The solution to this is very simple and need not be done with a penalize-everyone approach like the estate tax. Simply change the tax laws so that the cost basis for inherited property does not get levelized at the time of the inheritance. That way a piece of property for example that was purchased for $10,000 dollars in 1960 but sold by the heirs for $200,000 would be taxed on the full $190,000 gain. This gives the heir the choice whether to sell the property and pay the tax or to continue to hold on to it (and in most cases continue to farm it), rather than to be forced to sell the property to pay the estate tax. This should make kludge happy because Paris will still have to ultimately pay the taxes but it doesn’t result in double taxation for estates that have been taxed all along as they grew.</p>
<p>FF, I would be perfectly OK with the solution you propose. I believe that it would actually raise a lot more revenue than the current estate tax, as well. But the problem is administrative. Many heirs don’t know how much their parents paid for their property, how much it was depreciated, whether basis-affecting additions or improvements were made, stock splits, etc. etc. A couple of other brief points: Please don’t stoop to trotting out the “Save the family farm” tearjerker. That phony story has been debunked long since. Despite strenuous efforts, no one has been able to actually find a family farm which was lost due to estate taxes. Not only is the vast majority of agriculture today corporate, estate tax (which reaches only equity, not gross value of property) doesn’t threaten a viable business. The other bad thing about using a straighforward capital gains tax on sale after inheritance is that it acts as a disincentive to selling property, and tends to lock ownership up, which is a bad thing for a variety of reasons. </p>
<p>P2n:
I’ve already explained the simple solution to this problem. The “off-budget” FICA tax on wages has been subsidizing the “regular” budget which is funded by tax on both earned and unearned income for years, without any apparent issues being raised. The solution to the social security crisis is simply to reverse that for a few years.<br>
So: First, stop running deficits. Next, pay off the national debt. Next, using the greater financial leeway afforded by the first two steps, subsidize the “off budget” budget with “regular budget” revenues. That’s right: let the recipients of unearned income engage in a little payback and subsidize the payors (and recipients) of the Social Security system for a few years in return. Social Security isn’t structurally flawed - we just have a demographic bulge (we baby boomers) to deal with. Kill enough of us off and the system is in balance again.</p>
<p>“causing native-born blacks to be unemployed?”"</p>
<p>What about the Irish? Zooz it’s a back handed slap to blacks. Why even include reference to any skin color in your statement? Is there a need? Wouldn’t causing “americans” to be unemployed? be a better choice? </p>
<p>I just am asking was there a need to attach race to the question you posed? Does applying race rather than nationality help the question? Aren’t we all Americans?</p>
<p>"Everyone will pay - in one form or another. The rich (please define ‘rich’) pay the most now - by far in taxes. This "</p>
<p>Sorry, no that is not true in every sense of the word. While the rich may pay what might be a larger dollar amount, they tend to pay a smaller percentage of income in taxes than the average person. </p>
<p>Warren Buffet pointed out how he could very easily avoid income taxes if he so chose to by simply taking his Berkshire Stock and borrowing against it and taking his “income” in the form of an untaxable loan. There are many ways to reduce your tax burden as a percentage of your income. Just because you’re not using them doesn’t mean you couldn’t and then lower your percentage of tax due. Their called cpa’s, tax lawyers and what not. They have made a carreer of of helping the rich minimze tax obligations. So I don’t think I would say or use the word “fair” when talking taxes and the wealthy. The wealthy have the ability to pay others to use the tax code to reduce their obligation of income tax. The average person does not.</p>
<p>“If someone has a defined pension plan, providing somewhere around $40,000 a year, that’s like having $1 million in an IRA account.”</p>
<p>Do you mean defined benefit plan? No, they are not the same. Since ERISA was created DBP have slowly dissapeared or have been so dramatically underfunded that they risk failure. Besides neither IRA of EBP are taxed until monies are distributed. You pay no taxes on either while they sit. </p>
<p>" So who is rich? The person with the pension plan might feel secure, but probably not rich. The person with the IRA sounds rich, but has to be careful not to withdraw too much per year, and also bears the burden of administering his/her own pension plan."</p>
