5 Billionaires Who “Skated” On Death Tax

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Anyone else find this slideshow distasteful?

The estate tax had a one year reprieve this year and anyone who passed an estate, i.e. died, would not have to pay the estate tax. Fortune tallied up how much money five estates “saved” when their billionaire died. The billionaires were Dan Duncan ($10 billion), John Kluge ($7.5 billion), Mary Janet Cargill ($2.5 billion), Walter Shorenstein ($1 billion), and, most probably famously, George Steinbrenner ($1 billion). It’s a loss of revenue of around $9.9 billion.

In case you’re wondering, $9.9 billion is fraction of a fraction of the national debt, which stands at over 13.8 trillion.

The distasteful part is that those five people had families who lost someone. While some of them might be celebrating the fact that they inherited more because the estate tax took a nap, but that doesn’t mean we should be counting the tax revenue we didn’t collect.

When you think about it, it’s a sad commentary on what we’ve become.

{ 18 comments, please add your thoughts now! }

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18 Responses to “5 Billionaires Who “Skated” On Death Tax”

  1. John Koch says:

    This disgusts me!

    Not only did these people already pay taxes on the money that they WORKED HARD for, CNN wants to villainize them for a tax law that they had no control over!

    This is yet another reason why people associate the wealthy as “evil rich” instead of “hard working, fiscally responsible, job creators”.

    THANK YOU, CNN, for telling me how to think.

  2. Wil says:

    If you have paid tax on your income your entire life, your estate should pass to whomever you choose without any additional taxes. It doesn’t matter if your estate is valued at $1 or $1B. Simple as that!

  3. tbork84 says:

    But aren’t we supposed to think that they are evil and greedy because they were successful?

    Its a rather awful policy.

  4. zapeta says:

    Yeah, thats pretty distasteful. These people had no control over the tax situation or their death.

  5. Shirley says:

    If I worked honestly and paid all of my required taxes, the estate I leave at my death belongs to whomever I choose. Why in heaven’s name should Uncle Sam be entitled to any of it, regardless of the amount left?

    Estate Tax needs to be done away with entirely.

  6. freeby50 says:

    It is a bit distasteful. But I’m failing to see how the CNN article is vilifying anyone. Seems pretty straight forward reporting. I didn’t notice use of the words “evil” or “greedy” anywhere (maybe I missed it).

    Why do people assume that those billionaires ever paid taxes on their wealth? Most billionaires have accumulated wealth by building businesses or similar. That would be taxed by capital gains and do not pay taxes until their gains are sold. They aren’t paying income taxes on the vast majority of their wealth I am sure of that. Bill Gates has not paid taxes on the billions of dollars he’s got in Microsoft stock since he has not sold it. We can safely assume that most of the wealth of the megarich is in the same category and its quite likely that most of their wealth has never been taxed.

    • Jim says:

      I was with you until you got to “we can safely assume” because you know what happens when you assume… 🙂

    • uclalien says:

      “They aren’t paying income taxes on the vast majority of their wealth I am sure of that.”

      You’re sure?

      Income Tax 101:

      1. As an owner (stockholder) of a company, Mr. Gates pays corporate income taxes at a rate of 35% before ever seeing a dime. If that 35% isn’t lost to the government, it either gets distributed to Mr. Gates via dividends or reinvested in his company (which would likely lead to a higher stock price).

      2. There’s a stock adage that says, “You haven’t lost anything until you actually sell.” The opposite it also true. So there’s no reason anyone should pay taxes on gains they haven’t realized.

      3. If he (or an inheritor) chooses to sell those stocks to access funds, he/they must pay personal income taxes on the capital gains (15-39.6%).

      4. Between 2001 and 2009, the death tax ranged from 45-55% (2011 is 35%).

      If we assume a 35% corporate income tax rate, a 15% long-term capital gains rate, and a 35% death tax, we get a total tax rate of roughly 64%. Keep in mind that this is a best case scenario that assumes long-term capital gains and no state or local income taxes.

      But even if we assume that someone was “lucky” enough to have their loved one die in 2010, they are still stuck paying a total tax rate of roughly 45% to access any money.

  7. Chuck says:

    The beneficiaries who did not pay any estate tax also did not receive a step-up in cost basis for any capital assets. So they will pay capital gains taxes on any assets sold based on the original cost basis. Not quite a free ride.

  8. Sun says:

    Pay 35% for capital gains then or make income tax bracket limited to 15%. There’s a fallacy that some people are workin hard for their money when it is inherited and maintained versus earning by work.

