Republican Tax Plan 2017

[Glenstache]

it doesn't change the fact that people will just give it away to avoid taxes on it,  especially people in the 5-10 million networth range.

Perfect!  That's exactly what I want to happen.  I want a lifetime cap on how money you can give to your children without incurring ANY taxes, and I think the gift tax exemption amount per year is a fine place to start. 

But the current estate tax is approximately 800% of that amount, and the new GOP tax plan would make it an infinite amount.  I'm not worried about folks who want to gift a few hundred thousand dollars over decades, I'm worried about the RKOI crowd who inherit billions without ever finishing high school or working a day in their lives.  If you're a multibillionaire and want want to make your deadbeat hedonistic wildchild into a multibillionaire too, that kid absolutely should pay regular income taxes on whatever you give him.  His "income" shouldn't be treated and different than what the rest of us actually earn.

And (to get back on topic here) that's one of the fundamental problems with both versions of the current GOP tax plan; it strongly favors people who get rich without working over people who get rich by working.  Unearned income is taxed at a much lower rate than wage income.  Owner profits get low taxes, worker salaries get high taxes.  Working is discouraged, in favor of inheriting or passive ownership.  That seems like the very definition of promoting wealth inequality.

+1
Well said.

[lbmustache]

That seems like the very definition of promoting wealth inequality.

IMO that seems like the Republican MO at this point. I truly hope this doesn't pass - just as with healthcare, there are certainly improvements that can be made, but the GOP plan is NOT it.

[Car Jack]

The estate tax should stay.  Nobody receiving over $11M is hurting.  I'm convinced that getting rid of this tax is meant specifically for the Trump family.

The rich now pay essentially nothing.  Get above max FICA for the year and they then pay nothing.

I honestly think we should go back to the WWII tax brackets for the ultra wealthy where the top tax bracket was 94%.  Or at least to the brackets when Kennedy was first elected where it was 91%.  The GOP and 0.1 percenters keep crying poverty and "we'll have to move jobs overseas" with their paltry nothing percentages in federal taxes.  Meanwhile, they're all....as CEO's already moving the jobs overseas.  Not just manufacturing jobs, design engineering, software. 

[Gondolin]

But the fact is that most universities probably couldn't weather this expense easily.

What expense exactly are you referring to? Later posters turned to free tuition for everyone as the benchmark but, my original post was about the expense of tax assisting PhD stipends to offset the tax burden added by treating waived PhD tuition as income.

I think you'll find the numbers much more reasonable when considering $10-15k of expense per PhD rather then $45k sticker price tuition for every student.

Pratt Institute, for example, does not offer PhD programs so their cost would be ~$0.

[NoStacheOhio]

But the fact is that most universities probably couldn't weather this expense easily.

What expense exactly are you referring to? Later posters turned to free tuition for everyone as the benchmark but, my original post was about the expense of tax assisting PhD stipends to offset the tax burden added by taxing waived PhD tuition as income.

I think you'll find the numbers much more reasonable when considering $10-15k of expense per PhD rather then $45k sticker price tuition for every student.

Pratt Institute, for example, does not offer PhD programs so their cost would be ~$0.

PhDs aren't the only kind of grad students that receive tuition waivers

[Gondolin]

PhDs aren't the only kind of grad students that receive tuition waivers

Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.

[JLee]

PhDs aren't the only kind of grad students that receive tuition waivers

Such as? And in large numbers? Genuine curiosity - can't think of a field where Masters or JD candidates are given waived tuition.

https://www.edvisors.com/student-employment/jobs/tuition-waivers/

[sherr]

The estate tax should stay.  Nobody receiving over $11M is hurting.  I'm convinced that getting rid of this tax is meant specifically for the Trump family.

It's not. Getting rid of the estate tax has been a Republican goal for many years. Hence all the propaganda (but it's double taxation!) and misinformation (it's bankrupting the family farmers!) that have been circulating for quite some time.

Repealing it will help the Trumps personally, absolutely. But this is a generic-Republican thing, not a Trump thing. It's what their rich donors demand.

[Gondolin]

JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?

I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.

From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Master’s degree programs received assistantships"

Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.

[sol]

The estate tax should stay.  Nobody receiving over $11M is hurting. 

Not only should it stay, it should be lowered!  Why are we exempting $11 million from estate taxes?  That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries.  It's just a gift to the super-rich.