<p>No, there still is a risk to a DBP holder, failure. The pension guarantee fund can only provide so much. For the IRA are you talking about outliving your nestegg? </p>
<p>Actually the difference with the two is with a defined benefit you only have to worry about the money being there when you need it. With an IRA, you have to worry about the choices you make to get the money there. You have to live with your results good or bad. </p>
<p>“It’s not that easy these days to say who’s rich”</p>
<p>Well, I would say if you are in the 5% of income earners in the country having more income than 95% of the population would be a reasonable indicator. Now what you do with that money isn’t an indicator of wealth but moreso intelligence.</p>
<p>"FF, I would be perfectly OK with the solution you propose. I believe that it would actually raise a lot more revenue than the current estate tax, as well. "</p>
<p>Far and away it would raise more revenues than estate taxes. FF just lost his license as a conservative. </p>
<p>“But the problem is administrative. Many heirs don’t know how much their parents paid for their property, how much it was depreciated, whether basis-affecting additions or improvements were made, stock splits, etc. etc.”</p>
<p>If there was a transaction, there’s a record. So no, this really wouldn’t happen as valuations are done all the time. </p>
<p>“A couple of other brief points: Please don’t stoop to trotting out the “Save the family farm” tearjerker. That phony story has been debunked long since. Despite strenuous efforts, no one has been able to actually find a family farm which was lost due to estate taxes.”</p>
<p>I’m sure someone has, but that would be their own fault. There have always been ways to reduce or eliminate the estate tax. Just as people die without a will and screw things up, if a person of means doesn’t bother to create wills, trusts and gift to their heirs… well, that’s their problem not the system. The previous (prior to GW) system was pretty effective as long as you did something to pass things on. Estate taxes were minimized except for the truly stupid or stubborn. There is no way anyone could ever claim being left “helpless” by the estate tax. </p>
<p>More honestly it should be" I didn’t bother to take or do any of the steps to reduce my tax liability… I am a stupid person and the government should get a lot of my money and assets because I failed to use the means in front of me to take care of this."</p>
<p>Oh, there are always PLENTY of reasons to lay the burden on the poor and the middle class rather than on the rich. If we don’t tax the rich, why, they’ll invest all their gains at home rather than abroad, create lots of high-paying jobs with health insurance, invest in education infrastructure, and make sure things go swimmingly for all of us.</p>
<p>What’s wrong with this picture?</p>
<p>Social Security “problems” have two main causes: for the first time, substantial numbers of African-Americans, who have been paying into Social Security for decades, are now able to collect. Time to cut the benefits. Second - the flow of immigration is too low - most illegal immigrants, and legal ones too, pay into Social Security without ever collecting a dime in benefits. Together, they’ve been subsidizing my rather wealthy mother for decades. That’s the REAL elephant in the room.</p>
Perhaps I am a “no one” in your mind, but I can give you a very credible example. The farm at which I buy my flowers every year (I tend to buy many, many flats) was in that exact situation a few years ago. The parent had died but the sons wanted to continue farming it. Faced with the prospect of coming up with the cash to pay the taxes, they were about to sell it to developers. The only way for them to save it and continue farming it was to have the town buy the property and then lease it back to the family. So, in this case it was a semi-happy ending, but I’m sure that this story is repeated many times over with a less happy ending around the country. </p>
<p>As far as your “administrative” issues with my proposal - that’s what accountants are for. If someone chooses to not keep any records to protect their heirs, then that becomes their issue and I have no sympathy for them. But why take this option off the table for those who keep records and are willing to hire an accountant?</p>
<p>kluge, just you wait until driver gets back. :)</p>
<p>Kill some of us off? She would skin you alive for such nonsense. (lol). ;)</p>
