

The Temporarily Disappearing Estate Tax  - cwan
http://gregmankiw.blogspot.com/2009/12/temporarily-disappearing-estate-tax.html

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grellas
The problem with the estate tax is that it was passed in the name of getting
back at plutocrats but has worked over the years mostly to make it difficult
to keep family businesses intact when the founder dies.

Insane as was the political compromise that led to this final 1-year "repeal"
of the tax, this compromise likely will lead (assuming half-reasonable action
by Congress this next year) to having a more lasting exemption amount that
gives significant relief to many in the middle class beyond 2010. The family
business problem will remain. Thus, one should be able to pass, e.g., a $3M
estate to heirs without problem but, if you get to $10M and up, there will be
a high tax hit.

Still a highly unsatisfactory situation for the public, and one that has the
politicians squirming as well, especially since the estate tax (speaking in
_relative_ terms only) does not really raise that much in revenue for the
federal government.

~~~
pwnstigator
_The problem with the estate tax is that it was passed in the name of getting
back at plutocrats but has worked over the years mostly to make it difficult
to keep family businesses intact when the founder dies._

From the article itself: "Currently, the tax applies to about _5,500_
taxpayers a year." (Emphasis mine.)

5500\. We're not talking about upper-middle-class family business owners.
We're talking about people who are seriously rich.

 _Still a highly unsatisfactory situation for the public, and one that has the
politicians squirming as well, especially since the estate tax (speaking in
relative terms only) does not really raise that much in revenue for the
federal government._

This is because the estate tax threshold has been getting higher in every year
since 2001. If Bush had left it alone, this would not be the case. Also, there
are good reasons for an inheritance tax aside from revenue generation.

~~~
anamax
> From the article itself: "Currently, the tax applies to about 5,500
> taxpayers a year." (Emphasis mine.)

> We're not talking about upper-middle-class family business owners. We're
> talking about people who are seriously rich.

Actually, we're not.

The super rich aren't subject to the estate tax because they've arranged their
estates so it doesn't apply.

For example, neither Buffet's nor Gate's estates will pay a dime.

You remember Buffet. He's the guy who pushes the estate tax while selling
insurance to help people pay it.

~~~
jsm386
Well, that's not really the gist of the debate going on here. Gates and Buffet
have given away the vast majority of their money to charity. That's very
different than attempting to work around the estate tax through insurance,
trusts, etc in order to pass as much money as possible on to your heirs.

~~~
anamax
Want to bet whether their heirs benefit from those "charities"?

~~~
Locke1689
Sure. Why not? "Want to bet" isn't really an argument in any shape or form.

Edit: Interesting. After looking into the Foundation
([http://en.wikipedia.org/wiki/Bill_&_Melinda_Gates_Founda...](http://en.wikipedia.org/wiki/Bill_&_Melinda_Gates_Foundation))
I've actually become incredibly impressed by the transparency and general
properness with which they have composed themselves. Given the track record of
the foundation, I see absolutely no reason to suspect them of foul play now or
in the future.

------
startingup
This is one of those evil taxes - you pay a life time of taxes and accumulate
stuff, and then when you die, it gets dinged another 55%.

~~~
ajscherer
It seems like one of the least evil taxes to me. $3.5 million or more worth of
assets are absolutely irrelevant to a corpse. So the great evil is that the
descendants of someone who amassed a great fortune only get $1.5+ million that
they did absolutely nothing to earn, after presumably having every conceivable
advantage growing up? To me that seems much less evil than taking a fraction
of what a living person actually worked to earn and might still need.

Of course, I usually reserve the word "evil" for killing, raping, arson,
dragons, Satan and that kind of thing. Taxes seem to have a much less dramatic
effect on their victims.

~~~
riffer
This looks at the tax from the perspective of those who will inherit, and
concludes that since spoiled kids don't deserve big inheritances, the estate
tax is fair, just and moral. But what about where the money goes? Does the
government deserve it? I don't think so. One might be able to make an argument
that the money should go to society, because the system is what made the
creation of wealth possible. But that's not what the estate tax does, the
estate tax takes the money to the government. Arguing that spoiled kids have
not earned it is a lot easier than arguing that the government is deserving.

What about looking at the tax from the perspective of the individual who
created the wealth? What the tax does is encumber the creator of the wealth
from deploying it as he/she sees fit. Why do we want to encumber creators of
wealth?

TO CLARIFY: the gift taxes that are part of the estate tax complex encumber
creators, not just corpses. If you remove the gift tax, I have no problem with
the estate tax because nobody would ever pay it.

~~~
roc
> "Arguing that spoiled kids have not earned it is a lot easier than arguing
> that the government is deserving."

Isn't "the government is deserving" the crux of the Gates/Buffett argument?
That government has provided them, as wealthy people, far greater services
than the average person? (In the form of providing safety, protecting
property, supplying an educated workforce, enforcing market rules, etc)

The general idea being that you simply _can't_ become fabulously wealthy via
anything short of barbarism without government, so the government _does_
deserve something more to further these services that they're providing?

~~~
riffer
If Gates/Buffett really believe that the government is deserving, why have
they arranged their affairs to pay as little tax as possible? Including (but
not limited to) essentially zero estate tax?

Forgive me if I'm not convinced by an argument that suggests that others
should be compelled to do something the proponents of the argument
relentlessly avoid.

~~~
roc
To be fair, I think their argument is more accurately phrased: the government
is _more_ deserving than the heirs (after a reasonable threshold, natch). Or,
more generally, _society_ is more deserving.

