Tax Break Saves Wealthiest Americans $100 Billion

[Bird222]

Because the person receiving the money hasn't 'already paid tax on it.'

The business you for work 'already paid tax' on the money they use to pay you, but you still have to pay taxes. That isn't 'double taxation.'

The restaurant you pay with that money has to pay taxes on the money they earn from you. That's not 'double taxation.'

The produce vendor pays tax on the money he gets from the restaurant. That's not 'double taxation.'


It should be possible to pass along a few million, but after that estates should be taxed at 100%. Everyone should have to work hard and contribute to society, even if you're born with a silver spoon in your mouth. We don't need more Paris Hiltons and trustafarians in the world, but we do need roads and schools and police that could be paid with the taxes.

What is the rationale that explains why money should be taxed on each transaction?

 

[berzerker60]

What is the rationale that explains why money should be taxed on each transaction?

Because we need to pay for communal goods that are more efficiently and fairly handled through government than through private transactions. We all benefit from having an educated workforce and voting pool, for example, so public schools make sense even if not everyone in them could or would pay for them individually; having clean food and effective drugs assured by a central body saves consumers massive amounts of time and money on having to deeply research each and every transaction (at a significant disparity of power relative to the manufacturers) to ensure that same thing.

That money has to come from somewhere, and no one is ever going to be happy about giving it up, so we have to find the least bad method.

Taxing profits (as we do with businesses) rather then revenues encourages businesses to succeed, then requires them to contribute back towards the things that helped them succeed - the roads that brought them customers and deliveries, the police that keep them safe, the schools that educate their employees, etc.

Taxing people progressively on income is the same principle. Those at the top, who benefit most from all the services of government (since they own businesses, have lots of educated employees, have lots to lose without strong policing, etc.) and who will be least harmed by paying the taxes are asked to do so.

Sales taxes should be abolished, since they're regressive and hit the poor harder proportionately than they do everyone else, but they're just another compromise for the sake of funding things we all want and need.

Estate taxes recognize that society benefits from everyone having to contribute things of value to the world before being encased in riches and luxury. Meanwhile, the son of a rich man is already going to have every advantage - the best schooling, trips abroad, top healthcare, business connections, etc. - and least needs a huge inheritance.

Plus, a high estate tax would get rich people to spend more money before dying, which can only be useful for the economy. You can't take it with you, after all. And hell, maybe it will be a boon to their souls! Rich people don't get into heaven.

 

[Bird222]

Because we need to pay for communal goods that are more efficiently and fairly handled through government than through private transactions. We all benefit from having an educated workforce and voting pool, for example, so public schools make sense even if not everyone in them could or would pay for them individually; having clean food and effective drugs assured by a central body saves consumers massive amounts of time and money on having to deeply research each and every transaction (at a significant disparity of power relative to the manufacturers) to ensure that same thing.

That money has to come from somewhere, and no one is ever going to be happy about giving it up, so we have to find the least bad method.

Taxing profits (as we do with businesses) rather then revenues encourages businesses to succeed, then requires them to contribute back towards the things that helped them succeed - the roads that brought them customers and deliveries, the police that keep them safe, the schools that educate their employees, etc.

Taxing people progressively on income is the same principle. Those at the top, who benefit most from all the services of government (since they own businesses, have lots of educated employees, have lots to lose without strong policing, etc.) and who will be least harmed by paying the taxes are asked to do so.

Sales taxes should be abolished, since they're regressive and hit the poor harder proportionately than they do everyone else, but they're just another compromise for the sake of funding things we all want and need.

Estate taxes recognize that society benefits from everyone having to contribute things of value to the world before being encased in riches and luxury. Meanwhile, the son of a rich man is already going to have every advantage - the best schooling, trips abroad, top healthcare, business connections, etc. - and least needs a huge inheritance.

Plus, a high estate tax would get rich people to spend more money before dying, which can only be useful for the economy. You can't take it with you, after all. And hell, maybe it will be a boon to their souls! Rich people don't get into heaven.

I understand that. My question was really about the method of collection of taxes. Is it the easiest way to do it? Another question to ask is it even possible to tax money only once?

 

[hans030390]

You fucking people who are OK with the the government taking everything when someone dies are really freaking me out. You do realize that the money\things are the persons right, and not the governments. If you are OK with taking it all when they die, then why not while they are alive? Why does someone NEED 30 billion? They really only NEED 1 million so please write a check in the amount of $29,999,000,000.00 payable to the IRS or go to jail.

