Meet the New Class Traitors Who Are Coming Out As Rich [The Guardian]

[effigy98]

I suppose I'm rich.

I'd be ecstatic if they ever got rid of the Mortgage Interest Deduction. What a blight on society to have government subsidize debt.

I 100% agree. Rewarding any form of debt is bad. Debt typically is behind crashes, and crashes hurt most people.

[Telecaster]

If the estate tax only effects 1% of the population then it seems fair for 99% of the population (who pay nothing), but penalizes the wealthy.   It's sad to hear about families having to sell the farm to pay the estate taxes. 

And when was the last time you heard about it?  Like an actual news story?  According to the Tax Policy Center, only about 50 farm or small business estates total will be subject to the estate tax this year.   The average tax is less than 6%.  And there are provisions to spread out the tax payments over 15 years. 

https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threatens-small-farms

[libertarian4321]

I suppose I'm rich.

I'd be ecstatic if they ever got rid of the Mortgage Interest Deduction. What a blight on society to have government subsidize debt.

I'd be glad to see it go just so I'd never see another thread titled "Should I pay off my mortgage or invest in _____?" That one has been flogged to death and beyond. :)

[retired?]

I believe [the tax system] should be designed to do this in such a way that every American gets to pay some of the bill without causing those in poverty to ache even more.

If there are those who are paying $0 federally now, and you want in a future state for them to both pay something and yet not "ache more", it seems like you might be asking for 7 perpendicular lines...

Forget it.  You and I fundamentally agree yet I feel you are being obtuse.  I think that some small amount (50k is too high, I apologize for tossing that out to begin with) should be tax free for everyone.  Beyond that, everyone should pay a set percentage that covers the government's expenditures.  That's my opinion. 

1. Small amount of income that is not taxed.
2. Remainder of income taxed at a fixed percentage.

Is that clear enough? 
Dang.

Yes!!!!!!!!  Also agree with:

I do not believe the tax system should be used at all as an instrument of fairness, equality, equity, justice or any other social goal.  It should be used to finance necessary governmental functions.  I believe it should be designed to do this in such a way that every American gets to pay some of the bill without causing those in poverty to ache even more.

I recall when Obama kept speaking of 250k income as a cutoff for "being rich"......during one of his campaigns.  Probably same one where he told Joe the Plumber "you didn't make that".  At that time, I did a quick calc.  I looked at two cases - a 350k income family and a 100k income family with a scaled financial situation.  The fed tax for high earner was 18x that of 100k earner.  Easy example to make me comfortable that most high earners pay "their fair share".

I'm fine with a flat tax.  No estate tax.....that's truly un-American......and I wouldn't be affected either way.

[talltexan]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

[GuitarStv]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

Ironically, there's a good argument that having an estate tax is probably the most American type of tax you could ask for.  Passing an estate earned by someone else to his or her children creates an unequal playing field for the next generation.  It ensures that some people are rewarded for the work of others rather than what they earn for themselves and entrenches class separation.

[FIREySkyline]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

Ironically, there's a good argument that having an estate tax is probably the most American type of tax you could ask for.  Passing an estate earned by someone else to his or her children creates an unequal playing field for the next generation.  It ensures that some people are rewarded for the work of others rather than what they earn for themselves and entrenches class separation.

I'm not seeing how that makes it American. American is the right to do what you wish with your own resources and not having your choices, income and posessions subject to the approval of the state.

[GuitarStv]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

Ironically, there's a good argument that having an estate tax is probably the most American type of tax you could ask for.  Passing an estate earned by someone else to his or her children creates an unequal playing field for the next generation.  It ensures that some people are rewarded for the work of others rather than what they earn for themselves and entrenches class separation.

I'm not seeing how that makes it American. American is the right to do what you wish with your own resources and not having your choices, income and posessions subject to the approval of the state.

I figured American was often seen as the ability to work hard for what you have rather than simply inheriting it from an established aristocracy.

[sokoloff]

I figured American was often seen as the ability to work hard for what you have rather than simply inheriting it from an established aristocracy.

Aristocracy by blood (firstborn male becomes the next king) is contrary to most views of "what's American?" I think.

