7 ms·

Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals

36 points by DemiGuru 5y ago

missedthecue 5y ago
FWIW, the only way Pro Publica could derive the 3.4% figure was by pretending that the value of a stock going up is income, and then dividing the amount of tax paid by that amount. Warren Buffett is worth $100B. So if Berkshire Hathaway stock went up 10% in 2022, they'd say Warren Buffett made $10 billion in income, even if he didn't sell a single share. Obviously extremely misleading and if I were more cynical, I'd accuse them of doing this only to push a political narrative or agenda rather than to report the facts as they are.
- slater 5y ago
  So, what do you propose to make them pay their fair share?
  - AnimalMuppet 5y ago
    Their fair share of what? Income that they haven't actually received?
    - plainnoodles 5y ago
      I think it's reasonably fair to point out that, sure, while these people don't have the extra wealth as income, they did indeed grow wealthier, and significantly so. And generally we tax when things make money. A couple points about common rebuttals: "It's not liquid so it's hard for them to pay taxes on it" - we already tax illiquid things like property taxes and when people get income that's not cash, like having debt forgiven or being given a gift of stocks. And people who have debt forgiven or are given stocks as income frequently aren't as likely to have cash to simply pay the taxes when compared to these extremely wealthy owners of capital. "it might go back down and then they paid taxes on something they couldn't realize" - this applies to property taxes too, fwiw. But also, we deal with similar issues already - if you sell a stock at a loss, you can use it to reduce your taxable income. There's workarounds here if we are at all willing to attempt to tackle this. And it's worth noting that, sure, this might be taxed when they do eventually sell, but: 1. there is not always a when. You can do lots of interesting things with assets like this, such as borrow against them. 2. money now is worth more than money later. Letting people defer paying taxes on unrealized capital gains is VERY generous tax treatment. It's also worth noting that this doesn't have to make life hard for John Smith, Dirt Farmer, who owns $5000 of SPY. Just do what we do for other common scenarios like this - for instance, not having to pay capital gains tax on your first $X of cap gains for your primary residence.
      - AnimalMuppet 5y ago
        What this does to John Smith, Dirt Farmer, is that his land went up $500/acre, and he's got 1000 acres, and now he's got an "income" of $500,000 this year, which he can't actually get until he sells the land, which he doesn't want to do until he retires. So the options are: - He sells some of the land to pay the taxes. - He takes out a loan to pay the taxes. - We make a special carve-out for people in that situation so that the tax doesn't apply to them. The third solution seems kind of fake to me. "We don't like the results of this set of rules, so we're going to make exceptions for all the results that we don't like." Maybe it's telling us that the rules aren't all that great? > money now is worth more than money later. Letting people defer paying taxes on unrealized capital gains is VERY generous tax treatment. They don't have the money yet. Charging them tax on money they haven't even received yet seems like very ungenerous tax treatment - abusive, even. It only makes sense if you have already defined unrealized capital gains to be income - but that's begging the question.
        nautilius 5y ago
        > - We make a special carve-out for people in that situation so that the tax doesn't apply to them. Tax law does that all the time. Maybe you've heard of tax brackets. It's so that people who earn less pay a smaller tax rate. I don't see the trouble with that. It's applied in the other direction as well, e.g. with a maximum dollar value with medicare.
        JumpCrisscross 5y ago
        Zero chance a wealth tax goes into effect in America without excluding farmland. That or the Electoral College does.
        nautilius 5y ago
        Oh, I'm not talking legislative probability. I was responding to the comment that it's somehow an unfathomable thought to have different 'carve outs' for different people in tax law (or anywhere, really) when that is standard practice in reality already.
    - fatnoah 5y ago
      I assume those to propose to tax unrealized gains are also going to allow deductions or refunds for unrealized losses, too. Right?
  - rubyist5eva 5y ago
    What is their fair share?
    - specialist 5y ago
      Whatever amount (or rate) required to restore the USA's 1970s era gini coefficient of ~36.
  - prasadjoglekar 5y ago
    Sibling comments hit the nail on the head with "fair share". Here's a video from 2013, that outlines exactly how much tax Warren Buffet is paying. You can disagree with Schiff on his other ideas, but this particular analysis is spot on. https://www.youtube.com/watch?v=tyv9uOozi7g https://www.youtube.com/watch?v=tyv9uOozi7g
