Fall US Elections

[The_Animus]

How can I say this without my post getting sent to AAH? Basically, the pinned irony meter is a way of saying that the post I was responding to struck me as very ironic. If you look back at that post you will perhaps get the meaning.

Yeah I just misunderstood which part of the post you found ironic.

 

[SumDood]

... estate tax can be a burden for mere mortals...

Really? It doesn't even kick in until 5.2 million. So after you pay your 40% you're only going to get around 3 million. Cry me a river.

 

[maxpower1227]

Of course, he is so ungodly wealthy that he has lost sight of the fact that the estate tax can be a burden for mere mortals.

Give me a break. "Mere mortals" don't pay any estate tax.

ETA: What SumDood said

 

[maxpower1227]

Everything you have presented makes me think the Republicans are in the right (no pun intended) on this. That's even leaving aside the question of whether $7.4B for 9/11 responders is an absurdly high number. I mean has any analysis gone into this at all, or do advocates just get to pick a random, large number out of the air and then attack anyone who questions it as an unpatriotic and heartless scrooge?

Health effects arising from the September 11 attacks

The number of people affected is on the order of 10^5, many with decades of life ahead of them. An amount of money on the order of 10^9-10^10 amounts to $10-100k per person. Certainly nowhere near "absurdly" high given the cost of health care and the scope of the health problems involved. Are you still going to defend the indefensible?

 

[Ladewig]

Really? It doesn't even kick in until 5.2 million. So after you pay your 40% you're only going to get around 3 million. Cry me a river.

I have a question about your calculatio . I thought that even after you hit the minimum threshold, the 40% rate would not apply to the total value. Aren't the first few million exempt from the 40%?

ETA
I have just read some stuff which leads me to believe that the tax is 40% of whatever is above the $5.3.
So an estate of $5.3 million would have all $5.3 million going to the heirs.
And an estate of $6.3 would have $5.9 going to the heirs (5.3 plus 60% of 1.0).
But perhaps I read the source incorrectly.

 

[SumDood]

Really? It doesn't even kick in until 5.2 million. So after you pay your 40% you're only going to get around 3 million. Cry me a river.

I have a question about your calculatio . I thought that even after you hit the minimum threshold, the 40% rate would not apply to the total value. Aren't the first few million exempt from the 40%?

ETA
I have just read some stuff which leads me to believe that the tax is 40% of whatever is above the $5.3.
So an estate of $5.3 million would have all $5.3 million going to the heirs.
And an estate of $6.3 would have $5.9 going to the heirs (5.3 plus 60% of 1.0).
But perhaps I read the source incorrectly.

I will defer to your calculations. I just looked at wiki to see what the minimum threshold was for the tax. I got the 40% from sunmaster. All in all about a minute and a half of 'research.'

 

[sunmaster14]

I have a question about your calculatio . I thought that even after you hit the minimum threshold, the 40% rate would not apply to the total value. Aren't the first few million exempt from the 40%?

ETA
I have just read some stuff which leads me to believe that the tax is 40% of whatever is above the $5.3.
So an estate of $5.3 million would have all $5.3 million going to the heirs.
And an estate of $6.3 would have $5.9 going to the heirs (5.3 plus 60% of 1.0).
But perhaps I read the source incorrectly.

Yes, SumDood's calculation was wrong. The 40% tax applies to everything above ($5.3MM minus previous gift tax exclusions).

Regardless of his lack of sympathy for a person who may have $10MM of assets, three children and 8 grandchildren, and loses roughly $2MM to federal estate taxes and perhaps another $1MM to state estate taxes (in Illinois, for example), the presence of the estate tax affects everybody because it necessitates the implementation of a gift tax to go along with it.

Without a gift tax regime, of course, it would be possible to evade estate taxes by making gifts to your heirs before you die. Would anybody here care to hazard a guess as to the limit on gifts that can be made each year without having to report them to the IRS (and pay tax unless you use up some of your lifetime exclusion)? It's not a particular large amount of money, even for mere mortals.

 

[Spindrift]

Yes, SumDood's calculation was wrong. The 40% tax applies to everything above ($5.3MM minus previous gift tax exclusions).

Regardless of his lack of sympathy for a person who may have $10MM of assets, three children and 8 grandchildren, and loses roughly $2MM to federal estate taxes and perhaps another $1MM to state estate taxes (in Illinois, for example), the presence of the estate tax affects everybody because it necessitates the implementation of a gift tax to go along with it.

Without a gift tax regime, of course, it would be possible to evade estate taxes by making gifts to your heirs before you die. Would anybody here care to hazard a guess as to the limit on gifts that can be made each year without having to report them to the IRS (and pay tax unless you use up some of your lifetime exclusion)? It's not a particular large amount of money, even for mere mortals.

