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Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circu

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although those are high enough I'm not too concerned about it. I hope this doesn't start any arguments, but that's just my take on it and I'm open to hearing why it's a bad idea. Edit: I appreciate the responses, they've cleared up some misconceptions I had and moved my viewpoint a bit.

tanderson92 8y ago
A common misconception is that gifts within a family are taxed. They are, but only after one exceeds the lifetime limit. That limit is around $11M (per parent). It is true that if you exceed a certain amount per year you have to fill out a form, but that is not to be confused with paying actual tax on the excess gift. It's good that you feel the same about the inheritance tax because it's the same tax code that govern each.
- dragonwriter 8y ago
  Note that it's only if reportable gifts exclude the limit, nonreportable gifts (below the annual limit) don't count against the lifetime limit. Also, both limits tend to go up over time, so it's a moving target.
astrodust 8y ago
At low levels, which aren't taxed, it's not going to affect anything. At high levels, like giving your kid ten billion dollars, you're making it impractical or impossible for others to advance economically. You're creating a class of people with indestructible inherited wealth that never have to work, that only have to collect interest and rent on the backs of everyone else. That's what inheritance tax and gift taxes seek to disrupt.
- user5994461 8y ago
  I don't think so, this certainly has never been effective at that. I'd say that historically billion dollars fortunes got diluted between the 10 children then the next generation, some of whom might actually burn it stupidly very quickly. Otherwise, it's diluted by wars and calamity. However, there are no major disaster in the past decades and the number of children per family have dropped dramatically. It surely breaks the balance.
  - isostatic 8y ago
    That explains why the Grosvenor Family, a family who've owned the same company for 100 years longer than the united states has been in existent, is so poor.
    - ryacko 8y ago
      Comcast is a better example of a family owned business.
  - liftbigweights 8y ago
    > I'd say that historically billion dollars fortunes got diluted between the 10 children then the next generation Throughout history and across most cultures, it was usually the first born son who got the father's legacy and the lion's share of the wealth. It's why it was so important for wives ( especially of the powerful and wealthy ) to produce a male heir. Sometimes it was a matter of life or death. We all know of king henry's wives. "When Anne failed to quickly produce a male heir, her only son being stillborn, the King grew tired of her, annulled their marriage, and a plot was hatched by Thomas Cromwell to execute her." https://en.wikipedia.org/wiki/List_of_wives_of_King_Henry_VIII https://en.wikipedia.org/wiki/List_of_wives_of_King_Henry_VI...
- paulddraper 8y ago
  > like giving your kid ten billion dollars, you're making it impractical or impossible for others to advance economically. Zero-sum is one perspective, but not one that I subscribe to. Does your neighbor having $10b of stuff make you better or worse off than if than if there's $10b of stuff at the bottom of the ocean?
sailfast 8y ago
Disclaimer: I'm not a tax advisor or anything, just a humble payer. The notion of "the family" is not a thing unless you're talking about dependents. Transferring money from one person to another is income for the person receiving the money. It's not being taxed twice, just once per time "earned". (and it's not even taxed until the limit per the comment in this thread! TIL) To allow for these kinds of gifts they limit the amount that is tax free. Allowing unlimited gifts to "family" would likely result in all businesses being "family" businesses, etc etc. Lots of downstream ramifications. So this seems to answer "how do I help my kids a reasonable amount without being taxed without creating a giant dodge" Giant dodges are best done using LLCs and ownership by other family members. Typically this overhead costs a lot more to manage though, so it's only available to the super wealthy. I kid here, a bit. But it's clearly also something being done quite often.
- isostatic 8y ago
  > it's only available to the super wealthy. > I kid here Indeed, you don't have to be super wealthy to dodge taxes. In the UK some people who consider themselves poor will happily talk to a solicter about "inheritance tax planning". https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/ https://www.moneysavingexpert.com/family/inheritance-tax-pla...
skybrian 8y ago
It's about inheritance taxes. Without a limit, an easy loophole would be that a parent could give all their money to their kids before they die and avoid inheritance tax entirely. (Instead, they need a more complicated loophole using a trust.) But federal inheritance tax doesn't kick in until you leave over 11 million to an individual, and many states don't have an inheritance tax, so most people won't need to worry about this. (Not legal advice, states differ, etc.)
kcorbitt 8y ago
