Election 16: Donald Trumps wins Presidency. God Help us all!

[Larry]

That is such an apples to oranges comparison.  I make a lot of money and would cheer from the mountain tops if I ever sniffed 15%.  Discussions should not be intermixed with payroll taxes and writeoffs/tax credit/etc.  Romney takes advantage of the IRS tax code.  Romney also gave $7 million to charity which affords him the ability to reduce his tax rate.

Indeed it does (reduce his tax rate.) For every $100 "Romney donates", the IRS knocks $35 off of his taxes.

I'm curious as to your assertion that it's unfair to mention payroll taxes along with income taxes. Do you feel the same way about counting capital gains taxes as "income" taxes? Or do capital gains taxes count as "income tax", but payroll taxes don't? (And, could you please justify whatever rule you declare?)

 

With regards to the 4%, can you post a link to that or are you just pulling yet another factoid out of your philly that you can't back up?

Actually, I was quoting from memory, what lots of ES posters were saying, back when Romney was running.

But a quick Google turns this up, as my first hit.

Looks like I was remembering the numbers grossly incorrectly.

His AGI was $14M. And he intentionally overpayed his taxes to raise his rate to 14%, not 9%

And, if he had actually used all the deductions he was entitled to, his tax rate would have been 10%, not 4%. (That's from this article. The first one mentions that he overpayed, but not what it would have been.)

[Predicto]

 

 

I fail to see why an inheritance tax is useful or good. The money was already taxes and is being left to a family member cause of a death. Why should any of that money be the governments? The only reasonable answer I can come up with is that a lot of people hate the idea that a wealthy person can pass their money down to their kid when they die, and that seems like jealousy to me, not sound policy.

 

 

Not to be insulting, but you are completely off base on this one.  

 

1) most of the money in an estate has never been taxed before.  Ever.

 

2) From a conceptual point of view, all money has been "taxed before" it get to your hands and becomes income to YOU.  Why should estate money you receive be any different?

 

3) If there is one thing that almost all economists agree on, it is that SOMETHING has to be taxed, and estates are just about the best thing to tax, from an economic efficiency point of view.   Lots of politicians disagree, but virtually the only actual economists who disagree are those who have a political slant to their work (or are from the tiny and discredited Austrian school of economics, which is pretty much the same thing - more political statement than actual economic study).

 

4) From the standpoint of social utility, why would America want to create an aristocracy?   We want to reward hard work and investing - not being born into the right bloodlines and getting money for doing nothing other than having the right name.  Why penalize someone for earning income and generating economic activity, and not penalize someone for just getting given income for existing?  Why are we taxing a truck driver more than Paris Hilton?  Oor founding fathers, who loathed aristocracies, would have wondered what you were drinking if you had suggested this idea.

[tshile]

Not to be insulting, but you are completely off base on this one.  

 

1) most of the money in an estate has never been taxed before.  Ever.

 

2) From a conceptual point of view, all money has been "taxed before" it get to your hands and becomes income to YOU.  Why should estate money you receive be any different?

 

3) If there is one thing that almost all economists agree on, it is that SOMETHING has to be taxed, and estates are just about the best thing to tax, from an economic efficiency point of view.   Lots of politicians disagree, but virtually the only actual economists who disagree are those who have a political slant to their work (or are from the tiny and discredited Austrian school of economics, which is pretty much the same thing - more political statement than actual economic study).

 

4) From the standpoint of social utility, why would America want to create an aristocracy?   We want to reward hard work and investing - not being born into the right bloodlines and getting money for doing nothing other than having the right name.  Why penalize someone for earning income and generating economic activity, and not penalize someone for just getting given income for existing?  Why are we taxing a truck driver more than Paris Hilton?  Oor founding fathers, who loathed aristocracies, would have wondered what you were drinking if you had suggested this idea.

 

I'm willingly and admittedly engaging in a conversation, asking questions, in a situation where I know the other people involved know more about it than me. You're not insulting me, don't worry about that

 

 

1 - Maybe we're using two different frames of reference? When my parents die the money I'll inherit was absolutely taxed. It was taxed my parents earned it. What is passed to me that was passed to them from their parents was taxed when their parents earned it.