  9. Tim Connolly says:

    It never ceases to amaze me how the demogaugery of the liberal media works. Dan Duncan created a multi billion dollar jobs machine from little more than a pickup truck and ten thousand in personal savings from working in the oil patch. He left a legacy of prosperity for his employees,a deep reservoir of goodwill, many millions of dollars donated to the betterment of others, and has been a dramatic cintributor to the well being of investors of all kinds, from widows and orphans to the well to do. CNN and their ilk would be much more credible if they were willing to give even a slight modicum of balance to this gharish reporting of theirs.

  10. Rich says:

    I don’t think that either the story nor the slideshow are inherently distasteful.

    You can take from the story what you will — given that the title includes “skated” indicating that these people got away with something, but it is skewed to be viewed in a negative light. You can choose to look at it either way though — “How nice for those families, that there is that much more of those estates to go around” or “Those bastards left another 9.9 billion of taxes for my kids to end up paying”

    What you take from this “story” says more about you, the reader, than it does about the reporters writing it. It might have felt a bit more positive, if there had been some mention of how much those estates left to charities as well, but that information would have also reduced the story’s punch, either way.

    To those saying that the estate tax should be abolished should consider that most of the tax systems that these successful business people utilized to “earn” thier monies, assumed that they would be paying a given portion of their “lifetime earnings” back into the system, upon thier expiration. The reason they didn’t need to, was a TEMPORARY change in the rules. The temporary rule changes were implemented through the same backroom politicians which allowed governmental spending to continue at a deficit, irresponsibly.

  11. Don C says:

    The tax was merely deferred, not skated or avoided. The assets were transferred to the beneficiaries at historical cost (original basis), not at fair market value. If the beneficiary sold the assets the next day, they would incur huge tax liabilities (assuming they are not tax exempt entities).

    There is some misconception in some earlier posts. I doubt all of the wealth transferred was previuosly taxed. Say billionare X bought real estate for $1M that’s now worth $100M. None of this was taxed. This becomes taxable when sold. When the beneficiary inherits the real estate and later sells it for say $90M. They pay tax on the $89M gain.

    There are numerous laws within the tax code that allow taxpayers to defer taxation. This is designed to encourage investment ino the economy, and are not simply loopholes that favor the rich.

  12. Clay Ivy says:

    Those people didn’t earn that money; the person who died did. If that money simply passes down it makes it harder for others to earn a piece of the American dream. Warren Buffet compares this to picking olympians based on whether their parents were olympians. More people should follow Gates and Buffet in donating their wealth. This gives more people the chance to earn a better life. You don’t deserve wealth just because someone in your family earned it. Instead of worrying about what they get when someone dies, they need to get out and contribute.

    • Grant says:

      Regardless of whether they earned it or not, the person who did earn it should have the discretion to do with it as they please. I can’t imagine that taxing them and redistributing it would be any more efficient than their rich beneficiaries spending it and stimulating the economy while doing it. If the government was efficient with their use of tax payers’ money it would be one argument. Abolishing estate taxes doesn’t necessarily make it more difficult for other to earn a piece of the American dream. This American dream is founded on the ideal of people earning it regardless of their status in society. I’m a believer that hard work and determination are the building blocks to the American dream, not the ridiculous pork projects that the government continues to fund.

  13. freeby50 says:

    Are people mostly having a negative reaction over the word “skated”? Cause I’m puzzled what else about this article could possibly be so horrible.

  14. eric says:

    It is morbid if you think about it..product of an overly capitalistic society?

  15. Hi, Jim,

    Isn’t it sad that some rich people are so anxious to avoid estate taxes that they deliberately chose to die in 2010?

    On one level, the article is just a bizarre human interest piece to dramatize how the estate tax affected these wealthy who did happen to die in 2010, and as such I supposed it seemed like a good idea to the editors.

    But it is distasteful, I agree.

    And I wonder if next year there’ll be a followup article on how much money the heirs of deceased wealthy people will have to pay in 2011. Estates over $5 million will be taxed at 35%, so of course deceased billionaires will have pay many billions into the Treasury.

    Will we see articles next year on the family businesses that had to be sold in 2011 so that heirs could pay the estate taxes? Somehow, I doubt it.

    I understand that the heirs of multimillionaires aren’t pitiful charity cases. Why won’t some people understand that they don’t have to be — that the money doesn’t belong to the government, it belongs to the deceased person, and they have the right to leave it to their heirs as they see fit.

    The estate tax is basically the government asserting that property rights don’t really exist. It really owns all money and property. It’s just allowing us to control property while we’re alive. Once we die, property rights revert back to the “true” owner — the government.

    That’s the real message estate taxes sends.

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