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Too Rich to Live?
- sliverstorm 16y agoa 45% estate tax? That seems kind of insane! Is that on all your assets, or the property you own, or what? I can't believe the government gets half of everything you've got when you die. What ever happened to wills?
- kierank 16y agoThe argument for this is that you're getting a large windfall (and in most cases you haven't done anything to earn it) so you must be taxed on it.
- ryanf 16y agoAlso note that there is a huge exemption (apparently $3.5m last year, and $1m next year if they don't change it). It's only 45% beyond that point, like tax brackets.
- d2viant 16y agoOnly 45% at the federal rate. Don't forget (in most cases) the state taxes that get levied as well.
- Retric 16y agoThere are a lot of ways of avoiding this, EX1: you can give your wife unlimited assets without tax implications. EX2: Let's say you and your wife have a 7 million$ 50% of which is appreciated assets, and 2 million in life insurgence and 3 children. Each of you can give 1 million to each child, so 6 million is exempt, as is all life insurgence thus only the last million is taxed at 45%. Resulting in a 0.450 / ( 7 + 2) = 5% effective tax rate. Note: If they actually sold their appreciated assets they would pay more in taxes. EX3: 1 billion in assets. Set's up a blind trust = zero direct taxes on death. Money can compound tax free in the trust and is only taxed on disbursement. EX4: 1 billion donation to the red cross = zero tax. PS: If you do nothing and leave 5million to 1 person the effective tax rate is still only 36%. You really have to have huge amount in assets and stupid tax advice for this to be a major issue.
- amh 16y agoThat argument happens to be full of shit. Even if you win $36 million in the lottery (surely the stereotypical "windfall"), the feds won't tax you 55%. The highest marginal tax rate is 35%. Estate taxes are morally repugnant. If the idea of people passing along large fortunes to bratty kids is so bothersome, take comfort in the fact that money tends to "find its level". Spendthrift fools will eventually lose it all to mismanagement anyway. It might take more than one generation, but it'll happen.
- jacobolus 16y agoEstate taxes are only morally repugnant if you believe that the children of the elite have a unique right to the accumulated wealth of the society (which tends to build up in those who own property and capital). Why should all of us whose ancestors for generations actually built this society with their hands end up with nothing while the man whose ancestor was a robber baron, land speculator, or plantation owner receives a handout of a giant pile of cash? Especially when such dramatic wealth inequalities severely distort people’s economic behavior, depressing the overall growth of the whole economy and wealth of the whole society?
- sliverstorm 16y agoIt's not that the children are entitled to it, but the deceased wanted to give it to them. It's their assets, shouldn't they be allowed to decide what to do with them?
- pavel_lishin 16y agoI believe that you are limited in that, too - you can only give away so much money to relatives before it starts being taxed as well. I can't really cite anything, though, so feel free to disregard this.
- jacobolus 16y agoWhy? By common cultural and legal convention (and in my firm opinion), the accumulated wealth of most countries partly belongs to all who are citizens. You’re suggesting that the rest of us cede complete social and economic control to those who own property. Such is the typical libertarian utopian ideal, but in practice the result is a sort of quasi-aristocratic society with sharply limited opportunities for those at the bottom. If you change your perspective, recognize that every fortune depends just as much on the context and the society it was built in as it does on the individual who built it, that our definitions of wealth and property are essentially arbitrary human constructions, defined to be whatever we can mostly agree on (through our institutions of government), and decide that the accumulated wealth created by all our ancestors should "rightfully" (another human construction) belong somewhat to all of us, then suddenly inheritance in general becomes a way for some people (the rich) to take our property (that is, your property and mine and everyone's) and give it to a few people that they personally selected. Now, in practice, there's some kind of balance between these positions (full inheritance or no inheritance), because again, our culture and laws in a republican society are based on what we can agree on. In America, there's more of a cultural and legal emphasis on inheritance and personal wealth than in any of the Scandinavian countries, for example. But for someone to say that the very concept of broader societal input into inheritance is "morally repugnant" is in my opinion a pretty narrow and socially destructive morality, and I’m glad I don’t live in a country where a small elite has enough power and influence to impose such cultural definitions through force.
- kiba 16y agoThe government have no money. If they want to provide services, they have to take it by force, rather than engage in voluntary exchange. Everything they have comes from the people, ungratefully or not.