 

Now this assumes that when they pass I'll inherit money over the cap. I don't know if that will be the case. Though I believe it would be if everything happened today. Barely over the cap, but over the cap.

 

So I ask - where do you get the idea that "most of the money in an estate has never been taxed before. ever" ?

 

2 - Yes, but we're talking about a very, very specific situation where someone receives money because another person died. It's not like a loophole you can use to transfer money to your kids tax free, you have to die and the person that dies gets to choose who the money goes to.

 

3 - I'm curious as to why economists agree that estates are the "best thing to tax"? Is it because it's a large amount of money? Or is it because of #4 (and a point PeterMP made)?

 

4 - I don't see how allowing a person to pass the money they earned through hard work onto their kids somehow disadvantages the rest of us. I really don't.

 

 

These conversations seem to always pivot around this idea that people with a lot of money somehow don't deserve all the money they have; that they someone schemed the system; they were lucky; etc.

 

As someone with parents that have money, I say bull****. I recognize there are people who obtain their money that way, but there are plenty of people who obtain their wealth through hard work and responsible/conservative (financially, not politically...) life styles, these people seem to never be given any respect, they simply get lumped into the "wealthy people who screwed the rest of us to be wealthy and we deserve a share" group.

 

For what it's worth, my parents are in a weird situation where if everything went through today they would probably be over the cap. I'm not really expecting that by the time I actually have to settle their estate they'll be over the cap, between the cap going up and them moving out of a very unique situation (they're going to be spending money soon i assume.) So I don't really have a dog in this fight, but I'm close enough to kind of roll my eyes at the way people who do have a dog in the fight are constantly described.

 

My parents started as a a night time security guard and someone who worked the night shift sorting mail. Neither has a college degree. Both worked for the government (as did my grand parents that had even more money.) They lived in a trailer and drove a doon buggy. So I generally roll my eyes at the "the system is rigged, it's not hard work it's luck that gets you places" arguments. I don't apologize for it either.

 

My wife also graduated with a masters degree and 0 debt, no loans, and no money given to her. Which adds to my eye-rolling.

[Larry]

If you want an example of money in an estate that's never been taxed, I already gave you two.

I buy a stock for $20. I die when it's $100.

When was the tax paid on that $80?

Predictor made a second point, that I hadn't gotten to, yet.

If I pay a plumber, why should he have to pay taxes on it? After all, I paid taxes on that money when I got it. So he shouldn't have to pay any, right?

[tshile]

If you want an example of money in an estate that's never been taxed, I already gave you two.

I buy a stock for $20. I die when it's $100.

When was the tax paid on that $80?

Predictor made a second point, that I hadn't gotten to, yet.

If I pay a plumber, why should he have to pay taxes on it? After all, I paid taxes on that money when I got it. So he shouldn't have to pay any, right?

 

Isn't tax on the 80 paid when you sell your stock? Is there a way to transfer stock through an estate and have the recipient cash it out with no taxes? I plead ignorance on the issue, I honestly don't know.

 

I don't think paying your plumber for services is the same as inheriting money your parents earned (and were taxed for) after they die.

 

Also, my issue isn't with the idea that it happens, it's with his use of the words "most" and "ever" to suggest that pretty much the only money passed through inheritance is money that was never (ever) taxed...

[Larry]

Isn't tax on the 80 paid when you sell your stock?

But it hasn't been sold. I own a share of Disney, and now my heir owns a share of Disney.

And if my heir waits a while, and sells that share for $105, then he owes taxes on $5.

I don't think paying your plumber for services is the same as inheriting money your parents earned (and were taxed for) after they die.

The difference is?

In both cases, an already-taxed dollar, changed hands.

Granted, one of the people did some work, to EARN the money he got. Does that make him need to pay taxes which the other doesn't?

[Larry]

Now, as to the national sales tax proposals, I have some problems with them.

One is that it shifts taxation from income to spending. The bottom 90% pretty much spend every dime that get. The Romneys mostly use their money, to get more money. You've eliminated all taxes on the accumulation of wealth.