Similarly, why are they trying to lower the corporate tax rate?  This is also exactly backwards, at a time when the economy is so strong, unemployment is so low, and corporate profits are at record highs.  Now is the time to raise corporate taxes, according to Keynesian economics.  Then you can lower them to give the economy some juice if we have another recession, when the boost to corporate earnings might actually help.  Right now it won't help, and it just reduces our ability to deal with future economic downturns.  Similarly for interest rates, corporate taxes should also be climbing slowly during times as incredibly prosperous as these.  Why is this administration doing everything exactly backwards?  Is it just to be different than the last administration?

[JLee]

JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?

I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.

From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Master’s degree programs received assistantships"

Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.

That is not quite what you argued.  In response to a claim that "PhDs aren't the only kind of grad students that receive tuition waivers", you responded "Such as?"  This was followed by the statement that you "can't think of a field where Masters or JD candidates are given waived tuition."

If you meant to say "assisting PhD students constitutes the bulk of the expense to universities," perhaps that is what you should have said.

2014 census data indicates that 11.77% of people have masters degrees and 3.27% have PhD's.  I am unsure of the accuracy of those numbers, but it's what I have to work with.  Given that, 1.55652% of students received PhD assistantships and .97691% of students received Masters assistantships.  We're talking a ratio lower than 1.6:1. Clearly a larger percentage are PhD candidates, but there just aren't that many of them.

[A Definite Beta Guy]

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

[JLee]

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.

[A Definite Beta Guy]

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.

How so?

I don't see why the existence of some loopholes makes other loopholes justified.

[JLee]

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.

How so?

I don't see why the existence of some loopholes makes other loopholes justified.

If we're writing a new tax bill to close all these alleged loopholes, why are we 1) not closing ANY corporate ones, and 2) lowering the corporate rate further?

Then again, you don't care about income inequality so I suppose you might actually be looking forward to the old days when the .1% lived in castles and everybody else were peasants. Unless, of course, I've misread your post entirely.

[dragoncar]

So the same would hold for gifts given to children? At what age should this be enforced? If I pay for my kids grad program should that be taxable?

Of course it should.  Income is income.  If your 12 year old is out mowing lawns all summer, he's supposed to pay taxes on his income.  Even his tips.

I think you missed mizz's point, either intentionally or unintentionally.

If I gift my 8 year old a dinner, presumably that should not be taxable to her.
If I gift her a $10 toy for Christmas, presumably that should not be taxable to her.
If I gift her $1000 into her 529 account, that is currently not taxable (and I believe should not be taxable to her either, and legally, it falls into the gift tax exemption amount).

mizz was specifically talking about gifts given to children, not the child working for income.

Dinner and toys sound like non-taxable fringe benefits

[jpdx]

Interesting development regarding pass-through income. The latest Senate version is likely to include a 20% deduction for pass-through income. The House version works differently, it caps the rate at 25%, whereas the Senate version offers this deduction.

https://www.cnbc.com/2017/11/29/senate-tax-bill-will-reportedly-raise-pass-through-deduction-to-20-percent.html

Meaning small business owners in the 10-15% tax bracket would see a benefit from the Senate plan, compared to the House plan where they would see no benefit at all. Am I correct?

[jpdx]

...Presumably this would this be an above-the-line deduction, reducing AGI, and thus increasing ACA premium tax credit.

[Fomerly known as something]

JLee- what conclusion am I supposed to draw from this link? That tuition waivers exist?

I argued that PhD students get the massive majority of graduate level tuition waivers. Masters/MBA/ JD/MD degrees are major profit centers. These students are not getting waivers or fellowships the come with tuition assistance.

From your own link:
"Teaching and research assistantships were most common among students in doctoral degree programs, where 47.6% received assistantships. In contrast, only 8.3% of students in Master’s degree programs received assistantships"

Hence I still contend that tax assisting PhD students would constitute the bulk of the expense to universities.

Personal anecdote.  I have a friend currently in a public health PHD, she has been stipend in both her masters and now her PHD program.

[Mr Mark]

I'm glad they left the LTCG and qualified div rates pretty much unchanged. That and ACA are the key to post-FIRE success. I'm presuming as well that real estate will still be allowed to deduct depreciation, property tax and interest. and 

[MustachianAccountant]

Anyway, at least changing the step-up basis would be prudent - seems crazy not to.  Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.

