Slashdot Mirror
Silicon Valley Billionaire Takes Out $201 Million Life Insurance Policy
Hugh Pickens DOT Com writes "The Mercury News reports that somewhere in Silicon Valley, a 'mystery billionaire' has bought what the Guinness Book of World Records says is the most valuable life insurance policy in history — a policy that will pay his survivors a cool $201 million. Was it Larry Ellison? Eric Schmidt? Elon Musk? Zuck? Nobody knows because the name of the buyer is a closely guarded secret. 'We don't want hit men running around Palo Alto trying to find him — or members of his own estate,' joked Dovi Frances, the Southern California financial services provider who sold the policy. By last count, California boasts 111 billionaires with more than a third of them in tech, while San Francisco has 20 billionaires alone so it could be any of them. But why does a billionaire even need to take out life insurance when he or she has so many other assets. The most likely answer to this question is taxes and estate planning.
Upon death, an estate would be liable to pay off loans on any leveraged properties, plus a lot of money as part of the death taxes owed. This could force the estate to liquidate holdings to raise the money to pay off these liabilities even if it weren't the most opportune time to sell the assets. By taking out the life insurance policy, it would give the estate more flexibility in paying off the taxes and other debts owed, without necessarily having to sell assets to do so. 'In California, there are state death taxes that are exceptionally high (45 percent),' says Frances adding that the policy is actually a combination of more than two dozen policies, underwritten by 19 different insurers because if any single company had to pay out such a lavish benefit, it could be crippling. 'If your properties are leveraged then those loans are called immediately and need to be paid off, you want to hedge yourself against such a risk so [your beneficiary] can receive the proceeds without being exposed to taxes.'"
Upon death, an estate would be liable to pay off loans on any leveraged properties, plus a lot of money as part of the death taxes owed. This could force the estate to liquidate holdings to raise the money to pay off these liabilities even if it weren't the most opportune time to sell the assets. By taking out the life insurance policy, it would give the estate more flexibility in paying off the taxes and other debts owed, without necessarily having to sell assets to do so. 'In California, there are state death taxes that are exceptionally high (45 percent),' says Frances adding that the policy is actually a combination of more than two dozen policies, underwritten by 19 different insurers because if any single company had to pay out such a lavish benefit, it could be crippling. 'If your properties are leveraged then those loans are called immediately and need to be paid off, you want to hedge yourself against such a risk so [your beneficiary] can receive the proceeds without being exposed to taxes.'"
We don't want hit men running around Palo Alto trying to find him — or members of his own estate,' joked Dovi Frances, the Southern California financial services provider who sold the policy.
But they do want the publicity from having sold the policy or they wouldn't be disclosing this since it is nobody's damn business.
Hugh must have had a good weekend
I'm not sure who bought this policy, but it seems like the key to figuring it out is the odd extra million - I mean, why one million more than a nice round 200 million? That's a pretty odd addition.
What other significance can the number 201 have... hmm.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Why be king if your heirs won't be?
I comment occasionally so that I can mod others -1 overrated or -1 offtopic.
We need to stop big tax dodgers useing loop holes to pay no taxes.
No, no, no!
We need to force politicians to eliminate the loopholes, which are all legal and often intentional
To create legal loopholes and then to expect people to voluntarily pay more (than they have to) taxes is a losing and pointless battle.
Don't be a douche by calling them "death taxes".
We know where leadership by an anti-intellectual "strongman" who scapegoats minorities and likes boisterous rallies goes
Just need the insurance, as, well, insurance... in case this billionaire dies before they get a chance to retire outside of California, I suspect.
This issue is a bit more complicated than you think.
"Indeed, it is difficult to set bounds to the share of a rich man's estate which should go at his death to the public through the agency of the state, and by all means such taxes should be graduated, beginning at nothing upon moderate sums to dependents, and increasing rapidly as the amounts swell, until of the millionaire's hoard, as of Shylock's, at least the other half comes to the privy coffer of the state."
http://www.swarthmore.edu/SocSci/rbannis1/AIH19th/Carnegie.html
We need to stop big tax dodgers useing loop holes to pay no taxes.
No tax dodging. They are going to pay taxes with the life insurance money instead of having to sell off assets. That's the point.
We need to stop big tax dodgers useing loop holes to pay no taxes.
We can assume they paid their taxes when they received their paychecks. Why should their heirs pay them again?
In this case, this life insurance policy isn't to stop anyone from paying taxes. The purpose is to pay the taxes rather than having all the assets sold off to pay them. For example, if I were to leave a taco hut family business to my kids, if they can't scrape up the cash to pay the taxes on what the state guesses the hut is worth, they would be forced to sell it to pay 45% tax, thus losing the business me and my family spent a lifetime building. A life insurance policy would allow them to pay the taxes in cash and keep the business. Unfortunately, this may not be an option for those who do not have "extra" income to afford an life insurance policy.
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
You and the OP are still seeing the wrong side of this.... Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.
We need to stop big tax dodgers useing loop holes to pay no taxes.
How about instead we stop taxing the hell out of people when they die? and in this case they dont seem to be doing it to not pay taxes anyway- they are doing it because when they die the government is going to tax them so much they would have to sell off property just to pay the death tax on the property. now insurance policy pays for that and the family gets to keep their property- its not tax dodging, its smart.
"But why does a billionaire even need to take out life insurance when he or she has so many other assets. The most likely answer to this question is taxes and estate planning. Upon death, an estate would be liable..."
Thanks a lot for stifling the need for lots of uninformed commentary, guys. I was looking forward to lots of basement-dwelling idiots spouting off about how stupid this billionaire must be. Now I have to find somewhere else to spend my morning.
To the reddit! /me gone
Dear Slashdot: next time you want to mess with the site, add a rich-text editor for comments.
It wasn't me. Just sayin'.
are a measure of inherent instability in the system.
The government will grab it all as "death tax".
This way the heirs won't be left arguing over what to sell to pay off the government.
No sig today...
There's an estate tax in many, if not most states, and the federal government. What tax dodging, relevant to this article, are you talking about?
Gamingmuseum.com: Give your 3D accelerator a rest.
I wonder what Hugh Pickens's life insurance policy is. Because I hope he dies like Roland. (or at least disappears like JonKatz)
He'll die, the taxes will come due, and they'll dispute the payouts long past the point where the properties will be liquidated.
If money (or any object) is passed from one person to another, some people want their "fair share" of it. Even if, as you say, those people already had their fair share of it.
If you think I voted for Trump because of this post, you're wrong. I voted for Dr. Jill Stein of the Green Party. Again.
Ah, you helped me to understand what I first thought was just an off-topic post. It's not enough for statists to make the rich and successful pay their "fair share"-- they want their heirs to be punished. Why else would someone begrudge a person taking out an insurance policy to make sure their descendants could keep their family property?
Gamingmuseum.com: Give your 3D accelerator a rest.
You and the OP are still seeing the wrong side of this....
Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.
Capital gains are NOT taxed before death if the property is held and not traded.
AND, this isn't avoiding paying taxes, it's paying for death insurance to pay for those taxes.
Why do the government imprisons pickpockets?
They hate competition
Why is there an estate tax of 45% upon anyone's death!!!
Because if you don't heavily tax (effectively) inheritance then that's your new aristocracy right there.
sigs are hazardous to your health
You and the OP are still seeing the wrong side of this....
Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.
It may have been taxed as income for the principal - although anyone that rich probably managed to find a way not to pay it to begin with - but when the estate is passed to heirs, it becomes their income, and just like any other system where cash flows from point to point, it becomes fair game for the taxman again.
I will get a lot of grief for saying this, but I wouldn't cry if the whole Death Tax thing were 100% less what it takes to support minor heirs until they're grown up enough to be able to make their own fortunes. That's because the best legacy that a successful person can leave his/her heirs isn't a large chunk of money, it's the skills and mentoring that will make them successful on their own without simply breeding up a generation of useless drones living off other people's hard work. And after all, isn't that what we revile welfare recipients for?
We don't (so far) allow you to be handed political power simply because of who your parents are a la monarchy in the USA. But we do support handing wealth to people simply because of who your parents are.
There is no good reason for the financial services company that bundled these policies to be allowed to disclose any of this. I certainly would not use a company that can't keep their mouths shut.
You and the OP are still seeing the wrong side of this....
Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.
I think YOU are seeing the wrong side of it. Why is taxing income the best way to tax people? Income is wealth generation,
we shouldn't tax it. Taxing consumption would be much better. Originally in the USA estate tax was the only form of taxes.
This also makes sense to me as you're only taxing people after they are dead. Especially today as people generally live long
enough to see their grandchildren established, I think this is a great idea. Taxing people after they are dead with maybe an
exception for people who die while still having young dependents seems like the least painful way of collecting revenue for
the government. And as far as the "that income has been taxed already", all money has been taxed already, most forms of
taxes including income tax, sales tax, estate tax, etc... are a tax on the transfer of money from one person or company to another.
... To buy insurance. Buying insurance is a guaranteed loss of money. A significant loss, because not only does the insurance company have to cover the expense of running an entire company, but they need to make their own owners rich. Insurance can make sense for poor people, but for a rich people, no way.
Instead of giving the insurance company money, which they probably invest in some high interest thing, take 30 percent off of the top and then use the rest to pay off the life insurance at death, just invest it yourself and when you die have a 400 million dollar account for your relatives to use.
Troll is not a replacement for I disagree.
We can assume they paid their taxes when they received their paychecks. Why should their heirs pay them again?
Because their heirs did nothing to earn the money unless we consider kissing ass a valuable skill. They essentially won the (genetic) lottery and they should be taxed the same as someone who won the Mega-Millions lottery. The source of the funds is irrelevant. If I gave you $1 billion today then you would owe taxes on it. Why should it be any different if we happen to be related?
You've got to balance having a tax system that's got loopholes, and having a tax system that's tied in intractable knots. You can at least fix the former by patching in exceptions and exclusions.
No kidding!!! What do you say at this point?
well the way it works out the heirs would have to pay the taxes to get the property and then pay the capital gains taxes again if they sell it a few years later
not really, chances are the property of the estate is put up as collateral for a huge loan to live off of. person dies and the debts must be paid, so everything is sold off to pay the debts.
but wait, there was an insurance policy. policy pays off the debts or just pays the heirs and the estate is sold off saving lots of money in taxes
For the same reason why when I pay my plumber out of money I have that was already taxed, he has to pay taxes on it as well.
Money is usually taxed when it changes hands. Now I'll admit in case of estates it's not really practical because there are so many ways to get around it, and it also makes stupid situations happen, like if a parent wants to help an adult child pay for an expense they have, they are limited to the ~$14,000 a year gift limit without the kid being taxed as well.
So I admit it's a stupid law, but saying it's already been taxed is not a good argument against it in my opinion.