That is a good question! Why does anyone need $30 billion? I'd be OK with that given the state of the country and world in general.

 

[nehalem256]

I understand that. My question was really about the method of collection of taxes. Is it the easiest way to do it? Another question to ask is it even possible to tax money only once?

Seems like collecting large sums of money from dead billionaires should be one of the most cost effective means of tax collection.

 

[berzerker60]

I understand that. My question was really about the method of collection of taxes. Is it the easiest way to do it? Another question to ask is it even possible to tax money only once?

There is an alternative in the wealth tax, where instead of transactions you just tax people on their net worth each year. France has something like that as part of their tax system. It's probably fairer than an income tax in a lot of ways, but it's also more difficult to do effectively because people can hide wealth easier than they can hide income (since the businesses also report your income as part of their expenses).

As for whether it's possible to tax money only once, I'm not sure that concept really holds together, since it mostly depends on whose perspective you're taking. In the example above, I get paid by a business, invest in another business and get paid dividends (that I pay capital gains taxes on), then give everything to my son when I die and pay estate taxes. Did I get get triple taxed? You could say so, but only if you say my son, the business paying shareholders, and the business I work for aren't getting taxed at all on the transactions. Alternately, the company I work for essentially paid the taxes on my income by paying me that much more; the investment firm distributed the capital gains minus the expected taxation; my son paid the estate taxes; and I didn't get taxed on the money at all.

Even trickier: I own a LLC where I'm the sole employee, and have a small salary but pay dividends to myself at capital gains rates, then (as an individual) buy things from my company paying sales tax, before leaving everything to my son. How many times was "I" taxed on that money?

 

[JTsyo]

I say the opposite. Tax estates at 100%. Then end the income tax, end corporate taxes, stop all other government fees. Everything you earn is fully yours. When you die, why do you care any more?

If you want money, earn it. But you get to keep all of it tax free until the day you die.

A few safeguards would have to be put in place for married couples (since obviously you don't want to lose your home just because your spouse died), where it could be transferred once (but no marring repeatedly just to avoid taxes forever).

I'm with you on the estate tax. I think having money stay in families over generations is detrimental to society. I would have a graded scale from 10% to 99% ($50K-$50MM).

No other taxes and only estate taxes, I don't think there would be enough income. Also the income would be inconsistent year to year.

 

[dmcowen674]

I suspect many Rich Republicans that post in here are generational silver spooners themselves.

Never worked a lick in their life but claim all the time they "earned" their money.

 

[Exterous]

I read the article in more detail, it mentions a zero-out technique, however that just means the earnings beyond the estimated return calculated by the IRS during the life of the GRAT are tax free. The starting value is still going to be estate-taxed and the return calculated by the IRS will have to be returned to the original person in 2 years thus also still getting estate-taxed. I wish the article had a better breakdown.

I believe the part that people take issue with is that the appreciation of the assets in excess of the IRS rate is not taxed and is not required to be returned to the original person. You can certainly set up the trust to do so but you can also set them up with the beneficiaries as someone other than the grantor.

The IRS calculates the estimated rate of return based on a fixed rate in the IRS 7520 section which is currently around 2% (but has been lower). Its pretty easy to exceed a 2% return so these excess proceeds will be tax free to the designated beneficiaries. Now if we stop keeping the interest rate low the 7520 rate goes up as do the taxes collected

Also - this only avoids estate tax by removing assets from the estate prior to death. If you die during the term of a GRAT the GRAT is returned to the estate to be taxed and the beneficiaries receive nothing from the GRAT itself

I suspect many Rich Republicans that post in here are generational silver spooners themselves.

Never worked a lick in their life but claim all the time they "earned" their money.

Well, if it makes you feel better there are more trust that are governed by the 7520 rate that haven't been mentioned yet so there will be more opportunities for you and Yahoo to make posts about people taking advantage of low interest rates.

 

[CLite]

I believe the part that people take issue with is that the appreciation of the assets in excess of the IRS rate is not taxed and is not required to be returned to the original person. You can certainly set up the trust to do so but you can also set them up with the beneficiaries as someone other than the grantor.

