from their parents that some other kids don't. (Maybe we should give every kid an IQ test and levy a special tax on those that inherited good genes too?) - wtf
wtf, while I agree with the spirit of your arguments (lower taxes, more economic freedom), I disagree with your semantics. I don't think my classification of inherited property as income was absurd at all. Calling it compensation would be absurd, but I think anything that comes into one's possesion - earned or not - can properly be classified as income. If not, then I guess we could make up a new word for it, like 'flookus', and tax 'flookus' rather than income.
Also, stating that anything earned should always be the earners' to keep and do with as they please, is not merely an argument against the estate tax, but against any tax at all. Which is fine, if that's your position.
Not being an anarcho-capitalist, I do believe some government is necessary. If there is to be a government, it needs to be funded somehow. I would favor a low flat rate on all income, including property that is gifted, inherited, won, or found. Given a choice between a) taxing the fruits of labor/intelligence/investment at (say) 18%, and the fruits of luck at 0%; or b) taxing everything at a lower rate that yielded the same total revenue, I would choose b every time.
Of course, I'm not in favor of any of the ideas you put forth in reductio ad absurdum mode (taxing high IQ's etc.). As mentioned, I agree with you in spirit.
Boonton
If all taxation is a drag then why not tax at 0% and let those 'needed' services be financed thru debt? Because, in theory, there is an optimal tax rate where drag from taxation is minimized AND drag from inflationary deficits are also minimized.
Nobody is suggesting that the government only operate through debt (not even the libertarians who want 20% of the government currently). That wouldn't be sound economically either.
It is simply the realization that services need to be provided (or you have anarchy and a nation that isn't protected) and that some taxation is necessary. But the philosophy that you are espousing (and many other liberals) that taxation is good for the economy or that the government know best what to do with money, or that it is the government's money and anything we keep is a handout is simply not up for debate. It can be an opinion of yours but it is either factually inaccurate or can be proven to be an opinion without basis.
Also, a family being forced to sell a family business just because a family member died is simply unjust. You can call it "income" again, but it simply was already income and taxed already as income and then the fact that someone died means you as a government bean counter can declare it income to someone else again.
I really sypathize with those who want the estate tax to be "axed". But I also am a realist who thinks that there probably should be a compromise of a 20% tax over 20 million in assets or something like that. This way people in NY and CA won't be hit just for having a house and some savings (they'd go over the $675,000 limit quickly) and people like Hillary during debates won't be saying stuff about how NY doesn't get it's fair federal share (only because of policies that she advocates that try to soak the rich - and hit NYer's and CA'ers harder than TX'ers.)
But as I've asked and haven't gotten a response... I'm pretty sure the liberals wouldn't go for a compromise like that. Am I right?
It is simply the realization that services need to be provided (or you have anarchy and a nation that isn't protected) and that some taxation is necessary. But the philosophy that you are espousing (and many other liberals) that taxation is good for the economy or that the government know best what to do with money, or that it is the government's money and anything we keep is a handout is simply not up for debate. It can be an opinion of yours but it is either factually inaccurate or can be proven to be an opinion without basis.
These assertions of yours are factually inaccurate. I never stated that everything is 'the gov't's money' or that taxation in itself was good for the economy. I stated that distortions in the tax system are a drag for the economy and limiting those distortions is good for the economy.
Also, a family being forced to sell a family business just because a family member died is simply unjust. You can call it "income" again, but it simply was already income and taxed already as income and then the fact that someone died means you as a government bean counter can declare it income to someone else again.
Now you are just being dishonest. If I handed you a $10M business, are you going to tell me that wouldn't be income to you? Remember, just because you put a word in quotation marks doesn't change the fact that it has a real definition!
The family forced to sell the family business is indeed sad but it is no more unjust than the family forced to sell because they have medical bills to pay, or the family forced to sell a huge house because they can't pay the property taxes, or a million other stories in the economy. I'm not convinced that getting $10M for a price of $5M is all that sad or unjust.
But I also am a realist who thinks that there probably should be a compromise of a 20% tax over 20 million in assets or something like that.
I would too. If you inherit an estate it should be taxable income to you. In cases of illiquid 'family businesses' perhaps allow that tax to be deferred for a long period of time with a minimal interest rate.
Boonton
Checkmate!
Your quote, "Ohhh ho! You Cry! How dare I suggest the gov't tax people to improve the economy?! says exactly what you thought doesn't it?