The government will grab it all as "death tax".
What a BS way to frame the issue. Inheritance taxes should be taxes EXACTLY the same way we tax someone who wins the lottery or wins the jackpot in a Vegas casino. These people did nothing to earn the money. If you won the lottery you would be taxed on your new income. The fact that the parties are related should make no difference whatsoever. If the money is new to you then you should be taxed on it just like everyone else.
This way the heirs won't be left arguing over what to sell to pay off the government.
That is what a will is for.
California has no estate tax.
So, at year end when filling out your taxes, you don't take any tax deductions to which you're legally entitled? You voluntarily forgo tax deductions and elect to pay your full, 100% tax burden?
You are a special, special man.
Oh. Sorry. What you meant is you want RICH people to be prevented from benefiting from tax deductions while you continue to benefit from yours?
Yeah.
As others have pointed out, the issue isn't people taking advantage of tax deductions - to not do so is stupid. The issue is the specific tax deductions that are available. Regardless, crying in outrage that someone has made use of a tax deduction that's available is moronic because to not make use of that tax deduction, if its available, would be stupid.
Life Insurance Payouts are not taxed.
When you pay your plumber, it's income to the plumber and he has to pay taxes on it. Inheritance is not income. See my farm example above.
Personally, I want to see all taxes go and be replaced by a sales tax. Everyone is taxed, but only on what they spend. All money is spent.
There is no "I disagree" mod for a reason. Flamebait, Troll, and Overrated are not substitutes.
No doubt.
Why isn't estate tax 100%? Why should countless future generations of a family who've done nothing to earn it never have to do a day of work while the rest of society suffers? Inherited wealth is as unfair as it gets.
This space intentionally left blank
If we had one tax rate for everyone, it would solve the problem of tax loopholes.
Coder's Stone: The programming language quick ref for iPad
One of my favorites is the so-called "Saratoga" loop hole. Collect two weeks of rent on your property tax-free.
So named because it is believe that the loop whole was created around the Saratoga horse race which attracts a huge following of the rich who are willing to pay absurd rents for houses in the area during those two weeks of the year. Why should rich house owners have to pay tax when their collecting big fat rent checks for two weeks a year....
Yeah, it was really hard to get my mother to understand this. Somehow SHE is offended that a lot of HER wealth will be taken in taxes when she's dead. I don't care (I presume some of it would go to me, but it's not like I'm poor) but she's outraged about it. She's going to be dead! She's got no use for it, but she's offended that it'll be spent on useful stuff for society rather than handed to her heirs.
I live in the UK, we used to have old rich families where nobody had done anything of much use for centuries, but they inherited the wealth, the land, the titles, and so despite that they stayed rich. But estate taxes sorted that out. They have to work like everybody else, or else soon enough the money is all gone. Suddenly the big old manor house that had three people living in it was a LIABILITY and they had to find a way to MAKE IT GENERATE REVENUE or sell it before the estate tax bankrupted them. So now it's a hotel, or it's a conference centre, or serves some other useful purpose instead of sitting there mostly empty.
Quite a few billionaires (Buffet, Trump) would disagree with you.
If I am a brilliant man and create a company (and create value), I deserve to keep that. But why should my descendants, who are by virtue of their birth part of a "lucky sperm club," entitled to all that wealth?
True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean.
That's why such super high estate taxes exist. And typically they're not for you and me, it's for people over a certain threshold (say $1 mio + in assets)
in NYC the rich people buy up municipal bonds that are used to build infrastructure. actually its done like this all around the USA
rich people with lots of money like say $10,000,000 want a safe low risk place to park it and live off the interest. cities and counties want people to lend them money at low interest because there is no other way to build large infrastructure projects. NYC for instance they are building a huge new water pipe and there is almost $20 billion of transportation construction going on now.
it's not like this money is not doing anything useful
There is not a tax on anyone's death. There is a tax on receiving an inheritance. There is more than a semantic difference. Given X dollars, dividing them among Y heirs leads to no taxes, regardless of how large X is (although the higher X is, the higher Y needs to be).
Oft times not. Death obviates long-term capital gains taxes. So that's, in the most advantageous case 20%. It also obviates other cases of asset appreciation being taxes, which can be 28% or higher.
What is bequeathment if not income?
Your ad here. Ask me how!
We don't (so far) allow you to be handed political power simply because of who your parents are a la monarchy in the USA. But we do support handing wealth to people simply because of who your parents are.
These days they are pretty much the same thing.
The only thing necessary for evil to triumph is for it to be pitted against a slightly greater evil
They pay capital gains based on appreciation from the fair market value when they inherited the asset, not when the purchase price their ancestor paid.
Your ad here. Ask me how!
Interesting that the 45% rate isn't really California's tax.
http://www.marketwatch.com/sto...
Federal death tax is 40%.
There are two types of people in the world: Those who crave closure
What do you say to the following?
1. Primary tax revenue comes from VAT, Import Duty, and leasing rights to natural resources.
2. Some property and usage taxes like the gasoline tax, etc.
3. Strip 90% of the welfare system by simply giving everyone who signs up an equal a tax refund of around 50% of the money coming in from the VAT. AKA 50 % percentage of VAT revenue / number of people signed up for refund is the amount someone would get.
4. For those deemed unable to manage their own life and money the state would assign and monitor custodians to find and fund the services those people need. AKA Those who need group housing or institutionalization.
Because the founders of our country didn't want a nobility system in place. Because the foundation of the country was that inherited wealth wasn't supposed to be a ticket to never having to work.
Upon sale, they'd pay capital gains only on the increase in value relative to the valuation at the time the estate taxes were paid. So, no "again".
We need to stop big tax dodgers useing loop holes to pay no taxes.
Loopholes are not there to benefit the person that uses them. They are used by the government to manipulate you into using your money in such a way that it benefits the government. For example, Obama was giving tax breaks to companies to hire new employees. The government did not care that the business saved money or even if the employees got new jobs. What they did care about was that for a few tens of thousands in tax breaks to the company, they in-turn took dozens of people off of unemployment,maybe food stamps, etc... and they were then able to collect income tax from these new employees totaling more than the break they gave the business for hiring them. They manipulated the company into providing even more in tax revenue.
In almost every case, if you look at a loophole or tax break... then end net result is that the government collects more taxes because of it.
So you are saying if someone should happen to get lucky that the state should take it away from them because it's not you?
Has nothing to do with whether it is me or someone else. If I won the lottery today I would be taxed on the income. Getting an inheritance on an asset you didn't help create is functionally identical to winning a lottery and should be taxed the same way. There are a few exceptions I would make for exceptional cases of bad luck (like underage children whose parents died unexpectedly) but those corner cases are fairly easy to deal with.
It's not only the super rich that inherit things.
True but irrelevant. The only difference is the amount they inherit, not the principle of how it should be handled. You unexpectedly come into some money you should be taxed on it the same as anyone else. No better, no worse.
Farms that have been in families for generations are being sold off to pay the taxes when the farmer tries to pass it to his children
The question is whether the children were involved in the farm prior to the farmer dying. If they were involved then they helped earn the income and we can handled that as we would any other business that changes owners. If they were not substantially involved in the work of building the company then they can pay their lottery winnings the same as anyone else. If that requires selling off assets to pay the tax man then so be it.
If the farmer has a brain in their skull they will have the farm held in a corporation and have named the heirs as shareholders. Hell they can hold this stuff in a trust if they want to. But just because your parents had an asset that they worked hard for doesn't mean you should be entitled to it unless you worked hard for it too. If the kids helped build the farm and worked hard at doing so then they have earned the income and there is no problem. It's a working business that will require continued work to make money, not a cash award. If they are just handed the keys then it is nothing more than an asset that should be taxed like lottery winnings.
These farms may have millions of dollars in the equipment alone so the state sees these kids as inheriting millions of dollars.
If they were suddenly gifted the farm upon the death of the former owner and were not working the farm themselves then they WERE inheriting millions of dollars. If the kids were working the farm and appropriate business arrangements were made then it's hardly a lottery ticket. Working a farm is hard work. We can make some sane exceptions for productive business assets utilized appropriately but let's not confuse a working business with a cash bequeathment. If all the kids did was inherit the farm then it isn't a family asset.
These are people that have worked a farm their entire lives only to have it ripped from their hands because of class-envy assholes like you think they are getting away with something.
"Class envy"? Fuck you. You know nothing about me. I've worked my entire life too, inherited nothing, I'm doing just fine and I don't give a shit about people who think they are entitled to something just because their parents worked hard. I'm talking about applying the same rules to everyone and not giving a pass to people who are lucky enough to come into wealth they didn't earn themselves. You think that people who picked the right parents should be subject to special rules?
How 'bout trying to mind your own damn business
When we have a trillion dollar public debt, tax policy IS my damn business. Yours too.
Quite a few billionaires (Buffet, Trump) would disagree with you.
If I am a brilliant man and create a company (and create value), I deserve to keep that. But why should my descendants, who are by virtue of their birth part of a "lucky sperm club," entitled to all that wealth?
True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean.
That's why such super high estate taxes exist. And typically they're not for you and me, it's for people over a certain threshold (say $1 mio + in assets)
Because building for my family's future is one of my primary motivators. I'm not just in it for myself. If I die I want my kids to receive the same education they would if I were still alive. The government already takes half of what I earn, and I will do everything legally possible to give them nothing more when I die.
Eagles may soar, but weasels don't get sucked into jet engines.
When I worked in insurance, Ralph Lauren had $705M insurance policy in force. I guess they don't make those numbers public.
Could also be a protection against devaluation of an estimated >billion fortune.
E.g. having done an IPO or merger and being estimated a large amount, but not being allowed to sell the shares yet.
if you write up a proper will, you can give that money to anyone
The point is that it is YOUR money, and you paid the taxes on it. As such why the fuck should the government get to double tax you?? just because you are no longer alive to defend yourself? its robbery end of story
have you seen my sig? there are many others like it but none that are the same
You don't become a billionaire by writing lots of checks to the IRS. All those fuckers are huge tax dodgers, so fuck them and their heirs. We should take 90% if your total worth is over $10million...
Damn it, I forgot about 5 which is possibly the most important.
5. All payments on Government debt are to coming out of the VAT refund. People should feel the effects of allowing the government to over spend. Think of the wars the US might not have gotten into.... Of course we might not have gone to the moon ether.
The Government will tax you as many times as it can. It is not enough that that money have been taxed once at a high rate, but government want to tax it AGAIN after you die. Why not be fair and tax EVERYONE 45% of their estate on death? Or is being "fair" only counts when it helps the less successful?
Most movements of money get taxed at each movement. It's not like each dollar has a marker on it saying it only has to be taxed once.
Really, the worst thing that can happen to a society is the creation of an aristocracy.
Inheritance is not income.
