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The step up applies only to assets in one's estate at death, not assets in trust. IIUC, the very wealthy have limited exposure to step up in basis because they
by RhysU 3y ago
The step up applies only to assets in one's estate at death, not assets in trust.
IIUC, the very wealthy have limited exposure to step up in basis because they use trusts.
Everyone else doesn't want to owe taxes when selling a house at market value they, e.g., inherited from a recently deceased loved one.
The policy is not insane. It's sufficiently popular that no politician touches it.
- CPLX 3y agoNo it’s insane. Like any tax it could be made progressive, make the tax lower or nonexistent for smaller amounts of money. But stepping up the basis is insane and indefensible. It’s a heads I win tails you lose approach. Basically you’re saying oh we know there are capital gains here but they are not realized so it’s not time to tax them yet and then the person dies they say just kidding those capital gains never happened. It’s nonsense. Tax them at whatever rate makes sense if you want but don’t make a complete mockery of the concept of basis.
- steveBK123 3y agoMy simple tax take is that we should just treat all income streams as regular income, and have whatever progressive rate on that income and be done with it. By creating different classifications of income and constantly tweaking the rules, we setup entire tax evasion industries catering to those who have control of their income streams & money to pay advisors. There's lots of BS that estate tax exemptions are there to protect small farmers, but they constitute something like 0.002% of estate tax payers.
- RhysU 3y agoI agree. But if we had a simple system people would be able to tell whether or not they get adequate value for their money. Obtuse and opaque are a defense against fair or just, take your pick.
- steveBK123 3y agoI think people at the top miss that they get, in some sense, some of the most value for money from a modern functional society. In the absence of a government monopoly on violence and functional government services, a highly paid business exec will need to live their life more like a mafioso or warlord. There's places in latin America where even what Americans would call "upper middle class" people need to hire security and worry about kidnapping and extortion plots. Add to that things like rule of law, so that the government strongman can't suddenly declare your business anti-patriotic / illegal (China) & take your cash / put you in jail. Then you have things like - copyright, trademark, etc systems that allow you & I to develop ideas as IP and the government allows us to protect it in court so that we can reap the benefits. So no, I don't think "tax is theft" and that we should live in some Mad Max world. People who denigrate high trust society & rule of law do not understand how messed up living in low trust societies is. Nor am I thoroughly impressed with the idea that we need a permanent overclass who is able to pass wealth down untaxed across generations, especially given all the trust fund underachievers I've met in my life in NYC.
- RhysU 3y ago> It’s a heads I win tails you lose approach. All capital gains taxes are heads-govt-wins. The step up is simply not applying that insanity, for once, at death. That is, it's marginally sane.
- CPLX 3y agoYes if you think we shouldn’t tax people and not have an healthy modern society with government services and let wealth pile up for tens of generations completely unmolested then you’re right. The problem with that idea is that it’s wrong.
- RhysU 3y agoHow did we go from discussing the step up basis to assuming I want an "unhealthy modern society"?