Saving and passing along advantage to your children so that they can have a better life than you did is a laudable IMO (and many Americans think "what I think is laudable is American"). My grandfathers were literally a coal miner and steel mill worker, who scrimped and saved to provide for their kids. My parents were the first generation on either side to attend college. They both became public school teachers who scrimped, saved, and invested to provide for their kids. Each generation in that chain attained more financial success and had an easier time of life than the previous generation.

I support this and don't intend to be the one to break the chain.

[FINate]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

Ironically, there's a good argument that having an estate tax is probably the most American type of tax you could ask for.  Passing an estate earned by someone else to his or her children creates an unequal playing field for the next generation.  It ensures that some people are rewarded for the work of others rather than what they earn for themselves and entrenches class separation.

I'm not seeing how that makes it American. American is the right to do what you wish with your own resources and not having your choices, income and posessions subject to the approval of the state.

This wasn't the intent of the founders. They understood the need to balance individual liberty and while maintaining a strong federal government. We do not and never have had totally unconstrained choices -- this would produce total anarchy. Article I Section 8 of the US Constitution grants the government broad powers to tax, including the estate tax. As an individual you have the right to rule of law and equal protection...not unfettered rights to possessions, which is why the government can restrict ownership of things like explosives, radioactive materials, certain chemicals, and such.

Arguing about what's "American"  or "anti-American" is just shortcut for "this is how I think things should be" without getting into the substance of the argument.

[FIREySkyline]

This wasn't the intent of the founders. They understood the need to balance individual liberty and while maintaining a strong federal government. We do not and never have had totally unconstrained choices -- this would produce total anarchy. Article I Section 8 of the US Constitution grants the government broad powers to tax, including the estate tax. As an individual you have the right to rule of law and equal protection...not unfettered rights to possessions, which is why the government can restrict ownership of things like explosives, radioactive materials, certain chemicals, and such.

Arguing about what's "American"  or "anti-American" is just shortcut for "this is how I think things should be" without getting into the substance of the argument.

Just because it is permissible under the constitution doesn't make it American. And you'll also find that regardless of whether the taxation itself is constitutionally permissible, most of the use of those taxes falls outside the scope of the Federal government's powers as granted under the constitution. Rape and pillage of the commerce clause notwithstanding.

[StarBright]

I figured American was often seen as the ability to work hard for what you have rather than simply inheriting it from an established aristocracy.

Aristocracy by blood (firstborn male becomes the next king) is contrary to most views of "what's American?" I think.

Saving and passing along advantage to your children so that they can have a better life than you did is a laudable IMO (and many Americans think "what I think is laudable is American"). My grandfathers were literally a coal miner and steel mill worker, who scrimped and saved to provide for their kids. My parents were the first generation on either side to attend college. They both became public school teachers who scrimped, saved, and invested to provide for their kids. Each generation in that chain attained more financial success and had an easier time of life than the previous generation.

I support this and don't intend to be the one to break the chain.

If we're talking actual founding fathers as a definition of what is "American" - some of them actually advocated for an estate tax. I know Thomas Paine definitely did.

As you state, our founding fathers definitely did not want an aristocratic system. I don't know if you've read Piketty, but I think Capital in the 21st century makes an incredibly persuasive case that we need things like the estate tax to keep an aristocracy of Zuckerbergs, Waltons, Clintons, Bushes, Trumps, etc. from popping up in the next 20 years.

[FIREySkyline]

I figured American was often seen as the ability to work hard for what you have rather than simply inheriting it from an established aristocracy.

Aristocracy by blood (firstborn male becomes the next king) is contrary to most views of "what's American?" I think.

Saving and passing along advantage to your children so that they can have a better life than you did is a laudable IMO (and many Americans think "what I think is laudable is American"). My grandfathers were literally a coal miner and steel mill worker, who scrimped and saved to provide for their kids. My parents were the first generation on either side to attend college. They both became public school teachers who scrimped, saved, and invested to provide for their kids. Each generation in that chain attained more financial success and had an easier time of life than the previous generation.

I support this and don't intend to be the one to break the chain.

If we're talking actual founding fathers as a definition of what is "American" - some of them actually advocated for an estate tax. I know Thomas Paine definitely did.