  - missedthecue 5y ago
    The top 1% of earners make 20% of the income but pay 40% of federal income taxes. Can you tell me why that's not fair?
    - hedora 5y ago
      The issue isn't with the top 1%. It's the top 0.01%, which make a big chunk of that 20% and pay almost nothing in tax.
    - magicalist 5y ago
      The utility of a dollar is not constant.
      - missedthecue 5y ago
        Great. What's fair?
- arrakis2021 5y ago
  This is irresponsible reporting at best, and manipulation at worst.
- fatnoah 5y ago
  Later, the article makes this statement: > Billionaires in tech pay the lowest tax rate, an average of 17% of their income That seems to be > 3.4%
- lhorie 5y ago
  Reading the article, it says that the figures are looking at actual income, not changes in asset prices. It says the low figures come from a) lower tax rates from realized capital gain and b) deductions through charitable donations. Capital gains in the US are taxed at a maximum rate of 20%[0] for long term holdings, vs income tax rates, which can go up to 37%. Donations are also something that anyone can use to lower their own taxes, it's line 40 of the 1040 form. So one can easily change the title to claim that the super wealthy donate more, but I suspect that's not as much of an eye-grabber of a headline. There may be something to be said about donating to your own non-profits, but that's not what this article is about. [0] https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates https://www.nerdwallet.com/article/taxes/capital-gains-tax-r...
  - lumost 5y ago
    There is also tax loss harvesting, paying yourself via loans against assets, and using LLCs to purchase items like houses etc. to avoid taxation. It doesn't surprise me that billionaires pay substantially lower rates than long-term capital gains would imply they should.
  - uberman 5y ago
    "Donations are also something that anyone can use to lower their own taxes" This is false. It used to be less false, but now is mostly false. In order to get any tax advantage from donations, you must itemize as all hyper rich do. Full stop. If you take the standard deduction as almost everyone else does (more than 90 %) then you get nothing for your charitable giving. Note that when the hyper rich do give and get credit it is very often not to organizations that are very "charitable" at all. If you don't believe this to be true simply look up what a how "private foundations" and particularly "donor advised funds" work.
    - monoprotic 5y ago
      You're entitled to a deduction of up to $300 (or $600 if married and filing jointly) for charitable donations even if you take the standard deduction.
  - 5y ago
- closeparen 5y ago
  If your endpoint for inequality is “X% of people have Y% of wealth” and you also want to talk about income, then the income you talk about had better be “change in wealth.” Otherwise we get all kinds of intellectually dishonest equivocation about how to deal with the problem of billionaires, we need to tax the shit out of doctors and engineers. The incomes behind our staggering wealth inequality aren’t wage incomes! If on the other hand you think unrealized gains aren’t important, then you should be thinking of inequality in terms of something else, like consumption. But consumption inequality is both much smaller absolutely and much slower growing than wealth inequality; it doesn’t make a good political rallying point.
rufus_foreman 5y ago
So 0.001% of Americans pay 3.4% of income taxes? How the fuck is that fair?
- TheCoelacanth 5y ago
  3.4% of their income in taxes. Not 3.4% of all income taxes paid in the country. They paid $13.6 billion from 2014-2018. Total income taxes were about $1.5 trillion per year or about $7.5 trillion over the same timespan, so they paid about 0.18% of total income taxes.
  - rufus_foreman 5y ago
    So 0.001% of people paid 0.18% of income taxes? How the fuck is that fair?
    - hedora 5y ago
      It's not. They made way over 180x as much money as the average person.
    - feoren 5y ago
      As per my other comment: vastly, vastly, vastly, VASTLY underestimating the size of the wealth gap in America. https://mkorostoff.github.io/1-pixel-wealth/ https://mkorostoff.github.io/1-pixel-wealth/
      - rufus_foreman 5y ago
        "Gap" is a value judgement. I don't share your values.
    - TheCoelacanth 5y ago
      Value-based pricing. They got the most value out of the country, they should pay the most for it.
- feoren 5y ago
boeingUH60 5y ago
The Guardian reporting misleading headlines…as usual. The claimed 3.4% tax rate comes from calculating how much taxes they paid as a percentage of their net worth increase, not income. You can make a valid argument that the way ultra-wealthy people are taxed isn’t fair and that unrealized stock/other investments appreciation should be regarded as income…but it isn’t as of now, making this headline at least misleading and at worse an outright lie.
- nescioquid 5y ago
  The proposal discussed in TFA was a 20% minimum tax on income and unrealized gains, so it is reasonable that the issue is not framed in terms of simple income. Not sure how you think this is being misleading.
