The "Death Tax" lie.

[txaslftist]

Before the inheritance tax was partially repealed a few years back, did you know that if you (a married person) died with less than 1.2 million dollars in non-exempt property it did not affect you?

Did you know that your life insurance proceeds were exempt?
And your pension death benefit in certain cases?

What does that mean?

It means that the inheritance tax was a tax that only impacted the upper middle class and the wealthy. The upper middle class frankly weren't hit too hard, because of graduated rates and the exemption of the first million, but the very rich WERE hit hard.

The Republican Congress wants to make the repeal of the inheritance tax permanent. What will this mean? It means that stocks and real property passed from the uber-rich to their spawn will pass tax free. These are people whose primary source of income is not labor, but investment.

To make a comfortable living solely off of your investments, you need to have at least a million bucks in stocks, bonds, whatever. Once your reach that comfort zone, however, the changes in the tax code basically assure that if you are reasonably prudent, you will only get richer. You've become one of the "investor class".

You will continue to prosper, while those that work for a living will continue to bear the brunt of taxation. What is the net result of this disparity in treatment?

The rich get richer, the poor get (relatively) poorer.

What does this remind one of? Well, Mexico is a fine example. The very rich live in grand haciendas immediately adjacent to squalid tenements of the very poor. The middle class is relatively small and continues to shrink relative to the growth of the poor.

This is, in short, the economics of the third world. Combined with relaxed regulations on industry in the areas of environmental protection, mergers and acquisitions, looting pension plans, easier and more comfortable corporate bankruptcy regulations, and a host of other processes designed to take money out of the treasury's debt and hand it to ginormous corporations, and the disparity continues to grow.

This is not "trickle down" economics; it is "Flow Up" economics. Why? Because the rich do not reinvest in the US economy. Markets and market holdings are global. Hence the rich reinvest in the economies of Singapore, India, China, Tailand, Mexico and various other locales where a ready supply of cheap labor exists.

Until the US is a country with a "ready supply of cheap labor" (-ie, a lot of poor desperate people willing to work for peanuts with no benefits and no working regulations), corporate investment will continue to flow overseas. And we will continue to move in the direction of Mexico.

Please write your congressman and tell them to oppose this tax!

[wakeme2008]

1. Question Frist....

How much $$$$ will this save him...

A lot in Congress will pocket big bucks when they inherit... Think about it.

[txaslftist]

2. So will their constituents.

Oh, not the voters...

Don't mistake me. I mean the shareholders in the gigantic corporations that finance them.

The corporate sponsors/owners of the media whores who support them.

The rich "million dollar donors" who back them.

And who says congress ain't for sale.

[satya]

3. Full disclosure--excellent idea. Make 'em all say how the legislation will

affect them personally. And for that matter, why not apply this to ALL legislation?

[txaslftist]

5. Aren't the net worths and incomes of most representatives ...

... available to researchers? It seems like a study could be done by someone like Michael Moore to expose how much money this will save each representative/senator who backs it, including the president.

Frankly, permanent repeal of the inheritance tax will save the Bush clan MILLIONS.

[wakeme2008]

22. With Frist's parents still being alive

he does not have to report THEIR WEALTH...

[txaslftist]

26. Ah... I get it. Poor widdle orphan Fwistie.

Weft Aww awone wif his millions.

[ElaineinIN]

6. I heard a report once

for which I have no citation, so this is total heresay, that then George HW Bush filed his required financial disclosures for ethics purposes, he listed a total net worth of around $80 m. Assuming a 50% estate tax for ease of math, that's $40.0 million saved for George, Jeb, and Neil.

And those would have been 1988 numbers....

[slackmaster]

4. Estate tax has same fundamental flaw as the Alternative Minimum Tax

Both are basically sound in concept but were implemented all wrong.

Simply put, they should have been indexed for inflation. Absent a mechanism to compensate for the decrease in the value of a dollar in the long term, the resultant "bracket creep" eats its way down from the lofty wealthy classes the taxes were intended for, affecting more and more people who are in fact less and less wealthy.

$1.2 million today isn't worth anywhere near what it was when I was born (1958). Back then it made much more sense to assess estate tax on a de minimis millionaire. Today, a million dollars barely buys a home in some places. A person who leaves behind one million today might realistically hope that it gets used to a grandchild or two to college.

