"Tax Code More Progressive in 2004 than in 2000"

[Jim]

saver

 

stupid question from an undereducated taxpayer. if my family member keels over and leaves me 5 million, do I then have to pay federal income tax on that money? i assume so. at least we don't have a state income tax.

 

Depends if it is an individual or when they die. By 2009 the exemption will be up to $7 million for couples, $3.5 for an individual. There's a bunch of wonky calculations with some deferments as well. But - if it happened today then yes, it would likely be subject to the federal estate tax. And thanks to the Republican Congress you cannot deduct the state estate tax as you once could. Guess they favored the federal coffers rather than the local state ones.

Edited November 2, 2006 by Jim

[Mr_Phil]

I get taxed every year in a progressive tax system based on my income.

 

My property is taxed every year for real estate taxes.

 

After years of paying my taxes, I die. The government has no damn business taxing my estate, when I leave it to my family, no matter how big it is.

 

you, comrade!

 

Currently, capital gains are taxed when realized. When you die, however, your heirs get a stepped up basis and don't have to pay taxes on the unrealized cap gains.

Edited November 2, 2006 by Mr_Phil

[minx]

saver

 

stupid question from an undereducated taxpayer. if my family member keels over and leaves me 5 million, do I then have to pay federal income tax on that money? i assume so. at least we don't have a state income tax.

 

Depends if it is an individual or when they die. By 2009 the exemption will be up to $7 million for couples, $3.5 for an individual. There's a bunch of wonky calculations with some deferments as well. But - if it happened today then yes, it would likely be subject to the federal estate tax. And thanks to the Republican Congress you cannot deduct the state estate tax as you once could. Guess they favored the federal coffers rather than the local state ones.

 

Jim--I wasn't asking about the federal estate tax. Income tax pure and simple. Say I come into a chunk of money gambling, I'm supposed to report it as income. If win a car on the price is right.... report as income. if i fall into some money from a dead relative...income?

 

kinda sucks a little bit extra if that money is getting triple taxed. 1) when earned by now dead relative 2) estate tax (federal and local) and 3)me...as income.

 

just trying to gather some info.

[tvashtarkatena]

the inheritance tax hurts the lower and middle-income more than the rich.

 

It's fundamentally wrong to double-, triple-, and quadruple tax.

 

K Kubed is right. You would need 11-tuple taxation to provide a back round independent solution for the unification of liberalism, libertarianism, conservatism, socialism, and Rastafarianism sufficient to balance the strong I’ve-fuckin’-gotta-have-one-a-those-right-now with the weak perhaps-someone-else-needs-it-more-than-I forces. Unfortunately, this would produce 10 to the 500th unique but consistent versions for your form 1040, which would require an IRS the size of a galactic supercluster to process, assuming you could find an accountant.

 

Double, triple, and quadruple taxation, while it may mimic aspects of the observable universe, produces overly liberal universes where smarmy, overly educated and underemployed massage therapists take time out from tantric sex with their transgender friends to pull honest, hardworking mill workers from their trailers and force them to respectfully discuss “Hegemony or Survival” while sipping steaming earthenware bowls of organic chai with their pinkies in the air.

 

In a zero taxation universe libertarianism is favored, whereby mulleted multitudes drop the home schooled children they’re sodomizing to swarm into the cities in battered F150s, ignoring pedestrian crossing signs, to snatch well-nurtured children from Montessori schools for later use as bear bait, before flushing their parents out of their community forums, hunt them down, and forcing them to eat undercooked red meat laced with Copenhagen while listening the Hank Williams Jr. at as high a volume as their one working speaker can put out.

 

A single taxation universe quickly decays to an n-tuple taxation universe where nearly all available energy is spent arguing what ‘n’ should be.

Edited November 2, 2006 by tvashtarkatena

[Jim]

Minxy -

 

No, not taxed as income. Just estate.

[NealH]

Income tax pure and simple. Say I come into a chunk of money gambling, I'm supposed to report it as income. If win a car on the price is right.... report as income. if i fall into some money from a dead relative...income?

 

No. The estate is taxed on the amount that exceeds the current threshold. The assets get a stepped up basis to current fair market value. You would have no income tax liability resulting from the amount you receive after the government and creditors get their share.