Inheritance most certainly IS income. It is functionally equivalent to lottery winnings. People that receive an inheritance by definition did not create it and so they should be taxed on it in the same way they would if they went to Las Vegas and hit a jackpot.
Personally, I want to see all taxes go and be replaced by a sales tax.
I really don't think you've thought that through. Sales taxes are by their very nature regressive so you need to address that problem. Just because people have more money doesn't mean they spend more. Further, while there is nothing wrong with using a sales tax, having it as the only form of taxation is a bad idea which is why few places rely on them solely. Good tax policy depends on multiple revenue streams or else you get budget shortfalls when tax revenue falls from one stream. It's functionally identical to having all your money in one stock. Might work out well but its safer to diversify. For instance lots of local governments in the US get most of their revenue from property taxes but when house prices fell recently they found themselves with difficult to manage short falls. Sales taxes are vulnerable to the same thing when consumer spending falls in an economic downturn.
Everyone is taxed, but only on what they spend. All money is spent.
No it is not. Much money is simply a store of value. The very fact that people die with money they have not spent is clear evidence against your argument. That was money that was not spent but merely handed to another person. All money has the ability to be spent but once you get a certain amount of it there is no reason to spend it. At that point it simply becomes an insurance policy against a rainy day.
Your country being ancient greece? Plato figured out inheritance tax more than two thousand years ago, as a way to strengthen democracy by eliminating the threat of single families becoming too powerful. The founding fathers' ancestors were still banging rocks together at this stage.
Did you really write that with a straight face?
Presuming your mother lives in the US and given the profligate, wasteful spending the US government engages in, I can completely understand why your mother is outraged by it.
Though if you are careful to gift things at least 7 years before death and ensure the old generation don't "retain an interest" in them you can avoid a lot of inheritance tax in the UK. Afaict you can also skip generations.
The US is far stricter afaict.
note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register
That would be unenforceable, anyway. Easiest legal way around that: set up a corporation with heirs as joint owners; move money to said corporation, with legal (and security) structures in place for me to draw money from in an unlimited fashion while my heirs draw a nominal salary. Full ownership (with full control of the money) transfer to heirs on my death; heirs draw out remaining money at top (39.6%) marginal tax rates.
Given a couple of accountants and lawyers, I would imagine it's possible to set up a wealth transfer scheme upon death that avoids any law you might construct that wouldn't destructively impact the US economy.
Just so we're clear, you haven't actually argued anything against KingOfBLASH's reason why such taxes are a good thing ("True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean."). The only thing you've said is "it's wrong because I said so".
Which there is nothing wrong with having that opinion. I'm just pointing out that you have zero backing to sway those of us who are on the fence about the issue.
Buying insurance is a guaranteed loss of money.
That could not be more wrong. Insurance is way to protect against downside risk. It is a wager essentially. It prevents you from losing everything if catastrophic events occur. I have health insurance in case I get sick. While this is unlikely given my age and health, it is very possible and could be very expensive. I have homeowners insurance in case my house burns. I have a blanket policy in case something weird happens like a kid getting hurt on my lawn. I have car insurance to preserve the value of my car if there is an accident. Etc. You may lose money on insurance but it is not a "guaranteed loss". Basically you are making a bet with the insurance company that you think something bad will happen and they are betting it will not. One of you is right but you only find out who later.
Insurance can make sense for poor people, but for a rich people, no way.
If anything you have that backwards. The fact is that insurance is incredibly useful for wealthy people and they tend to have a lot of it. If you have an asset it makes sense to protect the value of that asset. Insurance is one way to do that.
Why shouldn't I be able to choose exactly what I decide to give my kids? Seems pretty presumptuous on your part that you know how to distribute my money upon my death than I do.
exactly, as soon as you have a child, kick him out on the street, he didnt do anything to earn that baby bottle!
have you seen my sig? there are many others like it but none that are the same
Because increasing estate and gifts taxes would allow us to reduce personal tax rates thus boosting economic growth. Lest you think this is infeasible, in 1924 Calvin Coolidge, one of our most conservative Republican presidents did exactly that.
Why is there an estate tax of 45% upon anyone's death!!!
There isn't. Only people inheriting assets worth millions are subject to such a tax. Furthermore why should the family be entitled to inherit a large fortune that they played no role in creating? If the kids weren't involved in creating the wealth then they should have no special tax rights regarding receiving the wealth.
That income has been taxed already. Bequeathment is not a fucking INCOME issue.
Inheritance most certainly IS income to the person inheriting it. The inheritor by definition did nothing to create that asset and to them it is income. It is functionally identical to them winning a lottery and should be taxed under the same rules. Whether or not the inheritor is related should be irrelevant to the discussion.
If you want to argue (pointlessly) again the income tax then that is a separate discussion. But as a principle inheritances should be handled just like lottery winnings for any part of the inheritance that wasn't created by the inheritor.
Because as a rich asshole you built your wealth on the backs of the citizens of the country and benefited from the services of the country to enable your wealth building and protected it.
Stop being a greedy fucker and pay what you are due. I am so tired of whiny rich assholes and their fan club.
OMG you are so oppressed, Want me to get you a new roll of twenties to blow your nose?
If you want to pay ZERO taxes, then go buy an island, and pay for your own military and security people as well as roads and infrastructure.
Do not look at laser with remaining good eye.
I call bullshit, you are not in a 50% tax bracket.
Do not look at laser with remaining good eye.
We live in a system that makes sure hard work doesn't pay off. We try to make sure everyone can get access to college (through state tax support or crippling debt, one of the two), so working your way up from the bottom isn't really an option. Instead, people are grown as a surplus crop of laborers, which are picked over for cheap workers, and which can easily be replaced.
Sans this system, there wouldn't be enough laborers. Programmers would get paid $250k, like they did in the 90s. Since this is ineffective--it's expensive and companies keep hiring away your talent, making it impossible to carry out the business strategy--a type of fiefdom arises where the employers hire entrants for cheap, pay to train them in vocational skills (lawyering apprentices, programmers, plumbers, etc.), and they advance on merit into higher positions as the company finds need for skilled laborers. The company replaces them with new entrants, since the guy they had is now a manager of IT Development or a Master Plumber or something. Then they get to pay $40k for entrants, $60k-$80k for skilled, and $80k-$120k for upper level senior positions. That's much cheaper and more effective than paying $250k for lame college grads.
So, no, rich kids who get handed the poor kid life don't get any skills that allow them to grow and become successful. They gain skills and, importantly, networking--they have a name that people know, lots of big aristocrat daddy's friends people--that they can use to increase their chances; but in the end it's a simple matter of luck. If these rich kids had all of daddy's skills but none of daddy's friends and didn't have daddy's name, they'd be likely to fall as flat as any kid who went through college.
Support my political activism on Patreon.
Taxing consumption is taxing income. Tarrifs are market meddling.
Support my political activism on Patreon.
Because building for my family's future is one of my primary motivators.
Nothing is stopping you from doing that. That doesn't mean your family should be entitled to special treatment under the law just because they are related to you. If your kids get income from any source then they should have to pay taxes on it the same as anyone else. I don't give a shit if your precious snowflakes are special to you. They aren't special to me and they should have to earn what they keep. If they are unable to care for themselves for some reason then society can make some appropriate accommodations for that but I have no interest in allowing able bodied people to get special treatment they don't deserve because they won the lucky sperm lottery.
If I die I want my kids to receive the same education they would if I were still alive.
So buy a life insurance policy. Set up a trust. Have a will. That's what they are for.
That income has been taxed already. Bequeathment is not a fucking INCOME issue.
Of course it is; "income" doesn't get taxed, TRANSFERS get taxed. For income tax, it's the transfer from your employer to you. For inheritance tax, it's the transfer from the estate to you.
The point is that it is YOUR money, and you paid the taxes on it. As such why the fuck should the government get to double tax you?
When you give it away it by definition is NOT your money (you gave it away) and therefor you cannot be taxed twice on it. It's someone else's money AND it is money they did not earn. It is functionally equivalent to lottery winnings and should be taxed the same way.
There is not a tax on anyone's death. There is a tax on receiving an inheritance.
No, it really is a tax on their death. The money is pulled out of the estate before being distributed.
Given X dollars, dividing them among Y heirs leads to no taxes, regardless of how large X is (although the higher X is, the higher Y needs to be).
This is just wrong. This is not how estate taxes work. It really is based on the initial amount and not how much it's divided up. From the IRS:
The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets. Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The value of some operating business interests or farms may be reduced for estates that qualify. After the net amount is computed, the value of lifetime taxable gifts (beginning with gifts made in 1977) is added to this number and the tax is computed. The tax is then reduced by the available unified credit. Most relatively simple estates (cash, publicly traded securities, small amounts of other easily valued assets, and no special deductions or elections, or jointly held property) do not require the filing of an estate tax return. A filing is required for estates with combined gross assets and prior taxable gifts exceeding $1,500,000 in 2004 - 2005; $2,000,000 in 2006 - 2008; $3,500,000 for decedents dying in 2009; and $5,000,000 or more for decedent's dying in 2010 and 2011 (note: there are special rules for decedents dying in 2010); $5,120,000 in 2012, $5,250,000 in 2013 and $5,340,000 in 2014.
http://www.irs.gov/Businesses/...
If we had one tax rate for everyone, it would solve the problem of tax loopholes.
No it would not. The loopholes aren't in the tax rate. The loopholes are in defining income. Defining income is complicated and that is what 90%+ of the tax code is. You want to simplify the tax code then you need to simplify the definition of income. A good start to that is to not make special tax exemptions for special groups. When you do that you are complicating the definition of income and saying a particular group deserves to pay less because their "income" is less.
If I die I want my kids to receive the same education they would if I were still alive.
And what makes your kids any more special than the kids of someone whose job has been outsourced and will die with nothing at all to leave their kids?
No, I'm sorry, in a fair society everyone should start with a level playing field. The kids of some inner city parents living in the projects are just as important as your kids, and society owes them a level playing field. That's why estate taxes are so high, and in fact some people want them to be much higher than they are today.
It's time to rethink our system of "the rich get richer..."
O.K. – I will step up to the plate.
You need some inequity to drive the system. Exceptional talent should deserve exceptional rewards. Too much inequity kills the system. The in crowd, the entrenched, the elite dominate the system to their own ends. People get into the top not because of exceptional talent but because they were born into it or luck - either the lottery or only those who are exceptionally talented and lucky (see big name movie stars).
The trick is to find a sweet spot.
You also want the least distortive system, which is why I favor a modest inherence tax. Everybody knows that they are going to die and they can’t take it with them. Having a low inherence tax would be less distortive then a high income tax. FYI, I am a small government person – but even a small government needs a tax base. Not having taxes is another debate.