deleted 5y ago
[deleted]
exabrial 5y ago
The only thing that upsets be about this everyone should be paying 3.4%. The government wastes nearly everything that is handed to it. The old "oh but what about police and fire" compromises a micron of the what is sent to the government. All of it ends up in the pockets of Senator's friends.
- feoren 5y ago
  This is a very myopic view that basically comes down to "I can't immediately think of thousands of different government services that require money, so they therefore don't exist and it all must be wasted." Yes, there is some corruption and waste, especially in the DoD. It's a non-trivial percentage, and too high. I too wish we gave less money to the defense industry. But when a suspension bridge needs substructure repairs for $400 million, and that contract might go to a Senator's buddy's company, it represents corruption, but not necessarily a huge amount of waste. It's only waste if the company is actually significantly worse at delivering. There are some bad incentives, but mostly everyone is still incentivized to do the job right. I'm hesitant to estimate a percentage on the amount of taxes that are outright wasted due to corruption, but I have serious doubts it's higher than 10%. Yes, that's WAY TOO HIGH, but it's not close to "all of it minus a micron", like you say. Nor is it nearly enough for 3.4% to actually sustain everything; nor is 0% waste possible (but we should still try!).
- kadoban 5y ago
  The vast majority goes to defense, social security, medicare/medicaid. Which ones should we dump? I mean we'd have to dump them all to go to the tax rate you propose, but where should we start?
belval 5y ago
Disregarding the misleading headline, it is overall a tough problem to define if and how to tax wealth. Most people would agree that applying a blanket tax on unrealized gains is problematic (since it would force you to sell to pay for gains), but at the same time most people also agree that having $100B in TSLA/AMZN stocks and borrowing against those assets while paying less taxes than people in the $5M income bracket is also an issue. This is fun HN bait because we discuss it every few weeks yet I haven't seen any real solution.
- lotsofpulp 5y ago
  The solution is marginal sales taxes. It would require tracking everyone’s expenses on a federal, or even global level. But then you can really redistribute wealth based on how “richly” someone is living. And also tax them proportionate to their consumption, which kills two birds with one stone. And you don’t have to worry about borrowing against assets to sidestep income taxes. First $50k you spend is at x% sales tax, next $50k is at x+y%, and so on.
Manuel_D 5y ago
Is this just income taxes? Excluding capital gains and estate taxes (when they pass)? If so then this is not surprising. Most of the wealthiest people derive the vast majority of their wealth from capital gains, not income. And it looks like that's what's being described by the article: > The difference in tax rates between the wealthiest Americans and the average worker comes down to two critical factors, according to the investigation: first, the wealthy have their income taxed at a lower rate because much of their wealth is accumulated through investments, like stocks; and second, the wealthy are able to use large charitable donations to get huge deductions. TL;DR: Capital gains taxes are distinct from income taxes. Journalist courts clicks by conflating the two.
cowvin 5y ago
One thing to note is that the wealthy will never pay any capital gains tax on their stock holdings. While they are alive, they simply take out low interest loans against their stocks. When they die, they pass on their stocks to their children taking advantage of the step up in basis: (https://www.investopedia.com/terms/s/stepupinbasis.asp https://www.investopedia.com/terms/s/stepupinbasis.asp) So now their kids possess a ridiculous amount of stocks and will never need to pay any capital gains on them. So yes, rich people who make a lot of money in unrealized capital gains are vastly underpaying taxes on their income. We should close the step up in basis tax loophole.
- JoshuaDavid 5y ago
  That honestly sounds like the step up in basis is the issue here, especially if it's uncapped, rather than the lack of taxation on unrealized and possibly non liquid gains.
- credit_guy 5y ago
  Aren’t you omitting something here? Like the fact that the step up in basis happens after the inheritance tax is paid? If I buy stock for $10 million and in 40 years it appreciates to $70 million (an average 5% annual growth), and then I die, my kids will pay inheritance tax on the $60 million capital gain. Then the new basis will become $70 million. What exactly do you propose it to be?
  - kozd 5y ago
    If they want to step up the basis, shouldn't they have to pay capital gains taxes on the difference? The estate tax's average effective rate of 17 percent (2017) is below the capital gains rate.