<p>What I am hoping for is that the new Congress and the Administration find the political will to address these issues - now. Not on the backs of the weak, but neither on the backs of a few, either. For that matter I am one conservative who thinks the Estate Tax is a good thing - for Warren Buffet, Bill Gates and the like. No American royalty - ever. Make 'em work for their money. Work is a good thing. Thrift and industry should be rewarded…never kill off the desire to feather one’s nest through sweat equity. However, I don’t like it when farming families in Iowa have to sell the family spread because Dad forget to go see the tax lawyer.</p>
<p>Mini, I’m happy your mother is wealthy but most people on SS–black and white and in between are not. The relatively few wealthy people collecting SS are not going to break the system. It is a program for ALL–even the rich and my MIL who lives with us and depends completely on SS for income.</p>
<p>I have no problem with illegals paying and not getting to collect–they come here illegally because it is better for them than where they were and they take the whole package including the SS tax they might not get back. Many of them work for cash all or part of the time and never pay a dime in taxes on that income.</p>
<p>“for Warren Buffet, Bill Gates and the like. No American royalty - ever. Make 'em work for their money. Work is a good thing. Thrift and industry should be rewarded…never kill off the desire to feather one’s nest through sweat equity. However, I don’t like it when farming families in Iowa have to sell the family spread because Dad forget to go see the tax lawyer”</p>
<p>Actually to BG and WB credit they are distributing alot of their wealth to causes they want, rather than waiting, doing nothing and letting the government decide where the money goes. That’s the nice thing about the IRS, pretty much you can give away your money ahead of time to the causes you support, you can even give it at death if you want. </p>
<p>“I don’t like it when farming families in Iowa have to sell the family spread because Dad forget to go see the tax lawyer”</p>
<p>In my experiences it isn’t that dad has forgotten to see the lawyer or CPA at all. Part of the process of minimizing estate taxes is giving up (gifting) control of assets while alive. Sometime while daddy wants junior to have things, it isn’t till after he’s gone. They may feel jr isn’t responsible enough or has married the wrong woman. It’s been an issue of control and final say. </p>
<p>Even FF florist problem would have been easily solved several ways over. Sometimes there’s more to the story then is let on. I have a half dozen questions about the situation I could ask FF but he probably isn’t close enough to know.</p>
<p>I also don’t like it when farming “families” in Iowa receive huge subsidies because they aren’t remotely competitive.</p>
<p>[edit: In other words, not-so-families] It’s fun to watch small farms get driven out, while huge agricultural enterprises get subsidies up the wazoo.</p>
<p>“Mini, I’m happy your mother is wealthy but most people on SS–black and white and in between are not. The relatively few wealthy people collecting SS are not going to break the system. It is a program for ALL–even the rich and my MIL who lives with us and depends completely on SS for income.”</p>
<p>I’m for everyone receiving it. And now Black folks are getting it in larger numbers for the very first time, and I think that is great! And illegal immigrants keeping it afloat for everyone - sounds good to me. But let’s not make any mistake about what the Social Security elephant in the room is - it’s ALL about race.</p>
<p>But I am so happy to have provided such large tax breaks to the rich, and built up defense industries and oil stocks, and helped provide them with cannon fodder for Iraq that now, as everyone can see, they are building huge new manufacturing plants all over Ohio, providing lots of high wage jobs and health benefits to millions, and have completely rebuilt the nation’s education system. This is clearly an economic experiment that is working.</p>
<p>But now that they’ve taken away what they can easily get from me, it’s now time to take aim at the kiddies.</p>
UCLAri, I’ll give you a mulligan on that one if you want to take it back. I was feeling like you were getting attacked a little too personally but now you are stepping into waters that may be way over your head. Have you ever been in or around agriculture?</p>
<p>No dirt under these fingernails. I’m not going to lie.</p>
<p>However, I’m curious if you don’t find it at all troublesome that the majority of farms in states that are important to presidential primaries receive large agricultural subsidies? Why does Iowa need ~70% of its farms subsidized, when California gets nearly no subsidies?</p>
<p>I’m all for agricultural independence. But I think we can do it in much better ways than huge piles of corn paid off to rot.</p>
Zooz it’s a back handed slap to blacks. Why even include reference to any skin color in your statement? Is there a need? Wouldn’t causing “americans” to be unemployed? be a better choice? </p>