Think about how you'd feel if you were in your 70s or 80s, worked and saved all your life, and the value of your estate was close to the cutoff for estate tax. Then throw in the uncertainty that generation is being subjected to. I'm sometimes disgusted at the lack of compassion some of us seem to have for people in that situation.

[txaslftist]

8. It WAS indexed for inflation.

The 1.25 million figure was up from the year before and had been steadily going up as annual incomes increased.

By now it would probably be 1.5 million if it had not been repealed.

By the same token, that 1.5 million would also continue to grow and increase. We're not talking about 1.5 million twenty years from now, we're talking about 1.5 million today.

And no, frankly, I don't have a lot of sympathy for people who pass holding that much money and suddenly discover that they have to pay a tax on a PORTION of the ammount (not including life insurance or stepped up basis in home) that is OVER 1.5 million.

It is not like they have to pay all of the money over 1.5 million. They don't have to pay life insurance proceeds.

Permanent repeal of the estate tax is designed to put large fortunes permanently beyond the reach of taxation so that the ONLY tax it ever recieves is on dividends (and that has been reduced also). With the "step up in basis" rules that apply upon death, even the increase in value of a home over years (investment income) is not taxed.

[ElaineinIN]

13. It was never inflation indexed.

Some other limits were indexed (GST Exemption, Annual exclusion) but hte unified credit equivalent never was indexed. The 1997 legislation increased it incrementally over time, and then the 2001 legisltation that includes "repeal" also increased it incrementally. In 1997, it was $600k, increasing incrementally to a top exemption of $1.0 million per person. The 2001 legislation bumped it, so this year its $1.5 per person, next year $2.0 million, then it goes to $3.5 million in 2009 (note, the year after * isn't president any more..hmmm), repeal is 2010, and then it comes back in 2011.

So this year its $1.5m per person (so, if done correctly, $3.0 m for a married couple, although you have to do a bit of planning to get the full bang for the buck.)

Plus, as indicated above, life insurance proceeds are included for estate tax purposes, but not for income tax purposes, although I can get some them out of the estate tax if structured properly. If you'd like a citation, look at IRC 2042 (estate tax) versis IRC 101 (income tax) for the treatment of life insurance proceeds.

[ElaineinIN]

10. You are absolutely right, sort of...

When the $600k per person was implemented in 1976, it was a lot of money-- by 1997, it wasn't very much, especially when you consider life insurance (by the way, life insurance proceeds aren't exempted from the estate tax... they are income tax free, and with a little bit of structuring, can be made estate tax free, but with no planning life insurance will be included in one's gross estate). So they should have been indexed for inflation and increased exemptions do make sense by and large, if your goal is to maintain applicability to the general population at the top 1 or 2 %.

Moreover, if part of the goal of the estate tax is to break up large concentrations of wealth (the estate tax was implemented about the same time as the antitrust laws), we really aren't worried about people who have one or two million dollars. We are worried about larger amounts.

This doesn't, however, address the fundamental question of whether repeall makes sense, either a a policy objective in an of itself, or as a question so spending and taxing priorities in a time resources are scarce.

That being said, I still am not going to use of my compassion on people who are only getting $1.0 million instead of $2.0 million. In the grand scheme of things, they are still in the top 1 or 2 % of the population.

[Hamlette]

11. the estate tax is indexed for inflation,

in the 70s the estate you could hand down tax free was around $600K now it is 1.5 million (not 1.2 as in the first post, it has gone up)

Only 1% of all estates pay ANY tax at all. And you ONLY pay tax on the amount OVER $1.5 M and there are many deductions. The max estate tax is 50%. The average estate that pays taxes (remember 99% of estates do NOT pay ANY tax) pays 19%.

Boo fricking hoo.

[ElaineinIN]

14. Look I agree with you

that there shouldn't be a repeal, but ...

the top bracket was 55% prior to 2001; now I believe it's 47% and its going down a percentage point every year.
the exemption was not and is not indexed for inflation; increased in the exemption were due to statutory changes.

Let's not give the pro-repeal forces any ground by not having our facts straight.

[Hamlette]

16. agreed, it is not indexed for inflation

but saying $1.2 M is not the same as it was in 1958 is not exactly honest.

I googled it quickly but only found a heritage publication bitching about the top rate. Who the hell cares what the top rate is when it only effects 1%. The richest of the rich?