It's a fair question. Personally though, I come down on the exact opposite side of the question – all gifts should be highly taxed, with maybe a nominal tax-free allowance of a few thousand dollars. Making large gifts tax-free is just another big advantage that kids born to rich parents get over those born into less-fortunate circumstances. If we're in favor of equality of opportunity (and almost everyone claims to be), much stronger inheritance/gift taxes seem like a really obvious place to start. I wrote some thoughts on this a few months ago: https://corbt.com/posts/2018/04/25/a-100-estate-tax.html https://corbt.com/posts/2018/04/25/a-100-estate-tax.html
- isostatic 8y ago
  It's not just rich kids that benefit, and it's not just direct gifts that benefit. If your parents live within commuting distance of London, you can probably take a very low paid job to get a rung on the ladder. Very few outgoings - no rent, no bills. £600/month for season ticket and nights out, and even on minimum wage you'll be saving £5k a year. If your parents live in say Devon or Yorkshire, you can't do that. You'll be paying £1k a month just for rent.
  - tomp 8y ago
    IIRC Switzerland is introducing a "homeowner's tax" - the equivalent to the tax your landlord would be paying on your rent if you were renting instead of owning - essentially, they're considering you're renting to yourself, so you need to pay the tax. Now that's pro-equality (ironically, for Switzerland).
    - TheCoelacanth 8y ago
      I believe they already have this (it's called "imputed rent") and are considering getting rid of this[1]. [1] https://lenews.ch/2017/08/24/a-swiss-parliamentary-commission-wants-to-get-rid-of-imputed-rent/ https://lenews.ch/2017/08/24/a-swiss-parliamentary-commissio...
- InitialLastName 8y ago
  > If we're in favor of equality of opportunity (and almost everyone claims to be) The problem with that notion is that people often talk around each other W.R.T what it actually means. For some people, the only value of that opportunity is to be able to create a better life for their kids, often through inheritance.
deleted 8y ago
[deleted]
secabeen 8y ago
The gift tax exists largely to prevent people from avoiding estate tax by gifting large sums of money just before death. That's why they're linked. If there was an estate tax and no gift tax, people would just give all their money away in the years leading up to death. The gift tax exemption is co-mingled with the estate tax exemption, so you can just think of the gift tax as pre-death estate taxes. As for why we have an estate tax, the general idea is that oligarcies and plutocracies are bad; that while you should be able to give your kids (and grandkids, and even great-grandkids) every leg up in the world, they should have to work and contribute to society; that the pernicious effects of wealth snowball as generations pass; etc. Add to that the fact that an estate tax has the least negative impact on the taxpayer (and their spouse), given that the taxpayer is dead, it's a pretty good tax. Especially now that the exemption is so high, I feel like the value proposition is pretty good.
- charlesdm 8y ago
  Very much depends on the policy country. In Belgium you can gift any arbitrary amount ($10,000, $5m, $100m) through a notarial deed (up to a day) before death and pay 3% "gift tax". But the estate tax gets to 27% in the low hundreds of thousands.
  - secabeen 8y ago
    Fascinating. Do you see a lot of deathbed transfers of wealth? Certainly, there are some illiquid assets that are going to be hard to transfer at deathbed in any country. In the US, you would see tons of deathbed transfer (they had to create a look-back period for gifts to prevent people from "improvishing" themselves via gifts to kids to qualify for government-paid nursing home care through medicaid). Is it just a cultural difference in Belgium, or something else?
    - charlesdm 8y ago
      Definitely possible. Most wealthy people do transfers before death and avoid (most of) the estate tax. Normal people with a low net worth generally don't do this, because they are unaware of the avoidance mechanisms.
dragonwriter 8y ago
> Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Could you explain the rationale for excluding such unearned income, other than privileging generational wealth against wealth earned by personal work and investment? > Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. He's paid tax on his income. When it goes to you, you are the then receiving income—whether it's as a gift or a payment for goods or services, whether you are in the family or not. Favoring one of those situations over another is just that, favoritism; it's not justifiable by “already paid” logic in one case but not the others.
- isostatic 8y ago
  > Could you explain the rationale for excluding such unearned income, other than privileging generational wealth against wealth earned by personal work and investment? If I buy a round of drinks, do people have to pay tax? (I assume there's some minimum threshold)
  - mmcconnell1618 8y ago
    I'm fairly certain the United States Internal Revenue Service would consider the drinks received by others as income they should technically report on their taxes. For practical purposes, I suspect that almost no one ever does report this type of gift, but yes, technically it would qualify. If I give someone $5 for their birthday, they should report it but won't. If I give them $50,000 for their birthday, they better report it or risk the IRS finding out and coming after them.
    - JoeAltmaier 8y ago
      Gifts < $14K not necessary to report
  - dragonwriter 8y ago
