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The "Death Tax" --Tax Break to the Wealthiest Amer

Econ101

Well-known member
Family farmers and ranchers are being used as pawns in this big transfer of wealth under the proposed killing of the "death tax" for the very wealthy.

Family farmers/ranchers want to pass on their farms/ranches to the next generation but the death taxes could destroy that dream because land values have way outstripped the income that can be produced by those farms and ranches.

The very wealthy are using this as an opportunity to transfer taxes from themselves to the middle class.

Here is how it works:

The Wealth Distribution

In the United States, wealth is highly concentrated in a relatively few hands. As of 2001, the top 1% of households (the upper class) owned 33.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 51%, which means that just 20% of the people owned a remarkable 84%, leaving only 16% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth, the top 1% of households had an even greater share: 39.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2004).

source:

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

The top 20% want to transfer, without taxes, their wealth to the next generation.

Much of the wealth is tied up in stocks and businesses that did not have personal taxes paid yet.

For example, if Bill Gates owns 100% of microsoft and sells off 50% of that stock to grow his business, he still has 50% of the business. He did not pay taxes on that ownership because he has not sold the assets yet. When he does sell that business, he will have to pay the 20% in capital gains taxes unless he shelters that gain in some other way.

If he dies and has not tied it up in a trust, with no "death tax" his heirs would pay nothing, not even the 20% of capital gains.

That means he could grow his wealth tax free as long as he doesn't sell the assets and have to pay the capital gains taxes. Capital gains taxes are less than the income tax rate and therefore are a boon to large investors. To see how this works, look at this website:

http://www.moneychimp.com/features/capgain.htm

While average wage earners also get a capital gains tax break if they sell assets after 1 year, the majority of the benefit goes to those who have the majority of money they want to pass on.

The death tax is the great equalizer.

Under the death tax, the 50% of the business that Bill Gates owns, if not sheltered (there are way too many shelters for the super rich) would be paid to the U.S. treasury. Without it, there would be a huge transfer of wealth and accumulated taxes that would never have to be paid.

If that money is not paid to the treasury, guess who gets to pay the taxes that money would have paid?


YOU!!!!
 

Red Robin

Well-known member
Econ101 said:
The very wealthy are using this as an opportunity to transfer taxes from themselves to the middle class.
You're real bright taxcon.

Econ101 said:
If that money is not paid to the treasury, guess who gets to pay the taxes that money would have paid?

YOU!!!!

How about as a government we spend less! There's a novel idea.
 

Cowpuncher

Well-known member
Econ101 wrote:



For example, if Bill Gates owns 100% of microsoft and sells off 50% of that stock to grow his business, he still has 50% of the business. He did not pay taxes on that ownership because he has not sold the assets yet. When he does sell that business, he will have to pay the 20% in capital gains taxes unless he shelters that gain in some other way.

This would be true only if the stock were sold by the corporation and the money never went into Gates personal account. If he kept the cash outside of the corporation, it would be a taxable event.


If you want to tax everything that a person accumulates during his working life at 50%, the great American incentive to achieve financial independence would suffer greatly.

The people who are able to accumulate wealth do so in spite of the government, not because of it. The government takes most of our savings through inflation as it is.

For example, you invest $100 in a company in 1956. You sell this investment in 2006. The $1,000 received is worth about the same as the original $100 in buying power. (Not sure exactly, but probably close.) Anyway, you will have to pay $135 in federal income tax and probably about a third of that for state income tax. You end up with $865 which is less than you started out with in 1956 dollars.

Just because the government has the right to take something a person has done legally and paid his taxes along the way doesn't mean the government ought to take it and give it to those who have accumulated nothing.

Some of your points are valid, but those with the greatest (Kennedys for example) have managed to get laws passed which allow them to pay no estate taxes at all.
 

Disagreeable

Well-known member
Red Robin said:
How about as a government we spend less! There's a novel idea.

What a good idea! I vote we start with Iraq. Let's stop spending $2Billion a week in Iraq and spend it on something that helps our country. You know, like border security, alternate energy research, educational grants......
 

Econ101

Well-known member
Cowpuncher said:
Econ101 wrote:



For example, if Bill Gates owns 100% of microsoft and sells off 50% of that stock to grow his business, he still has 50% of the business. He did not pay taxes on that ownership because he has not sold the assets yet. When he does sell that business, he will have to pay the 20% in capital gains taxes unless he shelters that gain in some other way.