I don't see a logical conflict in their preference for private charity over
government redistribution.

Honestly, I don't think _any_ proponent of the estate tax would mind if the
practical result of a high estate tax was that the rich just gifted their
estates to private charity to spite the government. Government is just the
only group with a sufficient cudgel to enforce the practice and sufficient
reach to ensure that otherwise-undirected estates do give back to society.

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parenthesis
The estate shouldn't be taxed at all, but the beneficiaries should pay tax on
what they receive: at 0% for charities, a low rate for otherwise poor
beneficiaries, a high rate for already rich beneficiaries.

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antidaily
Don't a lot of people establish a living trust to avoid it anyway? It would be
interesting to see what percentage of people who qualify to pay an estate tax
actually pay the full amount.

~~~
anguslong
Article says 5500 average per year fall into current estate tax. Estates taxed
at 45% beyond the $3.5 million threshold (2009).

2010, tax is 15% of all assets without further action by Congress (or
retroactive action).

In 2011, 55% tax beyond $1 million. Which impacts significantly more (cite?)
than 5500 estates. $1 million includes property, fixtures, assets, cash.

Shame that tax code will (no doubt) impact decisions of quite a few terminal
patients.

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pwnstigator
_One wealthy, terminally ill real-estate entrepreneur has told his doctors he
is determined to live until the law changes.

"Whenever he wakes up," says his lawyer, "He says: 'What day is it? Is it Jan.
1 yet?'"..._

I've never felt so comfortable calling a dying man an asshole.

His only concern is whether he can hand off a cozy life to his spoiled
progeny. Amazing. May he live into 2011.

~~~
logic
That's an interesting take on it.

I read it as a father desperately trying to make sure his affairs are in order
so his children can have the benefit of what he worked for.

My father (a teacher, so not a rich man by anyone's standards) made quite a
few unusual financial moves, quietly, before he passed, to make sure my mother
was in a safe place financially (who, given the social norms of their time,
never really dealt head-on with the family finances prior to his death). The
rest of my siblings and I had already moved on to build our own lives, he
wanted to make sure his wife was cared for when he couldn't do it himself.

That you'd so easily begrudge a dying man looking out for his family at the
end of his life without reading more than a soundbite in an article like this
says more about you than about him, I'm afraid.

------
jcnnghm
The obvious conclusion:

The Dead Collector: Bring out yer dead.

[a man puts a body on the cart]

Large Man with Dead Body: Here's one.

The Dead Collector: That'll be ninepence.

The Dead Body That Claims It Isn't: I'm not dead.

The Dead Collector: What?

Large Man with Dead Body: Nothing. There's your ninepence.

The Dead Body That Claims It Isn't: I'm not dead.

The Dead Collector: 'Ere, he says he's not dead.

Large Man with Dead Body: Yes he is.

The Dead Body That Claims It Isn't: I'm not.

The Dead Collector: He isn't.

Large Man with Dead Body: Well, he will be soon, he's very ill.

The Dead Body That Claims It Isn't: I'm getting better.

Large Man with Dead Body: No you're not, you'll be stone dead in a moment.

The Dead Collector: Well, I can't take him like that. It's against
regulations.

The Dead Body That Claims It Isn't: I don't want to go on the cart.

Large Man with Dead Body: Oh, don't be such a baby.

The Dead Collector: I can't take him.

The Dead Body That Claims It Isn't: I feel fine.

Large Man with Dead Body: Oh, do me a favor.

The Dead Collector: I can't.

Large Man with Dead Body: Well, can you hang around for a couple of minutes?
He won't be long.

The Dead Collector: I promised I'd be at the Robinsons'. They've lost nine
today.

Large Man with Dead Body: Well, when's your next round?

The Dead Collector: Thursday.

The Dead Body That Claims It Isn't: I think I'll go for a walk.

Large Man with Dead Body: You're not fooling anyone, you know. Isn't there
anything you could do?

The Dead Body That Claims It Isn't: I feel happy. I feel happy.

[the Dead Collector glances up and down the street furtively, then silences
the Body with his a whack of his club]

Large Man with Dead Body: Ah, thank you very much.

The Dead Collector: Not at all. See you on Thursday.

Large Man with Dead Body: Right.

------
3pt14159
Estate taxes are retarded to begin with, this is just ridiculous. Why don't
these people just give as a gift all their stuff to their kids while they are
alive? Canada might have a 5% GST tax, but we don't have any of this nonsense.

~~~
cwan
In the US, all you pay is the inheritance/estate tax - you don't get double
taxed on the actual inheritance that you file. In Canada, while there isn't an
estate tax, you get taxed on the gain as if it is income and so you pay the
income tax.

If you're going to compare apples to apples, the top marginal tax rates are
about 45-50%+ in Canada
([http://www.aurorainternational.net/Maximum_Personal_Marginal...](http://www.aurorainternational.net/Maximum_Personal_Marginal_Income_Tax_Rates.htm))
- and given the estate taxes in the US apply to anyone inheriting above a
million, it's relatively equivalent for those people while it's considerably
worse in Canada for everyone else given that considerably more people inherit
less than a million. Another point of comparison - highest marginal tax rates
start at 126K (Canadian) while you have to make over 370K USD to start getting
charged the highest marginal tax rates.

Addendum - re: gifts -
<http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States> \- "the gift
tax prevents avoidance of the estate tax should a person want to give away
his/her estate."

