Estate Lunacy

I had another thought regarding this point. While on some level an estate tax might seem communistic I don't believe that an estate tax is necessarily against capitalism. IMO what makes capitalism work as a system for generating wealth, not just accumulating it, is that it encourages a movement of capital from less productive to more productive endeavors. Capitalism can't work if people just squat on their capital and you can't really have a capitalist system under a feudal society where wealth transfer is primarily through inheretance. The problem with inherited wealth is that its capital that is passed on for no productive reason and those who are dependent on inherited wealth have little impetus to make that wealth more productive or necessarily the werewithal to do something productive with it. This leads to a longterm problem of stratification of where wealth gets concentrated into the hands of unprofitable and unproductive descendents of those who once were capable and out of the hands of those who might be able to do more with it. That very situation has happened several times in Chinese history where wealth, in terms of land, was accumulated and then passed on in families who became less and less productive with it until finally those who were dispossed of the land and unable to benefit from using the land more productively rose up to overthrow the prevailing landed aristocracy, redistribute the land and the cycle started all over again.

The estate tax provides some measure of check against that by making sure that at least some of that wealth ends up being redistributed (and redistributed ins't always a dirty word) rather than merely handed on without any regard to its productivity.

 

The money maybe but you're not. You're dead and as the saying goes, you can't take it with you.

 

Exactly Sishir Chang, very good point. The estate tax is not unrelated to hundreds of years of Anglo-American property law, which has developed an extensive aversion to "dead hand control" of property, simply because it's economically wasteful and tends to lock up capital rather than allow it to find it's most productive use.

EDIT: I should say that the last point is where I disagree with you a bit. While the redistributive use of capital frees it up for more uses, true, the incentive created by the estate tax (to leave an estate in the low millions behind rather than a higher one) is what stimulates the very rich to keep the capital flowing & productive (via consumption of non-durable goods, etc)

 

Don't think "he is dead and has no say" holds any water, that's that wills are for, to speak for you when you can't. Plus estate tax is close related to gift tax, you get taxed when you give too much away, and that's tax while you are alive.

Estate tax = wealth redistribution

 

Why must you be so dogmatic? It's slightly irritating of course, but really you just continue to marginalize yourself. I said at the beginning of the thread that I don't have a problem with the rich paying more to help out the country so get over yourself.

As for the double taxation point - it seems that most taxes come off consumption or increased value with the exception of property taxes. You don't get taxed for your savings account, you get taxed for the interest you earn, the same with stocks and with employment income. Once you've been taxed the principle isn't normally taxed again. To do so on the backend doesn't seem to be entirely fair. And it certainly looks like 'double taxation' whether or not the term itself irks particular people.

Whether or not this particular tax primes the economy more than letting whoever inherit it or not would depend on where the money goes vs where it would go - I haven't seen anything to indicate going into the general fund is more efficient/productive.

 

taxes come off change in ownership. inheritence is essentially that even though its within the family.

 

bigtexxx, your resentment of communism resonates with me profoundly.

I for one cannot stand many of the red states stealing money from the blue states through the redistribution of wealth with the power of big bad federal government. For more than a decade these bastards of the red states have kept voting for Republicans -- the supposed champion of small government, personal responsibilities, everything opposite of the commie ideology.

Moreover, the residents in our heavily Republican district also have no qualm repeatedly raising the property taxes to fund, *snicker*, the public schools, so that their families -- with average 2+ little bastards who may as well be aborted -- can avoid paying for the hefty costs of private schools. While practising the most deviate form of communism, these Republican candidates are running TV ads proclaiming "I am pround to be a Republican."

What happen to "Republican for lower taxes"?

Bastards.

Oh, did I forget to mention property tax is also double tax?

 

the principal is always taxed again whenever it's transferred. Let's say glynch wins $10 million in the lottery, pay 3 million in taxes, then glynch gives Hayes a job as his wine steward for 100,000 per year. Does Hayesstreet have to pay taxes on that money? Absolutely. Is it "double taxation"? Yes. Does it matter? No.

The tax is on the transaction and the value created, not the money itself. That's the system we use (and almost every country uses, in theory, I believe) because it's the most tenable one.

 

from this thread it seems the death tax also makes sure people set up a clean transition of ownership of the assets.

 

Any and all taxes == wealth redistribution.

 

Double taxation argument is intellectually dishonest.

If you track dollars as they follow through the economy, they are taxes multiple times.

WRT estate taxes, stepup in basis on death of owner cancels all unrealized capital gains (and losses). Estate taxes gets that missed tax dollars back IF the estate is large enough. So for 99.5% of households that do not pay estate taxes, double taxation or even single taxation is not even an issue.

 

Hey, how did you know I like wine? I don't think glynch would hire a wine stewart though - much too elitist and insulting to the working man.

I see what you're saying.

 

That's a good point and of course not all people who receive inherited wealth are just going to squat on it. I was making a philosophical point that the unfettered transfer of inhereted wealth isn't a good thing in the longterm. Obviously there are scions of the wealthy who are incredibly productive themselves that though is a crap shoot especially if an heir is rich enough to not have to work. Anyway I'm not advocating a 100% estate tax on all inhereted wealth just stating a philosophical support for the estate tax.

 

Wills have been challenged, although the Anna Nicole Smith ruling might change things, so they aren't ironclad. Anyway that still doesn't change the fact that you're dead and unless you're planning on coming back to haunt someone you'll have no idea nor care whether your will was enforced or not.

Estate tax is related to gift tax but they're not the same thing. There's a good argument for gift tax being you double taxation but we're not debating the gift tax.

 

Philisophically speaking, I would rather have a salary cap than a pure estate tax. $75-125 million is enough to live by.

As a representative society no more than one politician would cater to that demographic....

 

It doesn't work that way now.

 

If I had a business, and then I had a child, could I give the child a job that paid him all of the profits from my business, thus avoiding estate taxes upon my death?

 

If the amount of money you pay him would fit the salary for the job he does, then it should pass muster with the IRS. Of course, the child pays income tax on that money, FICA and perhaps state tax depending on where you live. You would probably do better using legal strategies to deal with the estate tax rather than paying them that way.

Individuals currently have a $12,000 annual gift exemption which does not have to deal with gift tax and it essentially lessens the estate tax since that money is being paid out now. A couple can therefore gift $48,000 to another couple on an annual basis with no IRS tax consequences.

 

with a lifetime limit of $1 million.