Aren't inheritance taxes redundant?

[dennilfloss]

I've been wondering about this for a long time. As far as I know, when someone dies and gives you money/stuff in inheritance, you have to pay taxes on the estimated value. However, hasn't the government already taken its share during the now-deceased person's life in the form of income tax (for the money) and sales/services tax (for the goods). He/she paid that when he/she acquired the income/stuff, yet the government still wants another cut.

Sounds unfair to me. Will the government give me money if I inherit a debt?

Inherit The Wind (Jerome Lawrence & Robert E. Lee)

 

[Crimson]

You are damn right its unfair.. but the liberals will tell you that anyone who inherits more than 600k is rich, and therefore deserves to have their money stolen... twice.

 

[RaDragon]

<< Sounds unfair to me. Will the government give me money if I inherit a debt? >>


LOL!

there are too many tax rules here in the US! though some rules have helped me outta paying too much income tax!

 

[Moonbeam]

Remember, you have as much chance of getting rich as the child of a multibillionaire, right, or have you some objection to the stratigification of society. And remember too how wealth turns over. The Rocafellers and Kennidies no longer are rich. And who ever heard of Ford.

 

[perry]

I've always found inheritance taxes to be funny. Uncy Sam always has his hand out it seems. Oh well. If the person had not died, I wouldn't have the money in the first place, so I can't complain too loudly.

 

[Sluggo]

It is horribly unfair. Many small businesses and farms easily exceed the minimum for the tax. It is typical class warfare by telling people that only &quot;the rich&quot; will benefit from the repeal of the death tax.

A few of my friends parents have passed, and it is a tragedy to see them liquidate a family business because the taxman is knocking on the door before the body is even cold.

 

[dennilfloss]

Maybe someone who posts here and works for the IRS can enlighten us as to what is the justification/reasoning behind such taxes (apart from greed). Some form of nepotism between the Grim Reaper and the Repo Man?

Taxman (The Beatles)

 

[Bryan]

God, I hope no one from the IRS posts here. The boys in FS/T would be in trouble... :Q

 

[cxim]

dennil...

you already know what 'unk bull' will give you ...

WIND IS RIGHT ! ....

Bury your Gold &amp; to hell with the go'ment !!!

 

[Sluggo]

The IRS has nothing to do with reasons behind taxes being collected. All the IRS does is enforce the existing laws which are made by your wonderful friends in the Executive and Legislative branches of government.

 

[IamDavid]

Even though nobody in my family will ever have enough to qualify for the inheritance tax I still think its very unfair.. The whole &quot;American dream&quot; is to get rich and then pass it on to your children to make there lives easier.. With the death tax it punishes people for reaching there dreams... Kinda socialist IMHO

 

[SuperTool]

Well, when I go buy something, the producer has to pay taxes on the earnings, even though I already paid them
I guess one way or the other, the money will have to be raised to pay for all the government spending, so if we ebolish estate taxes, we'll have to pay more in income taxes. Since I don't want to pay more income taxes, I am going to say keep the estate tax. But that's just my selfish argument

 

[Double Trouble]

Crimson &amp; Sluggo hit the nail on the head. There is no good justification that could withstand any type of logical analysis. The ONLY reason the death tax exists is because our legislators managed to use the class warfare argument to make people think it's ok for the government to take more money from people simply because the amount of the $$ exceeds some subjective threshold.

Bottom line is, the amount in question is irrelevant, it's completely unfair to re-tax something that's already been taxed. I want to work hard to leave money for my kids and grandkids, not to support a wasteful government.

 

[jeremy806]

Yeah. I disagree with the death text. My understanding is that the purpose of the tax is to prevent family dynasties, as mentioned above by someone else. However, the real effect ends up hurting family owned businesses. And as for non-business wealth, I believe that some taxes can be avoided by forming a trust.