One, you should pay more attention to ending tags
Two:
The gifts are per person (up to their inheritance) is added to the deduction. So, you're correct on form, but wrong on substance.
Your ad here. Ask me how!
Quite a few billionaires (Buffet, Trump) would disagree with you.
I'm not sure what you're saying these billionaires disagree with. If you're saying that Buffet and Trump think estates should be taxed, I would point out that there is nothing preventing them from donating their fortunes to whatever cause they wish. If their will states that their money should be given to the state or federal government, that's up to them.
If I am a brilliant man and create a company (and create value), I deserve to keep that. But why should my descendants, who are by virtue of their birth part of a "lucky sperm club," entitled to all that wealth?
That doesn't sound like capitalism to me. Are you saying that at your death the company that you've started and built should be liquidated so that no one can benefit from your work after you're gone? In your opinion true capitalism means that no matter the amount of effort, luck, or work one puts into their life, the outcome should be the same?
True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean.
That's why such super high estate taxes exist. And typically they're not for you and me, it's for people over a certain threshold (say $1 mio + in assets)
I can't agree with you that that everyone with over $1million is super-rich.
Here's a very middle-class example: A 50 year old man with three kids under 18. He has $200k equity in his home, and has saved $800k towards retirement. He dies, suddenly. Is it the moral obligation of the government to force the sale of his home and liquidate his retirement account so that they can "wipe the slate clean" for his minor children?
If you do nothing to earn something you get you don't win the lottery, you receive a gift.
There is zero functional difference between a gift and a lottery win. Both cases are unearned income received by someone. I don't give a crap about the intentions of the parties involved nor do I care if they are related. I don't object to a small ($10K) exception for immediate family but anything more than that should be treated as regular income and taxed accordingly.
If you make $50K a year, you are in the 25% Federal bracket,and if you are in California another 9.3%, then don't forget social security and medicare - 7.65%, and if you go thru the trouble of being self employed, you get to pay that twice, or 15.3%... OK you're right. It is ONLY 49.6% tax, for a self employed person in California. But, with what you have left you still have sales tax, gas tax, taxes on phone bills, cable bills, car tax (annual vehicle license fee), real-estate taxes... you get the idea.
This issue is a bit more complicated than you think.
Taxing consumption is taxing income. Tarrifs are market meddling.
Taxing consumption is not the same as taxing income at all.
Taxing consumption in the way of sales tax, luxury tax, etc... taxes you for consuming resources.
Taxing income taxes you for generating wealth. It penalizes you for creating value.
As we have a finite amount of resources and wealth it makes a lot more sense to tax someone for
consuming resources that it does to tax someone for creating resources and wealth.
I realize for someone living paycheck to paycheck that these are sometimes close to the same
but for the wealthy there is a huge difference between someone like Warren Buffet who creates
alot of wealth and spends very little of it and someone like Paris Hilton that consumes alot of
resources with a lavish lifestyle.
Taxing consumption hits the lower class much harder than it hits the upper class.
Some of these rich guys are true misers, they are so stingy they don't want to give their fortune over to their children, so narcissistic that the knowledge that their fortune will be destroyed makes them feel even wealthier. It's a psychological disease, not something to be admired or justified
Okay so if I get taxed 10% of my $50,000 salary, I pay $5000 in taxes.
If there's a 10% sales tax on consumption, then when I buy a bunch of shit, I pay $5000 in taxes.
Income is not wealth because money is not wealth. Wealth is the ability of labor to produce goods. If you have a $500 widget and I give you $500 for the widget, no wealth is created. If, instead, you create a $500 widget that allows you to create other $500 widgets but only invest $250, society is now more wealthy: 100 employed people creating widgets become 50 employed people creating widgets and 50 unemployed people who can now be employed to create samoflanges. These people are specifically inconvenienced by a round of layoffs, but in the end we all can spend half our money on widgets instead of all of our money on widgets, and we can spend the other half buying samoflanges.
That's wealth. Society is wealthy because the scarcity of widgets is now half, and the effort--the cost--to create widgets is now half, and the surplus available can now support the creation of samoflanges.
Support my political activism on Patreon.
Also, Warren Buffet hoarding his money is destroying wealth. He's concentrating $1000 from society into $900 in his pocket and $100 destroyed. Paris Hilton's lavish spending is more healthy for the economy and is not consuming wealth, but rather redistributing it. This does consume resources, because she consumes things; but it also increases the economic flexibility of society.
By contrast, the poor overspending decreases the opportunities for new business ventures to produce new goods and services which may be of interest to the poor: the poor have less money, thus they are not really a target market. When this effect spreads across the middle class, you no longer have business opportunities: nobody can buy into new consumer goods, thus new ventures are doomed to failure. The economy stagnates.
The rich spending within their means can spend quite a lot. The middle class can spend less, and the poor can spend even less. A certain amount of spending is healthy for the individual and the economy; excess of that is unhealthy.
Your economic theory is completely backwards. Please stand on your head.
Support my political activism on Patreon.
And it's one of the more fair taxes. It's progressive, and it's entirely on unearned income. If you think your forbears' money is yours by rights with no costs, you're a greedy dick.
Daniel Crawford
Money is taxed when it changes hands. This is nearly universal. Its (unearned) income for the inheritor. It should be taxed.
"You Work and Toil and Earn Bread, and I’ll Eat It"
-Lincoln
Funny how Government these days operates similar to slave holders. Any money you earn, there they are with their hand out demanding a cut. Presumably, because they "enabled" you to earn it. The Slave Holders housed the slaves, fed them, cared for them (valuable property, ya know) and in turn, benefited from their labor. Except for the fact that you can elect to pay these expenses yourself, the Feds are pretty much our Masters.
When Fascism comes to America, it will call itself Anti-Fascism, and tell you to give up your guns.
I think YOU are seeing the wrong side of it. Why is taxing income the best way to tax people? Income is wealth generation, we shouldn't tax it. Taxing consumption would be much better.
Taxing consumption disproportionately hits the lower and middle classes, who consume a greater percentage of their income than do the upper classes. It puts the burden of shouldering the government on those least able to afford it. In that manner it would act as a strong barrier to income mobility by preserving wealth for the wealthy and taking it most from the least wealthy.
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
Why shouldn't I be able to choose exactly what I decide to give my kids? Seems pretty presumptuous on your part that you know how to distribute my money upon my death than I do.
Because you're dead. You don't really matter anymore. What does matter is whether your kids should be given a windfall of wealth and power without having to do anything to earn it. You may have worked quite hard for your money and thus deserved the benefits of it. But they don't. Unless you taught them how to earn it on their own, at which point they don't really need it.
That said, I only support a high estate tax on wealth over a certain (high) amount. The estate tax should be an anti-aristocracy measure and not something that applies to even the professional class (e.g. doctors, lawyers, etc.) who still have to work hard for their money. It's good to be able to give the family home to your kids. It's not good to be able to ensure they never have to work a day to enjoy all the privileges of wealth.
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
Can you define what "Societal Interest" is?
As far as I can tell - everyone's definition of "Societal Interest" is what is best for them, not always what is best for other people. Which is more important to the society? Animal Welfare, Health Care/Disease researc, Education, the Arts, the Poor? How do we as a Society determine that? How should that interest be enforced? Wouldn't it be easier (and therefor more efficient) if people voted with their wallets and donated money to causes that they determined were the most effective at solving the problems that are important to themselves?
This has the other effect of removing the incentive to bribe politicians into giving more money to each particular type of charity (so more money ends up going to the people being helped instead of lobbyists working to get the government to give more money to cause X). It also significantly reduces the amount of overhead going to people doing things like "Grant Writing" that don't help - but are just simply overhead. I actually cringe at thinking what percentage of "academic research" budgets go to such tasks instead of actually doing research.
I have mod points and I am not afraid to use them
Only the dishonest call it the estate tax. Just like every other attempt the government uses to obfuscate, the name "estate tax" does not imply it's effect. Instead, it makes it sound benign.....which it is most definitely not. It's really rather simple: since all of the money and assets in one's estate has been taxed during one's lifetime, it is immoral to tax it again upon their death.
That is why it should be called the Death Tax. It is triggered upon one's death and for no other criteria. The death tax is unlike every other kind of tax we have which normally tax transactions (income, capital gain realization, use tax, etc). Literally, the only way it comes into play is if you die -- which everyone does.
What I meant is that you said that people winning the lottery or the jackpot "did nothing to earn the money" which is absolutely not correct: these people paid to earn the chance of winning. Risking your own money to earn the chance of a win is definately not "doing nothing". Getting money doing nothing is more similar to receiving a gift.
Anyway I agree that earned or unearned income should not make any difference.
True capitalism should require a level playing field when you start, and to really do that, when the final score is tallied, the slate should be wiped clean.
No, true capitalism involves you deciding, for yourself, what you want to do with the money you've made. That might very well include giving it to your wife or kids, as part of what you intended all along as you worked 100 hour weeks growing a business.
To follow your logic, a successful parent shouldn't be allowed to send their kid to a better engineering school (which because of staff and facilities, costs more), because that's not a "clean" slate for the college student compared to everyone else. But since plenty of parents are lazy wastes of oxygen, the only way to even the slate for you would be to make sure that no kid gets a better childhood or education than what the kid with the worst possible parents get. There! That way everything would be "fair" for you.
And typically they're not for you and me, it's for people over a certain threshold (say $1 mio + in assets)
Yeah, I can tell you've never had a single conversation in your life with a family farmer. Or someone who's launched a business that's modestly successful. You need to get out more. Oh, wait. That might make you more worldly than someone else's kid, and that wouldn't be fair.
Don't disappoint your bird dog. Go to the range.
Why should your family get all of your money/assets with "minimal" taxes? If building your family's future is a motivator for you, you should be gifting it to them (for even better tax benefits) over the course of your lifetime. (Again, for even better tax benefits)
Set up an education fund for them (for tax benefits). Be a co-signer when they buy a car/house (get better interest rates). Use your money/connections/your own business to make sure they have a job/job experience (teaching them the family business).
Theres lots of ways to build your family's future. Wanting to gift them a ton of money upon your death AND demanding minimal taxes says more about how important keeping your money within the family is than it does about your family's future.
> That income has been taxed already
So. Double-taxation is a requirement of any progressive society. Single-only taxation is anarchy. You need to take a cut of the money every chance you can get. That's why double-taxation of C-corporations in the US is a moral requirement. We tax corporate profits twice which is something that only a Republican could object to.
The question is how can we get more opportunities to tax? Require money after your death to be transferred to the state before probate? That would give another opportunity to help society. CA could get a 45% cut twice rather than just once.
You and the OP are still seeing the wrong side of this....
Why is there an estate tax of 45% upon anyone's death!!! That income has been taxed already. Bequeathment is not a fucking INCOME issue.
On what basis is receiving an inheritance not "income"?