As you state, our founding fathers definitely did not want an aristocratic system. I don't know if you've read Piketty, but I think Capital in the 21st century makes an incredibly persuasive case that we need things like the estate tax to keep an aristocracy of Zuckerbergs, Waltons, Clintons, Bushes, Trumps, etc. from popping up in the next 20 years.

To be honest, I somewhat agree with this. The reason being not fiscal but due to the constraints we have on available land per capita that did not exist in the past and which will continue to grow. If a billionaire family began accumulating vast amounts of land, that could have some serious consequences in the long run. But I still think we have to be incredibly careful how we implement this.

[bobechs]

   It's sad to hear about families having to sell the farm to pay the estate taxes. 

And it would be so much sadder if it were true...

[StarBright]

I figured American was often seen as the ability to work hard for what you have rather than simply inheriting it from an established aristocracy.

Aristocracy by blood (firstborn male becomes the next king) is contrary to most views of "what's American?" I think.

Saving and passing along advantage to your children so that they can have a better life than you did is a laudable IMO (and many Americans think "what I think is laudable is American"). My grandfathers were literally a coal miner and steel mill worker, who scrimped and saved to provide for their kids. My parents were the first generation on either side to attend college. They both became public school teachers who scrimped, saved, and invested to provide for their kids. Each generation in that chain attained more financial success and had an easier time of life than the previous generation.

I support this and don't intend to be the one to break the chain.

If we're talking actual founding fathers as a definition of what is "American" - some of them actually advocated for an estate tax. I know Thomas Paine definitely did.

As you state, our founding fathers definitely did not want an aristocratic system. I don't know if you've read Piketty, but I think Capital in the 21st century makes an incredibly persuasive case that we need things like the estate tax to keep an aristocracy of Zuckerbergs, Waltons, Clintons, Bushes, Trumps, etc. from popping up in the next 20 years.

To be honest, I somewhat agree with this. The reason being not fiscal but due to the constraints we have on available land per capita that did not exist in the past and which will continue to grow. If a billionaire family began accumulating vast amounts of land, that could have some serious consequences in the long run. But I still think we have to be incredibly careful how we implement this.

Exactly! - Land and natural resource use could be extremely important in the coming century (and I think this is further complicated by the concept of corporate person-hood as well).

I also agree with being careful about implementation but it seems to me like current amount is not awful. It isn't as if the government is confiscating the rest, just taxing it.

[retired?]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

I mean it is wealth that has already been taxed.  The simple act of passing it along to someone else, in my view, shouldn't be a taxable event.

[retired?]

To be clear, my usage of it above was simply as an expression to indicate that I don't agree with it.  No view on whether it is "American" or not since that brings up the whole issue of what it means to be "American" which is way too subjective for any online forum.

I think taxes are fine.  I don't think the govt is efficient in using the taxes they collect. 

Home property tax can be considered a tax on wealth.  But, it at least has designated buckets towards which it is supposedly applied. 

Also, if you are fine with taxing wealth (as opposed to income or consumption), why wait until the person dies?  Just continually gnaw away at what they've created.

Most people don't have a problem with it because they won't be affected by it.  Sure, tax those guys!  I won't be affected by it, but doesn't mean I think it is appropriate.

I think it is fine to pass along wealth to your descendants.  Based on the idea of personal property rights.  Which is something most Americans agree upon.

[moof]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

I mean it is wealth that has already been taxed.  The simple act of passing it along to someone else, in my view, shouldn't be a taxable event.

Part of this countries DNA is an aversion to kings, royal families, aristocracies, etc.  Self made success stories are the red meat of our particular national pride.

As such I strongly believe that hard earned money should be taxed less, not more, than easily gotten money.  So in my view capital gains should be at least as taxed as wages, probably more, and inheritance or other windfalls where your new found wealth is not the product of your labor should be taxed heavily to assure that we don't end up with more of an aristocracy than we already have.

Consider the opposite for the moment (i.e. our current situation).  If your grandpappy saved hard and got rich investing in stocks, and your father didn't eff up the estate you can just keep riding out the investments without having to lift a finger your entire life.  Did you do anything to help your grandpappy make or grow that money?  Doubtful.