This would be true only if the stock were sold by the corporation and the money never went into Gates personal account. If he kept the cash outside of the corporation, it would be a taxable event.


If you want to tax everything that a person accumulates during his working life at 50%, the great American incentive to achieve financial independence would suffer greatly.

The people who are able to accumulate wealth do so in spite of the government, not because of it. The government takes most of our savings through inflation as it is.

For example, you invest $100 in a company in 1956. You sell this investment in 2006. The $1,000 received is worth about the same as the original $100 in buying power. (Not sure exactly, but probably close.) Anyway, you will have to pay $135 in federal income tax and probably about a third of that for state income tax. You end up with $865 which is less than you started out with in 1956 dollars.

Just because the government has the right to take something a person has done legally and paid his taxes along the way doesn't mean the government ought to take it and give it to those who have accumulated nothing.

Some of your points are valid, but those with the greatest (Kennedys for example) have managed to get laws passed which allow them to pay no estate taxes at all.

You made some very good points, cowpuncher. I don't think that not giving as much to your children would stop you from accumulating wealth. It hasn't yet. Give to them while you are alive, if that is what bothers you.

I agree there are way too many loopholes for the very rich. That shows up in the top 1% owning and controlling 1/3 of the wealth. We need some work on that regard. Loopholes help the very wealthy but tend to not be used by the avg. family farmer in estate planning as the comments on the other topics have shown.

Your point on inflation is also noted. It is the slow but huge problem with viewing our whole economy as static and it is one of the biggest ways uncle sam steals from those without assets that increase with time.

The fact is that real assets increase in value along with inflation, almost no matter what the rate.

The taxes on assets are also delayed and paid in discounted dollars from the future.

Thanks for your input.
 

Econ101

Well-known member
Red Robin said:
Econ101 said:
The very wealthy are using this as an opportunity to transfer taxes from themselves to the middle class.
You're real bright taxcon.

Econ101 said:
If that money is not paid to the treasury, guess who gets to pay the taxes that money would have paid?

YOU!!!!

How about as a government we spend less! There's a novel idea.

rr, this is intended as a mature discussion without name calling. Can you grow up or go somewhere else?

As to your point on government spending less, it is a good one. Every dime the Congress spends should be looked at in this light. No more earmarking that comes out of our collective pocket that benefits specific poltiticians. We all end up paying for it one way or another.
 

Econ101

Well-known member
From the article noted on the first post:

Figures on inheritance tell much the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000). Thus, the attempt by ultra-conservatives to eliminate inheritance taxes -- which they always call "death taxes" for P.R. reasons -- would take a huge bite out of government revenues for the benefit of less than 1% of the population. (It is noteworthy that some of the richest people in the country oppose this ultra-conservative initiative, suggesting that this effort is driven by anti-government ideology. In other words, few of the ultra-conservatives behind the effort will benefit from it in any material way.)

I for one would like the republicans or democrats to be fiscally responsible before handing out more goodies at the expense of future generations and for the benefit of the super rich.
 

Disagreeable

Well-known member
Econ101 said:
From the article noted on the first post:

Figures on inheritance tell much the same story. According to a study published by the Federal Reserve Bank of Cleveland, only 1.6% of Americans receive $100,000 or more in inheritance. Another 1.1% receive $50,000 to $100,000. On the other hand, 91.9% receive nothing (Kotlikoff & Gokhale, 2000). Thus, the attempt by ultra-conservatives to eliminate inheritance taxes -- which they always call "death taxes" for P.R. reasons -- would take a huge bite out of government revenues for the benefit of less than 1% of the population. (It is noteworthy that some of the richest people in the country oppose this ultra-conservative initiative, suggesting that this effort is driven by anti-government ideology. In other words, few of the ultra-conservatives behind the effort will benefit from it in any material way.)

I for one would like the republicans or democrats to be fiscally responsible before handing out more goodies at the expense of future generations and for the benefit of the super rich.

I second that motion, but honestly don't see how the Dems can do any worse than the Republicans have. I sure hope they can do better, starting with working a reasonable work week.
 