The other thing that I heard is that the 600k limit was established long ago, but never adjusted for inflation. So, at one time, 600k may have been reasonable -- but not anymore. I assume that it is very easy for a family business to reach that value.

jeremy806

 

[Double Trouble]

A prime example of that would be in the case of a farm being left to a son or daughter. The land alone is worth a lot of money, but that's not actual cash. When the IRS comes knockin' on the door, there's no way the benefactors can pay tax on the 'estimated value' of the huge plot of land without first selling the farm, thus making it very difficult for a farmer to leave a family farm to his children and continue a family tradition......

Obviously, using the death tax to prevent 'dynasties' has not worked (since there are plenty of those around), and besides, why should anything be done to 'prevent dynasties'? If someone makes a lot of money and wants to pass that to his/her heirs, what's wrong with that?

 

[Mister T]

Financial Planners, Tax Lawyers, and Life Insurance Agents would lose alot of
money if the estate tax was repealed. Estate Tax Planning is a big business
in the US and there is quite a formidable lobby lining the pockets of Congressmen.

 

[Shack70]

I know the inheritance tax scares the crap out of me. When a certain relitive of mine dies, I am supposed to recieve several properties and a good deal of money. I don't want a good part of it to goto uncle sam:Q

 

[Thump553]

The fact of the matter is that wealth is becoming increasing concentrated in the United States and inheritance taxes are one of the few tools to prevent us becoming a straitified third world country.

The present argument about federal inheritance taxes is a joke-the initial exemption (ie, no tax) is something like a million bucks and going up each year automatically. So if you are an only child with two parents, with very rudimentary estate planning, they would have to leave you over 2 million before any federal inheritance tax kicks in. All Bush is doing is rewarding his rich friends, family and supporters at the expense of the middle class. Its a shame he is able to dupe so many otherwise clear-thinking supporters into buying his arguments.


Given the setup of our tax structure, many of the persons who have accumulated great wealth did so tax-free or with minimal taxes as long-term capital gains, tax-free swaps, etc. Example-you buy a home for $100,000 in 1965 and never sell it. At your death its worth 1.5 million (assume no mortgage). The decedent never paid any taxes on that 1.4 million gain-should it escape tax-free? Why?

Bush's proposals have nothing to do with STATE inheritance taxes whatsoever. Depending on the state, these are the ones most likely to impact upon an &quot;ordinary&quot; person.

 

[HomeBrewerDude]

Inheritance taxes aren't redundant anymore than other taxes. In fact, they seem less redundant. Consider the following:

1) you are taxed on your income (income tax)
2) you are then taxed on buying things (sales tax)
3) you are then taxed on the things you own (property tax)

If you argue that redundancy invalidates taxation, then you have to argue that a person should be taxed once and only once and everything except for the income or sales tax should be repealed.

The way I see it, the inheritance tax is really just a special income tax. Remember that many things about an estate make it a special case. For instance, when people die they usually haven't paid capitol gains tax (just another income tax) on property and stocks. The inheritance tax isn't a redundant tax, its the first taxation of a person's wealth. Since the creator of that wealth is dead, the tax burden is shifted to the people who benefit from that wealth.

I am all for reforming the inheritance tax by either increasing the exemption amounts or writing special exclusions for small businesses and farms. BUT i think its overkill to repeal the tax altogether.

 

[SirFshAlot]

I was thinking the same as yamaha, that a dollar is taxed countless times through it's endless journey.

 

[Pacfanweb]

It is definitely BS for the government to tax inheritance. If you think about it, you don't have to be &quot;rich&quot; like a Trump, or a Gates for this tax to hit you. Doesn't the tax start kicking in around 400,000 or 600,000? Many, many people have retirement plans they put money in their whole life to accumulate that much money. I am a good example. Age 35, I make WELL under 100k per year. I am not &quot;rich&quot; by any definition. I will, however, have a 401k plan worth over 1 mil. by the time I'm 65. How? I've been putting a little in every year since I was about 25. Why should the government get a big chunk of what's left when I die?

People can be envious of rich people all they want, but don't the top 10 percent-income folks pay well over 50 percent of all taxes? Fair is fair, and that should apply to all.