Meanwhile the kid born next door who's grandpappy and father just scraped by working a little lower pay jobs (or simply had a bout or tow of poor luck) has no inheritance coming.  He has to work his butt off just to tread water these days.

The ladder has largely been pulled up by the rich set.  Those who are rich beyond belief actively lobby congress with their estate's resources to lower taxes for themselves, they speak up and shareholder meetings to demand lowering of costs that result in offshoring, and generally prioritize reducing benefits to the masses to enhance their portfolio.  Those who have been rich for generations often have no concept of what it is like to actually start poor and build wealth up in the face of all of this.

After all, who needs money more right now, the Koch brother's heirs or impoverished kids facing badly funded schools, poor nutrition, exploding college costs, and doing so while growing up in high crime areas?

[FINate]

This wasn't the intent of the founders. They understood the need to balance individual liberty and while maintaining a strong federal government. We do not and never have had totally unconstrained choices -- this would produce total anarchy. Article I Section 8 of the US Constitution grants the government broad powers to tax, including the estate tax. As an individual you have the right to rule of law and equal protection...not unfettered rights to possessions, which is why the government can restrict ownership of things like explosives, radioactive materials, certain chemicals, and such.

Arguing about what's "American"  or "anti-American" is just shortcut for "this is how I think things should be" without getting into the substance of the argument.

Just because it is permissible under the constitution doesn't make it American. And you'll also find that regardless of whether the taxation itself is constitutionally permissible, most of the use of those taxes falls outside the scope of the Federal government's powers as granted under the constitution. Rape and pillage of the commerce clause notwithstanding.

I don't agree with your definition of what it means to be "American" so I'm deferring to the constitution because we are a constitutional representative democracy -- it forms the foundation of our nation.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Under the constitution the feds also have broad power to provide for the general welfare of the US. Our current spending is not unconstitutional.

[Hargrove]

I mean it is wealth that has already been taxed.  The simple act of passing it along to someone else, in my view, shouldn't be a taxable event.

Everything has "already been taxed." The simple act of passing it along to someone else is exactly the time it gets taxed.

[FINate]

What does "Un-American" mean in the context of the estate tax?

You say the estate tax is that. Do you think the income tax is Un-American? We didn't have one for the first seventy years of our country.

Perhaps you just don't like taxes at all?

I mean it is wealth that has already been taxed.  The simple act of passing it along to someone else, in my view, shouldn't be a taxable event.

Why not? Wealth is changing hands, it's a transaction. Like the gift tax. The estate tax isn't a tax on the estate itself, it's a tax on the transferring of property. If you don't want to pay any estate taxes you can simply donate your estate to a non profit and Uncle Sam gets nada.

From https://gspp.berkeley.edu/news/news-center/the-constitutionality-of-a-net-worth-tax

What then of the combined federal estate and gift tax? Isn't that a tax on an estate's assets? The answer, surprisingly, is "No". Congress enacted the first federal estate tax in 1916. Its constitutionality was upheld by the United States Supreme Court in New York Trust Company v. Eisner, 1921, 256 U.S. 345. The opinion of the Court, delivered by Justice Holmes, was that the estate tax was not constitutionally infirm as a direct tax. Later cases made clear that the estate tax was not a tax on the property of the estate, but rather an excise tax on the privilege of transferring property at death. The triggering event, then, is the death of the testator. The current statute imposes a tax on the transfer of a decedent's taxable estate.

[Telecaster]

I mean it is wealth that has already been taxed.  The simple act of passing it along to someone else, in my view, shouldn't be a taxable event.

This doesn't make a whole lot of sense for a couple reasons.  One reason is that you apply that argument to almost any financial transaction.    For example, if you earn money, that wage is taxed before you get it.  So taxes have been paid. Then when you spend it--that is someone else get its--they are taxed on the income.   That is, they are taxed on money that has already been taxed. 

But the other thing--and this is the part that really doesn't make sense--is that when it comes to inheritance taxes, you really can't apply that argument because in most cases that money hasn't been taxed.   The four richest people in America are Bill Gates, Warren Buffett, Mark Zuckerburg, and Larry Ellison.  Their wealth is mostly in the form of unrealized capital gains.  Bill Gates is rich because he holds lots of Microsoft stock, and the wealth in those shares has never been taxed. 

