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> I’m also a big believer in the estate tax As a third-generation American, I find the estate tax, even in its current form, extremely offensive, because it st

> I’m also a big believer in the estate tax As a third-generation American, I find the estate tax, even in its current form, extremely offensive, because it strives to reset every generation to zero instead of letting families establish themselves over time by building on the sacrifice and efforts of the parents. The current level of taxation, even though it's been recently, "graciously" increased, greatly extends the runway for families to achieve true financial independence. Currently, $5.3M and above estates fall under the 40% tax. That's far too small of an estate and far too large of a tax. People will say, "wow five million dollars, that's a lot!" Not really. Three heirs take home a million each - pay off a house and student loan debt for their families - god forbid they don't have something like outstanding medical bills - and sock away a partial retirement fund with the rest. Not enough to quit working and start their own business, or invest in anything riskier than an index fund. You might say that's not a bad deal. It's certainly better than nothing. But this, "oh, it's just a lottery" attitude is nonsense. If your parents started with nothing and are leaving you $5M, chances are you watched them bust their asses for forty years, and only got to see them a couple hours a day - at times, if at all. That doesn't sound like much of a lottery ticket to me. To top it all off, it's a double tax. That money has already been taxed, as far as the family as a unit is concerned. And wiping the slates clean every generation greatly reduces the ability of a family to weather multi-decade economic cycles. I hate to have climbed on my soapbox, but a statement like that only makes sense if you consider the family a method of perpetuating a shared set of values over hundreds of years - and if you can't, I find that sad.