36 points by DemiGuru 5y ago

FWIW, the only way Pro Publica could derive the 3.4% figure was by pretending that the value of a stock going up is income, and then dividing the amount of tax paid by that amount. Warren Buffett is worth $100B. So if Berkshire Hathaway stock went up 10% in 2022, they'd say Warren Buffett made $10 billion in income, even if he didn't sell a single share. Obviously extremely misleading and if I were more cynical, I'd accuse them of doing this only to push a political narrative or agenda rather than to report the facts as they are.

slater 5y ago
So, what do you propose to make them pay their fair share?
- AnimalMuppet 5y ago
  Their fair share of what? Income that they haven't actually received?
  - plainnoodles 5y ago
    I think it's reasonably fair to point out that, sure, while these people don't have the extra wealth as income, they did indeed grow wealthier, and significantly so. And generally we tax when things make money. A couple points about common rebuttals: "It's not liquid so it's hard for them to pay taxes on it" - we already tax illiquid things like property taxes and when people get income that's not cash, like having debt forgiven or being given a gift of stocks. And people who have debt forgiven or are given stocks as income frequently aren't as likely to have cash to simply pay the taxes when compared to these extremely wealthy owners of capital. "it might go back down and then they paid taxes on something they couldn't realize" - this applies to property taxes too, fwiw. But also, we deal with similar issues already - if you sell a stock at a loss, you can use it to reduce your taxable income. There's workarounds here if we are at all willing to attempt to tackle this. And it's worth noting that, sure, this might be taxed when they do eventually sell, but: 1. there is not always a when. You can do lots of interesting things with assets like this, such as borrow against them. 2. money now is worth more than money later. Letting people defer paying taxes on unrealized capital gains is VERY generous tax treatment. It's also worth noting that this doesn't have to make life hard for John Smith, Dirt Farmer, who owns $5000 of SPY. Just do what we do for other common scenarios like this - for instance, not having to pay capital gains tax on your first $X of cap gains for your primary residence.
    - AnimalMuppet 5y ago
      What this does to John Smith, Dirt Farmer, is that his land went up $500/acre, and he's got 1000 acres, and now he's got an "income" of $500,000 this year, which he can't actually get until he sells the land, which he doesn't want to do until he retires. So the options are: - He sells some of the land to pay the taxes. - He takes out a loan to pay the taxes. - We make a special carve-out for people in that situation so that the tax doesn't apply to them. The third solution seems kind of fake to me. "We don't like the results of this set of rules, so we're going to make exceptions for all the results that we don't like." Maybe it's telling us that the rules aren't all that great? > money now is worth more than money later. Letting people defer paying taxes on unrealized capital gains is VERY generous tax treatment. They don't have the money yet. Charging them tax on money they haven't even received yet seems like very ungenerous tax treatment - abusive, even. It only makes sense if you have already defined unrealized capital gains to be income - but that's begging the question.
      - nautilius 5y ago
        > - We make a special carve-out for people in that situation so that the tax doesn't apply to them. Tax law does that all the time. Maybe you've heard of tax brackets. It's so that people who earn less pay a smaller tax rate. I don't see the trouble with that. It's applied in the other direction as well, e.g. with a maximum dollar value with medicare.
        JumpCrisscross 5y ago
        Zero chance a wealth tax goes into effect in America without excluding farmland. That or the Electoral College does.
        nautilius 5y ago
        Oh, I'm not talking legislative probability. I was responding to the comment that it's somehow an unfathomable thought to have different 'carve outs' for different people in tax law (or anywhere, really) when that is standard practice in reality already.
  - fatnoah 5y ago
    I assume those to propose to tax unrealized gains are also going to allow deductions or refunds for unrealized losses, too. Right?
- rubyist5eva 5y ago
  What is their fair share?
  - specialist 5y ago
    Whatever amount (or rate) required to restore the USA's 1970s era gini coefficient of ~36.
- prasadjoglekar 5y ago
  Sibling comments hit the nail on the head with "fair share". Here's a video from 2013, that outlines exactly how much tax Warren Buffet is paying. You can disagree with Schiff on his other ideas, but this particular analysis is spot on. https://www.youtube.com/watch?v=tyv9uOozi7g https://www.youtube.com/watch?v=tyv9uOozi7g
- missedthecue 5y ago
  The top 1% of earners make 20% of the income but pay 40% of federal income taxes. Can you tell me why that's not fair?
  - hedora 5y ago
    The issue isn't with the top 1%. It's the top 0.01%, which make a big chunk of that 20% and pay almost nothing in tax.
  - magicalist 5y ago
    The utility of a dollar is not constant.
    - missedthecue 5y ago
      Great. What's fair?
arrakis2021 5y ago
This is irresponsible reporting at best, and manipulation at worst.
fatnoah 5y ago
Later, the article makes this statement: > Billionaires in tech pay the lowest tax rate, an average of 17% of their income That seems to be > 3.4%
lhorie 5y ago
Reading the article, it says that the figures are looking at actual income, not changes in asset prices. It says the low figures come from a) lower tax rates from realized capital gain and b) deductions through charitable donations. Capital gains in the US are taxed at a maximum rate of 20%[0] for long term holdings, vs income tax rates, which can go up to 37%. Donations are also something that anyone can use to lower their own taxes, it's line 40 of the 1040 form. So one can easily change the title to claim that the super wealthy donate more, but I suspect that's not as much of an eye-grabber of a headline. There may be something to be said about donating to your own non-profits, but that's not what this article is about. [0] https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates https://www.nerdwallet.com/article/taxes/capital-gains-tax-r...
- lumost 5y ago
  There is also tax loss harvesting, paying yourself via loans against assets, and using LLCs to purchase items like houses etc. to avoid taxation. It doesn't surprise me that billionaires pay substantially lower rates than long-term capital gains would imply they should.
- uberman 5y ago
  "Donations are also something that anyone can use to lower their own taxes" This is false. It used to be less false, but now is mostly false. In order to get any tax advantage from donations, you must itemize as all hyper rich do. Full stop. If you take the standard deduction as almost everyone else does (more than 90 %) then you get nothing for your charitable giving. Note that when the hyper rich do give and get credit it is very often not to organizations that are very "charitable" at all. If you don't believe this to be true simply look up what a how "private foundations" and particularly "donor advised funds" work.
  - monoprotic 5y ago
    You're entitled to a deduction of up to $300 (or $600 if married and filing jointly) for charitable donations even if you take the standard deduction.
- 5y ago
closeparen 5y ago
If your endpoint for inequality is “X% of people have Y% of wealth” and you also want to talk about income, then the income you talk about had better be “change in wealth.” Otherwise we get all kinds of intellectually dishonest equivocation about how to deal with the problem of billionaires, we need to tax the shit out of doctors and engineers. The incomes behind our staggering wealth inequality aren’t wage incomes! If on the other hand you think unrealized gains aren’t important, then you should be thinking of inequality in terms of something else, like consumption. But consumption inequality is both much smaller absolutely and much slower growing than wealth inequality; it doesn’t make a good political rallying point.