[Dancin'Dog]

So, let's discuss how "fair" it is for the $5.4 limit is for a single person vs. $11 million for a married couple to pass untaxed.  It's often the same "pot of gold", but if there's a divorce it gets taxed differently. 

[sokoloff]

That seems fair, in that it allows a spouse to inherit an unlimited amount without estate taxation from a pre-deceasing spouse and then taxes the residual only once, using both spouses' exemption.

Nearly any alternative that I could imagine would seem less fair.

Suppose a married couple has $100MM. Husband dies; wife "inherits" $50MM, paying estate tax on ~$45MM. For simplicity, we'll just take the 40% marginal as the total rate. She pays $18MM in estate tax. Then, she dies with ~$82MM estate, paying estate tax  of about $33MM. Together, they've paid ~$51MM in estate taxes.

Suppose the same situation, but they die together. Now, they pay ~$36MM in estate tax.

Suppose the same situation, but they are wise enough to have the first one's estate pass the exemption amount out of the estate and not to the spouse (ignoring generation-skipping rules here). Now, they pay ~$49MM in estate taxes.

Same situation, but they don't have the spouse inherit anything. Now, they're back to ~$36MM in estate tax.

Why should such very similar situations have such different outcomes?
Why should the tax code encourage spouses to leave their money not to their spouse?

What about it strikes you as unfair? To me, it seems very fair (once you assume that an estate tax is "fair" at all)

[Goldielocks]

The tax code is broken. There is no doubt about it.
Its good that the news keeps covering it one way or another.
The sad part is, in the name of fixing the tax code the loopholes just get moved up the value chain. Aka remove deductions and remove the estate tax as well.

The estate tax is not fair. However, it is also a corner stone of maintaining a free and democratic society, so it most definitely should not be removed.

There is something foul about the idea of a high estate tax...   much better would be a "deemed disposition" of property when the last of a married couple passes, before the property is passed on to the next generation (e.g., pay the deferred taxes on property when you die, and your heir gets it at a stepped up basis).   As I understand it, there is a large tax bonus (tax eliminated on capital gains) when you inherit property in the us, that the estate tax tries (and fails because of the huge cut off point) to account for.

[sokoloff]

Rather than capture the tax and step up the basis, why not simply avoid stepping up the basis?

If I own 100% of a company (let's say it's worth ~$1MM) that I want to pass on to my son, there's no particular societal interest in forcing him to find an investor to take a 39% minority stake in that company in order to pay a tax bill.

[Hargrove]

If I own 100% of a company (let's say it's worth ~$1MM) that I want to pass on to my son, there's no particular societal interest in forcing him to find an investor to take a 39% minority stake in that company in order to pay a tax bill.

Of course there is such interest. What you're describing is dynastic wealth, no less "uninteresting" to society because it's only one generation's worth. Oligarchy follows the consolidation of wealth and power in a democracy.

Inheriting a business requires no merit whatsoever. It's utterly non-competitive. It is vastly different to work your ass off and build a business up than it is to get it for free. A tax bill is all that convinces those without the necessary work ethic or ambition to close the business. No one benefits when business owners think these things operate themselves and require no upkeep. No one benefits when the wealthy think other people should just inherit wealth like they did (not even, often, the children inheriting fortunes they don't appreciate).

I'm confused about arguments that these taxes "aren't fair." Of course they're fair. If you have 10 million dollars to leave to heirs and didn't build the national highway system, fight in WWII, ban asbestos and thalidomide, cure polio... then you benefited from HARD work society did for you to make your opportunities possible, and much more so than most other people (who didn't need metal shipping boats or 18-wheelers or cargo planes). There's a reason Africa doesn't have a long list of billionaires, and it's not because nobody there works hard, it's because they don't capture the benefits. Neither do say, soldiers, who work harder than almost anyone. That's much closer to "not fair."

[sokoloff]

If I own 100% of a company (let's say it's worth ~$1MM) that I want to pass on to my son, there's no particular societal interest in forcing him to find an investor to take a 39% minority stake in that company in order to pay a tax bill.

Of course there is such interest. What you're describing is dynastic wealth, no less "uninteresting" to society because it's only one generation's worth. Oligarchy follows the consolidation of wealth and power in a democracy.

