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Sessions' bill would end estate tax

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alabama

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Sessions' bill would end estate tax

This should help the family farm stay around.

By Alexis Grant
Gannett News Service



SESSIONS
WASHINGTON -- Sen. Jeff Sessions, calling the federal tax on inheritances "Draconian" and "simply unfair," introduced legislation Tuesday that would immediately repeal the tax.

"The death tax falls on small and medium-sized companies particularly hard," the Republican senator said. "We need to fight to bring this up for a vote."

The estate tax, paid by the estates of the richest 2 percent of Americans after they die, generated about $24 billion for the federal government last year, according to the Internal Revenue Service. The estates of about 73,000 deceased Americans paid the bill.

Under a 2001 law, the tax is being gradually phased out until 2010, when it will cease to exist for one year. It will return in 2011 unless Congress passes a law to abolish it permanently.

The House has passed legislation to permanently repeal the estate tax starting in 2010. Sen. Jon Kyl, R-Ariz., introduced an equivalent bill in the Senate in February.

Under Sessions' bill, the tax would be abolished now. Sessions said the tax hurts family businesses and encourages dishonest tax practices,

Gary Palmer, president of the Alabama Policy Institute, a conservative think tank, said the tax punishes people for being successful.

"It's a huge impediment to the economy in terms of the expanse of small business," Palmer said. "There are people out there right now that aren't going to live until 2010. Why wait?"

Under the law passed in 2001, the amount of an estate that is exempt from the tax increases each year while the tax rate decreases.

This year, estates worth up to $1.5 million are exempt, and the tax rate is 47 percent. By 2009, estates worth up to $3.5 million will be exempt and the tax rate will have fallen to 45 percent.

But in 2011, after the tax disappears for a year, estates worth more than $1 million will be subject to the tax and the rate will be 55 percent.

Some say the tax, which was created in 1916 to prevent wealth from accumulating in the hands of a few Americans, should be reformed, not repealed.

Joel Friedman, a senior fellow at the left-leaning Center on Budget and Policy Priorities, advocates keeping the tax but making estates worth up to $3.5 million exempt.

"It's a progressive tax and it encourages a lot of charitable contributions," Friedman said.

And he said eliminating the tax would create "a hole in the budget that has to be plugged someplace," likely by middle- and lower-income Americans.

The Joint Committee on Taxation estimated that continuing to phase out the estate tax and abolishing it in 2010, would cost the government $290 billion over the next 10 years.

But supporters of proposals to eliminate the tax say abolishing it would generate more revenue than the estate tax generates now, as long as heirs are required to pay capital gains taxes on any portion of an inheritance they sell. That provision is included in the bills introduced by Sessions and Kyl.

The capital gains taxes would be based on the appreciation in the estate's value over all the years it existed. Currently, heirs who sell part of an inheritance to pay the estate tax do not have to pay capital gains taxes on the rest of the estate.

A study by CONSAD Research Corporation in Pittsburgh says the change would bring in $38 billion more over 10 years than the estate tax will earn.

The study was sponsored by the American Family Business Institute. Executive Director Dick Patten says the group exists solely to kill the estate tax.

"This tax pulls the capital out of family businesses," Patten said, adding that small businesses often face debt or have to sell after a death. "It's like we have to buy our business back from the government."
 

rancher

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This is one you had better make sure what you wish for is what you want. I say up the exemption and keep the tax, capital gains taxes will hurt you more.
 

SDSteve

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rancher said:
This is one you had better make sure what you wish for is what you want. I say up the exemption and keep the tax, capital gains taxes will hurt you more.
I agree set the exemption at ten million and adjust it for inflation each year will do the farmers and ranchers more good.
 

mrj

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A few of my observations and questions on the Death Tax dilemma.

What about the morality of re-taxing what the families, especially those in the business of agriculture, inheriting the estate already have paid taxes on over and over again?

Wouldn't it be better for business, families, and even the economy, if the attorneys, accountants and others making big money off the necessary estate planning would spend their time on activities producing something of value, other than just protecting what the families own?

I've read that the cost of collection of this tax is extremely high, maybe 65% or more of the income from the tax. Does anyone know if that is correct? If so, it is obscene, IMO.

The agriculture segment of the population gets hit harder with this than other businesses.

Proponents of this tax promote and use envy and class enmity, turning those who do not achieve wealth against those who do.

The theme of this tax is to punish success and reward failure.

Proponents tell us this tax affects only the very few extremely wealthy families in the USA. I know that is not true! So just how many of the top twenty wealthiest families in the USA have paid any Death tax over their past three generations to die?

Some points to think about.

MRJ
 

rancher

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MRJ, if your sons inherit your ranch and then down the road want out for some reason such as health or etc. they will lose it to capital gains. Talk to your accountant and see what will hurt them worse.
 

Cal

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rancher said:
MRJ, if your sons inherit your ranch and then down the road want out for some reason such as health or etc. they will lose it to capital gains. Talk to your accountant and see what will hurt them worse.

Capital Gains can be deferred by reinvesting in like properties, at least it's avoidable albeit undesirable. Inheritance tax leaves no such choices. What makes it "right" to choose a number that should be exempted while larger estates confiscated? Typical liberal class envy.
 

rancher

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The key is like properties, if your kids decide they don't want to ranch they lose it. I agree that it is damned if you do and damned if you don't.
 

alabama

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Rancher: Could the kid that wanted out take the one time capital gains tax exemption? This would get him out with no death tax and no capital gains tax.
 

mrj

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rancher said:
MRJ, if your sons inherit your ranch and then down the road want out for some reason such as health or etc. they will lose it to capital gains. Talk to your accountant and see what will hurt them worse.

rancher, What we really need, of course, is a total tax overhaul.

How much "Death Tax" do the truly top end of the wealthy people actually pay? I seriously doubt that it is much. They have staffs of attorneys to make sure of that, while most of us are very hard pressed to pay for adequate professional estate planning advice and implementation.

I also have a problem with the extremely high cost of collection of Inheritance taxes. If the structure for collections is eliminated along with the tax, I doubt the shortfall in the income to the government will be very high. The fact that so much more money will be put into savings and investments and businesses will probably generate more income taxes than any shortfall created by eliminating the death tax, IMO, of course.

MRJ
 

Cowpuncher

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As long as the government spends all the revenue that it takes in plus a whole lot more, where do you want them to get the money they are going to lose.

I don't want to have them tax me either, but the problem is that both republicans and democrats lose their heads when appropriating money they don't have.

Doesn't make much sense to leave our descendants an estate and a government debt which will somehow have to reckoned with.

Tax anyone but me!!
 

mrj

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Cowpuncher, what I'm saying is that first, we need to totally rework taxation in this country to eliminate loopholes, and to make sure everyone pays commensurate with ability, and probably not through an income tax, but a sales tax on new goods. I like what the Fair Tax people are proposing, but haven't had time to study it as well as want to, either.

Sure, those in government are going to tax and spend as much and as long as we allow them to.

That said, I do believe eliminating the death tax and the structure that collects it will generate more income tax simply because the money saved by no death tax will not just sit in the cookie jar at home doing nothing. It will be invested either on Wall Street, banks, or our businesses, thereby growing the economy and creating more income to tax.

MRJ
 

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