4 ms·

This is certainly the hottest possible hot take. > Have inheritance trigger a taxable event. This includes, by extension, allowing heirs to inherit stocks and

This is certainly the hottest possible hot take. > Have inheritance trigger a taxable event. This includes, by extension, allowing heirs to inherit stocks and property on a stepped up basis for CGT purposes; This works for billionaires but harms regular people. If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. In many states property taxes are reassessed upon property transfer in a will, so if your grandparents/parents had a really good property tax rate, you may end up paying so much tax that you can't afford to keep the house. There are already enough ways to rob the middle class. No thank you. > Tax stocks on market value every year just like we do with property. This isn't done because the universe of ways you can move, adjust, hedge, and sell stock is too broad. Again, this inadvertently damages the middle class who by-and-large are passive investors. I already pay enough tax, thank you. > Excessive audits of poor people with a deliberately complex system is punitive by design. Spending time and effort (and money) auditing the taxes of poor people is ridiculous. If you look at the problem from the perspective of a relatively understaffed organization it is far easier to automate the common errors less well off people make. Having been on the receiving end of this majority of the audits are a simple letter saying "you screwed up, you actually owe this much" and nothing more. Auditing the ultra-wealthy takes an actual dedicated team to do because the ways that these people illegally hide money are complex and ever-changing. This is why nothing we have done to repatriate USD, or "tax the billionaires" has worked since the dawn of the country. It honestly sounds like your statement here is actually a thin veil over just letting anyone making under $N exploit the system at (once again) the cost of the middle class. Moreover, the title of OP is deliberately inflammatory. The audit rate below 100k is extremely low. The delta can be explained by the difficulty involved. > Enforcement of a program like the EITC is a cost you do not have to pay. It is a waste of resources. It is possible to commit extremely complex fraud with the EITC. I pay so much tax as a software engineer I'd like to see other people get pounded by the IRS too regardless of how much more or less than me they make. > In fact, auditing anyone who makes less than $50,000 a year should be illegal. Maybe even $100,000. lol.