 

[JellyBaby]

It's a senseless tax. The government taxes inheritence &quot;just because&quot;. It's not like a toll booth where the monies go for road improvements. It's not like a sporting license fee where the monies go to enhance fisheries, etc. It's just another oppressive penal tax.

The better way to have approached the estate tax would have been to apply the repeal to the small business/family farm scenario first (ie in years 1-5), then later, if it's still feasible, apply it to the Rockafellers and Gates. But Rs are beholden so it's going down back asswards.

Either way it's all easily doable if Big Gubment would simply eliminate wasteful spending and failed programs. But that'll never happen because wasteful spending and failed programs provide career politicians with their careers.

 

[HomeBrewerDude]

Pacfanweb: because your assets are going to someone else, therefore it is 'income' for those fortunate to receive your assets. Your beneficaries by the way, do not do anything to earn their inheritance. Inheritances are gifts, and gifts are taxable. If I gave you $100,000 just because I wanted to, you would have to pay taxes on it, probably in the order of 40%. If you win $100,000 in a lottery, you have to pay taxes on it. One of the basic principles that our tax code is based on is that everyone has to pay taxes and that the amount that they pay is proportional to the amount they earn or are worth.

Additionally, by the time you are dead, lets say 35 years from now, the exemption will probably be more like 5-8 million dollars.

And I don't support the inheritance tax b/c I am envious of rich people. In fact, my wife and I will stand to inherent multiple times in the next 20-40 years. I support inheritance tax b/c there is no reason that I should be able to receive large sums of money from another person without paying tax on it. I should pay my fair share and you should too.

Now, if you want to argue what constitutes a 'fair share', that is another issue altogether.

 

[Pacfanweb]

<<If I gave you $100,000 just because I wanted to, you would have to pay taxes on it, probably in the order of 40%. >>

Wrong. Gifts are not taxable. If you PAID me 100k because you felt like it, it would be taxable. You have already paid taxes on that 100k. It's double, triple and even more in some cases for the government to keep getting a cut.
EDIT: I think it's gifts up to 10k per year. Either way, it's still wrong. The money has still already been taxed. I should be able to spend it the way I choose, whether that means buying something or leaving it to my children or wife.

<<Your beneficaries by the way, do not do anything to earn their inheritance. Inheritances are gifts, and gifts are taxable>>

They don't have to do anything to earn the money....I already did something to earn it, and I paid taxes for it. I should be able to do what I want to with it even if that means leaving it for my family. Many wealthy people get around this by giving their heirs much of their money before they die. I believe a will should accomplish the same thing. If everyone knew when they were going to die, they could liquidate their assets accordingly.
Life insurance is the best way around this problem. It is not taxable, so you can insure yourself to an appropriate amount to make up for the death taxes.

<<. I support inheritance tax b/c there is no reason that I should be able to receive large sums of money from another person without paying tax on it. I should pay my fair share and you should too>>

I agree, but I think that taxes ALREADY PAID on that same money are already too much. Just because the deceased decides to leave it to someone doesn't mean it should be taxed AGAIN.

 

[HomeBrewerDude]

I understand that people have already paid taxes on their assets, but that arguement doesn't work for me. Just because a person's income is taxed multiple times (ie city, county, state, federal) doesn't mean that those taxes are immoral or wrong on some fundamental level. Arguing redundancy doesn't justify repealing any tax.

Unfortunately, I was wrong about paying taxes on gifts. The person receiving the gift doesn't have to include that as taxable income. However, the person giving the gift has to pay a gift tax, assuming it is more than 10,000 per recipient per year. (At least, they deduct the amount of the gift minus the 10k exemption from their lifetime credit which is essentially the total amount that someone can give away tax free and is equal to the exemption amount for the estate tax.)

Without such a tax, the wealthiest would be able to give an elderly familiy member money to invest, which would then be bequeathed back to the original person tax free. While, it could be argued that all people could do this, only the wealthy could do this with a significant proportion of their income or total wealth.

The implication is clear...if we repeal the estate and gift tax, then the income gained from gifts and inheritances should be taxable. Otherwise, the very wealthy will be able to avoid paying even more taxes.