- tomjen3 16y agoIrrelevant - the money has already been paid for on the taxes.
- kiba 16y agoAnd that what taxes are. Your money, my money, and everyone's money. It is not paid, it is taken. You don't buy government services or products. They get provided for you.
- sliverstorm 16y agoNow that's an interesting thought. Two governments occupying the same space, selling you services commercial-style.
- jacobolus 16y ago45% tax after the first million, right? Denmark has a top marginal income tax rate of something like 60%. Why is a 45% marginal tax on estates “insane”? If you think about it instead as descendants get a completely un-earned windfall of $1 million + 55% of whatever is left after that, while only 45% of everything after the first million reverts to the general society, then the tax might just as easily be characterized as insanely low. Of course, this is just a legal agreement, hashed out in congress, and so “insane” is a pretty silly label either way. The legislative process may be messy, but I guarantee you the vast bulk of the people arguing on each side of inheritance taxes are perfectly sane, and there are compelling mutually incompatible arguments (compelling for some number of citizens anyway) on both sides.
- yalurker 16y agoAnd with this law passing, the death of the family farm is complete. Now instead of the midwest being full of family farms passed from father to son, we'll only have corporate farms, since the typical family can't come up with the cash to cover half the value of their land that now belongs to the government. I have little sympathy for the mega-millionaire trust fund kids this impacts, however, the estate tax completely destroys a way of life for millions of people in fly-over-country that has existed for generations. Sad.
- kiba 16y agoBeing able to preserve wealth within a family is a skill in itself. If anything, million dollars fund is one of the biggest challenge that any kid would have. Any kid who have managed to keep their fund growing deserve a kudos in my book because they didn't squander their money in questionable investment schemes. Remember, lottery winners typically all went broke. Very few have the financial skills to grow it.
- timwiseman 16y agoIf anything, million dollars fund is one of the biggest challenge that any kid would have. It is a challenge most people would gladly take.
- ricree 16y agoFrom what the article says, it sounds like the tax is reverting back to a previous level. I'm sure this will do little to help family farms. However, if it didn't kill them off the last time it was there, then what makes this time around so much more terribly.
- timwiseman 16y agoAnd with this law passing, the death of the family farm is complete. Now instead of the midwest being full of family farms passed from father to son, we'll only have corporate farms, since the typical family can't come up with the cash to cover half the value of their land that now belongs to the government. According to the article, the lowest exemption amount being discussed is $1 Million. According to wikipedia, the average value of a family farm is $250,000 in the US, so in other words this will not impact the average family farm at all. (As a side note, my mother's side of the family does maintain a family farm passed through generations and it is currently worth substantially less than that...) When you are talking about the truly large family farm worth over $1 Million, remember, that first million is still exempt, only the value over a million is taxed. This means that only a farm worth substantially over a million is at risk of unmanageable tax bills. A farm that large will look a lot like a corporate farm even if sole ownership has been passed through generations, and a farm owner with that kind of resources likely has a large life insurance policy that will help defray those taxes somewhat. [Edit: spelling and grammar]
- msie 16y agoWhat's the hit on passing your estate to your kin BEFORE you die?
- shasta 16y agoGift tax is similar (has been 45%, might go up), on amounts over $10,000.
- theli0nheart 16y agoIt's now $13,000 as of last year, I believe.
- IdeaHamster 16y agoCharitable giving is exempt, though...
- d2viant 16y agoAnd if it's a married couple, that's per person, not per estate.
- d2viant 16y agoDepends on how you do it. There are lots of ways to transfer assets down to the next generation to avoid tax. I won't list them all here, but the key point is that most of them take time to implement and the important part is to plan ahead and not wait until you're nearing the end of your life.
- deleted 16y ago[deleted]
- IdeaHamster 16y agoI'm sorry, I have zero sympathy for anyone distraught over this issue. If you're contemplating whether to live or die based on how much tax will be collected from your estate, then I have an easy answer for you: your life obviously isn't worth even a penny, so might as well get it over with. As for the issue of the tax itself, there is something to be said for using estate taxes to prevent the establishment of an aristocracy. I wonder how strong the correlation is between the estate tax rate and the wealth divide...