If you're advocating getting rid of the step-up in basis, I think that's a bad idea from a practical perspective.

When did Grandpa buy those shares? What were the basis figures on the dates of those various purchases? How much was the result of dividend reinvestments? When were those purchases? What was the share count and cost basis of those shares?

A paperwork and logistical nightmare as compared to "what day did Grandpa die? what were the shares worth on that day? Perfect; glad to have that taken care of in 5 minutes."

Can't figure it out? Fine, your basis is $0. Problem solved.

(Incidentally, Grandpa would have run into this problem if he had sold the shares *before* he died, how would that problem be solved? There's no "step up" in basis for people who forgot when they bought shares, or misplaced the paperwork. The best you can do is eyeball when the shares were bought through the company or broker, and use historical data, or if you're lazy, just make the basis $0)

[MustachianAccountant]

Agreed, it seems like the biggest argument in favor of the estate tax is "they're rich, they can afford it".

I think the better argument is that the estate tax is part of mitigating structural inequality.  It is wealth redistribution. Taxing the wealthy and wealth redistribution is not something everyone in this country agrees is a good thing, but many (myself included) think that a healthy society has a level of wealth redistribution and limits extreme economic inequality.

If you work your whole life and pay taxes, you don't pay taxes again when you die.  You are dead, you aren't doing anything.  Whoever is inheriting the money is (indirectly) paying the taxes, which seems appropriate. 

Anyway, at least changing the step-up basis would be prudent - seems crazy not to.  Unrealized capital gains (not family businesses!) account for a large share of estates that get hit with the estate tax.

I agree that limiting extreme wealth inequality is a fine goal for a society, but I'm not sure that an Estate tax is the best way to accomplish that. I also think that, if you DO want to accomplish it with an estate tax, EVERYone should be subject to it. As another poster said above, "they're dead, they don't need that money." Why should ANYone be allowed to pass a pile of money on to their heirs?

[NeonPegasus]

The estate tax should stay.  Nobody receiving over $11M is hurting. 

Not only should it stay, it should be lowered!  Why are we exempting $11 million from estate taxes?  That's more cash than anyone needs, because it will fund more than an entire lifetime at median salaries.  It's just a gift to the super-rich.

Just curious - do you think the number of beneficiaries should play into it? So, instead of the estate being taxed based on the lump sum, individuals are taxed based on what they receive. The more people to whom it is distributed, the less likelihood it has of hitting the limit.

Here's an example - right now, father in law's estate hovers near the current $6.5mm limit. He has three children who will be beneficiaries. At least half of his estate is real estate and he's directing DH and I to receive the family house, which may be valued at nearly a third (and meaning we'd receive little cash) of the value of the estate. If we had to pay a significant tax upon inheriting it, we'd have to sell or mortgage it to pay taxes.

Anyway, point is, $6.5mm split between 3 people is not the same as if all of it is given to 1 person. It seems like treating the estate tax more like the gift tax would be reasonable.

If one of the goals of an estate tax is to reduce the concentration of wealth, making it a per person tax would encourage the distribution amongst more people (though admittedly, it would probably still be the same family).

Anyway, I have agreed with your arguments about the estate tax, etc. Though selfishly, I'd like to not pay a whole bunch of taxes, I don't think it's right to have huge amounts of wealth concentrated in the hands of so few.

[desertadapted]

Although it’s been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone.  Then you can inherit unlimited wealth for no tax consequences.  The tax is only collected when you actually benefit from the asset (sell it).   That mythical unicorn, the family farm, could stay in the family indefinitely without tax consequences.  Don’t know what the historical tax basis for the asset was?  Fine, make it $0.  It was free to you anyway.  If the dearly departed didn’t bother to keep records on the tax basis how are you harmed by that?  But sadly, eliminating the step-up in basis is a fantasy rendered impossible by our current plutocracy.  Inconsolably grumpy about current tax plan, in case you can't tell.

[jean]

Although it’s been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone.  Then you can inherit unlimited wealth for no tax consequences.  The tax is only collected when you actually benefit from the asset (sell it).

This is reasonable.  I don't think the estate tax should be repealed at all, but one can make an argument that it should in the case where the step up basis doesn't exist.

I think it is nuts that the plan is to repeal the estate tax and keep the stepped up basis.  This is not something I've seen widely reported in the media. Then again, media attention is somewhat irrelevant since it doesn't really matter what the public thinks.  The law will pass or not pass without any say from normal taxpayers. 