$14K per year per person. And for husband and wife they can each make a gift so it's effectively $28K per year per person for the couple. I don't know many mortals who can give away $14K a year to one person, never mind $28K per year to all their heirs.

 

[Kestrel]

Paul Krugman and Bill Moyers discuss why the US is becoming an oligarchy dominated by those with inherited wealth:

 

[sunmaster14]

$14K per year per person. And for husband and wife they can each make a gift so it's effectively $28K per year per person for the couple. I don't know many mortals who can give away $14K a year to one person, never mind $28K per year to all their heirs.

Right, although I'm not sure why you seem to think that gifts have to be on an ongoing basis. The gift tax regime, in theory, impacts anybody who wants to give a $15K gift to somebody else, for whatever reason. It could be a diamond necklace to your mistress for her birthday. Or perhaps a car. Oh, it's possible that most people don't report such gifts to the IRS, but they are breaking the law by not doing it.

By the way, another problem with the estate/gift tax is that big legal battles arise between the IRS and the estate's representatives over the valuation of illiquid assets. In many cases these can only be resolved by forcing a liquidation of the assets, which, by definition, is an undesirable thing to do (otherwise, it wouldn't be forced).

 

[Spindrift]

Right, although I'm not sure why you seem to think that gifts have to be on an ongoing basis. The gift tax regime, in theory, impacts anybody who wants to give a $15K gift to somebody else, for whatever reason. It could be a diamond necklace to your mistress for her birthday. Or perhaps a car. Oh, it's possible that most people don't report such gifts to the IRS, but they are breaking the law by not doing it.

Again, I don't know many people who can give a $15,000 gift to anyone, once or on an ongoing basis.

By the way, another problem with the estate/gift tax is that big legal battles arise between the IRS and the estate's representatives over the valuation of illiquid assets. In many cases these can only be resolved by forcing a liquidation of the assets, which, by definition, is an undesirable thing to do (otherwise, it wouldn't be forced).

Is it really a big problem? Considering that the IRS only gets into the act when the estate is more than $5.34M. How many estates get liquidated because of the IRS and not because of heirs bickering?

 

[Kestrel]

Is it really a big problem? Considering that the IRS only gets into the act when the estate is more than $5.34M. How many estates get liquidated because of the IRS and not because of heirs bickering?

When estate taxes were lowered during the GWB administration, it was sold as a way to protect family farms. Proponents of the bill were unable to find a single example of a family farm going under due to estate taxes.

 

[Malcolm Kirkpatrick]

Socialism expresses an infantile, yet popular, power fantasy --"What a wonderful world it would be if I ran it".

Such a fantasy is hardly limited to socialism.

True.

The circle labelled "What a wonderful world it would be if I ran it" is overflowing with people of many, many different political philosophies and economic philosophies.

The missing element in other fantasies (if only everyone accepted Jesus, if only everyone adopted the libertarian "no initiation of force" principle) is that they don't contain as much of the element of salvation through State-imposed violence. Every evangelist for every ideology (most of us on JREF, for example) entertain the fantasy of persuasion, a minor-league power fantasy.

 

[sunmaster14]

Again, I don't know many people who can give a $15,000 gift to anyone, once or on an ongoing basis.

Well, ok. I guess I can see why you don't think there's a problem. I'm telling you there is, though. There are millions of people in this country who have to think twice about whether the hassle and the potential IRS scrutiny are worth making a simple transfer of an asset to another person. All things considered, I would rather be wealthy and have to worry about such problems than be poor and not have to worry about them, but how is it helping poor people to create such problems with wealthy people? Is it a form of schadenfreude?

Is it really a big problem? Considering that the IRS only gets into the act when the estate is more than $5.34M. How many estates get liquidated because of the IRS and not because of heirs bickering?

Once again, it might be inconveniencing only a few thousand people per year, and it might only be destroying a few billions dollars of wealth per year (although the estate tax avoidance industry probably consumes tens of billions of resources per year), but this needs to be weighed against the benefit, which is close to nil.

We could also just shake down every family who is worth over $100MM today for 15% of their wealth. That would raise over a trillion dollars, and it would only affect 10,000 families or so. So why not, right?

 

[sunmaster14]

When estate taxes were lowered during the GWB administration, it was sold as a way to protect family farms. Proponents of the bill were unable to find a single example of a family farm going under due to estate taxes.