The whole "it's been taxed already" line is pure sophistry, as logical and constant application of it would mean that taxation is impossible as the whole point of money is that it circulates (get's used repeatedly for different things) and at no point is there a way to declare "this dollar has been taxed any further use of it is tax-free".
Really, inheritance is just a post-mortum gift. Since there also exist gift taxes it seems perfectly reasonable to have inheritance taxes.
The whole point of the insurance is so that the taxes WILL be paid.
Suppose a dude has a business. It's worth $1 million. Maybe it's a well-run McDonald's., or a family farm. When the dude dies, his estate is taxed $450,000. Without insurance, his wife and kids have to sell the McDonald's in order to pay the tax. That sucks, so what the guy does is spend $20,000 / year to buy $500,000 in life insurance. When he croaks, the wife and kids use that insurance money to pay the taxes. That way, the taxes are paid and they don't have to sell the business.
It's better for the government too, because whose knows if the business will actually sell for a million now that the guy leading it is dead.
"That income has been taxed already."
No, it hasn't. Estates that are large enough to cross the $5,250,000 threshold for estate taxes in 2013 are overwhelmingly comprised of a) unrealized capital gains, and b) tax-protected unearned income. These by definition have not been taxed already.
He has $200k equity in his home, and has saved $800k towards retirement.
Your concern is that those who are literally millionaires are not getting a fair deal? There is some serious inflation going on in your notion of "middle"
government to force the sale of his home
It is very common indeed for the wealthy to take out term life policies to hedge against inheritance tax.
If you are in the inheritance tax-paying class and you didn't know this, get better financial advice.
You would be lucky to be in as low of a tax bracket as 50%
28% Federal
9% State
13% Social Security
4% Medicare
------------
54%
That tax bracket hits right in the middle of your average tech worker, especially in high tax/High property value areas like California.
I purposely did not include things that are not taxed as a percentage of income like property taxes/sales taxes/use/car/gas/etc taxes - they can easily punch that value up another 10%
I have mod points and I am not afraid to use them
If you make $50K a year, you are in the 25% Federal bracket,and if you are in California another 9.3%, then don't forget social security and medicare - 7.65%, and if you go thru the trouble of being self employed, you get to pay that twice, or 15.3%... OK you're right. It is ONLY 49.6% tax, for a self employed person in California. But, with what you have left you still have sales tax, gas tax, taxes on phone bills, cable bills, car tax (annual vehicle license fee), real-estate taxes... you get the idea.
I was going to respond but you did a much better job than I would have.
Eagles may soar, but weasels don't get sucked into jet engines.
Correct.
Incorrect. There are many forms of wealth, but money is one of them.
The real difference is that wealth is measured in units of money, income is measured in units of money per unit of time.
When you say "a $500 widget", do you mean (contrary to normal usage) that's the cost to produce it? In that case you'd be right, but even if it cost $499 one dollar of wealth has been created.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
See the 5Million threshold mentioned above. This whole discussion could just dissappear.
Your concern is that those who are literally millionaires are not getting a fair deal? There is some serious inflation going on in your notion of "middle"
Uh, a $200k home and $800k IRA is pretty much the definition of a middle class person who didn't screw up his finances. I'm pretty solidly middle class and in my mid 30's I have $50k in home equity and a bit over $100k in my IRA, by the time I retire I should have $150k in home equity (in today's dollars) and around $1.2-$1.5m in my IRA (again in today's dollars). If you're not targeting similar levels of capital at retirement you're going to either be working well past your planned retirement age or
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
I can't agree with you that that everyone with over $1million is super-rich.
Here's a very middle-class example: A 50 year old man with three kids under 18. He has $200k equity in his home, and has saved $800k towards retirement. He dies, suddenly. Is it the moral obligation of the government to force the sale of his home and liquidate his retirement account so that they can "wipe the slate clean" for his minor children?
I'll somewhat agree with you that everyone with $1M isn't necessarily super rich, although that puts someone well into the 1% category. Sure, if you live in Manhattan, or SF, or whatnot it's really not an excessive amount of money.
However, the way you wrote what you did suggests that you think that this person's estate will have to liquid on death to pay taxes or make sure his kids have to start from the same place as everyone else. The first $5M or so of an estate (I think, it changes frequently and I'm not in much of a position to worry about it) is free from estate taxes, at least at the federal level. So there's no problem with your subject leaving his entire estate to his 3 kids, largely tax free. That should cover their entire educations with quite a bit left over for a better than good start in real life.
I am, more or less. The tax code is weird and complex. There are ranges where your effective marginal rate is much higher than your "bracket" would indicate: as you lose the ability to take certain deductions, as your income causes your investment gains to be taxes differently, and so on.
Heck, you can be below the median income and see an effective marginal income tax rate of 30% on income (plus social security and state taxes, so possibly pushing 40% all up) if half of what you live on comes from long term investments.
Socialism: a lie told by totalitarians and believed by fools.
We need to force politicians to eliminate the loopholes, which are all legal and often intentional
To create legal loopholes and then to expect people to voluntarily pay more (than they have to) taxes is a losing and pointless battle.
If you have a plan that can actually "force" politicians to eliminate the loopholes, please post it, but I've come to the conclusion that it doesn't matter anyway. The rich (including corporations) will always find a way to avoid paying taxes and if you eliminate these loopholes, they'll find some others that nobody knows exist right now. Lawyers and accountants both excel at this. In the past when politicians have tried to plug holes in laws, somebody comes right behind them and drills a legal hole in the plug.
Uh, a $200k home and $800k IRA is pretty much the definition of a middle class person
Not mine, it isn't. This is the wealthy claiming that only Bill Gates is a little bit wealthy.
Jeez folks, you have it all wrong!
Rich people buy life insurance as a tax dodge. If the estate is structured as a business, the insurance is an expense and no income taxes are due for the insurance payments, saving say 40% on the purchase.
When the insured dies, the insurance goes to (for example) the kid(s). Insurance benefits are compensation for a LOSS, therefore no income taxes are paid by the recipient.
Thus we see, when planned correctly, a huge insurance premium reduces the estate and the proceeds from the insurance are received tax free by the children, thus avoiding ALL inheritance taxes.
This is another way the rich get to pay NO TAXES while the less informed and those with less disposable income pay significantly more in DEATH TAXES!
Wrong, with the 5M+ exemption the $1M dollar Mcdonalds pays nothing in estate taxes to the federal government. Now many businesses are worth more the and $5M but with a bit of estate planning the ability to avoid a large portion of estate taxes is available.
So much ignorance here.
It's time you just try to think.
No matter how hard you work and save and plan, some fucker always comes along and wants to take it from you.
You are that fucker.
Uh, median household income is $67,348, if you put away 10% (bare minimum) then at 72 you will have ~$1.2M in constant dollars, even pushing retirement down to 67 you still have ~$800k. If you're working off some kind of definition other than median I'm not sure how you can argue that position publicly without giving your own definition.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
And at today's rates, if you died suddenly, your estate would be less than a third the size it would need to be for estate taxes to kick in.
And let's be really clear about this: if your estate was worth, say 7 million dollars, your heir(s) would get five million off the top and have to pay a tax bill based on the remaining two million.
Pardon me for saying so, but I don't think they're really getting such a raw deal.
Why is there a 7% sales tax on any retail transaction!!! That income has been taxed already. Why is there an annual tax on any developed property!!! That income has been taxed already.
Money gets taxed whenever it moves around. I can sell you a shoe, and you'll pay sales tax on it. You can sell me that same shoe back, and I'll pay sales tax on it. We'll be paying sales tax on that shoe for as long as we keep exchanging it.
When you inherit money, you haven't been taxed on that transaction yet. Not until you pay the estate tax, that is. But maybe you're right. Maybe it's a gross violation of our code of ethics. After all, why penalize someone just for dying! Indeed, to get around this "death tax", you should merely transfer your wealth to your heirs prior to your death. That way you won't have to worry about the tax impact.
Dislaimer: sarcasm; the wealth transfer is taxed either way.
Chuuch. Preach. Tabernacle.
Because building for my family's future is one of my primary motivators. I'm not just in it for myself. If I die I want my kids to receive the same education they would if I were still alive. The government already takes half of what I earn, and I will do everything legally possible to give them nothing more when I die.
That's a sadly greedy way to go through life. I understand that "fuck you, I got mine" is a popular motto today, but seriously, have you no shame?
Chuuch. Preach. Tabernacle.
If you make $50K a year, you are in the 25% Federal bracket,and if you are in California another 9.3%, then don't forget social security and medicare - 7.65%, and if you go thru the trouble of being self employed, you get to pay that twice, or 15.3%... OK you're right. It is ONLY 49.6% tax, for a self employed person in California
I see, the 25% tax bracket is for all income $0-50K/year? I take it you're not an accountant.
Your numbers are bullshit, they don't even account for standard deductions or any other factors that run counter to your message, but what really gets me is that you use the word "bracket" without even understanding what it means. I get the idea: you're a loudly ignorant about things you talk about as a typical member of the tea party.
Chuuch. Preach. Tabernacle.
When I receive an inheritance, it is INCOME to me and should be taxed.
This fellow bought an insurance policy to avoid having to sell assets when it might not be advantageous. The insurance policy helps with the cash flow problem when he dies. It will increase the amount of his estate (and result in more tax revenue).
I don't read your sig. Why are you reading mine?
How about instead we stop taxing the hell out of people when they die?
We don't tax the hell out of people when they die. However, if someone dies and leaves a very large estate, then some of that estate is taxed before it is distributed to the heirs. Seems reasonable.
now insurance policy pays for that and the family gets to keep their property- its not tax dodging, its smart.
You're correct, it is. And it ensures that if someone amasses a large amount of wealth and they wish their heirs to have just as much wealth without having to earn it, that they use some of their wealth to make that happen.
Really, I don't see what the problem is with that?
"Here's a very middle-class example: A 50 year old man with three kids under 18. He has $200k equity in his home, and has saved $800k towards retirement. He dies, suddenly. Is it the moral obligation of the government to force the sale of his home and liquidate his retirement account so that they can "wipe the slate clean" for his minor children?"
Except there is a $5 million exemption per person so his heirs don't have to pay anything.
I don't read your sig. Why are you reading mine?
Taxing income taxes you for generating wealth. It penalizes you for creating value.
Bull. Shit.
Taxing income taxes you for ripping people off. Note, ripping people off is not the same thing as generating wealth.
There's nothing stopping people from providing goods and services for no profit, and hence not paying a cent in taxes.
You can buy $1 of raw materials and sell $2 of finished goods (the market can bear it!), turning a $1 profit, and paying taxes on that $1 profit.
Or you can buy $1 of raw materials and sell $1 of finished goods (at cost, below market rate), turning no profit, and paying no taxes.