Econ101

Well-known member
Funny thing, by catering to the very wealthy and not closing these loopholes and even expanding them, they help out the "liberal" elite they claim to so hate. A little more hypocrisy by the republicans who lost their way.
 

Red Robin

Well-known member
Econ101 said:
rr, this is intended as a mature discussion without name calling.
You guys after winning the election are sure tender hearted. Since it's a mature discussion should I go put on a pair of depends or take my false teeth out? What maturity level do we have to have here? Can we continue to make misleading , unsubstantiated statements , or is that no longer acceptable?
 

Econ101

Well-known member
Red Robin said:
Econ101 said:
rr, this is intended as a mature discussion without name calling.
You guys after winning the election are sure tender hearted. Since it's a mature discussion should I go put on a pair of depends or take my false teeth out? What maturity level do we have to have here? Can we continue to make misleading , unsubstantiated statements , or is that no longer acceptable?

I didn't win or lose the election rr. Put on your depends or take your false teeth out--whatever makes you more mature than name calling.

This is topic is about the estate tax, not childish name calling. You are welcome to join if you have anything to bring to the dicussion that is substantive.
 

Red Robin

Well-known member
I'm a big ole boy econ. I'll come and go and do as I please till macon makes me do different. If you get a forum of your own I'll be sure not to visit. BTW if something substantive is required to post, you wouldn't have 5000 posts.
 

Econ101

Well-known member
Red Robin said:
I'm a big ole boy econ. I'll come and go and do as I please till macon makes me do different. If you get a forum of your own I'll be sure not to visit. BTW if something substantive is required to post, you wouldn't have 5000 posts.

So what about the estate tax?
 

Cowpuncher

Well-known member
Dis wrote:

I second that motion, but honestly don't see how the Dems can do any worse than the Republicans have. I sure hope they can do better, starting with working a reasonable work week.

What is your opinion of a reasonable work week. 35 hours for New Yorkers or 70 for the farm and ranch crowd?

A whole lot of those who voted Democrat don't work at all - and some Republicans too!!
 
A

Anonymous

Guest
I moved this from the other thread so that we could keep it all together, Jesse. :lol:

Econ101 said:
This might be too hard of a topic for you to understand unless stated in the simplest of terms.

"Econo" types like me have a hard time getting simple minded people such as yourself to see if you don't want to. If you don't want to see the way I am explaining, it is your own stupidity, or stubborness at play, not my intelligence. For that I can be of no help to you. It is a personal problem.

Consider it a "stupid" tax, not an estate tax if that is the problem.
:lol2: :lol2: :lol2:

I think most Americans would agree with me that a simplified tax code is what we need most of all. That, and for government to live within it's means. We don't need more exemptions and more formulas whereby each special interest group with the right hired guns can legislate their own loopholes.

Your idea to protect the farmers and ranchers seems to be a good one, but nothing is ever that simple. Other special interests will also want their exemptions. Not to mention the fact that we will then turn the federal Death Tax into a problem area much like property taxes are in some states. We will have even more people wanting to have farms or ranches just for tax purposes.

At the same time, there can be legitimate ranching families who have to turn away from production agriculture and lose the ranch, even though they wanted to keep it all together. Let's use a Montana rancher as an example...

This Montana ranch has been in the family for years and years and the rancher has instilled in his kids the desire to keep it together, no matter what it takes. Upon his death, he leaves the ranch to his kids, but at some point they find that they are no longer able to sustain it with just agricultural production. They find that the only alternative they have to keep the ranch together and in the family as their father requested is to turn it into a recreational ranch.

Under your plan, it is no longer involved in production agriculture and those kids should be hosed by the IRS...just for trying to follow their father's wishes. I don't like taking those decisions away from families and making them have to be concerned with complicated tax codes just to keep what's already theirs.

Now, multiply that situation by all of the instances where it could happen with other family-owned farms and ranches. Or even other businesses that have had special interest status legislated into the tax code. It will become another problematic tax code, within a failed federal tax code, that will eventually only benefit those that have the right lobbyists on the payroll. Or even worse...a tax code that will provide the most benefit to those politicians that write and pass the legislation.