Your quote, "If I handed you a $10M business, simply misunderstands a family busines having to be sold because a family member dying triggered a taxable event.
Your quote, "getting $10M for a price of $5M is acting like the family is "getting $10 million" not "keeping" $10 million. It is a matter of perspective. It seems that your perspective is that it's the governments money and anything a family keeps is something they are "getting".
My perspective is that it probably isn't too healthy (creates mad citizens) if you have the government in effect ripping houses, farms, businesses, heirlooms out of a family's hands at the time of a family member's death. An uncle, cousin, daughter or whomever may have worked in the business for a long time and it may have been willed to the daughter, cousin, uncle to have the business but oh no... people who hate the "rich" or anyone who has a dollar more than them want to redistribute that saved "after tax income" and call it income again even though it never left the family.
I'm not sure if you gave a positive answer to the compromise solution. Is it a compromise that you could live with? I know that there are people on both sides of the argument that wouldn't like the compromise.... I'm just trying to get the liberals here to state their opinion. And how about conservatives or libertarians? Would a 20% over 20 million estate tax work?
1. 'Families' don't get estates, individuals do. When a lot of money (or even a little) is involved, it often becomes quite clear that the 'family' is hardly a unified unit. So to return to a simple example. Aunt Millie has a $100M dairy farm next to Trump Tower in Manhatten. Her 45 yr old son, Tommy Ingrate, is in line to inherit it. I don't consider it a tragedy that Tommy Ingrate only gets a $45M estate. I'll agree the taxation should be a bit closer to normal income taxes...in which case he would have maybe $60M after taxes. Your position appears to be that Tommy Ingrate should get $100M in income free of taxation....while the person who actually earns $100M would only get to keep $60M or so.
I suppose my use of the word 'get' may imply an element of randomness but that is mostly accurate. A rich relative dying and leaving you money is one of those Monopoly(tm) Chance events. Tommy Ingrate didn't earn that $100M or $45M. Aunt Millie has already paid her taxes so she is free to do whatever she wants with her $100M. But if Aunt Millie decides to spend $1000 on a fancy dinner should the waitress, cook and owner not pay income taxes on their earnings for the evening?
Your quote, "Ohhh ho! You Cry! How dare I suggest the gov't tax people to improve the economy?! says exactly what you thought doesn't it?
It does but it says less than what you're trying to make it into. Taxing income from wages & investments but not inheritance is a distortion in the economy. Eliminating the exemption for inheritance would reduce that distortion. Of course, if some good fortune made it so that taxes were unnecessary for the gov't then there is no special need for an estate tax (well, I'll say the 'social engineering' arguments about wealth concentration etc. are just weaker than my arguments).
My perspective is that it probably isn't too healthy (creates mad citizens) if you have the government in effect ripping houses, farms, businesses, heirlooms out of a family's hands at the time of a family member's death.
That's all well and good but let's call a spade a spade. You are distorting the economy for emotional reasons. That is no different than subsidies and protectionism to protect the all great 'farmer' because of Jeffersonian romanticism.
The whole purpose of the large exemption ($1M and growing) is to prevent just what you describe. Like most distortions, though, it leads to other ones. To 'make up' for the large exemption the tax rate is very high once you cross the mark. This is trivial for small estates but not huge ones.
With a $1M exemption and 55% rate, a $2M estate is taxed $550K, which is a 27.5% average rate. Pretty good compared to what income taxes would be on $2M.
The law already addresses your 'we have to sell great grandma's diamond ring from the Titanic because we can't afford the estate tax!' scenero. My solution would be to simply treat inheritance as income and let it be taxed as any other income would. In cases of a large, very illiquid asset like a family business let that tax be either bundled with the asset (so the debt can be sold off & paid later along with the business) or somehow deferred for a long period with a marginal interest rate.
But at some point there's a limit. It's one thing to overlook grandma's diamond ring as being income to the granddaughter....it's another to overlook her 'collection' of $100 bills! :)
Why should heirs have to pay anything? Boonton, you act like we should be thankful that the government lets us keep anything at all. In fact, the government should be greatful that it gets anything. If I work my entire life, save, and invest I want to enjoy the fruits of my labor and I want to give my children (or whomever I desire) every advantage I can. I don't want to fund some politician's pet project. And not everyone will have parents that pass wealth down. Life isn't fair, liberals need to accept that. Also Boonton, you commented on the negative effects of distortions within the tax code. I actually agree with you on that count to an extent. That is why income taxes should either be flat with no deductions or exemptions or they should be eliminated and federal revenues should come from national sales taxes.