Another is that it seems, to me, to be ridiculously easy for lots of people to get around. Through the "it's for my business" method.

Under a national sales tax, if I pay a plumber $100, I have to pay $6 in taxes. (I'm using the current Florida 6% rate).

If Dan Snyder wants to hire a plumber, he simply announces that the plumber is an employee of his company, and there's no tax. Similarly, any parts or fixtures that the plumber needs, are exempt from taxes. (Because SnyderCorp is buying them).

We gonna tax big purchases at that rate, too? (If we don't, then we're only taxing things that Little People spend their money on). If I buy a car, there's 6% tax on it. If Snyder's corporation buys one, no tax.

Same thing goes if either of us buys a house.

----------

Now, MAYBE, it's possible to prevent that kind of cheating. But I don't think it can be done without a level of record keeping and supervision that I think would make the current IRS look lean and fast.

[Predicto]

 

These conversations seem to always pivot around this idea that people with a lot of money somehow don't deserve all the money they have; that they someone schemed the system; they were lucky; etc.

 

 

 

 

Yes the conversations do that.  Because people who oppose estate taxes make sure that this is how the discussion is framed.  That is how they want my side to be characterized.   

 

I'm too busy today to give this the attention that ordinarily would.   I'm sorry.

Isn't tax on the 80 paid when you sell your stock? Is there a way to transfer stock through an estate and have the recipient cash it out with no taxes? I plead ignorance on the issue, I honestly don't know.

 

I don't think paying your plumber for services is the same as inheriting money your parents earned (and were taxed for) after they die.

 

Also, my issue isn't with the idea that it happens, it's with his use of the words "most" and "ever" to suggest that pretty much the only money passed through inheritance is money that was never (ever) taxed...

 

Your parents never sell the stock.  They pass it along in their will and you, the heir, get it tax free.   It is now worth 10 times what they paid for it.   900 percent profit.  No taxes.

 

They never sell the house.   They bouth it in 1973 for 32k and it is now worth 416k and they pass it along and the heir gets it tax free.  No tax on the increase in value.

 

Etc.

 

 

It's called the "step up in basis."

[PeterMP]

Yes the conversations do that.  Because people who oppose estate taxes make sure that this is how the discussion is framed.  That is how they want my side to be characterized.   

 

I'm too busy today to give this the attention that ordinarily would.   I'm sorry.

 

Your parents never sell the stock.  They pass it along in their will and you, the heir, get it tax free.   It is now worth 10 times what they paid for it.   900 percent profit.  No taxes.

 

They never sell the house.   They bouth it in 1973 for 32k and it is now worth 416k and they pass it along and the heir gets it tax free.  No tax on the increase in value.

 

Etc.

 

 

It's called the "step up in basis."

 

And if it is a house, I can take out a loan based on the house, use that for income, and get the loan interest deduction for any other income I have.

 

(There are some rules for a line of credit on a house being eligible for the tax deduction.)

 

tishile, capital gains taxes aren't based on the value of what you sell the thing for, they are based on the difference between what you bought it at and what you sold it at.  It is based on what you gained.

 

If you got it from your parents, then when you got it is what you got it at.  Maybe if we back tracked and made capital gains taxes based on what the parents bought it at that might make sense.

 

But then as an inheritor, you'd be responsible for figuring out the value of the things you inherited when your parents bought it.

[PeterMP]

 3 - I'm curious as to why economists agree that estates are the "best thing to tax"? Is it because it's a large amount of money? Or is it because of #4 (and a point PeterMP made)?

 

4 - I don't see how allowing a person to pass the money they earned through hard work onto their kids somehow disadvantages the rest of us. I really don't.

 

It isn't actually either one.  It is because taxes discourage behavior.

 

Taxes on income discourage working.  Taxes on labor costs (e.g. payroll taxes) discourage hiring.  Consumption taxes discourage consumption, which discourage the need for labor, which affects jobs.

 

Estate taxes affect dying.

 

Which is unavoidable up to at least this point in time.  Your not discouraging anything anybody can actually control and as such has a minimal impact on the rest of the economy.

 

Realistically, ideally, democracies are a form of meritocracy.  The cream rises to the top based on their work/skills.