[A Definite Beta Guy]

Because it's a tax loophole. Employer perks are wage income and should be taxed. If they are not taxed, they are tax loopholes (like your employer-based health insurance, which is the biggest tax loophole in America). It's no different at a university just because the perk happens to be reduced tuition.

Is the bill closing even one CORPORATE tax loophole???  Corporations keep their SALT deduction and get a 20% rate, but all of a sudden the Republicans think it makes sense to take away loopholes for individuals??  They keep the carried interest loophole benefiting hedge fund managers but make tuition waivers for grad students taxable???

I don't see why the existence of some loopholes makes other loopholes justified. I also am not really worried about corporations: the best corporate income tax rate is 0%. Corporations should only pay tax on the unimproved land value of their property and whatever surtaxes are assigned to their utilities. They shouldn't get a deduction for those taxes anymore than individuals do, because Uncle Sam should not be subsidizing local and state governments through the tax code.

I guess you could say they should pay a VAT too, if support that kind of taxation.

I don't particularly care about the carried interest taxation. I am more interested in imposing a general tax on financial transactions than changing tax codes for hedge funds. Carried interest only seems to be a really huge issue for people who care majorly about income inequality, which is not something I'm interested in.

You're dodging the point.

How so?

I don't see why the existence of some loopholes makes other loopholes justified.

If we're writing a new tax bill to close all these alleged loopholes, why are we 1) not closing ANY corporate ones, and 2) lowering the corporate rate further?

Then again, you don't care about income inequality so I suppose you might actually be looking forward to the old days when the .1% lived in castles and everybody else were peasants. Unless, of course, I've misread your post entirely.

It's not a tax bill to close all loopholes. GOP House leadership picked this particular one to make up some of the money on their bill so they can give a tax cut elsewhere. There's probably a bi-partisan tax overhaul bill that will close more loopholes, but this bill obviously isn't it, and the GOP did not even make an attempt at it.

Why would it bother me that the corporate tax rate is going down? I support that. Like I said, I think the corporate income tax rate should be zero. You're also correct that I don't particularly care about income inequality, but even if I did, I don't think the tax code is the place to reduce inequality. We should be raising tax dollars in the least distortionary matter possible. If that means Warren Bufffet is charged 0% tax, it means Warren Buffet doesn't pay tax. You should address inequality on the SPENDING side, by ensuring money goes to poor kids, poor schools, poor whatever, instead of Warren Buffet. This makes intuitive sense to me.

The specific question is why conservatives aren't up in arms about the graduate student hit, though. At least that's the way I read it. It's because it's a tax loophole. It's also not a tax loophole that will affect me much (unlike the tax loophole on medical insurance, which I would like to keep...everyone likes their own tax loopholes).

[ZiziPB]

Why would it bother me that the corporate tax rate is going down? I support that. Like I said, I think the corporate income tax rate should be zero. You're also correct that I don't particularly care about income inequality, but even if I did, I don't think the tax code is the place to reduce inequality. We should be raising tax dollars in the least distortionary matter possible. If that means Warren Bufffet is charged 0% tax, it means Warren Buffet doesn't pay tax. You should address inequality on the SPENDING side, by ensuring money goes to poor kids, poor schools, poor whatever, instead of Warren Buffet. This makes intuitive sense to me.

The problem with your thinking is that there would be nothing or precious little to spend if corporations and the Warren Buffets of the world pay zero tax.  You can address income inequality with spending but the money has to come from somewhere...

[Glenstache]

Just wow. This seems like an inconscionable case of kicking US citizens when they are down. I was not aware of this previously. One provision of the tax bill is to place a 20% excise tax on goods sent from Puerto Rico to the mainland.

http://thehill.com/policy/finance/362309-san-juan-mayor-gop-tax-bill-would-be-more-devastating-to-puerto-ricos-economy

This will destroy parts of their economy. Why? What is the possible justification for this? Why would this have even been put into the bill in the first place? The only thing I can think of is if a competitor to some industry on the island wanted more market share and lobbied a representative to slip it in.

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?

[sokoloff]

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?

Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

Assuming that is the case, it seems reasonable to levy a cross-border tax or some other means of putting PR-based manufacturing companies onto a similar footing as non-PR-based US-based companies.

[Glenstache]

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?

Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

Assuming that is the case, it seems reasonable to levy a cross-border tax or some other means of putting PR-based manufacturing companies onto a similar footing as non-PR-based US-based companies.

...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation

[Dancin'Dog]

Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 

Why not tax corporations %40 each time a CEO retires? 

[ZiziPB]

Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 

Why not tax corporations %40 each time a CEO retires? 

Not quite.  You are forgetting the step up in basis.  Any capital gains would go completely untaxed.

[sokoloff]

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?

Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation

Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".

I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)

[OurTown]

Senate Republicans, shorter version:  "Fuck the poor!"  (hat tip to Mel Brooks, History of the Word Part One).

[OurTown]

Senate Republicans, Christmas version:  "Are the no prisons?  And the workhouses, are they in good working order?"

[OurTown]

Senate Republicans, Christmas version, now with healthcare policy:  "Let them die and decrease the surplus population."

[ixtap]

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?

Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation

Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".

I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)

The very first google hit says "Puerto Rican corporations who intend to send funds to the US...pay federal income taxes."

[Glenstache]

Don't forget that PR does not get a voice in congress. Taxation without representation, anyone?

Is it taxation without representation?

I thought it was "no taxation and no representation" as PR residents are not federally taxed on PR-sourced income.

...except that corporations and individuals are taxed in PR.
https://tradingeconomics.com/puerto-rico/corporate-tax-rate
https://en.wikipedia.org/wiki/Implications_of_Puerto_Rico%27s_current_political_status#Taxation

Your first link details the Puerto Rico taxes imposed (not the federal US government taxes) and your second link says that "Puerto Rico residents who work for the federal government pay US income taxes".

I don't think either of those refute the "no taxation [on PR-sourced income] and no representation" claim. (Yes, they pay into and take out of Social Security; I'll give you that.)

In short, economic activity that stays within PR is not taxed by the Feds. If it extends beyond, then they pay Fed taxes just like everybody else.

[sokoloff]

In short, economic activity that stays within PR is not taxed by the Feds. If it extends beyond, then they pay Fed taxes just like everybody else.

If my economic activity stayed fully within Massachusetts, I would still be taxed federally. The fact that PR doesn't work the same way substantially undermines the "taxation without representation" claim, IMO.

Want representation? Become fully subject to federal taxation (basically, petition to become a state, which has its own quagmire of pros and cons to different constituencies).

[mizzourah2006]

Although it’s been mentioned over and over again on this thread, the obvious and simple solution to the estate tax is to eliminate the stepped-up basis for everyone.  Then you can inherit unlimited wealth for no tax consequences.  The tax is only collected when you actually benefit from the asset (sell it).   That mythical unicorn, the family farm, could stay in the family indefinitely without tax consequences.  Don’t know what the historical tax basis for the asset was?  Fine, make it $0.  It was free to you anyway.  If the dearly departed didn’t bother to keep records on the tax basis how are you harmed by that?  But sadly, eliminating the step-up in basis is a fantasy rendered impossible by our current plutocracy.  Inconsolably grumpy about current tax plan, in case you can't tell.

I completely agree with this. Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.

[sol]

Death should not be an event that our government collects taxes on.

The estate tax is not a tax on death, it is a tax on heirs who receive vast sums on unearned wealth.

An inheritance is income, just like winning the lottery is income.  Why are lottery winnings taxed but inheritances are not?  The person receiving the money should owe taxes on their income.  The dead person owes nothing.

[sokoloff]

Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.

The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.

It covers only:

• Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
  
• Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
• Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
• All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).

These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.

[mizzourah2006]

Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.

The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.

It covers only:

• Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
  
• Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
• Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
• All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).

These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.

so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?

[sokoloff]

so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?

You self-report the basis, calculate the [edit: basis gain] from that, and put it on schedule D. Absent an audit, it's on the honor system.

I used to file a 20+ page schedule D with a generated list of open and close dates (extracted from my online trading records and formatted by excel or python/lisp code). The chance the IRS ever looked at any given line item is approximately zero in my estimation, particularly since I listed some open and close transaction dates as "various", "various ST", or "various LT". I played it entirely straight, but the opportunity for abuse and fraud was rampant.

The reason for the step-up in basis being more practical at death versus before death (IMO) is that before death, you have access to the living taxpayer who might remember when or where they bought the asset, either exactly or approximately. Obviously, in an estate situation, that same inquiry is not possible.