There's a reason I chose a small business amount ($1MM) in my example because of the parallel to the current federal exemption and the utter impracticality of finding an investor who wants to put in only $400K to own a minority stake in a small business.

There's no estate tax due if I pass an entire estate consisting of 10,000 $100 bills to my son. Why should there be tax due if I pass along the same value in a different form? How many Main St small grocers, hardware stores, and service businesses exist today because government didn't tax them out of existence upon death of an owner? Do we want only large, publicly traded businesses to have survival prospects? (I work for one and while I hope that one does continue to succeed, I believe that small businesses should have a chance to compete and thrive.)

[trollwithamustache]

There's no estate tax due if I pass an entire estate consisting of 10,000 $100 bills to my son. Why should there be tax due if I pass along the same value in a different form? How many Main St small grocers, hardware stores, and service businesses exist today because government didn't tax them out of existence upon death of an owner? Do we want only large, publicly traded businesses to have

This is one of the stronger arguments out there against an inheritance tax or at least for the set up basis mentioned earlier. While everyone is railing against the POS lazy son inheriting all this wealth and wasting it on hookers and blow, many of these small business actually employ people in their local area. 

Lots of these types of businesses get sold out and shrunk/gutted for estate planning. The MBAs would prefer to say optimized, which means firing all your neighbors.

 When the IRS says your business is worth 10 or 12 x revenue but your profit margin is less than 15% its hard to pay the tax bill. In California, our small businesses would get demolished without prop 13 as many "million dollar" businesses are sitting on 2 or 3 million dollar properties that are required for the business to exist. 

[FINate]

There's no estate tax due if I pass an entire estate consisting of 10,000 $100 bills to my son. Why should there be tax due if I pass along the same value in a different form? How many Main St small grocers, hardware stores, and service businesses exist today because government didn't tax them out of existence upon death of an owner? Do we want only large, publicly traded businesses to have

This is one of the stronger arguments out there against an inheritance tax or at least for the set up basis mentioned earlier. While everyone is railing against the POS lazy son inheriting all this wealth and wasting it on hookers and blow, many of these small business actually employ people in their local area. 

Lots of these types of businesses get sold out and shrunk/gutted for estate planning. The MBAs would prefer to say optimized, which means firing all your neighbors.

 When the IRS says your business is worth 10 or 12 x revenue but your profit margin is less than 15% its hard to pay the tax bill. In California, our small businesses would get demolished without prop 13 as many "million dollar" businesses are sitting on 2 or 3 million dollar properties that are required for the business to exist.

I disagree. There is nothing special or sacred about small business - and this from someone who grew up working in the family's small business. They often get sold and continue as a going concern. My family's small business was sold to one of the employees and is thriving, doing better than when it was owned by another family member. If junior inherits the business and can't afford the inheritance tax then sell, and use some of the proceeds to pay the tax. Better yet, the parent should do estate planning before kicking the bucket...there are ways to make the transfer a lot smoother.

[FIREySkyline]

This wasn't the intent of the founders. They understood the need to balance individual liberty and while maintaining a strong federal government. We do not and never have had totally unconstrained choices -- this would produce total anarchy. Article I Section 8 of the US Constitution grants the government broad powers to tax, including the estate tax. As an individual you have the right to rule of law and equal protection...not unfettered rights to possessions, which is why the government can restrict ownership of things like explosives, radioactive materials, certain chemicals, and such.

Arguing about what's "American"  or "anti-American" is just shortcut for "this is how I think things should be" without getting into the substance of the argument.

Just because it is permissible under the constitution doesn't make it American. And you'll also find that regardless of whether the taxation itself is constitutionally permissible, most of the use of those taxes falls outside the scope of the Federal government's powers as granted under the constitution. Rape and pillage of the commerce clause notwithstanding.

I don't agree with your definition of what it means to be "American" so I'm deferring to the constitution because we are a constitutional representative democracy -- it forms the foundation of our nation.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Under the constitution the feds also have broad power to provide for the general welfare of the US. Our current spending is not unconstitutional.