selimthegrim 4y ago
> I pay so much tax as a software engineer I'd like to see other people get pounded by the IRS This sounds like a Chuck Tingle commission waiting to happen
jmyeet 4y ago
> If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. That's such a funny remark. First, this implies the tax rate is 100%. How else could you end up with nothing? Long term capital gains is what? 20%? If the "modest gift" of a $1 million house with a cost basis of $300,000 results in $140,000 in capital gains taxes, you still have $860,000. Hell, you can even have the system defer those taxes until the sale of the property (eg capped at 10 years) if you're worried about undue hardship. But the house has its cost basis reset to $1 million, which in insane. In some places, you even get to inherit the ridiculously low property tax rate, which was another result of homeowners voting themselves massive tax breaks. Second, these completely made up emotional anecdotes about regular people are so often used to defend practices whereby billionaires get to pay nothing. It's an appeal to emotion and a complete distraction. I don't know if you're just an unwitting victim of this propaganda (which it is) or you're one of the many bad faith pundits who use this appeal for the real goal: protecting the wealth of rich people. > This isn't done because the universe of ways you can move, adjust, hedge, and sell stock is too broad. It's a remarkably easy problem to solve. Just tax 1-3% of the net value of your assets based on their value on December 31 of each year. > It honestly sounds like your statement here is actually a thin veil over just letting anyone making under $N exploit the system at (once again) the cost of the middle class. The idea of a middle class here itself is a myth and deliberate propaganda by the wealthy to pit the imaginary middle class against the imaginary lower class. There are only really two classes: those who trade their labor for an income and those who own capital. This idea of "defending the middle class" is 100% propaganda. You, as a software engineer, are in the same class as a neurosurgeon, a profesional basketball player, a waiter, a nurse or a teacher. I hope you realize that someday.
- LorenPechtel 4y ago
  What I would like to see done about this case is the person who inherits the house (and I would apply this to any asset that either can't be subdivided or will be harmed by being subdivided) can choose to get that $1M house with a $300k basis and a IRS lien on it for 14% (140k tax vs 1M of value) of it's value. The lien is not triggered by inheritance or by the sale of a share of the property to someone else who also has a share that has the same lien. The lien is triggered by any other transfer. Should a property become subject to multiple such liens only the largest is active, but all apply for purposes of who you can sell to without triggering the lien. Fundamentally, this allows passing of property and family businesses without inheritance tax, but the IRS collects in the end if it ceases to be held within the family. (The sales without triggering are about one recipient buying out somebody else's share.) This should cover basically all cases where the inheritance tax is unfair, the threshold for inheritance tax on things not covered by this can be lowered.
jcranmer 4y ago
> If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. Quiz time: Capital gains is 0% for anything less than $40k, 20% for anything over than $400k, and 15% for everything in the middle. How much do you have to inherit for the total effective tax rate to be greater than 95%? > In many states property taxes are reassessed upon property transfer in a will, so if your grandparents/parents had a really good property tax rate, you may end up paying so much tax that you can't afford to keep the house. In most states, property taxes are reassessed frequently (once every low single digit years). The only state where property taxes aren't regularly reassessed appears to be California. And I'm highly unsympathetic when the argument boils down to "we bought this property 50 years ago and we couldn't afford taxes on it if it were assessed at market value."
- jmyeet 4y ago
  I pretty much agree but want to add some clarifications. > The only state where property taxes aren't regularly reassessed appears to be California. Technically, property taxes are reassessed in California but because of Prop 13, passed in the 1970s, the increase cannot exceed 2% per year. With in inflation in the 70s and 80s, this was a massive boon to incumbent homeowners and their descendants (since that favorable tax rate can be inherited). California is the poster child for this taxpayer-led cash grab but it's not the only one. New York for example has a very complicated property tax system with various caps that amount to much the same thing but nowhere near as extreme. > ... highly unsympathetic when the argument boils down to "we bought this property 50 years ago and we couldn't afford taxes on it if it were assessed at market value." It's actually worse than that. It's always couched in terms of kicking seniors out of their life long homes because they're on a fixed income even though the major beneficiaries are Disney and extremely wealthy people. Worse, property held in LLCs allow you to retain favorable tax treatment even when the LLC changes hands. Disney has to be singled out here because the're still paying 1960s taxes on their land in Anaheim. Back to seniors, it's such a ridiculous argument. For one, you can always treat different taxpayers differently and, for example, freeze propert taxes for seniors until they die. You don't need to give a massive tax benefit to Disney to do that. Interestingly, a state like Texas handles this way better. Property taxes are deferred for seniors until they die. They're still accuring property tax debt but it doesn't hit their immediate incomes. This gives people a choice: stay in their family home and pay taxes when the houses are inherited or downsize to save on taxes. This has the added benefit of freeing up housing stock.
landemva 4y ago
> I pay so much tax as a software engineer Over a decade ago I was complaining to my tax CPA. He replied, "No income, no income tax." I quit that week.

selimthegrim 4y ago

> I pay so much tax as a software engineer I'd like to see other people get pounded by the IRS This sounds like a Chuck Tingle commission waiting to happen

jmyeet 4y ago

> If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. That's such a funny remark. First, this implies the tax rate is 100%. How else could you end up with nothing? Long term capital gains is what? 20%? If the "modest gift" of a $1 million house with a cost basis of $300,000 results in $140,000 in capital gains taxes, you still have $860,000. Hell, you can even have the system defer those taxes until the sale of the property (eg capped at 10 years) if you're worried about undue hardship. But the house has its cost basis reset to $1 million, which in insane. In some places, you even get to inherit the ridiculously low property tax rate, which was another result of homeowners voting themselves massive tax breaks. Second, these completely made up emotional anecdotes about regular people are so often used to defend practices whereby billionaires get to pay nothing. It's an appeal to emotion and a complete distraction. I don't know if you're just an unwitting victim of this propaganda (which it is) or you're one of the many bad faith pundits who use this appeal for the real goal: protecting the wealth of rich people. > This isn't done because the universe of ways you can move, adjust, hedge, and sell stock is too broad. It's a remarkably easy problem to solve. Just tax 1-3% of the net value of your assets based on their value on December 31 of each year. > It honestly sounds like your statement here is actually a thin veil over just letting anyone making under $N exploit the system at (once again) the cost of the middle class. The idea of a middle class here itself is a myth and deliberate propaganda by the wealthy to pit the imaginary middle class against the imaginary lower class. There are only really two classes: those who trade their labor for an income and those who own capital. This idea of "defending the middle class" is 100% propaganda. You, as a software engineer, are in the same class as a neurosurgeon, a profesional basketball player, a waiter, a nurse or a teacher. I hope you realize that someday.

