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100% with you on this. I am set to inherit a large sum of money when my grandfather dies (150-200k). And yes, 'large sum' is what I said. I honestly thought abo

100% with you on this. I am set to inherit a large sum of money when my grandfather dies (150-200k). And yes, 'large sum' is what I said. I honestly thought about writing 'life-changing' sum, because that will allow me to eliminate all of my debt, and substantially change my lifestyle. I'm exactly who this would bite in the ass. I have neither the know-how, nor the real money to spend on moving things around to hide it from taxation. Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay.

arn 6y ago
But there's a large exception. You won't be taxed on that amount. You presently get the first $23 million tax-free before any inheritance tax kicks in... and then only for the amount above $23 mil.
- MereInterest 6y ago
  Agreed. Having more than $23 million in inheritance definitely puts one above "middle class".
  - beamatronic 6y ago
    Perhaps, in some low-cost-of-living areas.
    - MereInterest 6y ago
      $23 million, assuming a low yield of 5% annually, means that a person is receiving $1.15 million every year. The average income in the top 5% of the Bay Area is $808k/year [1]. This is ignoring every other source of income, and only looking at passive income received as a result of already having significant wealth. [1] https://www.kqed.org/news/11799308/bay-area-has-highest-income-inequality-in-california https://www.kqed.org/news/11799308/bay-area-has-highest-inco...
saalweachter 6y ago
> An even better approach would be to replace the estate tax with an inheritance tax. Under an inheritance tax, heirs would simply pay income and payroll taxes on their inheritance above a large exemption, just as others do on their wages. > If an inheritance tax exempted the first $1 million received over one’s lifetime and applied the highest income and payroll tax rates to amounts above that threshold, it would raise $790 billion over the next decade.
mercutio2 6y ago
Are you sure you understand the estate tax? Even before Bush-era increases to the estate tax exemption, estate taxes only cut in on $1 million and larger estates. These days, the exemption is $5 million. Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries.
- deleted 6y ago
  [deleted]
- saalweachter 6y ago
  > Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries. This is also the difference between an estate and an inheritance tax. If someone has a $25 million estate and divides it evenly among 25 heirs, under an estate tax with a $23 million exemption and a 40% tax above that, each heir gets $968k. Under an estate tax with a $1 million exemption, each heir gets $616k. Under an inheritance tax with a $1 million exemption, each heir gets $1 million.
  - sgt101 6y ago
    The main thing is to encourage it to be distributed to a large number of heirs because if 10 people get $1m they will spend far more than 1 person getting $1m and will pay sales tax, property tax and so on with it, also the people they spend it with will do the same and so on. The problem comes when folks pass $10m + pools down through generations.
    - rpiguy 6y ago
      Large accumulators of wealth simply dodge estate taxes all together. They put the money in a foundation and their heirs get a draw on the foundation for the rest of their lives. Whatever reforms are put in place should focus on minimizing that ability to dodge the taxes. Estate taxes are strange things in that they don't affect the poor and middle class because few people inherit more than 1 million dollars and we have exemptions for family farms and inherited small businesses. It also doesn't hurt the ultra-rich, who easily evade inheritance taxes. It hits a very narrow band of wealthy between the middle class and the ultra-rich.
jellicle 6y ago
> Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay. So you know that a) you will pay zero taxes under current law even if you received fifty times as much money and b) you'd pay zero taxes under the proposal in the article and yet c) you still use yourself as an example of someone who would pay taxes. Do I have it right?
mithr 6y ago
> I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay. Except, the point doesn't really stand, does it? Those with "extreme wealth" will indeed be taxed, because those sums would be much greater than 150-200k. Some percentage will find ways to avoid it, but that is true with any law, and those that do will have to make some tradeoffs to do so. "The rest of us", which in this case includes you (and me), will not at all be affected by this. We would only be affected by this as we get closer to having that kind of extreme wealth ourselves. And that's the whole point of only taxing the larger amounts -- that it does not impact the rest of us, and in fact you are precisely not someone this will "bite in the ass". To go a bit further, you yourself say that you consider 150-200k to be a large sum of money, maybe even life-changing. All of these estate taxes, with their minimums in the millions, would absolutely still let you receive life-changing amounts of money as inheritance -- much larger than what you already consider to be life changing -- and only start taxing the portion of it that is more "excessive".

arn 6y ago

But there's a large exception. You won't be taxed on that amount. You presently get the first $23 million tax-free before any inheritance tax kicks in... and then only for the amount above $23 mil.