rufus_foreman 5y ago

So 0.001% of Americans pay 3.4% of income taxes? How the fuck is that fair?

TheCoelacanth 5y ago
3.4% of their income in taxes. Not 3.4% of all income taxes paid in the country. They paid $13.6 billion from 2014-2018. Total income taxes were about $1.5 trillion per year or about $7.5 trillion over the same timespan, so they paid about 0.18% of total income taxes.
- rufus_foreman 5y ago
  So 0.001% of people paid 0.18% of income taxes? How the fuck is that fair?
  - hedora 5y ago
    It's not. They made way over 180x as much money as the average person.
  - feoren 5y ago
    As per my other comment: vastly, vastly, vastly, VASTLY underestimating the size of the wealth gap in America. https://mkorostoff.github.io/1-pixel-wealth/ https://mkorostoff.github.io/1-pixel-wealth/
    - rufus_foreman 5y ago
      "Gap" is a value judgement. I don't share your values.
  - TheCoelacanth 5y ago
    Value-based pricing. They got the most value out of the country, they should pay the most for it.
feoren 5y ago

boeingUH60 5y ago

The Guardian reporting misleading headlines…as usual. The claimed 3.4% tax rate comes from calculating how much taxes they paid as a percentage of their net worth increase, not income. You can make a valid argument that the way ultra-wealthy people are taxed isn’t fair and that unrealized stock/other investments appreciation should be regarded as income…but it isn’t as of now, making this headline at least misleading and at worse an outright lie.