The IRS calculates the estimated rate of return based on a fixed rate in the IRS 7520 section which is currently around 2% (but has been lower). Its pretty easy to exceed a 2% return so these excess proceeds will be tax free to the designated beneficiaries. Now if we stop keeping the interest rate low the 7520 rate goes up as do the taxes collected

Also - this only avoids estate tax by removing assets from the estate prior to death. If you die during the term of a GRAT the GRAT is returned to the estate to be taxed and the beneficiaries receive nothing from the GRAT itself

I mean I agree with everything you say. Bottom line I think the article is being disingenuous because if a rich guy has billions in assets there is no way they get passed tax free. Sure earnings on those assets in excess of 2% (or whatever rate the IRS is currently using) will be passed on tax free but nothing else.

 

[ElFenix]

You fucking people who are OK with the the government taking everything when someone dies are really freaking me out. You do realize that the money\things are the persons right, and not the governments. If you are OK with taking it all when they die, then why not while they are alive? Why does someone NEED 30 billion? They really only NEED 1 million so please write a check in the amount of $29,999,000,000.00 payable to the IRS or go to jail.

it's transferred from one person to another. why shouldn't it be subject to income taxes?

I understand that. My question was really about the method of collection of taxes. Is it the easiest way to do it? Another question to ask is it even possible to tax money only once?

most tax occurs on transactions because most transactions a) involve some sort of arm's length valuation; b) involve some sort of liquid asset being exchanged; c) are usually logged somehow by book or record.

we're not taxing money.

 

[moonbogg]

Wait. I thought it was their money? Why do they have to pay FORTY PER-FUCKING-CENT just for the crime of giving it to their family? Are you shitting me? Why do they even bother being so successful if it can't get passed on? Damn it man, its like this country wants to punish success and then bitch about people saying "fuck it" and going on welfare. Welfare is the only way to get that stolen money back without breaking the law or exploiting a loop hole. I say exploit the ever loving shit out of that loophole until it breaks this country clean in half, because any country that steals from its successful citizens needs to be broken down.

EDIT: 40%? Nearly HALF? FORTY PERCENT!?!! WTF IS THIS SHIT!???

 

[Jhhnn]

Estate taxes don't punish success, at all. The Dead cannot be punished.

Nor do they punish inheritors, who receive free money in either event.

Go ahead, punish me! Let me have free money! More than I could possibly ever spend. Leave me $1B, and I'll weep piteously for the $400M I didn't get. I swear it.

 

[dullard]

You do realize this would be the end to all business as we know it?

For instance a wealthy family owning a large percentage of a company with a stock price of 20 P/E. If the IRS demanded a check immediately for those stock positions it would effectively take over 20 years of profits to pay it off. The other option is immediately sell all the stocks, however if you dump such a large position into the market the value would plummet. Then the family has no stock, hasn't come close to fully paying off the IRS, and are now broke and destitute from the IRS bill, quite a lot poorer than a random homeless bum because of the enormous debt with absolutely no way to pay it off.

Fucking brilliant plan.

Why would the IRS get or demand a check? When the owners die, the IRS owns the dead people's money and property. The IRS now owns the business and can keep it, sell it slowly, or sell it in one go (just like normal businesses are sold/merged without their shares going to near zero). No dumping required.

 

[berzerker60]

Wait. I thought it was their money? Why do they have to pay FORTY PER-FUCKING-CENT just for the crime of giving it to their family? Are you shitting me? Why do they even bother being so successful if it can't get passed on? Damn it man, its like this country wants to punish success and then bitch about people saying "fuck it" and going on welfare. Welfare is the only way to get that stolen money back without breaking the law or exploiting a loop hole. I say exploit the ever loving shit out of that loophole until it breaks this country clean in half, because any country that steals from its successful citizens needs to be broken down.

EDIT: 40%? Nearly HALF? FORTY PERCENT!?!! WTF IS THIS SHIT!???

Who is "they" in "it was their money"? It's obviously not the inheritor's money, or else he wouldn't need to inherit it.

Why does your employer have to pay some percentage on THEIR MONEY via your income tax in order to give you a salary?

Why does a store have to pay some of THEIR MONEY in sales tax?

Why do they even bother being so successful if it can't get passed on?

Are you shitting me? Possible reasons: 1) having nice stuff is great because nice stuff usually works better, 2) nice stuff is great because it marks social success, getting you men/women, 3) never worry about money again, 4) can donate to charity, 5) can donate to politicians and support stuff you believe in, 6) the truly rich never go to jail for serious amounts of time, 7) to provide your kids with great education, networking chances, life experiences, health care, food, and everything else needed for them to have easy success their whole lives, assuming they're willing to work for it, 8) because to some people it's a measure of success in itself.