The IRS has a lot of discretion when it comes to determining valuation and payment schedules. It makes no sense for the IRS to actually bankrupt a family owned business or a family owned farm. I would not be surprised if it is extremely rare. I do personally know somebody who inherited his father's business software consultancy when his father died suddenly of a heart attack in 1998. The business had very little free cash flow, but the IRS insisted it was worth a lot of money, and estate taxes were even higher back then. The legal battle with the IRS really crimped the business and took up a great deal of my friend's time and money. I think it lasted for five years. It was almost like the IRS became a partner in the business though. Like any rational partner, it wasn't going to do anything to bankrupt the business, but it certainly wasn't making a positive contribution either.

 

[ehcks]

I have a question about your calculatio . I thought that even after you hit the minimum threshold, the 40% rate would not apply to the total value. Aren't the first few million exempt from the 40%?

ETA
I have just read some stuff which leads me to believe that the tax is 40% of whatever is above the $5.3.
So an estate of $5.3 million would have all $5.3 million going to the heirs.
And an estate of $6.3 would have $5.9 going to the heirs (5.3 plus 60% of 1.0).
But perhaps I read the source incorrectly.

Yes, the tax is 40% only on the amount above the 5.2 million.

Which is nice, because the median net worth of even the top quintile is under one million.
http://www.census.gov/people/wealth/files/Wealth distribution 2000 to 2011.pdf

The total number of people on earth with over 5 million in net worth is less than 1% of the population of the US.
http://en.wikipedia.org/wiki/Distribution_of_wealth
http://upload.wikimedia.org/wikiped...er_of_High_Net_Worth_Individuals,_2011_v4.jpg

 

[Spindrift]

Well, ok. I guess I can see why you don't think there's a problem. I'm telling you there is, though. There are millions of people in this country who have to think twice about whether the hassle and the potential IRS scrutiny are worth making a simple transfer of an asset to another person. All things considered, I would rather be wealthy and have to worry about such problems than be poor and not have to worry about them, but how is it helping poor people to create such problems with wealthy people? Is it a form of schadenfreude?

Millions of people? I don't believe that. Got anything to back that up with?

If anything creates problems for wealthy people people it's bad?

Once again, it might be inconveniencing only a few thousand people per year, and it might only be destroying a few billions dollars of wealth per year (although the estate tax avoidance industry probably consumes tens of billions of resources per year), but this needs to be weighed against the benefit, which is close to nil.

A few thousand per year? Again, anything to back that up with? I doubt it's anywhere near that.

We could also just shake down every family who is worth over $100MM today for 15% of their wealth. That would raise over a trillion dollars, and it would only affect 10,000 families or so. So why not, right?

If you think it will work, okay sounds good. I don't particularly see any reason to do it but if you want to, go ahead.

 

[Spindrift]

The IRS has a lot of discretion when it comes to determining valuation and payment schedules. It makes no sense for the IRS to actually bankrupt a family owned business or a family owned farm. I would not be surprised if it is extremely rare. I do personally know somebody who inherited his father's business software consultancy when his father died suddenly of a heart attack in 1998. The business had very little free cash flow, but the IRS insisted it was worth a lot of money, and estate taxes were even higher back then. The legal battle with the IRS really crimped the business and took up a great deal of my friend's time and money. I think it lasted for five years. It was almost like the IRS became a partner in the business though. Like any rational partner, it wasn't going to do anything to bankrupt the business, but it certainly wasn't making a positive contribution either.

So the IRS did not liquidate the assets like you said happens in many cases. Any information on the number of cases where the IRS DOES liquidate the assets?

 

[sunmaster14]

So the IRS did not liquidate the assets like you said happens in many cases. Any information on the number of cases where the IRS DOES liquidate the assets?

I didn't say that the IRS was the one to liquidate illiquid assets. But they can force the heirs to do so by presenting them with a big tax bill and demanding payment. This is particularly problematic in the art world.

 

[Ladewig]

True.The missing element in other fantasies (if only everyone accepted Jesus, if only everyone adopted the libertarian "no initiation of force" principle) is that they don't contain as much of the element of salvation through State-imposed violence. Every evangelist for every ideology (most of us on JREF, for example) entertain the fantasy of persuasion, a minor-league power fantasy.

I was not including libertarians in my accusation. I was actually redefining the assertion to be "if I made all the laws in the US and I decided where and when to initiate state-imposed violence, then this would be an awesome country."

Using that definition, I am even more adamant that socialists are far from being the majority of the members of that club. There are loads of Tea Party Christians who would want the state to arrest and incarcerate homosexuals. The are large swaths of Americans who want the state to have the power to limit where Mosques are built but not limit where churches are built. Many Americans in that circle are prepared to throw away the parts of the Constitution and require religious test clauses for federal elected officials.

No. It is not only the socialist who fantasizes about how wonderful life for everyone would be if he or she had unlimited power to tax, spend, legislate, and judicate (while wielding the reins of state-imposed violence).