Hi Jane,
You know what I find sad? That a comment on money draws 70 more comments than one on torture or many other valid topics you've brought up.
If America has one flaw it is that the masses are fixated on money. It's understandable...well up to a certain extent, but it's still a sad testament to the general materialistic bend of the American twig and the crooked branch that is has formed.
Jane, I suspect your blog would become ever more popular if you just limited yourself to money matters...and perhaps become the Emily Post/Dear Abby of the financial section.
Money is something folks can understand. They can sink their teeth into it grab after it and they can obsess about it. You've got the right color combination - now you just need to throw a few denomintions around like they do at the Protocols of the Yuppies of Zion. (If you see a Hollywood banner just click 'home' and let it refresh for Andrew Jackson's peepers)
That's clearly the first class ticket. And if you don't do it - well, heck, I was thinking of redecorating my own blog in Franklin green and Fort Knox gold.
;-)
SDAI-Tech1
(speaker for the masses collective unconscious)
Why should heirs have to pay anything?
Because heirs are aquiring income & our tax system is based on income taxation. I keep saying this but you seem stunned that in an income tax system, people who get income pay taxes on it. You seem to think that if you put the word 'income' in ' marks it magically becomes something else.
If I work my entire life, save, and invest I want to enjoy the fruits of my labor and I want to give my children (or whomever I desire) every advantage I can. I don't want to fund some politician's pet project.
Don't worry, you can do what you want with your after tax money. When you 'give' your children money (children here are usually grown adults), they are receiving income. And income is taxed. How about the person that wants to give their children every advantage by giving them a job? You seem quite happy that they have to pay taxes on the wages they pay their kids as well as their kids paying taxes for their wages!
That is why income taxes should either be flat with no deductions or exemptions or they should be eliminated and federal revenues should come from national sales taxes.
Go ahead, but remember that means estate income would be taxed without exemption as well. If a dirt poor person inherits a $10K diamond ring she will have to either sell it or find some other way to come up with $2K (assuming a 20% flat tax) to pay your flat income tax. Replacing income taxes with a national sales tax is another topic in itself which deserves its own thread, IMO. I will agree with you that if we decide a national sales tax should totally replace the income tax then we might as well ditch the estate tax.
SDAI Tech - It's not that anyone is fixated on "money"... Here's my take... People all agree that "torture" is wrong. There is nothing to debate about. But people do have disagreements on who should be taxed what or other "solution proposals". What gets people riled up when talking about torture is the "idiots" (don't mind if I call them that) who want to blame Bush or Rumsfeld or call for them to resign because of a few "idiots" (don't mind if I call them that either) who staked Iraqi's in pyramids or maybe worse.
Here's a slam dunk article I agree with but I'd still be willing to vote for a compromise solution. Would liberals be interested in compromising? Or will they stay extreme? :)
Another reason for the fixation on money is the fact that money is symbolic of value - as George Carlin once remarked - "The whole revolution is about values, man - what you'll do for ten dollars, what you'll do with ten dollars..."
While not everything can/should be reduced to dollars, the fact that money has this symbolic value, and is the nearest thing we have to a universal symbol of value (however flawed) makes it a magnet for discussions about values of all kinds.
Here, how you view and value the concept of property rights is coming into play - which goes beyond money, but is mostly discussed in terms of money.
I remember surprising myself in thinking that money was perhaps more spiritual in nature than it is tangible or intellectual - and that currency itself is nearly devoid of inherent value.
Boonton, you are correct income does have a definition.
income: The amount of money or its equivalent received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.
Too bad this isn't the definition you appear to think it is.
Inheritence is a transfer of wealth it isn't income.
SDAI-Tech1 wrote:
You know what I find sad? That a comment on money draws 70 more comments than one on torture or many other valid topics you've brought up.
Actually what’s really sad are people who post comments on a thread about the estate tax (but don’t post comments on a thread about torture) just to criticize others for doing the same.
;)
'Families' don't get estates, individuals do. When a lot of money (or even a little) is involved...[SNIP]...position appears to be that Tommy Ingrate should get $100M in income free of taxation....while the person who actually e