What a horror, someone having to donate their life savings to charity as they're old instead of hoarding it so their spoiled kids can never work a day in their lives!

Smaug/McDuck 2016!

 

[CLite]

Well I now see what happened a little more clearly with the original Bloomberg article, Yahoo did a shitty rip and didn't include all the graphics. In 2009 the SANDS stock price was only $2.58, it rose to $46.87 by 2011.

If I gifted my neighbor $20,000 dollars in bitcoins when they were worth $1/coin, and then 2 years later they are worth $1,000/coin should I have to pay taxes on the gift I gave him because it would dramatically exceed the gift tax exemption ($20,000,000 value)? This is exactly what happened with Adelson, he gifted a relatively shitty asset that sky-rocketed in value post gift. I'm not exactly sure how you lock this down.

 

[Argo]

Why would the IRS get or demand a check? When the owners die, the IRS owns the dead people's money and property. The IRS now owns the business and can keep it, sell it slowly, or sell it in one go (just like normal businesses are sold/merged without their shares going to near zero). No dumping required.

Yeah, because one thing the government is good at is running a for profit business...

 

[Matt1970]

This is the liberal mentality. If you have it, we desreve it. The poor masses who decided to never achieve anything deserve the money more than your offspring does. We'll tax it when you make it and no matter what you do with it, either spend it or give it to your offspring, we'll tax it again. Or better yet, I especially like the scenario where when you make it, we tax it, when you give what you have left to your offspring, we will tax it, and when your offspring spends it we will tax it again.

 

[werepossum]

"Gift" taxes are the biggest load of shit. Only someone who dies poor is a sad enough piece of shit in life to say "Oh yeah, all those guys who had money left... they should TOTALLY be taxed AGAIN. Yea, I know they were taxed already but they should TOTALLY be taxed again!"

Agreed, and well said.

No its a symptom of artificially manipulated financial markets. In fact Yahoo and dmcowen had a very similar thread just a few months ago - with many of the same eye catching tag lines:

http://forums.anandtech.com/showthread.php?t=2342265

While this trust is not exactly the same as the 'Jackie O' trust mentioned there the issue is the exact same: Mainly that the IRS sets the calculated interest rate through its section 7520 rate at the time of setup.* With the Fed keeping rates at all time lows the 7520 rate has been below 2% for almost the entire year** (It was as low as 1% in 2012). Obviously the rate of investment returns have almost universally exceeded this rate leaving large gains in the trust.

Now here is a key point - the gains cannot be realized yet. It is an annuity so the payments are fixed over a fixed period of time and only at the end of that time are the leftover paid out. So if the markets tank there will be nothing left to payout and all these headlines meant nothing.

It should also be noted that these are not new investment vehicles. It is only with the very unusual condition of record low interest rates + high stock market returns tat make these attractive. I didn't see anyone complain in 2001 or 2008 when these would have generated negative growth for the trust and potentially lowered the annuity payout. Or really at any other time in the 20+ years since their creation

This is a side effect of the manipulation of interest rates not a tax break

*http://wills.about.com/od/overviewoftrusts/qt/grantorretainedannuitytrust.htm
**http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Section-7520-Interest-Rates

Excellent point.

I say the opposite. Tax estates at 100%. Then end the income tax, end corporate taxes, stop all other government fees. Everything you earn is fully yours. When you die, why do you care any more?

If you want money, earn it. But you get to keep all of it tax free until the day you die.

A few safeguards would have to be put in place for married couples (since obviously you don't want to lose your home just because your spouse died), where it could be transferred once (but no marring repeatedly just to avoid taxes forever).

One of the biggest incentives to work hard is to leave something to one's family. Do we really want a tax code designed to break that bond and encourage consumption of as much of one's life earnings as possible before the government takes it all?

Beyond that, does Government own me? If so, then Government obviously has the right to all my property when I die, for it's property's property is its property. If not, then what I own, I should be able to dispense as I wish.

 

[Zaap]

What a horror, someone having to donate their life savings to charity as they're old instead of hoarding it so their spoiled kids can never work a day in their lives!
Smaug/McDuck 2016!