 

Regarding the double taxation issue, I think Canada actually has a pretty good approach. Generally (I'm probably not getting the details fully correct as I practice US tax law, not Canadian), they don't have an estate tax per se, but when someone dies, there is a second income tax that gets applied on any assets that have built-in gain (or built-in loss) that has not yet been realized. Thus, the heirs take with the same stepped up basis in the US, but the estate is only taxed on the gain and not on the entire value of the property, avoiding the double taxation.

[Mal_Con]

money from an Estate is not taxed as income. Estate tax is only for estates larger than several million and a decent tax attorney can easily push it to 10 million or so. Another advantage is if it is appreciated property you get a stepped up basis reducing Capital gains tax when you sell it. Example my dad bought a acre of land for $500 when I got it value was 75k if I sell for 100k I only have to pay tax on the 25k gain. Trust me I'm a lawyer.

[mattp]

KKK says: It's fundamentally wrong to double-, triple-, and quadruple tax.

 

I'm repeating several posts previous, but let me repeat that you are just plain WRONG on the double or triple taxation issue. If you are against such "double or triple taxation, let's talk about simply eliminating the "step up" in basis. The vast majority if not nearly all of what is taxed under estate taxation laws has never been taxed.

 

We are not talking about some poor working schmoe whose estate is now being taxed on his paycheck savings. In order to pay any estate tax at all, you must have an estate valued at over $2 million or $4 million for a married couple.

 

Unless they are paid a lot more than you and me, this is not a tax on someone's wage income that has been put in the piggy bank, but it is a tax on their earnings from stock investment or real estate or other assets that have never been taxed. Seriously: the "double taxation" argument just doesn't hold up unless you assume that these people who earn 100's of thousands a year are idiots and don't invest well.

 

Let's have a real discussion here and see how many succesful investors are interested in avoiding "double or triple taxation." (Note: by "successful investor" I mean anybody who has had substantial sums to invest - wealth - and competent counsel or inate skills in asset management.) It is largely capital gains or in cases where they have not managed the estate very well it is simply taxes on the perpetuation of wealth that that folks don't want to pay.

[KaskadskyjKozak]

KKK says: It's fundamentally wrong to double-, triple-, and quadruple tax.

 

I'm repeating several posts previous, but let me repeat that you are just plain WRONG on the double or triple taxation issue. If you are against such "double or triple taxaction, let's talk about simply eliminating the "step up" in basis. The vast majority if not nearly all of what is taxed under estate taxation laws has never been taxed.

 

We are not talking about some poor working schmoe whose estate is now being taxed on his paycheck savings. In order to pay any estate tax at all, you must have an estate valued at over $2 million or $4 million for a married couple.

 

Unless they are paid a lot more than you and me, this is not a tax on someone's wage income that has been put in the piggy bank, but it is a tax on their earnings from stock investment or real estate or other assets that have never been taxed. Seriously: the "double taxation" argument just doesn't hold up unless you assume that these people who earn 100's of thousands a year are idiots and don't invest well.

 

Let's have a real discussion here and see how many succesful investors are interested in avoiding "double or triple taxation." (Note: by "successful investor" I mean anybody who has had substantial sums to invest - wealth - and competent counsel or inate skills in asset management.)

 

cut the bullshit lawyer speak.

 

That estate was built up through the efforts of someone who was taxed on his/her income and through real estate taxes. That person paid his dues *already*. When he/she dies and the estate goes to a family member - or whomever he gives the property in his will, the government is taxing again. It's bullshit. Of course all pinko commie statist assholes don't see it that way. Big government tries to justify spreading out taxation across the board for everything they can, purposely hiding beyond a false premise of "fairness" and playing class warfare.

[cj001f]

That estate was built up through the efforts of someone who was taxed on his/her income and through real estate taxes.

 

unless of course they inherited the capital

[KaskadskyjKozak]

That estate was built up through the efforts of someone who was taxed on his/her income and through real estate taxes.

