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This is a myth, perpetrated by the campaign against the estate tax. See my other comment: https://news.ycombinator.com/item?id=9993417 https://news.ycombinator

This is a myth, perpetrated by the campaign against the estate tax. See my other comment: https://news.ycombinator.com/item?id=9993417 https://news.ycombinator.com/item?id=9993417 > if you inherit a $10M business, the only way to pay your tax bill is to liquidate the business. I've never heard of a business being liquidated to pay estate taxes, and I've heard of many businesses being passed from generation to generation. For one thing, doesn't this valuable business have revenues?

yummyfajitas 11y ago
According to the CBO, about 5% of estates have liquidity problems. https://www.cbo.gov/sites/default/files/07-06-estatetax.pdf https://www.cbo.gov/sites/default/files/07-06-estatetax.pdf See also these survey results, which suggest estate taxes limit business growth and shrink businesses: http://coles.kennesaw.edu/centers/cox-family-enterprise/cox-family-documents/EstateTaxes.pdf http://coles.kennesaw.edu/centers/cox-family-enterprise/cox-... This probably underestimates the nature of the issue, since as noted, a business with an aging owner will engage in estate planning and will liquidate sufficiently over time as to not enter the 5%. This, in turn, diverts cash from investment into unnecessary liquidity. Note also that this isn't an anti-estate tax argument. This is an argument against demanding cash tax payments for in-kind transfers. It applies to more than just estates, e.g. startup employees exercising their options, and does not apply to estates which are comprised of highly liquid assets (cash, SPY). There is no need to spout pro-taxation talking points, I'm discussing a technical detail of payment methods.
- Gustomaximus 11y ago
  Of course paying estate taxes limits growth. So does paying any tax, haha, this is why companies actively avoid them when they can. I thought it was interesting where the survey referenced 'paying off taxes will involve selling all/part of the business". This was around 40% positive across the categories. While firstly I'd take results with a pinch of salt as the people answering likely have an agenda to push, and a survey is not always reality. But having to sell some of a business is not a bad thing from a community POV. It keeps capital circulating in an economy. This offsets one on the main weaknesses of capitalism, that capital keeps concentrating. This conversation is about an equal society, so in that context I feel this is a good result, stopping people forever accumulating assets without having to release them. Hence it would be an easy argument liquidity problems from estate taxes could be a good thing for ensuring an equal society.

yummyfajitas 11y ago

According to the CBO, about 5% of estates have liquidity problems. https://www.cbo.gov/sites/default/files/07-06-estatetax.pdf https://www.cbo.gov/sites/default/files/07-06-estatetax.pdf See also these survey results, which suggest estate taxes limit business growth and shrink businesses: http://coles.kennesaw.edu/centers/cox-family-enterprise/cox-family-documents/EstateTaxes.pdf http://coles.kennesaw.edu/centers/cox-family-enterprise/cox-... This probably underestimates the nature of the issue, since as noted, a business with an aging owner will engage in estate planning and will liquidate sufficiently over time as to not enter the 5%. This, in turn, diverts cash from investment into unnecessary liquidity. Note also that this isn't an anti-estate tax argument. This is an argument against demanding cash tax payments for in-kind transfers. It applies to more than just estates, e.g. startup employees exercising their options, and does not apply to estates which are comprised of highly liquid assets (cash, SPY). There is no need to spout pro-taxation talking points, I'm discussing a technical detail of payment methods.

Gustomaximus 11y ago
Of course paying estate taxes limits growth. So does paying any tax, haha, this is why companies actively avoid them when they can. I thought it was interesting where the survey referenced 'paying off taxes will involve selling all/part of the business". This was around 40% positive across the categories. While firstly I'd take results with a pinch of salt as the people answering likely have an agenda to push, and a survey is not always reality. But having to sell some of a business is not a bad thing from a community POV. It keeps capital circulating in an economy. This offsets one on the main weaknesses of capitalism, that capital keeps concentrating. This conversation is about an equal society, so in that context I feel this is a good result, stopping people forever accumulating assets without having to release them. Hence it would be an easy argument liquidity problems from estate taxes could be a good thing for ensuring an equal society.