Ah yes, the liberal mindset. In a nutshell:

Family leaving money to their own kids = Greedy! Selfish!! Worst possible use of money! Terrible! Root of all evil!!!

People who receive their own family's hard earned money= Undeserving! Greedy! Spoiled! Rotten! Terrible!!! Evil!!


Family's money stolen to give to government fatcats who are already rolling in money (but loooooove to pretend they are broke) and who'll then pretend to give any of it to poor people= Rainbows and unicorns! Best possible use of money! Compassionate! Everything that's good!

People who receive someone else's family's stolen money= Entitled! Unselfish! Wonderful! Good! Best people on the planet!

(Of course, it's no small coincidence that liberals perpetually hope to be on the receiving end of someone else's family's stolen money- but they know they'll never get left anything earned by honest, hard working family members.)

 

[werepossum]

I'm with you on the estate tax. I think having money stay in families over generations is detrimental to society. I would have a graded scale from 10% to 99% ($50K-$50MM).

No other taxes and only estate taxes, I don't think there would be enough income. Also the income would be inconsistent year to year.

So you have absolutely no concept of private property other than your own? Just "I find you having things is detrimental to society", so I'm taking your shit?" So, why wait until they die? Why not just take 99% of everything everyone owns and redistribute it fairly? Better yet, why have money at all? Why not just have Government assign work and distribute what society needs that person to have?

If you're gonna be a bear, be a grizzly. If you're gonna be a selfish asshole, be THE selfish asshole. Don't wait for these evil people who have more than you to die, leaving you only to punish their heirs, when you can punish them all.

 

[CLite]

Why would the IRS get or demand a check? When the owners die, the IRS owns the dead people's money and property. The IRS now owns the business and can keep it, sell it slowly, or sell it in one go (just like normal businesses are sold/merged without their shares going to near zero). No dumping required.

So now the IRS has to become the world's largest auction house? When I die they have to deal with my closet full of clothes, shoes, my house, my furniture, everything? They get to do this for all the millions of Americans?

Asset seizure seems all wonderful and dandy when you get to make billions, but what happens when you are swamped with billions of items not worth more than $10?

You could not come up with a more terrible idea if you tried. There is a reason the IRS wants cash not assets.

 

[bshole]

So you have absolutely no concept of private property other than your own? Just "I find you having things is detrimental to society", so I'm taking your shit?"

If you love oligarchies and castes, you will hate the estate tax. Currently the United States has more asset inequality than any first world nation and is nearing third world nation levels in this metric.

 

[Jhhnn]

Ah yes, the liberal mindset. In a nutshell:

Family leaving money to their own kids = Greedy! Selfish!! Worst possible use of money! Terrible! Root of all evil!!!

People who receive their own family's hard earned money= Undeserving! Greedy! Spoiled! Rotten! Terrible!!! Evil!!


Family's money stolen to give to government fatcats who are already rolling in money (but loooooove to pretend they are broke) and who'll then pretend to give any of it to poor people= Rainbows and unicorns! Best possible use of money! Compassionate! Everything that's good!

People who receive someone else's family's stolen money= Entitled! Unselfish! Wonderful! Good! Best people on the planet!

(Of course, it's no small coincidence that liberals perpetually hope to be on the receiving end of someone else's family's stolen money- but they know they'll never get left anything earned by honest, hard working family members.)

Apparently, you fail to realize that you just asserted that the accident of birth entitles some people to free money. Once that's acknowledged, all the self righteous raving is revealed for what it is.

Luck is amoral. Having good luck is not cause to claim the moral high ground.

 

[berzerker60]

So you have absolutely no concept of private property other than your own? Just "I find you having things is detrimental to society", so I'm taking your shit?" So, why wait until they die? Why not just take 99% of everything everyone owns and redistribute it fairly? Better yet, why have money at all? Why not just have Government assign work and distribute what society needs that person to have?

Dead people can't own things. You can't take something from a dead person. You can only take things from a dead person's estate. That's fundamentally different.

Obviously NOT "I find you having things is detrimental to society, so I'm taking your shit?" because no one is talking about some single person deciding that. We're talking about changing laws through a democratic process such that an elected government, in enforcing them, takes things from you. That's fundamentally different.

Also, nice slippery slope fallacy. "If you're going to have a single fireman in your town, why not just have every single person be a fireman instead!!! We'll all starve to death because no one will grow food, all because of your LIBERAL having-firemen-in-town agenda!!!"