MereInterest 6y ago
Agreed. Having more than $23 million in inheritance definitely puts one above "middle class".
- beamatronic 6y ago
  Perhaps, in some low-cost-of-living areas.
  - MereInterest 6y ago
    $23 million, assuming a low yield of 5% annually, means that a person is receiving $1.15 million every year. The average income in the top 5% of the Bay Area is $808k/year [1]. This is ignoring every other source of income, and only looking at passive income received as a result of already having significant wealth. [1] https://www.kqed.org/news/11799308/bay-area-has-highest-income-inequality-in-california https://www.kqed.org/news/11799308/bay-area-has-highest-inco...

saalweachter 6y ago

> An even better approach would be to replace the estate tax with an inheritance tax. Under an inheritance tax, heirs would simply pay income and payroll taxes on their inheritance above a large exemption, just as others do on their wages. > If an inheritance tax exempted the first $1 million received over one’s lifetime and applied the highest income and payroll tax rates to amounts above that threshold, it would raise $790 billion over the next decade.

mercutio2 6y ago

Are you sure you understand the estate tax? Even before Bush-era increases to the estate tax exemption, estate taxes only cut in on $1 million and larger estates. These days, the exemption is $5 million. Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries.

deleted 6y ago
[deleted]
saalweachter 6y ago
> Putting the exemption back down to $1 million doesn’t sound like it would heavily impact you unless your grandfather had a lot of beneficiaries. This is also the difference between an estate and an inheritance tax. If someone has a $25 million estate and divides it evenly among 25 heirs, under an estate tax with a $23 million exemption and a 40% tax above that, each heir gets $968k. Under an estate tax with a $1 million exemption, each heir gets $616k. Under an inheritance tax with a $1 million exemption, each heir gets $1 million.
- sgt101 6y ago
  The main thing is to encourage it to be distributed to a large number of heirs because if 10 people get $1m they will spend far more than 1 person getting $1m and will pay sales tax, property tax and so on with it, also the people they spend it with will do the same and so on. The problem comes when folks pass $10m + pools down through generations.
  - rpiguy 6y ago
    Large accumulators of wealth simply dodge estate taxes all together. They put the money in a foundation and their heirs get a draw on the foundation for the rest of their lives. Whatever reforms are put in place should focus on minimizing that ability to dodge the taxes. Estate taxes are strange things in that they don't affect the poor and middle class because few people inherit more than 1 million dollars and we have exemptions for family farms and inherited small businesses. It also doesn't hurt the ultra-rich, who easily evade inheritance taxes. It hits a very narrow band of wealthy between the middle class and the ultra-rich.

jellicle 6y ago

> Edit: I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay. So you know that a) you will pay zero taxes under current law even if you received fifty times as much money and b) you'd pay zero taxes under the proposal in the article and yet c) you still use yourself as an example of someone who would pay taxes. Do I have it right?

mithr 6y ago

> I know the first million, as illustrated in the scenario this article presents, is exempted. I'm using myself as an example. The point still stands - extreme wealth would be hidden, and the rest of us would have to pay. Except, the point doesn't really stand, does it? Those with "extreme wealth" will indeed be taxed, because those sums would be much greater than 150-200k. Some percentage will find ways to avoid it, but that is true with any law, and those that do will have to make some tradeoffs to do so. "The rest of us", which in this case includes you (and me), will not at all be affected by this. We would only be affected by this as we get closer to having that kind of extreme wealth ourselves. And that's the whole point of only taxing the larger amounts -- that it does not impact the rest of us, and in fact you are precisely not someone this will "bite in the ass". To go a bit further, you yourself say that you consider 150-200k to be a large sum of money, maybe even life-changing. All of these estate taxes, with their minimums in the millions, would absolutely still let you receive life-changing amounts of money as inheritance -- much larger than what you already consider to be life changing -- and only start taxing the portion of it that is more "excessive".