In either case, the same amount of wealth (indeed, the same end product) is generated. However, in one case, there is no tax paid. Therefore, it necessarily follows that income tax is independent of generation of wealth.
If you're bothered by taxes, simply opt to avoid profit. But, you see, the problem isn't that you have to pay taxes. The problem is your unbridled greed.
Chuuch. Preach. Tabernacle.
Because building for my family's future is one of my primary motivators. I'm not just in it for myself. If I die I want my kids to receive the same education they would if I were still alive. The government already takes half of what I earn, and I will do everything legally possible to give them nothing more when I die.
That's a sadly greedy way to go through life. I understand that "fuck you, I got mine" is a popular motto today, but seriously, have you no shame?
You seriously read it that way? Of course I care about others. That is my responsibility as a human being. I care about my family more than strangers. That is my responsibility as a husband and father. It's also human nature.
Tell you what, you sign up to put my kid through the college of her choice, help her with her first home purchase, generally make sure he has a better life than I do, and make sure my wife doesn't lose her home without my income, and in return I'll happily let the government take whatever they want from what I've managed to scrape up. No? Then fuck off, you sanctimonious prick.
Eagles may soar, but weasels don't get sucked into jet engines.
Stop pretending you pay the *marginal* tax rate on ALL of your income. You have an argument, but you weaken it with sloppy form. Oh, and said example pays last dollar at 15%, not 25%.
Tax rate schedule from here: http://www.forbes.com/sites/kellyphillipserb/2013/01/15/irs-announces-2013-tax-rates-standard-deduction-amounts-and-more/
$50k in 2013, no kids, all self-employment. Subtract standard deduction (6100) and personal exemption (3900), and 1/2 of self-employment tax (3825), net taxable income is $36175. First 8925 gets taxed at 10%, income from 8926 to 36250 gets taxed at 15%. 892.5 + (36175-8925)*.15 = $4087.5 in tax -- 8.175% effective income tax.
Add 15.3% self-employment tax (you pay employee and employer halves) 50000*.153 = $7650
Total effective federal liability of 23.475%
Assuming your California number of 9.3%, that's a total income-based tax burden of 32.775%, or a little less than 1/3.
Non self-employed in same circumstance DOES fall under 25% marginal rate, but only by $3750, tax of $5928.75 for effective tax rate 11.8575% + 7.65% FICA.
Total federal of 19.5075%, together with 9.3% California for a total of 28.8075%.
28% ish to 32% ish of total income-based liability isn't cheap, but it's certainly not the 50%+ you just tried to demonstrate.
It's even worse if you compare 12% or 8% to your suggested 25% marginal rate.
All that to say I think the numbers will be even lower if your knowledge of California marginal rates is similar to your knowledge of Federal marginal rates...
they're going to die too soon.
It's gotta be Zuckerberg, or maybe Sergey Brin.
OWS called, they want their LOSERS back.
Seriously, people like you are why Venezuela is in the shitter. People like you helped bring the various "isms" to power that resulted in over 100 million dead.
You call other people greedy when you entire premise is driven by greed and envy. You will never be "rich" because you are too busy hating people who managed to achieve it. So go back and wallow in your self pity and STFU because no one wants to listen to your whining.
This is such a pathetic measuring stick. You are screaming that the government takes 50% of your income. You are neglecting what you get for that.
I personally think libertarians are mentally deficient. They neglect to realize what they get for the money.
So let's lower your taxes to zero. For this you do not get any of the following services:
1. Roads
2. Clean water
3. Sewage
4. Fire department
5. Police department
6. Judicial system
7. Educating you and your community
8. Protection from say . . . some foreign country coming and taking what is yours
9. Innovation - think of what NASA, and so many grants have brought us - HINT: You are on the internet
Need I go on?
For 50% of my income, that is one hell of a bargain.
if half of what you live on comes from long term investments
Well, that sounds like a serious "do some fucking real wealth generation yourself!" incentive from the state, doesn't it?
Ezekiel 23:20
Yes, I did. You care about others, just not as much as you do about your own. Of course you're right, this is human nature. Much like fucking anything that moves, taking that juicy steak from the cripple, or killing anything that seems like it might one day pose a threat to you. Personally, I think that appeals to human nature are a bit played out, as the kids say.
You made a conscious decision to have kids knowing full well that you'd be raising them at the expense of the rest of the human race. That you'd be helping your daughter pay for college, but not helping some other little girl get a hot meal. Of course, you could've decided to do the truly selfless thing and not have kids, so that you could be a better human, so that your little girl wouldn't distract you from the rest of the world. But no, human nature stopped you from being selfless, and you were powerless to resist. Woe is you.
Your daughter is not special. She is one of billions of people suffering through this world. I'll pay for her college just as soon as I can pay for everyone's college, because I don't believe that preferential treatment is fair, by definition. Your entire argument stems from emotion (and appeals to "human nature") and lacks any substance of logic. Don't be offended by the allegations of greed. After all, it's just human nature.
Chuuch. Preach. Tabernacle.
Okay, you are ignorant of any understanding of economics. Simple as that.
You can have no money and have vastly more wealth than someone with $50,000 in the bank. The man with cash in the bank may have more stress due to more labor required to keep up with the demands of life--that $50,000 is a buffer, a hedge against disruption for his fragile system of debts he must continue to pay from commissions on sales which are dodgy. Meanwhile your debts are paid, so you have all of these assets and plenty of free human labor time.
Society--large economic systems--operates primarily on scarcity. This isn't a strategy so much as a status: there is more demand than supply in general, particularly in energy and thus in things that require energy to produce. Exchanging things around creates no wealth; rather it moves wealth around, and potentially destroys wealth in the process of transfer. Creating a way to acquire more of a thing without expending so much resource--so much energy, so much raw material, so much human labor--creates wealth in society and reduces scarcity.
Running a farm does not create wealth. Society has 10,000 people and has the capacity to produce food for 10,000 people. You work on a farm, produce food, and get paid for your work. That's not wealth generation. You work on a farm, create a farming method so that you can produce the same amount of food for less human time and raw material investment, and now have capacity to feed 20,000 people, you have now generated wealth. You may sell more and invest less and gain personal wealth, but society also comes out with more than it started: more food, more capacity to produce food, more capacity to support humans, more human labor available (especially after creating more humans, who can now be fed, IF you can support all their other needs).
Selling something that costs $250 to produce for $500 does not generate wealth; it instead transfers a thing worth $250 to someone who is willing to part with twice its value in order to obtain it. This may be because they can use it to derive more wealth than that from some other source: they may be able to make the next person three times as poor by using your $250 gizmo, and so paying you $500 still lets them extract $750 and come out $250 ahead. Nothing of value is created, but money is siphoned and concentrated, and with it economic freedom and the ability to acquire assets--wealth.
You assume that by someone generating an income, they are creating wealth. The problem with this assumption is income is complex: it comes exclusively from other people losing exactly as much money, and so is zero-sum. It's all the other assets and all the other effects that you must examine.
Support my political activism on Patreon.
Uh, median household income is $67,348
The United States 2012 census found 2012 median household income to be $51,371 . Allowing for a quick estimate of inflation, you are wrong by 20%.
So, it seems that you argue publicly by relying on false information, and starting every comment with "Uh".
You may be thinking of income - the cutoff to enter the top 1% of annual household income is indeed about $700,000. But the discussion is about household net worth. It's frustratingly hard to find exact numbers, but as far as I can tell, somewhere around 8% of American households have a net worth above $1M, not counting primary residence (9.6 million households according to CNN out of ~120 million households according to the Census Bureau). It takes about $5M in non-house wealth to make the 1%. Including home equity, between 15% to 20% of households are millionaire households, as far as I can tell.
Having said that, I agree with you that very few Americans have to worry about the estate tax. The first $5.4 million of an estate is exempt from taxation, and two spouses can join their exemptions onto a single estate if they want, for a total exemption of $10.8 million. I'm no real fan of the inheritance tax, but even I'll admit that the tax in its current form only affects those who are truly loaded. I think that the law we have now (40% tax on anything over 10.8 million) is a vaguely reasonable compromise between the soak-the-rich folks and the no-taxes-ever folks. However, for many years prior to 2011, the exclusion was much lower, and the inheritance tax and really did impact a number of people who had relatively large amounts of money tied into illiquid assets like the proverbial family farm. Many of the "save the family business" arguments actually did make sense prior to the law change in 2011.
For the same reason why when I pay my plumber out of money I have that was already taxed, he has to pay taxes on it as well.
Money is usually taxed when it changes hands. Now I'll admit in case of estates it's not really practical because there are so many ways to get around it, and it also makes stupid situations happen, like if a parent wants to help an adult child pay for an expense they have, they are limited to the ~$14,000 a year gift limit without the kid being taxed as well.
So I admit it's a stupid law, but saying it's already been taxed is not a good argument against it in my opinion.
You could always loan them the money and forgive $14,000 a year then state in the will that you forgive the rest of the debt upon your death. or just set up a trust and make your heir the executor. There are so many ways around the inheritance tax.
Sorry, my number was for dual income households, even at $51,371 saving 15% will get you $831k at 67 or 10% will get you $977k at 72. This is still far from supporting your argument that you have to be 'rich' to have $800k in your retirement account.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
> It is ONLY 49.6% tax,
Considering how much society has sacrificed so you could take that money, you owe more than that. The car you drive was built with steel most likely from a mine that was state-sponsored then to a port created with public money then carried on a train that runs on tracks created with public money then to a truck that drives on roads created with public money. And so on. And, that is just a small part of one of the tools you use to make what you call "your" money. I'm sorry, but you actually only did a very small percentage of the total work required to have done the job. You do not deserve to keep what other people paid so that you could make that.
This site is getting destroyed by Republicans. Really, you think everyone else should pay but yourself? That's the very definition of a Republican.
... or inheritance tax. Federal estate tax rate is 45%. However, IANAL or an accountant.
Yes, I did. You care about others, just not as much as you do about your own. Of course you're right, this is human nature. Much like fucking anything that moves, taking that juicy steak from the cripple, or killing anything that seems like it might one day pose a threat to you. Personally, I think that appeals to human nature are a bit played out, as the kids say.
You made a conscious decision to have kids knowing full well that you'd be raising them at the expense of the rest of the human race. That you'd be helping your daughter pay for college, but not helping some other little girl get a hot meal. Of course, you could've decided to do the truly selfless thing and not have kids, so that you could be a better human, so that your little girl wouldn't distract you from the rest of the world. But no, human nature stopped you from being selfless, and you were powerless to resist. Woe is you.
Your daughter is not special. She is one of billions of people suffering through this world. I'll pay for her college just as soon as I can pay for everyone's college, because I don't believe that preferential treatment is fair, by definition. Your entire argument stems from emotion (and appeals to "human nature") and lacks any substance of logic. Don't be offended by the allegations of greed. After all, it's just human nature.