 

unless of course they inherited the capital

 

somebody worked for that capital, and was taxed for it, whether it was passed down once, twice, or many times

[cj001f]

Somebody worked for that capital, and was taxed for it, whether it was passed down once, twice, or many times

 

bwah! that's good comedy KK.

[crackers]

somebody worked for that capital, and was taxed for it, whether it was passed down once, twice, or many times

 

well. I guess that might be true if you reproduce so fast that all the money was made after 1913.

[mattp]

KK, you are ignoring the step up in basis. When someone dies, current law provides that the capital gains tax is eliminated on their previously untaxed capital gains. You are also mixing apples and oranges here: real estate tax is not a tax on income or on capital gain. Next you're going to be telling us that the estate taxes force the sale of family farms (hint: when the Republicans tried that in Congress they were called out on it and could not cite a single example of where this had ever happened).

[JayB]

I am left wondering whether a tax code that is not conceived in a manner thats in accordance with peoples abstract conceptions of what constitutes a "progressive" policy matter more than the outcomes that the said code produces.

 

I can pretty much guarantee that I could go to a gathering of self-annointed progressives with a packet of statistics related to tax-free municipal bonds. "Overwhelmingly held by the wealthy...only produce a tax benefit for the people in the highest tax brackets...help them shield their unearned income from taxes that the rest of us have to pay...think of what we could do with the revenue - let's kill the tax exemption for dividends generated by municipal bonds!!" The odds that anyone in the audience would chime in and say, "Won't this make it more difficult and costly for municipalities to borrow the money they need to build hospitals and bridges and other infrastructure, and won't the additional costs be passed onto the people who depend on these services the most through higher sales taxes and other fees, which will affect the poor people who use them the most?" are slim indeed.

 

The way things works doesn't always conform to abstract notions of what's fair, and this is especially true for what's economically optimal - that is what co-optimizes tax yields and long-term economic growth. If you are out to soak the rich, you need to be careful how you go about doing so most of these efforts end up being a nuisance for the wealthy and seldom end up benefitting the poor. Anyone remember the 10% luxury tax on goods over a certain threshold - I think it was $100,000? Did that hurt the rich folks? Not really - unless you consider postponing the yacht purchase a hardship. It did deliver a pretty big hit to the boatbuilders who made these crafts, and to the blue-collar guys who made them.

If you want to be morally and intellectually consistent, you'll also have to add the mortgage tax deduction to the list of regressive tax breaks that needs to be substantially reformed.

[cj001f]

I am left wondering whether a tax code that is not conceived in a manner thats in accordance with peoples abstract conceptions of what constitutes a "progressive" policy matter more than the outcomes that the said code produces.

 

psst: JayB - that's how politics works

 

And as for hurting yacht builders - our wonderful government has done far more to decimate American industry than a luxury tax

[Peter_Puget]

Plainly speaking the estate tax is simply the government confiscating a portion of the wealth of the deceased.

 

1) Economic literature overwhelmingly favors consumption taxation over wealth (ie capital) taxation.

2) Many here have suggested that it is very easy to avoid the so called “death tax.” Consider this study suggesting that virtually all estimates of estate taxes paid exclude these avoidance tactics and their negative consequences. The estate tax may result in less government revue than if it was abolished.

3) Given the above it seems that those hit by the estate tax are those who, for example, bought a house it the Bay Area and have lived there since the ‘50s. Worked in middle management their whole life and now have an unexpectedly large portfolio. Those advocating the estate tax are in essence screwing these little guys and letting the really rich escape.

4) Here is a recent study suggesting that the repeal of the estate tax might increase charitable giving: B of A

5) There is something unseemly about confiscating wealth. From my perspective if you think it is moral to confiscate wealth upon someone’s death you should have a problem living off the fat of the land and being unemployed/underemployed and not generating that wealth in the first place.

[Off_White]

For the sake of all the needy children, abolish the death tax now!

 

[Peter_Puget]

Actually OW let's not forget our friendly neighborhood Trust and Estate Planning attorney on average these guys make around $150k/annum. There are approximatley 20,000 of them in the US. That's 3 billion just in net attorney fees!

[mattp]

Jay, you’re speaking nonsense again. Do you really think that all any “self-annointed progressive” cares about is punishing the rich, and they have no concern for or consideration of how various investment incentives have been fashioned for good reasons some times? And do you really still believe in Trickle On economics?