rtpg 12y ago
An estate of 5 million puts you well into the upper echelons of society. I have little sympathy for those who the estate tax hits
- brandonmenc 12y ago
  My grandmother's uncle left an estate over five million. She then burned through the entirety of her share paying for her stay in a nursing home when she couldn't speak or wipe her own ass, so the taxpayers didn't have to. Everything's not as simple as you think.
  - yequalsx 12y ago
    I suppose you think your grandmother ought to have been able to keep the millions while having society pay for her care. Does that seem fair to you? The estate tax issue is not in any way related to the issue of health care for the elderly.
    - humanrebar 12y ago
      Nobody said that. It's a fair point that five million dollars isn't as much money as it seems, especially when accounting for healthcare costs. If the government took most of that money, this grandmother would have burnt through the remaining money quickly and ended up on government-assisted healthcare with much less choice about the kinds and quality of care. It's very pertinent.
      - yequalsx 12y ago
        It was stated that $5 million puts one in the upper echelons of society. This is a true statement. It is also true that a calamity can wipe out that amount of money. I do not believe the issues are related in that I don't think it makes for good public policy to make the taxation threshold for estate taxes to be at the calamity-proof level. It appears to be possible from what you've said about your grandmother's situation that even if her inheritance was not taxed at all she would have still ended up using up all of her savings on care. If your point wasn't that you believed she should have been able to pass along the millions to her children while receiving care at the expense of society then I don't see how it was relevant.
        humanrebar 12y ago
        It's not my grandmother. I just thought the downvotes were uncalled for. And I think your threshold for what's a reasonable estate is both arbitrary and too low. $5 million sounds like a lot, but give it a decade. Many family businesses are already valued over $5 million. Should functioning businesses be liquidated because the founder died? Soon, family homes in places like NYC, SF, and DC will be within spitting distance of $5 million. Should the family have to get a new mortgage or move because grandma died? Besides, I don't have confidence that the general fund of the federal government would better spend that money than someone seeking health and indirectly pouring money into better medical science and technology.
- loumf 12y ago
  An estate of 5 million pays $0 in estate tax. The tax is on the amount (net of deductions) OVER 5.34 million. A net $6m estate would pay about 4% (264k), not 40%.
yequalsx 12y ago
There is no such thing as a double tax as you put it. All money is double, triple, quadrupled so on and so forth taxed. The principle for fairness behind taxation is that whenever you get money (or wealth) there is a tax. Regardless of where is comes from. There are exceptions and loopholes to this principle. If I work very hard and earn $100,000 in a year I get taxed. If someone else dies and I inherit $100,000 (in the U.S.) there is no tax. In case 1 a person works for it and pays tax and in case 2 there is no tax. Consider another case. Suppose I walk down the street and find $100,000. I have to pay tax on it. (At least I'm supposed to pay tax on it.) Estate taxes are too little in this country. A family can perpetuate a shared set of values over hundreds of years without leaving $x million to the children.
- refurb 12y ago
  Yet "more equitable" and "socialist" countries like Canada have no estate tax whatsoever.
  - yequalsx 12y ago
    In Canada the estate pays the tax not the beneficiaries. In Canada the estate is considered a sale. "The deceased is considered to have sold all of his or her capital property for fair market value immediately prior to death. This includes, with certain exceptions, all the deceased person’s non-registered assets (personal belongings, cars, investments, business assets, etc.). If any of these assets have gone up in value since their acquisition, the estate will owe taxes on the capital gain in the year of death. Capital gain is the difference between the fair market value of the item when purchased and the fair market value item of the same item at the date of death." See this website: http://turbotax.intuit.ca/tax-resources/inheritance-tax.jsp http://turbotax.intuit.ca/tax-resources/inheritance-tax.jsp
    - refurb 12y ago
      That's not an estate tax, that's the estate paying taxes owed on property. In Canada, if you die with $20M in cash, you are free to give it to heirs with no tax penalty.
danielweber 12y ago
> People will say, "wow five million dollars, that's a lot!" Not really. Yes really. I have many issues with the estate tax (and I also have many issues with not having an estate tax), but when you find yourself complaining about how little a million dollars is, you really need to stop before you lose your entire audience.
- brandonmenc 12y ago
  Yes, a pile of five million dollars is a lot. An estate worth $5M, which is then taxed at 40%, the remainder of which is distributed amongst any number of heirs, each of whom may then be obligated to pay an additional income tax on that - ends up being far less. Especially in a country where you're expected to pay for your own education, health care, and retirement.
  - pjc50 12y ago
    expected to pay for your own education, health care, and retirement In much of Europe the first two and a good chunk of the third are largely provided as public goods. Establishing a reliable "floor" standard in all three makes it much easier for people to truly stand on their own merits rather than being handicapped by parental poverty.
  - danielweber 12y ago
    > An estate worth $5M, which is then taxed at 40%, That's not how the estate tax works. The first $5 million (or so) is not taxed. > where you're expected to pay for your own education, health care, and retirement You can pay for your kids' education directly, no estate tax involved. You can put significant amount of money into 529 savings accounts for your kids and your grandkids, effectively increasing estate tax limitations if (like most upper class) education is a place where you will expend significant resources.
    - brandonmenc 12y ago
      You're right, the first ~$5M is an exemption, and not taxed by the Federal government. My mistake.
Omniusaspirer 12y ago
It's just a different mentality towards life and entitlement- there's nothing sad about it. Hitting all your points in order: 1) 1 million dollars is a lot of money to come out of nowhere. It's simply dishonest to pretend that isn't a life changing amount for a middle class family. At the very least it's going to be like you said- modest home paid off(100-500k), car loans all paid off(50k), and student loans paid off(300k if your kids went to expensive schools and you have 3 of them). I'm really not seeing why anyone should be entitled to never work again simply because their parents made a lot of money. (With that said, my parents didn't choose to bury themselves in debt and could have retired instantly if they received this inheritance when combined with the investments they already had) 2) It's absolutely a lottery. Trying to cloud this issue with "oh well the parents potentially weren't there as much and that emotional cost is easily worth a few million" is disingenuous. It makes the assumption that money has no influence on the quality of the child's upbringing and "time spent with kids/day" is the only metric worth mentioning. 3) Being taxed when you're dead isn't a tax to me. At all. I understand this is a personal opinion but you should have the same understanding regarding your own opinion here. When I'm dead I no longer feel entitled to anything I gained in my lifetime- it's not like I'm ever going to use it again. I also don't feel my kids are entitled to it just because they happened to be born (effectively via lottery) to me. To suffice: Let the fruit of my efforts benefit society/humanity as a whole. It was my goal in life and ought to be in death.
- JoeAltmaier 12y ago
  That's Polyanna thinking, that an estate tax will benefit humanity. What nation do you live in? You trust the govt to spend your wealth, more than say a relative? I don't believe it. And 'wealth' isn't all gold buried in the back yard. Its also investments in businesses (either stocks or directly) as a corporation or even a proprietorship. Who runs the restaurant after you die? The government? Preposterous.
  - Omniusaspirer 12y ago
    You're assuming the estate tax needs to exist in it's current form- ideally it would allow for me to deign money out to specific aspects of government or approved (need to avoid abuse here) charities of my choice. That would still serve to dissuade the multigenerational family/genetic lottery while leaving the individual with some say in how their (now former) assets are used. On your last point- a traditional corporation won't fail if one person dies as the issue of ownership is inherently divested from any individual person. Stocks are one of the easiest assets to liquidate on this planet- I'm not seeing an issue there. The restaurant? It would be sold. If I have a family member who I actually think could run it adequately they would be able to purchase it like anybody else and I would encourage them to do so while I was still alive.
Marazan 12y ago
"Double tax" is a phrase that needs to die in a fire due to it's preposterously disingenuous use. I work, I get paid, my money is taxed. I buy a chocolate bar, the sale is taxed The money that is spent on the chocolate bar goes in part to the shop who makes a profit (that is taxed) and to the company that made the chocolate bar who make a profit (that is taxed). The company pays the worker that made the chocolate bar (that is taxed) Etc, etc, etc. Transaction are always being taxed - that's how the tax system works.
- loumf 12y ago
  Also, in this case, it isn't double-taxed. The heirs never paid tax on it. It's very likely that estates of that size have tax-deferred parts or insurance. Finally, there are many incorrect statements in the description of the estate tax above that would probably lead you to believe that you have to pay 40% of 5.3m, which is not true 1. You get deductions (like outstanding mortgages and medical bills) 2. You pay the tax on the net OVER 5.3m. So, in the case described above, the estate tax would be $0.
- paulhauggis 12y ago
  I'm fine with not using the "double tax" phrase, as long as all taxes are included in tax arguments. I have heard here on HN that Denmark and Sweden don't have taxes that are that high..while not including all of the small taxes that you pay on a daily basis..deflating the actual tax rate to make it seem better. Also, Companies actually contribute more in taxes than people like to admit. They pay workers' wages..and those wages include tax money that goes to the government.
  - aidenn0 12y ago
    > Also, Companies actually contribute more in taxes than people like to admit. They pay workers' wages..and those wages include tax money that goes to the government. That's still a tax on the workers' wages, not a tax on the company. If we shifted all income tax into a payroll tax, then by your definition workers aren't taxed at all? Anything that increases the cost of employing a worker will reduce the marginal net benefit of employing that worker, which will result in either lower salaries, fewer employees or both.
loumf 12y ago
(I said this in response to a comment, but there seems to be a lot of confusion on the estate tax all over this sub-thread -- sorry for the repeat) An estate of 5 million pays $0 in estate tax. The tax is on the amount (net of deductions) OVER 5.34 million. A net $6m estate would pay about 4% (264k), not 40%.
UVB-76 12y ago
A wonderful worldview, until one considers the reality that extraordinary wealth does not tend to accrue to the most virtuous, 'hard-working' individuals in society.

