Personally, I say kill the estate tax. The money was taxed once, why should the government tax it again? Problem is, ending it would create a hole in collections so Senators and Congressmen won’t have enough money to adequately fund their pork projects.
The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.
The administration plans to cut the jobs of 157 of the agency’s 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.
The Bush administration has passed measures that reduce the number of Americans who are subject to the estate tax — which opponents refer to as the “death tax” — but has failed in its efforts to eliminate the tax entirely. Mr. Brown said in a telephone interview Friday that he had ordered the staff cuts because far fewer people were obliged to pay estate taxes under President Bush’s legislation.
But six I.R.S. estate tax lawyers whose jobs are likely to be eliminated said in interviews that the cuts were just the latest moves behind the scenes at the I.R.S. to shield people with political connections and complex tax-avoidance devices from thorough audits.
Sharyn Phillips, a veteran I.R.S. estate tax lawyer in Manhattan, called the cuts a “back-door way for the Bush administration to achieve what it cannot get from Congress, which is repeal of the estate tax.”
“Problem is, ending it would create a hole in collections so Senators and Congressmen won’t have enough money to adequately fund their pork projects.”
Ahh… the old starve the beast approach to federal spending. Never worked, never will. As long as the government can borrow money to pay for things, there will be execess goverment spending. End of story.
And I say, if I must be taxed then tax me when I am dead. It is the height of absurdity to do away with the inheritance tax. – we will will end up with an 18th century social structure.
Does a national consumption tax makes better sense, yes. Can you kill off a large government entity and an entire service sector, no. It would be no problem today with computer controlled inventories and sells to make a variable sales tax for each line of goods. 3% food, 4% clothing, etc. It will never happen.
Why not tax it like other income. If a capital asset and it is sold, tax it under the capital gains structure. Difference between double taxation of capital (divs and cap gains) vs. wages is as follows: wage earner gets paid, employer deducts the wages from their taxes and earner puts them on theirs. Depending on the marginal tax rate the govt wins or loses on the taxation of that income (typically a loss because employer tax rate is higher than employees). Owners of the company earn money through the company. Dividends are not deductible by the company so income is taxed at 35%. Then some portion of that is paid as a dividend to the owner who then gets taxed at 28-35% and if they keep and don’t spend any of those dividends the amount above the estate exclusion is taxed at 55%. Any they spend does get hit with other taxes such as sales, property tax etc.
When does the govt collect enough? No one ever says they have too much money in the govt.
Read ” Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich–and CheatEverybody Else” for a view on how the super wealthy avoid taxes. url to Amazon.
Allow me to rant a bit here, as this is one of my pet issues.
The truth is that for the “ultra rich” (e.g. Gates, Buffett, the Rockefellers, Howard Hughes, the Gettys, etc, etc.), the money is NEVER taxed. Appreciated assets are placed into charitable foundations, resulting in current tax deductions (to shelter whatever income they need for their lifestyles) at the present value — with no tax paid on the appreciation. They maintain control of their assets (which is what the point is when there is more wealth than can be spent) through generations, bypassing the inheritance tax.
The inheritance tax applies only to people below that “ultra rich” category who would like to provide some financial security to their kids and grandkids. The fact that Gates (through his dad) and Buffett are advocates for maintaining the inheritance tax is disingenuous — they themselves have NO intention of paying it.
Note that charitable foundations only spend ~5% of their assets (the minimum required by law) on actual charity. This means that if the assets in the trusts earn more than 5% per year, the trust is actually growing — again, tax free. In a recent article, the only person whose trust distributes materially in excess of the 5% threshold is Mike Milken’s.
Some may say that this is all OK because >eventually
The estate tax doesn’t earn that much money for the government. It’s all about making the rich pay up. Not the super rich, but the generation of new business owners. They’ll be forced to sell, and various corporations which never pay estate tax will buy them up and get bigger.
“Conservative: Against – Feels fairness is not in equal distribution of wealth but keeping what you earn within reasonable tax limits and assuring opportunity to succeed through hard work and self discipline.”
Experience shows the following:
“Conservative – in favor of borrowing in lieu of taxing in the hopes that a Liberal or Moderate will show up eventually to raise taxes and pay off the ballooned deficit. Favors regressive taxation (consumption taxes) that falls most heavily on the poor. Delusionally believes that wealth is obtained solely through personal effort, rather than by personal effort protected and enabled by state mechanisms like contract, property and corporation laws. Displays congnitive dissonence by simultaneously believing in corporate welfare and “rugged individualism,” as well as massive military and pork-barrel spending and no-bid contracts for crony capitalists while professing an apparently sincere belief “small government.” Stubbornly refuses to believe that those who gain the most from an ordered society should pay more to maintain it.”
They may be firing the lawyers who deal with the estate taxes, but they are hiring battalions of auditor/agents to dramatically raise the rates of middle class tax return audits. The local tax preps are going into ultra conservative mode and advising clients to be very cautious.
No doubt, the entire American tax code is a bloated nightmare that will ultimately spark a tax revolution, a revolution that will begin with a bit bigger bang than just tossing a few cases of tea into Boston Harbour.
I would suspect, for beginners, an all out cyber attack on the IRS computers. After that, the people would simply not pay the taxes, and after that is when it would get messy.
Recommendation: Don’t keep all your assets in a bank.
#9,
Do you even know the estate tax cap? You’d have to have a pretty big company to get any tax.
It always comes down to community vs. me me me.
The vast majority of “me” can’t do it without community. But the temporarily rich love to believe they are different.
#12….Smartalix….I was looking at the caps and I kept thinking, these are pretty high actually. For a normal middle class, non-business owner an estate of half a million or even three quarters of a million is quite large. Unless you own a house in the Bay area, then a three bedroom, shack puts you in the Buffet, Gates catagory.
What they need is maybe a separate rate for the moderate individual who happens to have a business worth say, 500,000.00 to 3 million, to protect their heirs from having to sell the business to pay the taxes.
The estate tax is not a double tax. Most of the wealth in estates is in real estate and stocks, and due to how they are transferred to heirs the capital gains are eliminated. Therefore, if there is no estate tax, income through gains from real estate or stocks is NEVER taxed (not even once). The arguments against the estate tax are a load of crap–they are mostly from rich people or from politicians protecting rich people.
Also, let’s not forget that 99.5% of the population does not have enough wealth in their estate to be subject to the estate tax in the first place. Look at the chart on CNN/Money: money.cnn.com/2006/06/08/pf/taxes/estate_tax_debate/index.htm
The argument about protecting small businesses is a load of garbage, also. Not only are very few family businesses affected by the estate tax each year, but there is a specific corporate structure that exists for family businesses to avoid this situation. It’s called a Family Limited Partnership (or FLiP).