Note that it's used in conjunction with national defence, not doling out money to preferred peoples and causes. Promoting the general welfare means in order to preserve the freedoms in the country, not to pick special people to help or to modify behaviors through grants and assistance. Those are completely outside constitutional bounds.

Also note the "uniform" mandate of all taxes. But that's another topic.

[GuitarStv]

This wasn't the intent of the founders. They understood the need to balance individual liberty and while maintaining a strong federal government. We do not and never have had totally unconstrained choices -- this would produce total anarchy. Article I Section 8 of the US Constitution grants the government broad powers to tax, including the estate tax. As an individual you have the right to rule of law and equal protection...not unfettered rights to possessions, which is why the government can restrict ownership of things like explosives, radioactive materials, certain chemicals, and such.

Arguing about what's "American"  or "anti-American" is just shortcut for "this is how I think things should be" without getting into the substance of the argument.

Just because it is permissible under the constitution doesn't make it American. And you'll also find that regardless of whether the taxation itself is constitutionally permissible, most of the use of those taxes falls outside the scope of the Federal government's powers as granted under the constitution. Rape and pillage of the commerce clause notwithstanding.

I don't agree with your definition of what it means to be "American" so I'm deferring to the constitution because we are a constitutional representative democracy -- it forms the foundation of our nation.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Under the constitution the feds also have broad power to provide for the general welfare of the US. Our current spending is not unconstitutional.

Note that it's used in conjunction with national defence, not doling out money to preferred peoples and causes. Promoting the general welfare means in order to preserve the freedoms in the country, not to pick special people to help or to modify behaviors through grants and assistance. Those are completely outside constitutional bounds.

Also note the "uniform" mandate of all taxes. But that's another topic.

It might simply come down to your idea of what freedom really is then.

Is someone born a quadriplegic as free to earn an income, travel, and generally pursue happiness as someone born without any health problems?  The case can be (convincingly) argued either way, and I'm not sure that there's an answer that will satisfy everyone.

[FINate]

This wasn't the intent of the founders. They understood the need to balance individual liberty and while maintaining a strong federal government. We do not and never have had totally unconstrained choices -- this would produce total anarchy. Article I Section 8 of the US Constitution grants the government broad powers to tax, including the estate tax. As an individual you have the right to rule of law and equal protection...not unfettered rights to possessions, which is why the government can restrict ownership of things like explosives, radioactive materials, certain chemicals, and such.

Arguing about what's "American"  or "anti-American" is just shortcut for "this is how I think things should be" without getting into the substance of the argument.

Just because it is permissible under the constitution doesn't make it American. And you'll also find that regardless of whether the taxation itself is constitutionally permissible, most of the use of those taxes falls outside the scope of the Federal government's powers as granted under the constitution. Rape and pillage of the commerce clause notwithstanding.

I don't agree with your definition of what it means to be "American" so I'm deferring to the constitution because we are a constitutional representative democracy -- it forms the foundation of our nation.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Under the constitution the feds also have broad power to provide for the general welfare of the US. Our current spending is not unconstitutional.

Note that it's used in conjunction with national defence, not doling out money to preferred peoples and causes. Promoting the general welfare means in order to preserve the freedoms in the country, not to pick special people to help or to modify behaviors through grants and assistance. Those are completely outside constitutional bounds.

Also note the "uniform" mandate of all taxes. But that's another topic.

General Welfare as a broad legal term (https://en.wikipedia.org/wiki/General_welfare_clause) granting the Federal Government power to tax and spend for the general welfare of the nation. This can include actual "welfare" to the poor, but also a broad range of other activities.

[robartsd]

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Under the constitution the feds also have broad power to provide for the general welfare of the US. Our current spending is not unconstitutional.

Note that it's used in conjunction with national defence, not doling out money to preferred peoples and causes. Promoting the general welfare means in order to preserve the freedoms in the country, not to pick special people to help or to modify behaviors through grants and assistance. Those are completely outside constitutional bounds.

Also note the "uniform" mandate of all taxes. But that's another topic.

I take this "uniform" to mean that they apply the same throught the United States (no variation from state to state). I don't take it to mean that our progressive tax structure is unconsitutional. (I do question if the ammendment allowing the federal goverment to impose a personal income tax was properly ratified, but the supreme court says that question is "beyond review").