rtpg 12y ago

An estate of 5 million puts you well into the upper echelons of society. I have little sympathy for those who the estate tax hits

brandonmenc 12y ago
My grandmother's uncle left an estate over five million. She then burned through the entirety of her share paying for her stay in a nursing home when she couldn't speak or wipe her own ass, so the taxpayers didn't have to. Everything's not as simple as you think.
- yequalsx 12y ago
  I suppose you think your grandmother ought to have been able to keep the millions while having society pay for her care. Does that seem fair to you? The estate tax issue is not in any way related to the issue of health care for the elderly.
  - humanrebar 12y ago
    Nobody said that. It's a fair point that five million dollars isn't as much money as it seems, especially when accounting for healthcare costs. If the government took most of that money, this grandmother would have burnt through the remaining money quickly and ended up on government-assisted healthcare with much less choice about the kinds and quality of care. It's very pertinent.
    - yequalsx 12y ago
      It was stated that $5 million puts one in the upper echelons of society. This is a true statement. It is also true that a calamity can wipe out that amount of money. I do not believe the issues are related in that I don't think it makes for good public policy to make the taxation threshold for estate taxes to be at the calamity-proof level. It appears to be possible from what you've said about your grandmother's situation that even if her inheritance was not taxed at all she would have still ended up using up all of her savings on care. If your point wasn't that you believed she should have been able to pass along the millions to her children while receiving care at the expense of society then I don't see how it was relevant.
      - humanrebar 12y ago
        It's not my grandmother. I just thought the downvotes were uncalled for. And I think your threshold for what's a reasonable estate is both arbitrary and too low. $5 million sounds like a lot, but give it a decade. Many family businesses are already valued over $5 million. Should functioning businesses be liquidated because the founder died? Soon, family homes in places like NYC, SF, and DC will be within spitting distance of $5 million. Should the family have to get a new mortgage or move because grandma died? Besides, I don't have confidence that the general fund of the federal government would better spend that money than someone seeking health and indirectly pouring money into better medical science and technology.
loumf 12y ago
An estate of 5 million pays $0 in estate tax. The tax is on the amount (net of deductions) OVER 5.34 million. A net $6m estate would pay about 4% (264k), not 40%.