 

Allowing large sums of money to be transferred between generations eliminates that.  Your parents worked hard and had skills that allowed them to make money.

 

They didn't game the system.  They earned it.  There is no problem with that.  The merit the money they have.

 

But you don't necessarily have those same skills or work ethic.  If they leave with a large sum of money, then we loose our meritocracy.

 

This is especially important in the context of money = power/speech (which is the case given our current political system).

 

You have people that have gained large amounts of power simply due to their birth position.  They had no control of who their parents are.  They don't necessarily especially deserve the power.  The meritocracy is broken.

 

You've set up a system not too much different than the Royal court in feudal Europe.  Power (that is based money) is the result of birth right.

 

It is even worse if economic growth is limited in some real way.  

 

There really is some sized pie (the point I originally made in this thread) because what you've really done is given a bunch of the pie to a person that hasn't done anything to deserve it other than be born to the right parents, but the fact that they have such a head start gives them an advantage in terms of collecting more money and taking an ever larger piece of the pie (to pass onto their children).

 

And that's what we see the top 0.1% are gaining wealth at an exceedingly rapid rate.

[PeterMP]

Now, as to the national sales tax proposals, I have some problems with them.

One is that it shifts taxation from income to spending. The bottom 90% pretty much spend every dime that get. The Romneys mostly use their money, to get more money. You've eliminated all taxes on the accumulation of wealth.

Another is that it seems, to me, to be ridiculously easy for lots of people to get around. Through the "it's for my business" method.

Under a national sales tax, if I pay a plumber $100, I have to pay $6 in taxes. (I'm using the current Florida 6% rate).

If Dan Snyder wants to hire a plumber, he simply announces that the plumber is an employee of his company, and there's no tax. Similarly, any parts or fixtures that the plumber needs, are exempt from taxes. (Because SnyderCorp is buying them).

We gonna tax big purchases at that rate, too? (If we don't, then we're only taxing things that Little People spend their money on). If I buy a car, there's 6% tax on it. If Snyder's corporation buys one, no tax.

Same thing goes if either of us buys a house.

----------

Now, MAYBE, it's possible to prevent that kind of cheating. But I don't think it can be done without a level of record keeping and supervision that I think would make the current IRS look lean and fast.

 

The idea that a sales tax is regressive is an issue.  That's why you exempt some things like I described.  You exempt the things that the poor are spending most of their money on and so they end up paying little to no tax.  The other thing I described doing is actually offering a rebate system.

 

For the rest, states are already dealing with those things.  It would be trivial to simply piggy back on what they are doing (or create a national system and allow states to piggy back on the federal government).  There already is a whole system set up by states about getting an exemptions, etc.

[chipwhich]

Indeed it does (reduce his tax rate.) For every $100 "Romney donates", the IRS knocks $35 off of his taxes.

I'm curious as to your assertion that it's unfair to mention payroll taxes along with income taxes. Do you feel the same way about counting capital gains taxes as "income" taxes? Or do capital gains taxes count as "income tax", but payroll taxes don't? (And, could you please justify whatever rule you declare?)

 

I don't think I used the word unfair.  You took an extreme example, made it more extreme by moving his 14% to 4%, the 14% ironically pretty close to your 16% in the example.  What is missing is what the rich have to spend in order to drive that rate to 14%.  You took a meaningless set of numbers and made them more meaningless.  His tax rate would have looked worse had he not donated 7 million to charity. 

[chipwhich]

The irony in Predicto's pontificating is he is a lawyer with wealth.  Those of us with wealth always have the means to put our personal and estate into the best position for protection from things like estate taxes.  It's the middle class that takes the hit.

[Larry]

I don't think I used the word unfair.  You took an extreme example, made it more extreme by moving his 14% to 4%, the 14% ironically pretty close to your 16% in the example.  What is missing is what the rich have to spend in order to drive that rate to 14%.  You took a meaningless set of numbers and made them more meaningless.  His tax rate would have looked worse had he not donated 7 million to charity.

He made it look like he paid 14%, by pretending that he gave 2 million to charity.

He actually gave 7, which reduced his actual rate to 10%.