nescioquid 5y ago
The proposal discussed in TFA was a 20% minimum tax on income and unrealized gains, so it is reasonable that the issue is not framed in terms of simple income. Not sure how you think this is being misleading.

deleted 5y ago

[deleted]

exabrial 5y ago

The only thing that upsets be about this everyone should be paying 3.4%. The government wastes nearly everything that is handed to it. The old "oh but what about police and fire" compromises a micron of the what is sent to the government. All of it ends up in the pockets of Senator's friends.

feoren 5y ago
This is a very myopic view that basically comes down to "I can't immediately think of thousands of different government services that require money, so they therefore don't exist and it all must be wasted." Yes, there is some corruption and waste, especially in the DoD. It's a non-trivial percentage, and too high. I too wish we gave less money to the defense industry. But when a suspension bridge needs substructure repairs for $400 million, and that contract might go to a Senator's buddy's company, it represents corruption, but not necessarily a huge amount of waste. It's only waste if the company is actually significantly worse at delivering. There are some bad incentives, but mostly everyone is still incentivized to do the job right. I'm hesitant to estimate a percentage on the amount of taxes that are outright wasted due to corruption, but I have serious doubts it's higher than 10%. Yes, that's WAY TOO HIGH, but it's not close to "all of it minus a micron", like you say. Nor is it nearly enough for 3.4% to actually sustain everything; nor is 0% waste possible (but we should still try!).
kadoban 5y ago
The vast majority goes to defense, social security, medicare/medicaid. Which ones should we dump? I mean we'd have to dump them all to go to the tax rate you propose, but where should we start?

belval 5y ago

Disregarding the misleading headline, it is overall a tough problem to define if and how to tax wealth. Most people would agree that applying a blanket tax on unrealized gains is problematic (since it would force you to sell to pay for gains), but at the same time most people also agree that having $100B in TSLA/AMZN stocks and borrowing against those assets while paying less taxes than people in the $5M income bracket is also an issue. This is fun HN bait because we discuss it every few weeks yet I haven't seen any real solution.

lotsofpulp 5y ago
The solution is marginal sales taxes. It would require tracking everyone’s expenses on a federal, or even global level. But then you can really redistribute wealth based on how “richly” someone is living. And also tax them proportionate to their consumption, which kills two birds with one stone. And you don’t have to worry about borrowing against assets to sidestep income taxes. First $50k you spend is at x% sales tax, next $50k is at x+y%, and so on.

Manuel_D 5y ago

Is this just income taxes? Excluding capital gains and estate taxes (when they pass)? If so then this is not surprising. Most of the wealthiest people derive the vast majority of their wealth from capital gains, not income. And it looks like that's what's being described by the article: > The difference in tax rates between the wealthiest Americans and the average worker comes down to two critical factors, according to the investigation: first, the wealthy have their income taxed at a lower rate because much of their wealth is accumulated through investments, like stocks; and second, the wealthy are able to use large charitable donations to get huge deductions. TL;DR: Capital gains taxes are distinct from income taxes. Journalist courts clicks by conflating the two.

cowvin 5y ago

One thing to note is that the wealthy will never pay any capital gains tax on their stock holdings. While they are alive, they simply take out low interest loans against their stocks. When they die, they pass on their stocks to their children taking advantage of the step up in basis: (https://www.investopedia.com/terms/s/stepupinbasis.asp https://www.investopedia.com/terms/s/stepupinbasis.asp) So now their kids possess a ridiculous amount of stocks and will never need to pay any capital gains on them. So yes, rich people who make a lot of money in unrealized capital gains are vastly underpaying taxes on their income. We should close the step up in basis tax loophole.

JoshuaDavid 5y ago
That honestly sounds like the step up in basis is the issue here, especially if it's uncapped, rather than the lack of taxation on unrealized and possibly non liquid gains.
credit_guy 5y ago
Aren’t you omitting something here? Like the fact that the step up in basis happens after the inheritance tax is paid? If I buy stock for $10 million and in 40 years it appreciates to $70 million (an average 5% annual growth), and then I die, my kids will pay inheritance tax on the $60 million capital gain. Then the new basis will become $70 million. What exactly do you propose it to be?
- kozd 5y ago
  If they want to step up the basis, shouldn't they have to pay capital gains taxes on the difference? The estate tax's average effective rate of 17 percent (2017) is below the capital gains rate.