yequalsx 12y ago

There is no such thing as a double tax as you put it. All money is double, triple, quadrupled so on and so forth taxed. The principle for fairness behind taxation is that whenever you get money (or wealth) there is a tax. Regardless of where is comes from. There are exceptions and loopholes to this principle. If I work very hard and earn $100,000 in a year I get taxed. If someone else dies and I inherit $100,000 (in the U.S.) there is no tax. In case 1 a person works for it and pays tax and in case 2 there is no tax. Consider another case. Suppose I walk down the street and find $100,000. I have to pay tax on it. (At least I'm supposed to pay tax on it.) Estate taxes are too little in this country. A family can perpetuate a shared set of values over hundreds of years without leaving $x million to the children.

refurb 12y ago
Yet "more equitable" and "socialist" countries like Canada have no estate tax whatsoever.
- yequalsx 12y ago
  In Canada the estate pays the tax not the beneficiaries. In Canada the estate is considered a sale. "The deceased is considered to have sold all of his or her capital property for fair market value immediately prior to death. This includes, with certain exceptions, all the deceased person’s non-registered assets (personal belongings, cars, investments, business assets, etc.). If any of these assets have gone up in value since their acquisition, the estate will owe taxes on the capital gain in the year of death. Capital gain is the difference between the fair market value of the item when purchased and the fair market value item of the same item at the date of death." See this website: http://turbotax.intuit.ca/tax-resources/inheritance-tax.jsp http://turbotax.intuit.ca/tax-resources/inheritance-tax.jsp
  - refurb 12y ago
    That's not an estate tax, that's the estate paying taxes owed on property. In Canada, if you die with $20M in cash, you are free to give it to heirs with no tax penalty.

danielweber 12y ago

> People will say, "wow five million dollars, that's a lot!" Not really. Yes really. I have many issues with the estate tax (and I also have many issues with not having an estate tax), but when you find yourself complaining about how little a million dollars is, you really need to stop before you lose your entire audience.

brandonmenc 12y ago
Yes, a pile of five million dollars is a lot. An estate worth $5M, which is then taxed at 40%, the remainder of which is distributed amongst any number of heirs, each of whom may then be obligated to pay an additional income tax on that - ends up being far less. Especially in a country where you're expected to pay for your own education, health care, and retirement.
- pjc50 12y ago
  expected to pay for your own education, health care, and retirement In much of Europe the first two and a good chunk of the third are largely provided as public goods. Establishing a reliable "floor" standard in all three makes it much easier for people to truly stand on their own merits rather than being handicapped by parental poverty.
- danielweber 12y ago
  > An estate worth $5M, which is then taxed at 40%, That's not how the estate tax works. The first $5 million (or so) is not taxed. > where you're expected to pay for your own education, health care, and retirement You can pay for your kids' education directly, no estate tax involved. You can put significant amount of money into 529 savings accounts for your kids and your grandkids, effectively increasing estate tax limitations if (like most upper class) education is a place where you will expend significant resources.
  - brandonmenc 12y ago
    You're right, the first ~$5M is an exemption, and not taxed by the Federal government. My mistake.