General Welfare as a broad legal term (https://en.wikipedia.org/wiki/General_welfare_clause) granting the Federal Government power to tax and spend for the general welfare of the nation. This can include actual "welfare" to the poor, but also a broad range of other activities.

While I understand that case law supports this interpreation, I do not agree that this interpretation is in keeping with the founders' intention to place a limit on government. I'd much prefer these functions of government be limited to the states rather than appling at the federal level in keeping with the tenth ammendment.

[FINate]

General Welfare as a broad legal term (https://en.wikipedia.org/wiki/General_welfare_clause) granting the Federal Government power to tax and spend for the general welfare of the nation. This can include actual "welfare" to the poor, but also a broad range of other activities.

While I understand that case law supports this interpreation, I do not agree that this interpretation is in keeping with the founders' intention to place a limit on government. I'd much prefer these functions of government be limited to the states rather than appling at the federal level in keeping with the tenth ammendment.

We could argue the meaning of the general welfare clause until the cows come home, and we would be continuing a debate going back to the founding of these United States. Short history here of Jefferson, Madison, and Hamilton: https://en.wikipedia.org/wiki/General_welfare_clause#United_States. The Judicial Branch has the final word on questions of constitutionality and decided in Helvering v. Davis (1937) that the general welfare clause grants Congress broad spending power.

It's fine to disagree with that interpretation while acknowledging that it's the law of the land, but I take issue with labeling outcomes of this American system of checks and balances as somehow un American, especially without additional supporting evidence or claims. I just don't like using "American" or "un American" as a shortcut, because people are largely free to imbue these terms with whatever meaning they desire.

[StockBeard]

We can't easily increase income taxes on the rich without making it more difficult for those who are trying to become wealthy.

Consumption tax (VAT) kind of does that though? It taxes spendypants, rewards frugal folks.

[Goldielocks]

Rather than capture the tax and step up the basis, why not simply avoid stepping up the basis?

If I own 100% of a company (let's say it's worth ~$1MM) that I want to pass on to my son, there's no particular societal interest in forcing him to find an investor to take a 39% minority stake in that company in order to pay a tax bill.

There is always a benefit to society to recoup taxes within 20 years instead of within 50 years.   If the business had a large gain in value, then it should be able to afford some of the capital gains taxes to allow transfer to an heir.   If it doesn't, then there is very little to tax, anyway.

Many countries will exempt small domestic businesses from paying capital gains taxes on the first $xx.   (between $500k and $1million, typically).  Farms as family businesses get even greater protections... but not limitless ones.

[talltexan]

If I own 100% of a company (let's say it's worth ~$1MM) that I want to pass on to my son, there's no particular societal interest in forcing him to find an investor to take a 39% minority stake in that company in order to pay a tax bill.

Of course there is such interest. What you're describing is dynastic wealth, no less "uninteresting" to society because it's only one generation's worth. Oligarchy follows the consolidation of wealth and power in a democracy.

There's a reason I chose a small business amount ($1MM) in my example because of the parallel to the current federal exemption and the utter impracticality of finding an investor who wants to put in only $400K to own a minority stake in a small business.

There's no estate tax due if I pass an entire estate consisting of 10,000 $100 bills to my son. Why should there be tax due if I pass along the same value in a different form? How many Main St small grocers, hardware stores, and service businesses exist today because government didn't tax them out of existence upon death of an owner? Do we want only large, publicly traded businesses to have survival prospects? (I work for one and while I hope that one does continue to succeed, I believe that small businesses should have a chance to compete and thrive.)

I'm not an attorney and don't give tax advice, but I'm pretty sure your example about the 10,000 Franklins no different than about the $1 million business. Under current law, both are below the exemption of Federal Estate Tax.

[robartsd]

I'm not an attorney and don't give tax advice, but I'm pretty sure your example about the 10,000 Franklins no different than about the $1 million business. Under current law, both are below the exemption of Federal Estate Tax.

The discussion stemmed from the idea that taxes should be collected on the stepped up basis upon inherritance (instead of an estate tax). If the basis step up was taxed inherriting a $1 million business would be very different than inherriting $1 million cash.

[talltexan]

Thank you for clarifying. Indeed the basis step-up matters.