    > If I buy a round of drinks, do people have to pay tax? Ideally, probably, but even in a system which tries to mitigate the advantage of generational wealth created by the current favorable regime of gift and inheritance tax by a purer income tax, the friction of taxing de minimis personal gifts as income to recipients is something you probably want to avoid.
wnevets 8y ago
> Ignoring the possibility of using it to circumvent an income tax you can't just ignore the reason why it exist.
Aunche 8y ago
You can make an argument that any tax isn't fair. Why should you have to pay a sales tax on money you already paid income taxes for? Why should a company pay a payroll tax to pay their employees? What really matters is the economic consequences of these taxes. For example, you can't make sales tax too high because it discourages people from buying things and hurts poor people disproportionately. There isn't much of a economic downside to taxing large gifts. Sometimes taxing an inheritance runs the risk of closing a family owned farm or business.
zimablue 8y ago
What would really make sense -> a wealth tax What we have instead of that -> an estate tax What you need to make an estate tax work -> a gift tax Wealth taxes and income taxes are kind of orthogonal. Why do you need a wealth tax? For the same reason you need a progressive income tax, power naturally accumulates and without a force pushing against that you slide towards feudalism. It's also important to note that wealth doesn't work like "I earned a pile of gold and if I do nothing I/my children will gradually deplete it". Wealth makes higher returns the more wealth you have, returns /above/ inflation, meaning that if you throw it into a managed fund it will make you money (on average) forever. So it's less like you own a pile of gold and more like you own a boatload of land and rent it to other people to passively get you money (equity same deal but more steps). So half the people are born into the world effectively owning not a pile of gold but shares on the other half! (Try earning a living without land, water, telecoms, probably soon air, which we allow people to own). If you don't think this is bad because of some sense of fairness and morality, accept that it's bad because "those who make peaceful revolution..." - eventually you get the French revolution.
xkcd-sucks 8y ago
Governments, like most living things, want to be at the top of the power hierarchy. Families are similar organisms that accrue power similarly. Where families are powerful, governments and corporations are weak. So, governments do things to cripple families so they cannot become powerful enough to be dangerous. Retaining wealth across generations is a thing that makes a family powerful.
- TheOtherHobbes 8y ago
  Government, like Soylent Green, is people. The US government has been the pet toy of a small cadre of powerful families for a long time now.
pkaye 8y ago
The yearly gift tax exclusion is $15K to each recipient. When it exceeds that, it will count against the lifetime estate tax exclusion which is $5.6M. Only then would they have to worry about the extra taxes. So for an average person they will never reach that limit. And there are clever tricks to bump up the limits. The two parents can gift to the child/spouse separately to give 4x the gift tax limit.
empath75 8y ago
Explain the rationale for why certain people should be born into a massive inheritance of wealth and power while others are born only to starve to death.
rafd 8y ago
AFAIK, many countries do not tax gifts or have an estate tax (ex. Canada).
bachmeier 8y ago
> I feel the same way about inheritance taxes, although those are high enough I'm not too concerned about it. Having just gone through this, your parents must be really, really wealthy if your inheritance taxes are high. You can inherit many millions of dollars and not pay a cent in taxes in the US.
- rory 8y ago
  Some states have their own tax which starts lower. Here in Massachusetts it kicks in at $1MM.
microtherion 8y ago
> if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business Surely you agree that if he instead were to hire an extra gardener with the same $30,000, that money would be taxable as the gardener's income? So why should somebody who works for their money pay taxes on it, but not somebody who receives the money as a gift?
- OJFord 8y ago
  I assume therefore that you dutifully calculate and pay income tax on any and all birthday or Christmas presents?
  - microtherion 8y ago
    To the extent that we have received large gifts from relatives, yes, we've reported those accurately to the tax authorities in two different countries. There was no tax due, but I would not have objected philosophically to the gifts being taxed.
    - OJFord 8y ago
      Huh, sorry, as a Briton it's quite literally a foreign concept to me; I thought I was joking. In the UK there's inheritance tax to pay over a threshold if you die within 7 years of making the gift, but otherwise there's not a 'gift tax'. The situation you describe still isn't the same as declaring it as income though - assuming you are working, if it were taxed at your marginal rate of income tax you'd already be over any threshold no matter how small the gift.
  - TheCoelacanth 8y ago
    Yes, I have calculated and paid tax on all gifts that I have ever given in excess of the reporting threshold (i.e. none, because I don't give away gifts worth tens of thousands of dollars).
    - OJFord 8y ago