LorenPechtel 4y ago
What I would like to see done about this case is the person who inherits the house (and I would apply this to any asset that either can't be subdivided or will be harmed by being subdivided) can choose to get that $1M house with a $300k basis and a IRS lien on it for 14% (140k tax vs 1M of value) of it's value. The lien is not triggered by inheritance or by the sale of a share of the property to someone else who also has a share that has the same lien. The lien is triggered by any other transfer. Should a property become subject to multiple such liens only the largest is active, but all apply for purposes of who you can sell to without triggering the lien. Fundamentally, this allows passing of property and family businesses without inheritance tax, but the IRS collects in the end if it ceases to be held within the family. (The sales without triggering are about one recipient buying out somebody else's share.) This should cover basically all cases where the inheritance tax is unfair, the threshold for inheritance tax on things not covered by this can be lowered.

jcranmer 4y ago

> If you applied capital gains tax to grandpa's modest gift to his grandchildren the grand children may very well end up with nearly nothing. Quiz time: Capital gains is 0% for anything less than $40k, 20% for anything over than $400k, and 15% for everything in the middle. How much do you have to inherit for the total effective tax rate to be greater than 95%? > In many states property taxes are reassessed upon property transfer in a will, so if your grandparents/parents had a really good property tax rate, you may end up paying so much tax that you can't afford to keep the house. In most states, property taxes are reassessed frequently (once every low single digit years). The only state where property taxes aren't regularly reassessed appears to be California. And I'm highly unsympathetic when the argument boils down to "we bought this property 50 years ago and we couldn't afford taxes on it if it were assessed at market value."

jmyeet 4y ago
I pretty much agree but want to add some clarifications. > The only state where property taxes aren't regularly reassessed appears to be California. Technically, property taxes are reassessed in California but because of Prop 13, passed in the 1970s, the increase cannot exceed 2% per year. With in inflation in the 70s and 80s, this was a massive boon to incumbent homeowners and their descendants (since that favorable tax rate can be inherited). California is the poster child for this taxpayer-led cash grab but it's not the only one. New York for example has a very complicated property tax system with various caps that amount to much the same thing but nowhere near as extreme. > ... highly unsympathetic when the argument boils down to "we bought this property 50 years ago and we couldn't afford taxes on it if it were assessed at market value." It's actually worse than that. It's always couched in terms of kicking seniors out of their life long homes because they're on a fixed income even though the major beneficiaries are Disney and extremely wealthy people. Worse, property held in LLCs allow you to retain favorable tax treatment even when the LLC changes hands. Disney has to be singled out here because the're still paying 1960s taxes on their land in Anaheim. Back to seniors, it's such a ridiculous argument. For one, you can always treat different taxpayers differently and, for example, freeze propert taxes for seniors until they die. You don't need to give a massive tax benefit to Disney to do that. Interestingly, a state like Texas handles this way better. Property taxes are deferred for seniors until they die. They're still accuring property tax debt but it doesn't hit their immediate incomes. This gives people a choice: stay in their family home and pay taxes when the houses are inherited or downsize to save on taxes. This has the added benefit of freeing up housing stock.

landemva 4y ago

> I pay so much tax as a software engineer Over a decade ago I was complaining to my tax CPA. He replied, "No income, no income tax." I quit that week.