The irony in Predicto's pontificating is he is a lawyer with wealth.  Those of us with wealth always have the means to put our personal and estate into the best position for protection from things like estate taxes.  It's the middle class that takes the hit.

Did you miss the fact that you have to have a $5M estate, before there even is any estate tax?

[Hersh]

When I posted about Rand Paul's tax plan, I was getting more at the lack of responsibility to the country as a whole when everything is about cutting taxes. The infrastructure isn't going to repair itself and it certainly isn't going to be free. The debt isn't going to pay itself off. Cutting taxes won't pay down the debt. At what point will there be an honest conversation about actually paying for these things?

[tshile]

Larry, PeterMP, Predicto - Thank you.

 

tishile, capital gains taxes aren't based on the value of what you sell the thing for, they are based on the difference between what you bought it at and what you sold it at.  It is based on what you gained.

 

If you got it from your parents, then when you got it is what you got it at.  Maybe if we back tracked and made capital gains taxes based on what the parents bought it at that might make sense.

 

But then as an inheritor, you'd be responsible for figuring out the value of the things you inherited when your parents bought it.

 

I understood what capital gains was, on its face, but I didn't associate stocks with the cost basis step up. I also don't think I was giving real estate value changes the attention it deserved, especially now that I've learned people take low interest, tax free loans out against that value.

 

They didn't game the system.  They earned it.  There is no problem with that.  The merit the money they have.

 

But you don't necessarily have those same skills or work ethic.  If they leave with a large sum of money, then we loose our meritocracy.

 

Understood.

 

The problem is that I'm leading a life where I save money for my children. In different ways, for different things. The idea that someone could look at money I saved, by working, for the sole purpose of helping my children and view that as undeserving, lacking in merit, to the point that taking a significant portion of it not only justified, but is considered the best way to fund the government is... well it's a little irritating. Who are you to tell me and my family that making the decisions we've made, living the life we've lived, etc is lacking in merit?

 

Because it means my kids will be given more advantages than kids of other parents that didn't do that?

 

Yeah, that's kind of the point...

 

Though I have to admit, I recognize the long term effects that has and how it's like feudal Europe. I think there may be a better way to avoid that?

 

But, again, I don't view leaving money for your kids/grand kids the same way as paying a plumber. I guess if I did I wouldn't have any trouble with it, I probably also wouldn't save as much as I do and maybe live a little more.

 

It becomes borderline offensive when I watch friends, who make more than me, blow every penny they come in contact with tell me that I should pay a significant portion of money I leave for my kids (or lose what is left for me), because it disproportionately advantages my kids over theirs. As if their shortcomings are a reason to punish me.

 

It's kind of like listening them tell me (someone with no student loan debt) how their student loan debt should be forgiven, because they 'deserve' it and the system is corrupt, when I want to school with them and the reason they have unmanageable student loan debt is because they cashed out the over payments on stereos and other crap, and drank alcohol and smoked weed all day/night and skipped class and paid a lot of money for either no degree or a worthless degree. They're financially irresponsible to boot. Of course they'd never admit that, they're convinced the problem is the system, not them.

 

That last two bits have nothing to do with you, and "punish" is probably the wrong word to use there. Paying inheritance tax, currently, means you're leaving over 5 million dollars to someone in your death. I realize if you're doing that, it sounds really weird to complain about it. I get that it's a good 'problem' to have. (but most taxes are)

[chipwhich]

Did you miss the fact that you have to have a $5M estate, before there even is any estate tax?

 

I come from a family of farmers in MD.  My family of farmers have lots of wealth on paper, their land is worth millions of dollars.  From of cash perspective they are poor.  Farmers don't sell their land, they pass it on to their kids.  They aren't fancy figs on a plate kind a folk, they are hard working, up before the crack of dawn blue collar folk.  Of course, once the tax man cometh, and farmer folk die, the land must be sold.

[88Comrade2000]

Sex Tax, Fast Food/Fine Dining Restaurant Tax/ Soda Tax, Chocolate Tax, etc....