Let 'em eat cake with Bush.

on the run...to work

[ElaineinIN]

18. Well, it is, but that isn't the point

http://www1.jsc.nasa.gov/bu2/inflateCPI.html

is a CPI inflation calculator. If you put in $600,000 (the unified credit in 1976) and adjust by the CPI index between 1976 and 2004 (the most recent the calculator will let you go), that's wotth $1,992,000 in today's dollar. So it is honest to say that $600,000 in exemption in 1976 is roughly equivlent to the $2,000,000 exemption that it will be next year.

Now, although it's honest, in theory it means that it should effect the same percentage of people. If they hadn't increased the exemption from $600,000, it would effect a greater percentage of people, which is what was happening.

The really important point is that we are still worrying about the top 1 or 2 or 5 % of the country, at the expense of everyone else.

[slackmaster]

20. No, a few arbitrary adjustments does not constitute indexing

A properly indexed system must have automatic, mathematically determined changes over time. People in my mother's generation face huge uncertainties right now because Congress has not implemented a PERMANENT and guaranteed formula for predicting how much estate tax will be owed on an estate of a given size.

This uncertainty has huge effects on how older people structure their finances, the timing of gifts to their children and grandchildren, etc.

Some of the responses here illustrate the lack of real compassion I wrote about earlier. Shame on you.

[gratuitous]

12. So, instead of leaving $1.25 million to your kid

You would have left only the exempt $1 million, plus 55% of the amount over $1 million: $137,000 out of $250,000. And that's without any estate planning at all. Your kid would have to recover from the trauma of your demise with only $1.137 million in the bank instead of $1.25 million.

Hmmm. Nope, I still think I'll spend my concern on people living on less than a dollar a day. But thanks for trying to paint millionaires as equally deserving of consideration and compassion. It was good for a laugh.

[samplebytes]

15. a million dollars barely buys a home in some places....

1 million dollars will buy 3 brand new homes in my city.

1 million dollars will buy 5 5 year old homes in my city.

1 million dollars will buy 8 well-kept 40-50 yr old houses in my neighborhood.

Even decent college educations are about 50K for 4 years.

It's fuzzy math.

[slackmaster]

19. And that is one of the fundamental flaws with a one-size-fits-all system

I'm sure you could have bought several houses in the cheaper areas in New Orleans two weeks ago. Think of how many you could buy now.

I live in San Diego BTW.

[txaslftist]

27. And you just GOTTA live in those places, right?

In Kinnebunkport a mil won't even buy you a boat house.

So?

[mod mom]

7. Do you mean "the Paris Hilton tax" why let the thugs frame our speech?

[txaslftist]

9. That was my point by putting "death tax" in quotes. It isn't.

I like the sound of "Paris-Hilton" tax better.

[satya]

17. The estate tax is really a deferred capital gains tax. If everybody

played by the same rules, accumulating wealth and paying taxes as they went along, fine--I might be willing to eliminate estate tax. But the system is skewed to favor the upper tax brackets all along. My taxes subsidize someone else's million-dollar mortgage.

So if they want to repeal this tax, let's repeal all the other perks that allow some people to build huge estates while working people pay taxes on earned income.

[slackmaster]

21. My mom's attitude is "Stop changing the #$%^&* rules!"

She's a former Republican BTW.

[txaslftist]

24. The lawmakers are the beneficiaries of the repeal...

...unfortunately, and that is on both sides of the aisle. I don't know where I read it and I don't remember the numbers, but I do know that a substantial number of the lawmakers on Capital Hill are mmmmulti MMMillionaires.

[BiggJawn]

23. And Ditto-monkeys who stand to inherit a leaky single-wide....

..and MAYBE a coon dog and an old CB radio are the ones who yell loudest about paying the "Death Tax"

I asked a guy once "Are you gonna get a million bucks when your dad dies?"

"Uh, no, I don't think dad has anywhere near that..."

"Then why worry? I'll TELL you why you worry, it's because Gush Pfleghmball TOLD you to worry. He TOLD you this tax would affect YOU, but he LIED to you. What do you expect from a crazy-assed dope fiend?"

End of conversation. No comeback was possible, except maybe to have him start chanting "USA! USA! USA!" and he was not quit THAT dumb....

[txaslftist]

25. Gush Pfleghmball?

I like that.