"Death Tax" Repealed by one House of Congress
Discussion
The estate tax, currently a staggering 55%, has been a target of the administration from the start. "Death should not be a taxable event", is the tagline.
Opponents, like Bill Gates' father says, "People with wealth here have it because they live here; therefore, when they die, they should give back to the community through tax".
I don't agree with "taxing" death. Do you all have such a thing?
www.washingtonpost.com/wp-dyn/articles/A50961-2005Apr13.html
www.forbes.com/2001/06/08/0609tax.html (interesting chart near bottom of article)
Opponents, like Bill Gates' father says, "People with wealth here have it because they live here; therefore, when they die, they should give back to the community through tax".
I don't agree with "taxing" death. Do you all have such a thing?
www.washingtonpost.com/wp-dyn/articles/A50961-2005Apr13.html
www.forbes.com/2001/06/08/0609tax.html (interesting chart near bottom of article)
chaparral said:
Large inheritances are mostly capital gains. If they had been liquidated before death then they'd have to pay the taxes then. Since the taxes weren't paid then, they have to be paid before the money becomes untraceable.
But was tax not already paid upon earning the money? So the death tax is a "second" taxing, is it not?
jimbeaux said:
Large inheritances are mostly capital gains. If they had been liquidated before death then they'd have to pay the taxes then. Since the taxes weren't paid then, they have to be paid before the money becomes untraceable.
But was tax not already paid upon earning the money? So the death tax is a "second" taxing, is it not?
No, The tax laws here have more holes in them than a down and outs clog...........
£ for £ I pay far more tax than any millionaire....
jimbeaux said:
Large inheritances are mostly capital gains. If they had been liquidated before death then they'd have to pay the taxes then. Since the taxes weren't paid then, they have to be paid before the money becomes untraceable.
But was tax not already paid upon earning the money? So the death tax is a "second" taxing, is it not?
Absolutely. Capital gains tax is evil.
jimbeaux said:
Large inheritances are mostly capital gains. If they had been liquidated before death then they'd have to pay the taxes then. Since the taxes weren't paid then, they have to be paid before the money becomes untraceable.
But was tax not already paid upon earning the money? So the death tax is a "second" taxing, is it not?
Yes and No. iirc Capital Gains are extinguished at death , so there would be some implied "offset" against Inheritance tax(?)
Nope. The tax on the INITIAL investment was income tax. The tax on the GAINS from that investment is capital gains tax. If you keel over still owning an investment that has gained value then you still have to pay the capital gains tax, but you can't since you're dead. Therefore your heirs have to pay it.
Hypothetical example: You earn $150,000 of which $50,000 goes to income taxes. You invest the remaining $100,000. Over the next twenty years, the investment grows to $1,100,000 (beyond average but not ridiculous rate of return, and it makes the numbers simpler).
Now, if you sell out while your alive, you pay $400,000 in capital gains tax, regain your investment, and pocket $600,000 in gains.
If, however, you begin your new job pushing up daisies before you sell, your heirs get an investment worth $1,100,000, of which $1,000,000 hasn't been taxed yet. Should they get it tax free? I believe not, because otherwise you're penalizing the original, wealth-creating investor for being alive by having them pay taxes they wouldn't if they were dead!
The inheritance tax rate is higher than the income tax rate for two reasons. First, the inheritance is not earned by the recipient. For several reasons, unearned income, especially windfall income, is taxed at a higher rate than earned income.
Second, while you're alive, your investment and actions are under scrutiny and subject to investigation. When you're dead, you cannot be called as a witness in a civil investigation of mismangement or fraud if the investment subverted the law. Death is also a good way to make skeletons in the closet disappear. If you were paid $100,000 to kill somebody and later died, then come inheritance time, your heirs will find the $100,000 "hidden under your mattress" - and it would be tremendously difficult to convict you or find you liable for it and completely impossible for you to serve a criminal sentence for it.
The difference between the two tax rates is a combination of the increased taxation on unearned income and the government's estimate of the ill-gotten gains that got passed on and cleaned up.
Hypothetical example: You earn $150,000 of which $50,000 goes to income taxes. You invest the remaining $100,000. Over the next twenty years, the investment grows to $1,100,000 (beyond average but not ridiculous rate of return, and it makes the numbers simpler).
Now, if you sell out while your alive, you pay $400,000 in capital gains tax, regain your investment, and pocket $600,000 in gains.
If, however, you begin your new job pushing up daisies before you sell, your heirs get an investment worth $1,100,000, of which $1,000,000 hasn't been taxed yet. Should they get it tax free? I believe not, because otherwise you're penalizing the original, wealth-creating investor for being alive by having them pay taxes they wouldn't if they were dead!
The inheritance tax rate is higher than the income tax rate for two reasons. First, the inheritance is not earned by the recipient. For several reasons, unearned income, especially windfall income, is taxed at a higher rate than earned income.