tanderson92 8y ago

A common misconception is that gifts within a family are taxed. They are, but only after one exceeds the lifetime limit. That limit is around $11M (per parent). It is true that if you exceed a certain amount per year you have to fill out a form, but that is not to be confused with paying actual tax on the excess gift. It's good that you feel the same about the inheritance tax because it's the same tax code that govern each.

dragonwriter 8y ago
Note that it's only if reportable gifts exclude the limit, nonreportable gifts (below the annual limit) don't count against the lifetime limit. Also, both limits tend to go up over time, so it's a moving target.

astrodust 8y ago

At low levels, which aren't taxed, it's not going to affect anything. At high levels, like giving your kid ten billion dollars, you're making it impractical or impossible for others to advance economically. You're creating a class of people with indestructible inherited wealth that never have to work, that only have to collect interest and rent on the backs of everyone else. That's what inheritance tax and gift taxes seek to disrupt.

user5994461 8y ago
I don't think so, this certainly has never been effective at that. I'd say that historically billion dollars fortunes got diluted between the 10 children then the next generation, some of whom might actually burn it stupidly very quickly. Otherwise, it's diluted by wars and calamity. However, there are no major disaster in the past decades and the number of children per family have dropped dramatically. It surely breaks the balance.
- isostatic 8y ago
  That explains why the Grosvenor Family, a family who've owned the same company for 100 years longer than the united states has been in existent, is so poor.
  - ryacko 8y ago
    Comcast is a better example of a family owned business.
- liftbigweights 8y ago
  > I'd say that historically billion dollars fortunes got diluted between the 10 children then the next generation Throughout history and across most cultures, it was usually the first born son who got the father's legacy and the lion's share of the wealth. It's why it was so important for wives ( especially of the powerful and wealthy ) to produce a male heir. Sometimes it was a matter of life or death. We all know of king henry's wives. "When Anne failed to quickly produce a male heir, her only son being stillborn, the King grew tired of her, annulled their marriage, and a plot was hatched by Thomas Cromwell to execute her." https://en.wikipedia.org/wiki/List_of_wives_of_King_Henry_VIII https://en.wikipedia.org/wiki/List_of_wives_of_King_Henry_VI...
paulddraper 8y ago
> like giving your kid ten billion dollars, you're making it impractical or impossible for others to advance economically. Zero-sum is one perspective, but not one that I subscribe to. Does your neighbor having $10b of stuff make you better or worse off than if than if there's $10b of stuff at the bottom of the ocean?

sailfast 8y ago

Disclaimer: I'm not a tax advisor or anything, just a humble payer. The notion of "the family" is not a thing unless you're talking about dependents. Transferring money from one person to another is income for the person receiving the money. It's not being taxed twice, just once per time "earned". (and it's not even taxed until the limit per the comment in this thread! TIL) To allow for these kinds of gifts they limit the amount that is tax free. Allowing unlimited gifts to "family" would likely result in all businesses being "family" businesses, etc etc. Lots of downstream ramifications. So this seems to answer "how do I help my kids a reasonable amount without being taxed without creating a giant dodge" Giant dodges are best done using LLCs and ownership by other family members. Typically this overhead costs a lot more to manage though, so it's only available to the super wealthy. I kid here, a bit. But it's clearly also something being done quite often.

isostatic 8y ago
> it's only available to the super wealthy. > I kid here Indeed, you don't have to be super wealthy to dodge taxes. In the UK some people who consider themselves poor will happily talk to a solicter about "inheritance tax planning". https://www.moneysavingexpert.com/family/inheritance-tax-planning-iht/ https://www.moneysavingexpert.com/family/inheritance-tax-pla...

skybrian 8y ago

It's about inheritance taxes. Without a limit, an easy loophole would be that a parent could give all their money to their kids before they die and avoid inheritance tax entirely. (Instead, they need a more complicated loophole using a trust.) But federal inheritance tax doesn't kick in until you leave over 11 million to an individual, and many states don't have an inheritance tax, so most people won't need to worry about this. (Not legal advice, states differ, etc.)