[Larry]

I come from a family of farmers in MD.  My family of farmers have lots of wealth on paper, their land is worth millions of dollars.  From of cash perspective they are poor.  Farmers don't sell their land, they pass it on to their kids.  They aren't fancy figs on a plate kind a folk, they are hard working, up before the crack of dawn blue collar folk.  Of course, once the tax man cometh, and farmer folk die, the land must be sold.

Wow. You may be the person the GOP was looking for, back when the "tax man seizing the family farm" slogan was used, by the GOP, to try to justify eliminating the grossly unfair "death tax".

I remember a few years back, that meme was flying back and forth through our public debate. And the folks on the left started demanding that the GOP provide them with just one case where someone literally lost the family farm SOLELY because of inheritance taxes. And the GOP was never able to find a single case. In our entire nation, in our entire history. In fact, near as I could tell, they never even attempted to do so.

Now, maybe that was because the left was setting the bar too high. Were they demanding that the GOP provide them with a farmer who died, completely debt free, or some such? If the deceased owed $75K in estate taxes, and $75 on the Visa, then they claim it was the Visa that forced the sale? I wouldn't put it past some politicians. But, if that were the case, I would expect to have seen the GOP pointing at family farmers, and the left offering lame deflections. Instead what I saw was the GOP not even attempting to claim that it had EVER happened.

When I see one "side" of a political debate say something, and the other side doesn't even attempt to challenge it, then I tend to suspect that it's true.

And, I see what looks like some logical sense behind it, too. I visualize a case where Farmer Jones dies, leaving an estate consisting of $5,000 cash, a family farm appraised at $20M, and an estate tax bill of $7M. And it sure SEEMS, to me, that if Junior really wants to keep the $20M asset he's about to receive, (as opposed to he doesn't want to be a farmer, he's a software designer. He wants cash), that it's not grossly unreasonable to expect him to borrow $7M (using the $20M property as collateral), pay the tax, and inherit a $20M property with a $7M mortgage on it.

[skinsmarydu]

https://s.yimg.com/lo/api/res/1.2/OnI0L7s0G_EWxpEPs_FAMg--/YXBwaWQ9eWhvbWVydW4-/http://media.zenfs.com/en_us/News/ucomics.com/nq150620.gif

[twa]

borrowing 7M on a 20M farm so the govt don't starve.... 

[Larry]

borrowing 7M on a 20M farm so the govt don't starve....

Paying 7M in taxes on a 20M income.

[tshile]

Paying 7M in taxes on a 20M income.

 

But it's not 20 M income.

 

It's a 20 M valuation on an asset that was recently acquired.

 

A valuation that's subject to change, and by its nature speculative.

 

And you want someone to give the government 7 M because of that valuation.

 

Which makes sense when you equate inheriting the family farm to paying your plumber. Not everyone puts those two on the same level though.

 

So they have to borrow 7 M for a farm because someone determined it was worth 20 M, it's not even that someone actually offered to pay 20 M.

 

 

A 7 M mortgage at todays rates for 30 years would be a 30k+ payment a month. That's just P&I I'm not sure what people who take 7 M mortgages actually do, I'm using a basic fixed rate 30 year so maybe people who know what they actually do are laughing hysterically at me right now, but that's a pretty big chunk of change a month. Justified by what? The presumption of valuation and because "they can afford it"?

[s0crates]

Are farms really worth that much? How do farmers pay their property tax?

Is it possible for the law to distinguish some assets from others for the purposes of inheritance?

[tshile]

Are farms really worth that much? How do farmers pay their property tax?

Is it possible for the law to distinguish some assets from others for the purposes of inheritance?

 

I don't know, I think Larry was picking the numbers to play along with the GOP's argument. Exaggerating so as to say - even if what you initially claim is true (which he pretty much said he doesn't think it's true beforehand)... I'm just using his numbers and arguing against the logic.

 

They seem to argue that the person receiving the money/assets doesn't deserve it. But I look at it from the other direction, the person giving the money doesn't deserve to leave it for their kids if they want? Because it comes across a little different when you flip the direction you look at it from; we don't wand kids of rich people being more advantaged than kids of poor people, which reads to me like some people are upset some are capable of doing that while others are not...