- sliverstorm 16y agoIf you had children and a lot of money, were old and racked with health problems that left you bedridden, and the date of your death was by all accounts sometime in the next two years, would you actually insist on living an extra year and saddling your children with hundreds of thousands of dollars in taxes on the things you pass on to them? There may not be a clear answer, but is it so insane to even contemplate these things? The elderly are not being greedy- they don't benefit monetarily. They are trying to care for their children in the last way they can, similar to those who choose to take out life insurance. Would you similarly condemn a parent who dies protecting their children from danger?
- julius_geezer 16y agoThe danger of having .55n million rather than n million?
- jacobolus 16y agoThose kids might not be able to bankroll their own space ships.
- jballanc 16y agoSo you're comparing dying in order to protect a life with dying in order to avoid excess taxes? The question is not "life == money" vs "life < money" vs "life > money", the question is why are you attempting to compare life and money in the first place?!?
- hop 16y agoVery wealthy people have the resources and probably the smarts find ways to lessen tax liability - setting up trusts, moving money offshore, etc.
- jquery 16y agoYes, very wealthy people... like a two-income family of programmers that saved 20% of their money and invested prudently.
- deleted 16y ago[deleted]
- starkfist 16y agoWhy on earth is that what you thought of when you think of an estate tax? Raping the peasants on their wedding day? Lobsters in a bucket? I'm having serious mixed-metaphor head explosion from your post. Is english even your second language?
- deleted 16y ago[deleted]
- starkfist 16y agoThat's crabs, not lobsters. I was more confused by the peasants and noble thing. I didn't mean it as an insult, I was genuinely interested in which country has a folklore of buckets of lobsters and the princes raping the peasents during their wedding. Seems like a pretty interesting place!
- deleted 16y ago[deleted]
- hugh3 16y agoNow that the parent has been deleted and only this reply is left, I am amused to speculate what the parent could possibly have said about raping peasants and lobsters in buckets. No no, don't tell me, I'm having too much fun reconstructing it in my head.
- deleted 16y ago[deleted]
- kmfrk 16y agoTo counterbalance the tone of impending doom in some of these comments and the article, it's worth remembering that the article is from WSJ and might bear the slighest hint of bias. J
- jdietrich 16y agoMany of the wealthiest people in America opposed the repeal of the tax in the first place - http://news.bbc.co.uk/1/hi/world/americas/1170874.stm http://news.bbc.co.uk/1/hi/world/americas/1170874.stm Warren Buffet has been quoted as saying "The idea that you get a lifetime of privately funded food stamps based on coming out of the right womb strikes at my idea of fairness." There's a strong argument for high estate taxes on the principle that the inheritance of wealth is inherently anti-democratic. Most historical dictatorships have been based on the simple principle of compound interest. In Britain two thirds of our land is still owned by just 6,000 people, most of them aristocrats. I think any American would be a fool to forget that their nation was founded as a rejection of British serfdom, and that their nation is perhaps the only one in history that has not lived under the tyranny of oligarchy. It seems to me to be no coincidence that America is almost unique in the world in not having a common cultural sense that economic wealth inevitably translates into political power. For a contemporary example of the perils of unearned wealth, we need look no further than Russia - in less than two decades it has descended to a state of pure plutocracy, based on little more than unchecked accumulation of wealth and simple corruption. Those opposing campaign finance laws and regulation of that sort would be wise to look at the career of Vladimir Putin as a cautionary example of what happens when wealth is allowed to dominate democracy. I consider myself a classic liberal, on largely utilitarian grounds - I believe that a free market is good for us all and that any regulation of that market is likely to do more harm than good. However, I fail to see the harm done to society by considering a dead person's assets to be essentially 'dead money', beyond that which is necessary to sustain his family. If you truly wish to have a lasting influence on the world after your death, trust laws give you ample opportunity to leave a permanent economic legacy. The likes of Gates, Buffet, Carnegie and Rockefeller seem to recognise this. I fail to see what good comes of inheritance, but do see a long history of great wrongs resulting from it. From the perspective of this Brit, inheritance seems to be more fundamentally un-American than most things condemned as such.
- adbge 16y agoThe majority of the harm, as I see it, stems from the government attempting to regulate the market and the unintended consequences of that regulation.