kcorbitt 8y ago

It's a fair question. Personally though, I come down on the exact opposite side of the question – all gifts should be highly taxed, with maybe a nominal tax-free allowance of a few thousand dollars. Making large gifts tax-free is just another big advantage that kids born to rich parents get over those born into less-fortunate circumstances. If we're in favor of equality of opportunity (and almost everyone claims to be), much stronger inheritance/gift taxes seem like a really obvious place to start. I wrote some thoughts on this a few months ago: https://corbt.com/posts/2018/04/25/a-100-estate-tax.html https://corbt.com/posts/2018/04/25/a-100-estate-tax.html

isostatic 8y ago
It's not just rich kids that benefit, and it's not just direct gifts that benefit. If your parents live within commuting distance of London, you can probably take a very low paid job to get a rung on the ladder. Very few outgoings - no rent, no bills. £600/month for season ticket and nights out, and even on minimum wage you'll be saving £5k a year. If your parents live in say Devon or Yorkshire, you can't do that. You'll be paying £1k a month just for rent.
- tomp 8y ago
  IIRC Switzerland is introducing a "homeowner's tax" - the equivalent to the tax your landlord would be paying on your rent if you were renting instead of owning - essentially, they're considering you're renting to yourself, so you need to pay the tax. Now that's pro-equality (ironically, for Switzerland).
  - TheCoelacanth 8y ago
    I believe they already have this (it's called "imputed rent") and are considering getting rid of this[1]. [1] https://lenews.ch/2017/08/24/a-swiss-parliamentary-commission-wants-to-get-rid-of-imputed-rent/ https://lenews.ch/2017/08/24/a-swiss-parliamentary-commissio...
InitialLastName 8y ago
> If we're in favor of equality of opportunity (and almost everyone claims to be) The problem with that notion is that people often talk around each other W.R.T what it actually means. For some people, the only value of that opportunity is to be able to create a better life for their kids, often through inheritance.

deleted 8y ago

[deleted]

secabeen 8y ago

The gift tax exists largely to prevent people from avoiding estate tax by gifting large sums of money just before death. That's why they're linked. If there was an estate tax and no gift tax, people would just give all their money away in the years leading up to death. The gift tax exemption is co-mingled with the estate tax exemption, so you can just think of the gift tax as pre-death estate taxes. As for why we have an estate tax, the general idea is that oligarcies and plutocracies are bad; that while you should be able to give your kids (and grandkids, and even great-grandkids) every leg up in the world, they should have to work and contribute to society; that the pernicious effects of wealth snowball as generations pass; etc. Add to that the fact that an estate tax has the least negative impact on the taxpayer (and their spouse), given that the taxpayer is dead, it's a pretty good tax. Especially now that the exemption is so high, I feel like the value proposition is pretty good.

charlesdm 8y ago
Very much depends on the policy country. In Belgium you can gift any arbitrary amount ($10,000, $5m, $100m) through a notarial deed (up to a day) before death and pay 3% "gift tax". But the estate tax gets to 27% in the low hundreds of thousands.
- secabeen 8y ago
  Fascinating. Do you see a lot of deathbed transfers of wealth? Certainly, there are some illiquid assets that are going to be hard to transfer at deathbed in any country. In the US, you would see tons of deathbed transfer (they had to create a look-back period for gifts to prevent people from "improvishing" themselves via gifts to kids to qualify for government-paid nursing home care through medicaid). Is it just a cultural difference in Belgium, or something else?
  - charlesdm 8y ago
    Definitely possible. Most wealthy people do transfers before death and avoid (most of) the estate tax. Normal people with a low net worth generally don't do this, because they are unaware of the avoidance mechanisms.

dragonwriter 8y ago

> Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Could you explain the rationale for excluding such unearned income, other than privileging generational wealth against wealth earned by personal work and investment? > Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. He's paid tax on his income. When it goes to you, you are the then receiving income—whether it's as a gift or a payment for goods or services, whether you are in the family or not. Favoring one of those situations over another is just that, favoritism; it's not justifiable by “already paid” logic in one case but not the others.

isostatic 8y ago
> Could you explain the rationale for excluding such unearned income, other than privileging generational wealth against wealth earned by personal work and investment? If I buy a round of drinks, do people have to pay tax? (I assume there's some minimum threshold)
- mmcconnell1618 8y ago
  I'm fairly certain the United States Internal Revenue Service would consider the drinks received by others as income they should technically report on their taxes. For practical purposes, I suspect that almost no one ever does report this type of gift, but yes, technically it would qualify. If I give someone $5 for their birthday, they should report it but won't. If I give them $50,000 for their birthday, they better report it or risk the IRS finding out and coming after them.
  - JoeAltmaier 8y ago
    Gifts < $14K not necessary to report
- dragonwriter 8y ago
  > If I buy a round of drinks, do people have to pay tax? Ideally, probably, but even in a system which tries to mitigate the advantage of generational wealth created by the current favorable regime of gift and inheritance tax by a purer income tax, the friction of taxing de minimis personal gifts as income to recipients is something you probably want to avoid.

wnevets 8y ago

> Ignoring the possibility of using it to circumvent an income tax you can't just ignore the reason why it exist.