Let me make sure I understand your argument:
1) Caring about and providing for your family is the same thing as rape, theft, and murder.
2) Every child is nothing but a burden to society. Or was it just mine in particular?
3) No one should go to college unless everyone can go to college. When I die everything should be taken from my family to further that goal.
Did I get that right? You're an idiot. Bye.
Eagles may soar, but weasels don't get sucked into jet engines.
A corporation pays corporate income tax on its revenue. The company pays an employee. The money transferred to the employee has already been taxed. Are you suggesting that the employee not pay income tax? It's the transfer of money that is taxed, not the existence of it.
An argument consists of premises and conclusions. Regarding your first point, I neither set that forth as a premise nor did I conclude that from the premises I did set forth. Reading comprehension fail. Let me clarify: I provided a list of other acts which are generally despised by society yet which are "human nature". My goal was not to equate these acts with caring and providing for one's own family, but instead to serve as a counterexample to your implied claim that acts which are "human nature" must necessarily be "right" or "good".
Your second point, as defensively worded as it is, leads to an interesting discussion. It's true (although not necessarily true, I suppose) that every child is a burden to society, at least at some times (paricularly during the early phases of life). However, to say that every child is nothing but a burden to society isn't exactly accurate either, as numerous counterexamples to this claim can be easily identified (say, Isaac Newton, or Haile Selassie I). Either way, this isn't a claim that I made, so I feel no need to defend it as such. I didn't single out your child in particular, but that should be apparent to anyone that reads what I wrote.
Your third point does not logically follow from anything I said myself. I didn't make any claims as to what anyone "should" do. I didn't say the world "should" be fair (although I do think that it would be generally better for humans if it were fair), I merely pointed out that your approach is not fair. You're unfairly biased in your daughter's favor, and you can't offer a single logical argument in support of your position. I'm not saying that no such argument can be made, only that if there is, you haven't made it.
Again, I reiterate the point that your argument stems from emotion, not logic. I encourage you to reflect on your beliefs in the context of rational logic, and write back after you've done so. Don't you think that the emotional need to support one's family, lacking any basis in reason, is fascinating?
Chuuch. Preach. Tabernacle.
The million dollar exemption in IRC 2057 was last effective for tax year 2003. ..." - feet taste bad.
This is why we don't start our posts with "Wrong
If you research it, and research stuff from the past ten years, you can of course find some ways to pass some assets before death and pay other taxes instead of the estate tax. Certain types of property are exempt. I posted the simple version because there are hundreds of pages of applicable law and regulations and this is Slashdot, not CPAnet. In some cases, some portion may be exempt, so if you had a business worth $500K and of that $200K was exempt, you'd have $300K taxable. You'd need $135K in cash or insurance to pay the tax without selling or liquidating the business.
I can't agree with you that that everyone with over $1million is super-rich.
Here's a very middle-class example: A 50 year old man with three kids under 18. He has $200k equity in his home, and has saved $800k towards retirement. He dies, suddenly. Is it the moral obligation of the government to force the sale of his home and liquidate his retirement account so that they can "wipe the slate clean" for his minor children?
I'll somewhat agree with you that everyone with $1M isn't necessarily super rich, although that puts someone well into the 1% category. Sure, if you live in Manhattan, or SF, or whatnot it's really not an excessive amount of money.
However, the way you wrote what you did suggests that you think that this person's estate will have to liquid on death to pay taxes or make sure his kids have to start from the same place as everyone else. The first $5M or so of an estate (I think, it changes frequently and I'm not in much of a position to worry about it) is free from estate taxes, at least at the federal level. So there's no problem with your subject leaving his entire estate to his 3 kids, largely tax free. That should cover their entire educations with quite a bit left over for a better than good start in real life.
Yes, I'm aware that the ceiling where estate taxes apply is well beyond my pay grade. My reply was mostly toward the poster who claimed that the fair thing to do is "wipe the slate clean" by taking everything away upon death, that somehow that is "true capitalism", and that $1M is a good threshold for separating the wealthy from the rest of us.
The poster I replied to thinks $1M in assets makes someone incredibly wealthy, which just isn't the case. That's not the Warren Buffets or Bill Gates of the world, that's someone at the cusp of retirement, who finally owns their home after paying off a 30-year mortgage with enough money stashed away to continue living their middle-class lifestyle as long as they stick to a budget.
Someone who saves their entire working life and invests their money in a couple of duplexes to have some retirement income now has $1M in assets. A small business owner who owns their building and an office full of equipment has $1M in assets. The idea that having the government step in and take it because it would be unfair for them to allow their children to inherit anything is asinine.
If we ever want to encourage the wealthy to get even more inventive about hiding their assets, I'm pretty sure this is a great way to do it.
I suppose it really boils down to how much is "too much". Everyone thinks they are middle class, and that anyone who has more is wealthy.
Because we should leave it up to the rich to decide if "the poor" is a more worthy cause for donations than "the arts" or vice-versa? Donations only do so much, and they are FAR from equitable. Granted government isn't all together better - there is no one right answer. Just as scientific discovery could occur in a garage, in a secret international company R&D lab, or in a government funded academic institution - so too must we expect a multi-prong approach to societal issues. Religious organizations do a lot of good, but a large number of them spend donations on themselves and a very narrow sliver of population/area surrounding them to feel like they do good. Not trying to make this a religious debate, but just pointing out waste and "what's best for whom" type questions can be raised against any party.
Anyway, regarding your definition question, there may not be one set definition, but the general idea is to ensure conditions are in place to allow personal growth and well-being. There is a lot of inequity in the world, some can be rationalized as mere luck of the draw, or can be held up to show who worked the hardest, but there is plenty of back room deals, underhanded tactics, bias (e.g.: racism), and much much more that are far less justifiable but no less impactful. Ensuring monopolies only exist where most-practical, for example, is one way the government protects society's interests (who needs 10 sets of water pipes delivering water to every building?) - sometimes this has to be done after the fact (breaking up AT&T or Standard Oil, for two examples). Helping the homeless is another after-the-fact support where, potentially, one's circumstance is a result of society's failings (not enough jobs, not enough mental health options for veterans, whatever it may be).
Long long story short: I find 'conservatives', generally speaking, to focus on the negatives ("why help the homeless, they're just being lazy?", "we must stop voter fraud!", etc...), glossing over the realities of things like PTSD in the first instance, or far more mundane issues in the second - people move, not everyone drives, some people are forced to work on election day.
Anyway, here's a link related to societal interest, aka "for the good of society" or "common good":
http://en.wikipedia.org/wiki/Common_good
Queue in the hordes of /. libertarians who can't break the six figure barrier themselves but are terribly concerned that the rich are being mistreated.
Or as Lenin used to call them, the "useful idiots".
You're still building for your family's future, even if you feel that a 45% estate tax is too much. Not saying it is or isn't, just that passing on 55% is not nothing and is not necessarily removing one of your primary motivators.
If we really want more of a meritocracy, maybe a 100% estate tax would be the way to go. (Note: I know this wouldn't work due to issues of unequal education and nepotism).
If you buy a beer with it, the bar owner is still taxed, because it's then his income.
A 12 year old could spot the fallacy: money isn't being taxed, transactions (movements of it) are.
Confucius say, "Find worm in apple - bad. Find half a worm - worse."
Because building for my family's future is one of my primary motivators. I'm not just in it for myself. If I die I want my kids to receive the same education they would if I were still alive. The government already takes half of what I earn, and I will do everything legally possible to give them nothing more when I die.
Maybe the real issue is that your goverment isn't actually providing education for your own children. Your dependency on being able to leave capital to you descendants is merely a symptom of that actual problem.
For 50% of your income, that is a bargain. For 50% of my income, not so much.
Taxing income taxes you for ripping people off. Note, ripping people off is not the same thing as generating wealth.
Or you can buy $1 of raw materials and sell $1 of finished goods (at cost, below market rate), turning no profit, and paying no taxes.
In either case, the same amount of wealth (indeed, the same end product) is generated.
WRONG. Wealth is created when you spend time/energy turning that raw material into something worth more to someone.
A cabinet is worth more than a pile of lumber. You didn't rip someone off. You created value.
If I buy an old car, fix it up, and sell it for more I didn't rip someone off because I bought it for less than I sold it for it is
actually worth more now.
Running a farm does not create wealth.
You assume that by someone generating an income, they are creating wealth. The problem with this assumption is income is complex: it comes exclusively from other people losing exactly as much money, and so is zero-sum. It's all the other assets and all the other effects that you must examine.
Generating income is not a zero sum game. If I buy a car and fix it up. I have created wealth.
If I buy a box of lumber and create a table. I have created more wealth for me and for the person I sell the table for who
otherwise would have to spend their own time/energy/expertise/etc... making the table.
Likewise running a farm very much does create wealth. If I grow tomatoes in a garden in my backyard, I am
creating something that didn't exist before, reducing the scarcity of tomatoes, and generating wealth for me and the people
I sell those tomatoes to.
Because building for my family's future is one of my primary motivators. I'm not just in it for myself. If I die I want my kids to receive the same education they would if I were still alive. The government already takes half of what I earn, and I will do everything legally possible to give them nothing more when I die.
Maybe the real issue is that your goverment isn't actually providing education for your own children. Your dependency on being able to leave capital to you descendants is merely a symptom of that actual problem.
I used education as an example, but there are many others. Helping with a down-payment for a starter home is another. Or perhaps they need some seed capital for a purpose I can't predict.
Eagles may soar, but weasels don't get sucked into jet engines.
Save the farm... That still barely applies. If your family farm is that valuable and it is going to stay in the family most would typically have begun the transition plan and have started transferring assets. As an example: in this area if you had 4 quarters and its worth ~10k per acre that is just a bit over $6 million dollars in land assets alone. So in that case you would maybe have to get a loan from the bank if all of a sudden the old man dies and it has to be transferred. That loan will be very easy to get. The returns for a farm like that will be very reasonable and nothing close to harm is done. If you have that many acres in corn country you can afford to pay an tax or two. What corn policy giveth, the tax man barely taketh.
Exactly. It really seems like a lot of people don't understand exemptions, tax brackets, and effective tax rates. Worse, I've seen editorials in major newspapers that make the same elementary mistakes. I wonder how much public opinion would shift on these matters if everybody actually understood how those calculations are really done.
An interesting anagram of "BANACH TARSKI" is "BANACH TARSKI BANACH TARSKI"
You still get to build wealth. It's just that each generation your family has to rebuild the wealth.
Don't worry, if you really are wealthy you'll still create a dynasty of rich kids since the 50% tax comes roughly once every 80 years and your money should double (under proper management) on an order of magnitude of every 10 years or so.
