Personally, I'm of the mind that estates should pass how the person who has the estate wants, and the state has no right to that money. If the person who earned or otherwise held the money thinks it should go to their Paris Hilton-esque daughter to blow in a lifetime of partying and drugs and bullshit, so be it; I don't think the government should get their greedy hooks in it.Yeah, I don't quite understand it either. If the wealthy person decides to spend the money on a yacht or a mansion or a Bentley or eating at fancy restaurants, there's no extra tax. But if they want to give it to their kids (upon their death), then the tax man demands an extra pound of flesh. You can do the whole $14k-per-year thing, but it's not practical for large estates, and you also run the risk of depleting your assets too soon if you live too long.
Other than a blatant grab for cash, what's the purpose behind an inheritance tax? What is the negative outcome that such a tax is preventing?
I do not understand either of these positions, and I sincerely ask for clarity. Other than the "all taxes are evil" position, I come to this discussion with the premise that SOME taxes are a necessity and the only decision is to be what we tax (losers), and what we do not tax(winners), and of course the percentages of said necessities. If it helps in the conversation, assume that the federal government needs $1(one) dollar to operate on an annual basis, and we are determining the best way to fund it fairly.
I do not understand why the entirety of someone's estate is to automatically be put into the winners column. I understand a certain amount excluded, I would understand treating already taxed net worth differently than unrealized capital gains. I would also understand keeping the original cost basis to defer taxes in order to prevent a forced sale of a family business. I respectfully ask for both of you to further explain why you feel my position is incorrect.
Do you both agree that unrealized gains should continue to be taxed at 0% and stepped up in basis for the first $5 million? What about after that amount. Current taxes for the living maxes out at 20% for long term capital gains, but 39.6% for income. What are your positions as to why this is "fair"? Max inheritance tax is 40%, very similar to the max income rates. Why should capital gains be taxed at a lower rate than income. To that end, why should my rental income be treated as regular income, but my dividends are not? Why shouldn't all income taxed the same?
Would you both agree that the cost basis should not be taxed at all since it has already been taxed, but any gains, unrealized or not, should eventually be taxed. That may be by the beneficiary when they eventually sell at the ORIGINAL cost basis with the profit taxed at their tax rate.
Why should anyone receive any gain without being taxed eventually, minus reasonable exclusions like primary residence home selling or the multi-millions in inheritance exclusion from taxes as examples?
If I take my income, after it is taxed, and hire someone to do work for me, they will also be taxed on THEIR income. That was originally simply MY already taxed income. I would argue this money should not be taxed well before inheritance money is excluded, they at least did something for it. Why should an inheritance get MORE favorable treatment than labor?