Figure out a way to make the collection of taxes more equitable on that first income if you have a problem with the way it's done now. But let's don't take a chance on soaking the farm and ranch families just because some people are jealous of the Kennedys and Kerrys. In fact, I don't even agree with hosing the Kennedys and Kerrys with a Death Tax, because I'm not a hypocrite on this issue and I don't have a double standard where this government-approved theft is concerned.

What's right is right, and what's wrong is wrong...and it's just plain wrong to steal something from somebody just because they die and they're no longer around to look after it. Steal from them just because we can? I don't think so! Doing that stealing in the name of the federal government makes it worse, not better.

Any plan to 'fix' the Death Tax is only a win/win situation for DC politicians, lobbyists, tax attorneys and accountants. This tax represents not only stealing, it represents a class envy that I don't like and that I think we would do well to stay away from. We don't need more government-approved stealing, we don't need more class envy, we don't need more taxes, we don't need more exemptions, we don't need more loopholes. We need a simplified tax code and we need for government to live within it's means.
 

Econ101

Well-known member
Steve, I will!!! Please do also.


X, a dude ranch is still a ranch, as are horse ranches etc.

You are right about tax loopholes. They are everywhere. In my example of Bill Gates, the personal taxes on his fortune is not realized unless he sells the stock or dies. If he sells it, there would be a 35% tax on his sellings anyway so the "death tax" is just 15% if the full rate is 50%. No SS tax on that which is 15 % something and you get what regular folks have to pay in taxes anyway (at least those taking home over 326,450 are in the 35% tax bracket).

At some point the unrealized taxes from the retained earnings must be paid. "Death" taxes try to catch the rich from avoiding these taxes from one generation to another. These are taxes everyone else must pay already.

Are you for rich people avoiding taxes forever? Why not give those breaks to the average worker?
 

Steve

Well-known member
I had a chance to think about your plan, and one thing kept coming up, it was just your plan...over the years I have heard alot about great tax plans,..but none seem to get passed......so until the Law is sitting on the books I will try to get the death tax abolished, ...


....alot of Ranches, Farms, and family businesses are effected by this regressive tax....

What is the applicable lifetime exclusion amount?
The applicable lifetime exclusion amount is $625,000 in 1998 –- scheduled to increase in uneven increments to $1 million in 2006. It is the amount that an individual can pass, free of gift tax during life or estate tax at death to anyone they choose.
so even if you give it to them while your alive you still get taxed....

What is the cost to collect the Death Tax?
It costs approximately 65 cents for every $1.00 of revenue for the collection and compliance costs of the death tax.

so not only do the rob US, but the waste 65% of in the process......


When is the "Death Tax" due?
The tax is due 9 months after the date of death, and is payable in cash.
and is bassed on the IRS evaluation........not what it may or may not get...

This tax causes the failure of 70% of the business subject to it......no wonder we are losing the middle class.....

89% of the tax collected comes from estates valued at less the 2.5 milllion......Guess the Bill Gates, and Kerrys of the world forgot to Pay thier fair share.......

so it is not a tax on the wealthiest,...it is a regressive tax on small business, Family Farms and Ranches.....

In a study done by The Center for the Study of Taxation, it was determined that if gift, estate and generation-skipping taxes had been repealed in 1971, by the year 1991 there would have been 262,000 more jobs, $46.3 billion more in GDP and $398.6 billion more in capital.
 

Soapweed

Well-known member
Land values have gone up a fairly large percentage in the past year. Cattle values have gone down significantly. "On paper" the total value of most cattle ranching operations is probably about the same, but with calf sales off over a hundred dollars per head from last fall, many ranchers don't feel very prosperous at this time. Main Streets of ranching towns have already started to notice the change.

The additional value that land has "risen" will do nothing positive for the ranchers in it for the long haul. Property taxes, which are based on land values, will only go up. Any family operation in the process of continuing on with a next generation will be in trouble. If a ranching son or daughter of a family wishes to purchase the land interests of non-ranching brothers or sisters, this high land value will make the transition nearly impossible. Ranches will have to be sold because of this. If the "death tax" could be eliminated, this would at least be one step in the right direction of helping to enable farms, ranches, and small business to pass on to a new generation.

Bill Gates is part of this topic. His expertise is probably the only reason that computers are available for the Ranchers.Net crowd to argue on. Should he be financially brought to his knees just because he is successful? Ingenuity and productivity should be encouraged instead of being punished with unbearable taxes.
 
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