Second, while you're alive, your investment and actions are under scrutiny and subject to investigation. When you're dead, you cannot be called as a witness in a civil investigation of mismangement or fraud if the investment subverted the law. Death is also a good way to make skeletons in the closet disappear. If you were paid $100,000 to kill somebody and later died, then come inheritance time, your heirs will find the $100,000 "hidden under your mattress" - and it would be tremendously difficult to convict you or find you liable for it and completely impossible for you to serve a criminal sentence for it.
The difference between the two tax rates is a combination of the increased taxation on unearned income and the government's estimate of the ill-gotten gains that got passed on and cleaned up.
chaparral said:
Nope. The tax on the INITIAL investment was income tax. The tax on the GAINS from that investment is capital gains tax. If you keel over still owning an investment that has gained value then you still have to pay the capital gains tax, but you can't since you're dead. Therefore your heirs have to pay it.
Hypothetical example: You earn $150,000 of which $50,000 goes to income taxes. You invest the remaining $100,000. Over the next twenty years, the investment grows to $1,100,000 (beyond average but not ridiculous rate of return, and it makes the numbers simpler).
Now, if you sell out while your alive, you pay $400,000 in capital gains tax, regain your investment, and pocket $600,000 in gains.
If, however, you begin your new job pushing up daisies before you sell, your heirs get an investment worth $1,100,000, of which $1,000,000 hasn't been taxed yet. Should they get it tax free? I believe not, because otherwise you're penalizing the original, wealth-creating investor for being alive by having them pay taxes they wouldn't if they were dead!
The inheritance tax rate is higher than the income tax rate for two reasons. First, the inheritance is not earned by the recipient. For several reasons, unearned income, especially windfall income, is taxed at a higher rate than earned income.
Second, while you're alive, your investment and actions are under scrutiny and subject to investigation. When you're dead, you cannot be called as a witness in a civil investigation of mismangement or fraud if the investment subverted the law. Death is also a good way to make skeletons in the closet disappear. If you were paid $100,000 to kill somebody and later died, then come inheritance time, your heirs will find the $100,000 "hidden under your mattress" - and it would be tremendously difficult to convict you or find you liable for it and completely impossible for you to serve a criminal sentence for it.
The difference between the two tax rates is a combination of the increased taxation on unearned income and the government's estimate of the ill-gotten gains that got passed on and cleaned up.
Thanks; very thorough!
). Jaglover said:
The
I don't agree with "taxing" death. Do you all have such a thing?
Yes we do
And I have no problem with it, it is far easier to justify in my mind than taxes on income.
>> Edited by Jaglover on Wednesday 25th January 08:59
Agree entirely. My only problem at the moment is that I think the middle classes (who are not used to paying it) are currently coming off worse than the upper classes (who are more used to avoiding it).
jimbeaux said:
The estate tax, currently a staggering 55%, has been a target of the administration from the start. "Death should not be a taxable event", is the tagline.
Yes, Bush is pandering to his ultra-wealthy backers (the only people
in the US to have to worry about estate tax).
The estate tax itself is a pretty fair way of preventing one
easy form of tax-evasion; it also helps prevent the creation of
a de-facto aristocracy, though to some extent that is
happening anyway.
Bush has been very sucessful in spinning this to the population though -
the tax only applies to estates over $3m (2% of the population ?)
yet something like 40% of the population think they stand to
benefit from the abolition of it. Exemplary spinning...
chaparral said:
Hypothetical example: You earn $150,000 of which $50,000 goes to income taxes. You invest the remaining $100,000. Over the next twenty years, the investment grows to $1,100,000 (beyond average but not ridiculous rate of return, and it makes the numbers simpler).
Now, if you sell out while your alive, you pay $400,000 in capital gains tax, regain your investment, and pocket $600,000 in gains.
If, however, you begin your new job pushing up daisies before you sell, your heirs get an investment worth $1,100,000, of which $1,000,000 hasn't been taxed yet. Should they get it tax free? I believe not, because otherwise you're penalizing the original, wealth-creating investor for being alive by having them pay taxes they wouldn't if they were dead!
The big BUT of this is, lets assume we're talking property investment for example, there's not tking into account of inflation. You may have a 'profit' of £1M but it's value isn't the equivalent of £1M 30 years previously. Indeed, those inheriting may not actually gain much in real terms. IMO the inflationary devaluation of the investment should be taken into account but would add complexity to the system and probably open a nasty can of worms.
jimbeaux said:
Opponents, like Bill Gates' father says, "People with wealth here have it because they live here; therefore, when they die, they should give back to the community through tax".
Wouldn't be so bad if it did go back to the community, the community that ultimately helped that wealth generate initially, but once it goes into that big pot in the sky called the treasury it hardly gets fairly re-distributed does it
Goes to fund some daft policy that benefits nobody
Dave
Mr Whippy said:
Opponents, like Bill Gates' father says, "People with wealth here have it because they live here; therefore, when they die, they should give back to the community through tax".
Wouldn't be so bad if it did go back to the community, the community that ultimately helped that wealth generate initially, but once it goes into that big pot in the sky called the treasury it hardly gets fairly re-distributed does it
Goes to fund some daft policy that benefits nobody
Dave
Truth spoken!
Gassing Station | The Pie & Piston Archive | Top of Page | What's New | My Stuff