 

I agree with the sentiment in your first sentence: "I am left wondering whether a tax code that is not conceived in a manner thats in accordance with peoples abstract conceptions of what constitutes a "progressive" policy matter more than the outcomes that the said code produces." However, I'd say that same tendency for folks to view tax policy through the lens of their own political agenda and limited view of the consequences of this or that tweak to the tax code applies equally to conservatives, libertarians, and liberals.

[cj001f]

Actually OW let's not forget our friendly neighborhood Trust and Estate Planning attorney on average these guys make around $150k/annum. There are approximatley 20,000 of them in the US. That's 3 billion just in net attorney fees!

 

So you are going to reform probate law as well PP? Oh wait, that's not what you were thinking.

[JayB]

Jay, you’re speaking nonsense again. Do you really think that all any “self-annointed progressive” cares about is punishing the rich, and they have no concern for or consideration of how various investment incentives have been fashioned for good reasons some times? And do you really still believe in Trickle On economics?

 

I agree with the sentiment in your first sentence: "I am left wondering whether a tax code that is not conceived in a manner thats in accordance with peoples abstract conceptions of what constitutes a "progressive" policy matter more than the outcomes that the said code produces." However, I'd say that same tendency for folks to view tax policy through the lens of their own political agenda and limited view of the consequences of this or that tweak to the tax code applies equally to conservatives, libertarians, and liberals.

 

Matt - if you appeared to understand anything at all about economics I'd take the gibes more seriously, but I'm reasonably confident that even my half-assed, leisure time acquaintance with the subject makes you the guy arguing on behalf of the Creationist position in most of these arguments. There's help though. Start with this article by your boy Krugman: Read Me Matt and Jim!

 

As for the second point, I agree, with the minor caveat that I think that ill-informed soak-the-rich populism is something that folks who call themselves progressives have an almost exclusive franchise on. Ditto for protectionism, though this often territory also occupied by nativist right-wing nutjobs. As far as solutions go, I like the staggered flat-tax as an idea that might not be optimal but might be an imrovement over the present megacluster.

 

No tax on income below 20 thousand, X percent on 20-40 thousand, a bit more on 40-80 thousand, a bit more on 80-160 thousand, and so on. Deductibilty for health care expenses and retirement contributions - no deductions for anything else. Flat tax on capital gains from all asset classes and dividends.

[cj001f]

is something that folks who call themselves progressives have an almost exclusive franchise on. Ditto for protectionism

 

 

Weren't you the one expressing haughty disdain for those who consider the electorate stupid yesterday? You remind me of the comissars, or the liberal elite, dedicated to the idea of the common man, but loathing them entirely.

[KaskadskyjKozak]

KK, you are ignoring the step up in basis. When someone dies, current law provides that the capital gains tax is eliminated on their previously untaxed capital gains. You are also mixing apples and oranges here: real estate tax is not a tax on income or on capital gain. Next you're going to be telling us that the estate taxes force the sale of family farms (hint: when the Republicans tried that in Congress they were called out on it and could not cite a single example of where this had ever happened).

 

You're ignoring my point. Maybe if I cite a liberal icon, you'll get it:

 

Let me tell you how it will be;

There's one for you, nineteen for me.

'Cause I’m the taxman,

Yeah, I’m the taxman.

 

Should five per cent appear too small,

Be thankful I don't take it all.

'Cause I’m the taxman,

Yeah, I’m the taxman.

 

(if you drive a car, car;) - I’ll tax the street;

(if you try to sit, sit;) - I’ll tax your seat;

(if you get too cold, cold;) - I’ll tax the heat;

(if you take a walk, walk;) - I'll tax your feet.

[JayB]

is something that folks who call themselves progressives have an almost exclusive franchise on. Ditto for protectionism

 

 

Weren't you the one expressing haughty disdain for those who consider the electorate stupid yesterday? You remind me of the comissars, or the liberal elite, dedicated to the idea of the common man, but loathing them entirely.

 

Thankfully the electorate is composed elements other than fringe progressives/wingnuts.