[ZiziPB]

Now that brokerages and investments are tracked via computer it would not be that difficult to calculate the original price paid and tax the gains if/when the investments were sold. It's not like people are walking around with hundreds of stock certificates today and the govt. can't find out how much was paid for them.

The groundwork is being laid for such a system to be workable, but the data is nowhere near covering the purchases of people who are most likely to die today.

It covers only:

• Shares of stock, including exchange-traded funds (ETFs) that are not treated as regulated investment companies (RICs) for taxation purposes, you acquired on or after January 1, 2011;
  
• Shares of stock in RICs and stocks acquired in connection with dividend reinvestment plans acquired on or after January 1, 2012;
• Specific debt securities (for example bonds with a fixed rate of interest and fixed maturity date), securities futures contracts, options, rights and warrants purchased or acquired on or after January 1, 2014; and
• All other debt securities (for example zero coupon bonds that convert into interest paying bonds) purchased or acquired on or after January 1, 2016 (this tax information will be reportable on 1099-B forms filed in 2017).

These regulations were passed to reduce the tax compliance slippage, but also sets us up for a reasonable way to eliminate the step-up in basis upon death in 50 years.

so given what you are saying is true (I'm not debating it at all) if I am a 75 year old with some of these investments today and I decide to sell them, how do I pay taxes on them if it isn't trackable by the govt? Do I not pay taxes on the gains?

Presumably the sale would be reported to IRS by your broker with a $0 basis and it would be up to you to show your actual basis.  If you can't, you pay taxes on the entire sale proceeds.

[jean]

The reason for the step-up in basis being more practical at death versus before death (IMO) is that before death, you have access to the living taxpayer who might remember when or where they bought the asset, either exactly or approximately. Obviously, in an estate situation, that same inquiry is not possible.

I hear you, but lack of paperwork and complexity is no excuse for capital gains incurred during the duration of the now-dead person's life to go untaxed, forever.   Do you agree?  What do you propose as a solution, if not an estate tax or simply making the basis $0 if you can't figure it out?

[sokoloff]

I don't find a loophole that requires the death of a human being to take advantage of to be particularly objectionable or exploitable and would rather the government forgo the taxes on some income than to excessively tax the inheritance (by a zero basis determination) or to create a bunch of wasteful human activity (to guesstimate the basis and potentially audit the same) particularly for those under the stress of the death of a beloved family member.

So, I think I just don't agree with your premise, though I completely understand your position and agree that it has a different though equally logical consistency as mine does.

I think that an estate exemption in the single-digit millions per deceased person (to avoid taxing "nuisance estates") and a step-up in basis for recipients is practical and pragmatic, even if as an engineer, I can identify certain small unfairnesses about that outcome.

[seattlecyclone]

Death should not be an event that our government collects taxes on.

The estate tax is not a tax on death, it is a tax on heirs who receive vast sums on unearned wealth.

Not exactly. The estate tax pays no attention to how much you inherited. It is charged on the total value of the deceased person's estate, and is the same amount whether the whole inheritance goes to one person or is split up across 100 far-flung relatives.

Some states do actually have an "inheritance tax" that is calculated based on how much a living person receives from an estate. Nothing like that currently exists at the federal level.

[loyalreader]

Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 

We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false. 

The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance. 

I don't think it's unreasonable to think that someone who stands to inherit $11m when their parents die has been given a leg up on... everything... in their life. I don't feel bad for people who have to pay more taxes on inheritances over $11m.

If everyone who had an estate of more than $11m gave the excess to the charity of their choice that would be great. We probably both agree that would be better than the government taking it as a tax. But you can't legislate moral responsibility, only rights.

[sokoloff]

Death should not be an event that our government collects taxes on.

The amount that has been accumulated in one's lifetime is irrelevant. 

The money was hard earned & taxed all along the way. 

We can quibble over your third point, but not your first. The government does not collect taxes on death. That's a ridiculous statement and calling it a death tax is false. 

The tax is on your estate. Yes, it is taxed when you die, but it is not a tax on your death. It is a tax on your heir's inheritance.

If there's something ridiculous written above, I don't agree with you on which statements are ridiculous.

"My labor isn't taxed; it's an income tax after all."

"My purchases aren't taxed. It's a sales tax, not a purchase tax."

Those both seem equally valid as "It's not a tax on a death event; it's an estate tax."