Omniusaspirer 12y ago

It's just a different mentality towards life and entitlement- there's nothing sad about it. Hitting all your points in order: 1) 1 million dollars is a lot of money to come out of nowhere. It's simply dishonest to pretend that isn't a life changing amount for a middle class family. At the very least it's going to be like you said- modest home paid off(100-500k), car loans all paid off(50k), and student loans paid off(300k if your kids went to expensive schools and you have 3 of them). I'm really not seeing why anyone should be entitled to never work again simply because their parents made a lot of money. (With that said, my parents didn't choose to bury themselves in debt and could have retired instantly if they received this inheritance when combined with the investments they already had) 2) It's absolutely a lottery. Trying to cloud this issue with "oh well the parents potentially weren't there as much and that emotional cost is easily worth a few million" is disingenuous. It makes the assumption that money has no influence on the quality of the child's upbringing and "time spent with kids/day" is the only metric worth mentioning. 3) Being taxed when you're dead isn't a tax to me. At all. I understand this is a personal opinion but you should have the same understanding regarding your own opinion here. When I'm dead I no longer feel entitled to anything I gained in my lifetime- it's not like I'm ever going to use it again. I also don't feel my kids are entitled to it just because they happened to be born (effectively via lottery) to me. To suffice: Let the fruit of my efforts benefit society/humanity as a whole. It was my goal in life and ought to be in death.

JoeAltmaier 12y ago
That's Polyanna thinking, that an estate tax will benefit humanity. What nation do you live in? You trust the govt to spend your wealth, more than say a relative? I don't believe it. And 'wealth' isn't all gold buried in the back yard. Its also investments in businesses (either stocks or directly) as a corporation or even a proprietorship. Who runs the restaurant after you die? The government? Preposterous.
- Omniusaspirer 12y ago
  You're assuming the estate tax needs to exist in it's current form- ideally it would allow for me to deign money out to specific aspects of government or approved (need to avoid abuse here) charities of my choice. That would still serve to dissuade the multigenerational family/genetic lottery while leaving the individual with some say in how their (now former) assets are used. On your last point- a traditional corporation won't fail if one person dies as the issue of ownership is inherently divested from any individual person. Stocks are one of the easiest assets to liquidate on this planet- I'm not seeing an issue there. The restaurant? It would be sold. If I have a family member who I actually think could run it adequately they would be able to purchase it like anybody else and I would encourage them to do so while I was still alive.

Marazan 12y ago

"Double tax" is a phrase that needs to die in a fire due to it's preposterously disingenuous use. I work, I get paid, my money is taxed. I buy a chocolate bar, the sale is taxed The money that is spent on the chocolate bar goes in part to the shop who makes a profit (that is taxed) and to the company that made the chocolate bar who make a profit (that is taxed). The company pays the worker that made the chocolate bar (that is taxed) Etc, etc, etc. Transaction are always being taxed - that's how the tax system works.

loumf 12y ago
Also, in this case, it isn't double-taxed. The heirs never paid tax on it. It's very likely that estates of that size have tax-deferred parts or insurance. Finally, there are many incorrect statements in the description of the estate tax above that would probably lead you to believe that you have to pay 40% of 5.3m, which is not true 1. You get deductions (like outstanding mortgages and medical bills) 2. You pay the tax on the net OVER 5.3m. So, in the case described above, the estate tax would be $0.
paulhauggis 12y ago
I'm fine with not using the "double tax" phrase, as long as all taxes are included in tax arguments. I have heard here on HN that Denmark and Sweden don't have taxes that are that high..while not including all of the small taxes that you pay on a daily basis..deflating the actual tax rate to make it seem better. Also, Companies actually contribute more in taxes than people like to admit. They pay workers' wages..and those wages include tax money that goes to the government.
- aidenn0 12y ago
  > Also, Companies actually contribute more in taxes than people like to admit. They pay workers' wages..and those wages include tax money that goes to the government. That's still a tax on the workers' wages, not a tax on the company. If we shifted all income tax into a payroll tax, then by your definition workers aren't taxed at all? Anything that increases the cost of employing a worker will reduce the marginal net benefit of employing that worker, which will result in either lower salaries, fewer employees or both.

loumf 12y ago

(I said this in response to a comment, but there seems to be a lot of confusion on the estate tax all over this sub-thread -- sorry for the repeat) An estate of 5 million pays $0 in estate tax. The tax is on the amount (net of deductions) OVER 5.34 million. A net $6m estate would pay about 4% (264k), not 40%.

UVB-76 12y ago

A wonderful worldview, until one considers the reality that extraordinary wealth does not tend to accrue to the most virtuous, 'hard-working' individuals in society.