Aunche 8y ago

You can make an argument that any tax isn't fair. Why should you have to pay a sales tax on money you already paid income taxes for? Why should a company pay a payroll tax to pay their employees? What really matters is the economic consequences of these taxes. For example, you can't make sales tax too high because it discourages people from buying things and hurts poor people disproportionately. There isn't much of a economic downside to taxing large gifts. Sometimes taxing an inheritance runs the risk of closing a family owned farm or business.

zimablue 8y ago

What would really make sense -> a wealth tax What we have instead of that -> an estate tax What you need to make an estate tax work -> a gift tax Wealth taxes and income taxes are kind of orthogonal. Why do you need a wealth tax? For the same reason you need a progressive income tax, power naturally accumulates and without a force pushing against that you slide towards feudalism. It's also important to note that wealth doesn't work like "I earned a pile of gold and if I do nothing I/my children will gradually deplete it". Wealth makes higher returns the more wealth you have, returns /above/ inflation, meaning that if you throw it into a managed fund it will make you money (on average) forever. So it's less like you own a pile of gold and more like you own a boatload of land and rent it to other people to passively get you money (equity same deal but more steps). So half the people are born into the world effectively owning not a pile of gold but shares on the other half! (Try earning a living without land, water, telecoms, probably soon air, which we allow people to own). If you don't think this is bad because of some sense of fairness and morality, accept that it's bad because "those who make peaceful revolution..." - eventually you get the French revolution.

xkcd-sucks 8y ago

Governments, like most living things, want to be at the top of the power hierarchy. Families are similar organisms that accrue power similarly. Where families are powerful, governments and corporations are weak. So, governments do things to cripple families so they cannot become powerful enough to be dangerous. Retaining wealth across generations is a thing that makes a family powerful.

TheOtherHobbes 8y ago
Government, like Soylent Green, is people. The US government has been the pet toy of a small cadre of powerful families for a long time now.

pkaye 8y ago

The yearly gift tax exclusion is $15K to each recipient. When it exceeds that, it will count against the lifetime estate tax exclusion which is $5.6M. Only then would they have to worry about the extra taxes. So for an average person they will never reach that limit. And there are clever tricks to bump up the limits. The two parents can gift to the child/spouse separately to give 4x the gift tax limit.

empath75 8y ago

Explain the rationale for why certain people should be born into a massive inheritance of wealth and power while others are born only to starve to death.

rafd 8y ago

AFAIK, many countries do not tax gifts or have an estate tax (ex. Canada).

bachmeier 8y ago

> I feel the same way about inheritance taxes, although those are high enough I'm not too concerned about it. Having just gone through this, your parents must be really, really wealthy if your inheritance taxes are high. You can inherit many millions of dollars and not pay a cent in taxes in the US.

rory 8y ago
Some states have their own tax which starts lower. Here in Massachusetts it kicks in at $1MM.

microtherion 8y ago

> if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business Surely you agree that if he instead were to hire an extra gardener with the same $30,000, that money would be taxable as the gardener's income? So why should somebody who works for their money pay taxes on it, but not somebody who receives the money as a gift?

OJFord 8y ago
I assume therefore that you dutifully calculate and pay income tax on any and all birthday or Christmas presents?
- microtherion 8y ago
  To the extent that we have received large gifts from relatives, yes, we've reported those accurately to the tax authorities in two different countries. There was no tax due, but I would not have objected philosophically to the gifts being taxed.
  - OJFord 8y ago
    Huh, sorry, as a Briton it's quite literally a foreign concept to me; I thought I was joking. In the UK there's inheritance tax to pay over a threshold if you die within 7 years of making the gift, but otherwise there's not a 'gift tax'. The situation you describe still isn't the same as declaring it as income though - assuming you are working, if it were taxed at your marginal rate of income tax you'd already be over any threshold no matter how small the gift.
- TheCoelacanth 8y ago
  Yes, I have calculated and paid tax on all gifts that I have ever given in excess of the reporting threshold (i.e. none, because I don't give away gifts worth tens of thousands of dollars).
  - OJFord 8y ago