Unless the kids start eating into the principal in which case they'll be returned to your pre-wealthy state
Well the tax STARTS at $1 million. So in your example he still gets to give his money to his kids (minus costs of probate).
You are pointing out is another problem with our system.
Nationwide, there are areas where someone with $1 million is super rich (like detroit), and areas where someone with $1 million is lower middle class (like New York City). It might make sense in some super high cost areas like NYC to raise the minimum to, say, $10 million since literally you have situations where grandma bought a house for $10k and now it's worth seven figures, and suddenly she's considered rich.
(Yes this happens.)
Running a farm does not create wealth.
You assume that by someone generating an income, they are creating wealth. The problem with this assumption is income is complex: it comes exclusively from other people losing exactly as much money, and so is zero-sum. It's all the other assets and all the other effects that you must examine.
Generating income is not a zero sum game. If I buy a car and fix it up. I have created wealth.
If I buy a box of lumber and create a table. I have created more wealth for me and for the person I sell the table for who
otherwise would have to spend their own time/energy/expertise/etc... making the table.
Likewise running a farm very much does create wealth. If I grow tomatoes in a garden in my backyard, I am
creating something that didn't exist before, reducing the scarcity of tomatoes, and generating wealth for me and the people
I sell those tomatoes to.
Only if your labor (and in the case of the farm, water, fertilizer, etc.) is of zero value. Otherwise, you're not creating anything, wealth-wise. You're just converting a valuable commodity (your time and effort) into value-added to the raw materials. The illusion of creation comes from not including all the inputs in your equations.
But considering the way we value the ability to push money around more than we value physical labor in today's world, I suppose that forgetting to do that is just a natural mistake.
So then if you sell the cabinet for the price as you bought the pile of lumber for, you didn't create any value? The cabinet is only more valuable than the pile of lumber if you charge more for it?
This is the fundamental disconnect between greedy fucks and reality. The cabinet is more valuable than the pile of wood, even if the carpenter chooses to sell it for the same price as a pile of wood. That people are greedy and will always sell the cabinet for more has no bearing on this fact. It is irrelevant.
Chuuch. Preach. Tabernacle.
Yes, in the stricted sense, a product is only the sum of it's inputs whether that input is labor,sunlight,expertise,etc... but that's
not the view typically taken in economics and that would mean that wealth is never created.
If I can make 2 tables a year and 4 chairs a year and you can make 1 table a year and 8 chairs a year, then in both cases there
is the same amount of labor involved but if I only make tables and you only make chairs and we trade then we both come out ahead.
In economics one of the inputs is usually either labor or capital in order to generate something out the other end but that doesn't
mean it's a zero sum game. A zero sum game typically means that as a whole everyone would be better off not playing.
That's not the case with converting labor/money into something else of value.
Right, that's comparative advantage, and is a way to generate wealth: you take the things you aren't good at (expensive for you to do) and you let someone else who can do them more efficiently do them (less expensive for them). Less total resources (what a grammar construct...) are spent in this way to produce the same output, so more total wealth exists.
I always use the example of taking an action which creates output greater than its input. People confuse this with profiteering: if you spend $8 on wood and $6 on metal and $4 in labor and make a birdhouse, that birdhouse has a value of $18. If you sell that for $20, you profiteer $2 by transferring wealth to yourself from another person. That's not wealth generation, it's only wealth transfer; however, it does utilize comparative advantage, and so the establishment of businesses which can provide high-quality birdhouses cheaper than individuals can produce them themselves (including the cost of the individual's labor--often overlooked) does itself generate wealth.
In the same way, basic public health care generates wealth: the establishment of an effective policy to provide free clinical care has an associated and rather high cost, but it has an exceedingly high economic return due to the large gains in public health that come from free STD testing, vaccination, minor wound treatment (infections, sprains, etc.), and so on. Mishandling these plans diminishes or inverts that: public health care can be an economic drain, causing more total death and suffering than even America's broken private system. Further, as public health policies become more comprehensive--as they cover more health conditions--it becomes more difficult to implement economically positive plans.
Most fully-comprehensive public health policies have glaring flaws at the upper end: long waiting lists for "not fatal now, could become fatal later" diseases, i.e. the cancer won't kill you for 6 months, so we'll schedule surgery in 4 months... oh, the cancer has progressed faster than expected. Private health care policies often do this as well, but less often: more capital availability makes more health resources (doctors) available. Canada handles this simply: they use a single-payer system, but also everyone gets private insurance from their employer just like in America. Canadians use said private insurance when the public system becomes inadequate, bypassing its flaws without exposing themselves to the whole surface of flaws that a private system could develop.
This is the same standard of wealth generation as, for example, iTunes. Before iTunes, there was a murky world of mp3.com, portable MP3 players, and CDs. iTunes was really the first widely accepted method of purchasing music online. This meant that people could purchase individual songs for a dollar or two rather than spending $15 on CD; and that distribution became much less resource intensive; and that people didn't need to wait for shipping or go to the store to actually get music. This freed up a lot of capital and labor: less fuel, shipping resources (trucks, fuel, highway capacity, air traffic capacity), physical capital (CDs, machinery), and labor (time spent operating and maintaining machines to press all these CDs). In exchange, consumers got more fine-grained purchasing power and even a steep discount on whole albums (50%-ish, $8 albums instead of $15), as well as shipping times measured in seconds.
A zero-sum game doesn't mean everyone is better off not playing; it means what goes in comes back out. Poker is zero-sum: the five of you put $10 in the pot, and someone comes out $40 richer while four of you come out $10 poorer. The stock market is another one: securities are arbitraged, and the fact that there are 100 million shares of AAPL at $400 doesn't mean you can actually sell all 100 million shares of AAPL for $400 each--large liquidations always push the spot price down.
It takes a rather long explanation to illustrate why this is; the short of it is the
Support my political activism on Patreon.
1. Roads - full of potholes
2. Clean water - diverted to the ocean to save a fish, gov't asks me not to flush
3. Sewage - yet another surcharge on my water bill
4. Fire department - special fire district, another surcharge
5. Police department - dunno, never encountered them, either way in 53 years.
6. Judicial system - dunno, never encountered it, except jury duty once
7. Educating you and your community - paid for private school for self and kids. community doesn't seem too bright
8. Protection from say . . . some foreign country coming and taking what is yours - mostly we go there and do that. Could stay home cheaper
9. Innovation - think of what NASA, and so many grants have brought us - HINT: You are on the internet - most of the build-out was non-govt
OK, flame-baiting aside, yes the Gov't does provide useful things. The complaining about taxes is mostly about how inefficient it appears to be at it, as well as outright waste and fraud. Google up some recent and on-going investigations to Los Angeles county cases where school administrators were making obscene amounts of money while their schools are falling apart.... or for that matter what shenanigans are going on with school infrastructure money being spend to buy iPads? Then there is a (slow) "high speed train" that goes nowhere, will not be used and will lose money forever... so Far, a billion has been spend and not one shovelful of dirt has been moved. on and on.
So friggin' what!!!
If you're in a tax bracket that pushes your marginal income tax to 50%, then you're doing OK for yourself, and are quite comfortable. Stop your whining about how much you're paying in taxes, while the deficit balloons, and infrastructure crumbles.
In the 50's, the top (federal only) marginal tax rate was 72%. In that decade, the US paid off most of its debt from WWII, built the Interstate highway system and most of the country's airports. There was incredible investment in scientific research that led to a man on the moon only a decade later, and the country built schools like crazy for a baby-booming population.
And, despite what the anti-tax crowd will say about high taxes being job killers, the US had some of the most robust economic growth of the last 100 years during this time.
All that has been accomplished with today's minimal taxation is a further widening of the wealth gap that leaves the rich riding the gravy train, and everyone else scrambling for some crumbs.
You get no sympathy from me.
Unfortunate that the writer had to use Luntz's right-wing term "death tax" for the estate tax.
Again, the need for parents to leave money for their descendant's to have a home is yet another flaw in the system. It just proves that getting decent housing is inaccesible/too hard.
NEEDS should be covered by the goverment. And leaving money for you children to afford luxuries is sort of not-capitalist, because it means they got free money just for being your children (which is something we inhereted from feudalism/monarchies, and not actually capitalist).
Because society has deemed it in our best interest to promote productivity.
Lets say you work hard, have some luck, and end up with 10 million dollars. You die, pass that on, and nothing is taxed. Your child could easily live off the interest of that money and provide nothing of value to society during their lifetime. And then that child's child. And then that child's child's child, etc..
Even with the large estate tax now, how investing is taxed, we've basically created a permanent upper class. A royalty based on wealth that will NEVER go away, no matter how little they provide in terms of innovation or productivity. Even with 45% of their estate disappearing each generation, merely through investments alone, the rich can stay wealthy very easily.
If you've made 5 million dollars (the minimum amount required to fall under the estate tax), surely your children should be able to live on 2.5 million.....
Thats great sentiment. You make 90,000? Surely you can live off of 55,000 so we can distribute wealth more evenly. I don't think our politician are concerned with our future generations not "contributing" enough to society due to already having wealth. Bill Gates was already in the "permanent upper class" when he dropped out of Harvard and used his Mom's IBM board of directors influence to build a highly successful company.
But sure your point is we should punish wealth generation. But then criticize when people try to avoid the punishment. That must be a human trait. What other species accepts punishments and asks for more?
does not apply to estates, that's why. The original income may or may not have been taxed already. But when someone else gets their hands on the moolah, it is income for *them* so is subject to taxation
If you're selling your product/services for zero profit, what money do you use to pay for your house/rent, food, clothing, transportation, etc.?
Stop! Dremel time!
Perhaps you get money from charity or social welfare programs. Perhaps you don't get money and you starve or freeze to death. Either way, that's not relevant. Profit is orthogonal to creation of value.
Chuuch. Preach. Tabernacle.
Taxing income taxes you for ripping people off.
I guess this is where you and I disagree. I don't consider charging enough to make a living ripping people off. Assuming sufficient competition and lack of collusion, consumers will have a choice of whether they consider my offer to be a good value to them, or whether they want to shop elsewhere.
Stop! Dremel time!
That's an entirely reasonable stance to have.
I was only trying to highlight the difference between profit and creation of value. In practice, they almost always go hand in hand, since people aren't generally eager to work for [literally] nothing. However, there's nothing that logically necessitates this. Value can still be created when there is no profit, and profit can still be had when no value is created.
I consider "charging enough to make a living" to be a necessary evil. I feel that it is immoral to demand compensation for one's labor, as it fosters a quid pro quo mentality which is at odds with the virtues of justice and temperance. However, "ya gotta eat", and since society isn't virtuous enough to support those of us who would eschew profit, we're forced into the same profit-chasing rat race as everyone nelse. However, we're digressing, as none of this has any bearing on the distinction between profit and creation of value.
Chuuch. Preach. Tabernacle.