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Repeal The Estate Tax

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The Estate Tax is a federal tax on your estate (all your property, life insurance proceeds, annuities, trusts, etc.) after your death and if it were permanently repealed between 2006 to 2016 it is estimated to cost $369 billion (by the Joint Committee on Taxation) to $1 trillion (Center on Budget and Policy Priorities), but I don’t think that matters. Right now the amount exempt from the tax, $2 million in 2006, means only 0.5% of all estates are affected; by 2009 ($3.5 million exempt) it will only affect 0.3%. I don’t think that matters one bit.

When I get my paycheck, a huge chunk is taken out by the Federal government for taxes, another chunk by the state, and then medicare dings me followed by social security. When I buy stocks and then sell it, government takes away some of that in capital gains. Even when I earn a little bit of interest from my Emigrant Direct account, they take a piece of it there to. Now they’re going to say that when I die, the federal government is going to take away yet another piece? Picture that wizened picture of Uncle Sam going to funerals across the country, reaching into the casket, and making out with some wallets.

Think I’m off my rocker?

If you’re curious, CNN Money had a little piece about all the proposals.

{ 16 comments, please add your thoughts now! }

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16 Responses to “Repeal The Estate Tax”

  1. Dus10 says:

    One of the biggest problems with the Estate Tax is the cost involved in probate and the tax collection. Essentially, it comes down to punishment. If a tax is only there because the government needs to cover its costs to operate the tax, then it is there to punish those for whom it affects. Sure, the government is going to lose nearly $1 trillion if we get rid of it… but if we ended the probate process, we would be saving huge amounts in expenses… and if we did not have to collect the taxes, we would be saving even more.

    However, there is already a way to get around the Estate Tax… setup a trust and put your asset within it. It keeps the government out of the way, and it lowers the tax burden felt by the survivors.

  2. FMF says:

    I’m with you. People have already paid taxes on this money — why tax them again? Reason: dead people don’t vote!

  3. di says:

    It’s not you (the dead person) being taxed — it’s the person(s) receiving the gift. If you gave x dollars (for large values of x) to someone, that would be taxed as well; there’s no difference.

    As for the “this money was already taxed” argument, all money has already been taxed. I pay taxes when I get paid; should there not be any taxes when I buy a tasty sandwich with that money?

  4. CK says:

    Down with the estate tax. It punishes people who work hard, save and would like to pass money to their heirs. Why make people jump through the hoops of setting up trusts? I could care less if it let’s families like the Hiltons and the Rockfellers keep money through generations. Who cares, someone earned it at somepoint. It’s petty jealousy.

  5. Chris says:

    All right, that’s it.

    I enjoy reading these personal finance blogs and I agree with the authors and commenters on most subjects, I’d say 98% of the time, but when the estate tax comes up and people start whining with these pathetic and self-serving arguments it just makes my blood boil.

    I am absolutely, unequivocally, 100% opposed to eliminating the estate tax and am, in fact, in favor of raising it and expanding it dramatically. The estate tax was designed to prevent great wealth, and with it great power, from accumulating and consolidating over time into the hands of a few wealthy families and destroying our system of freedom and democracy in the process. You know, like America had before we wised up to such brain-dead policies. If you’re scratching your head trying to think of historical relevance, think slavery, robber barons, horrific working conditions and lack of safety for the labor force, the laissez faire roaring 20s that caused the Great Depression, and the New Deal policies that came about to fix these disasters and prevent their recurrence. Every time rich people whine about having to contribute to society and people start listening to them, get ready for the destruction of the middle class and a government that serves *only* those who are wealthy while it punishes, *really* punishes, anyone who isn’t. You know, like what we have now with the current administration. Then get ready for a cratering economy as it implodes and we needlessly go through the whole stupid cycle, again, because overly greedy pricks can’t be bothered to give a damn about the rest of the population and refuse to learn anything from history.

    It is the *rest* of the taxes that should be examined and streamlined or eliminated if they no longer serve a useful purpose. For those who say things like “It [the estate tax] punishes people who work hard, save and would like to pass money to their heirs,” I say what a crock of bullshit.

    First, it does nothing of the sort. When you leave this realm of existence your money is useless to you. Money is a human-invented system of commerce that was designed to benefit and serve the living. If you want to whine about being “punished” by taxes, why don’t you focus your energy on reducing or eliminating truly unfair taxes, or taxes that serve no useful purpose and that you pay while you are alive so the ultra wealthy can have the tax breaks they don’t need.

    Second, I’m sick of hearing people bitch about how they can’t leave their money to their precious children because the big bad government wants to take it from them. Very amusingly, this argument almost always comes from conservative types (who vote Republican in large numbers) who constantly pound their collective chest about the importance of hard work and personal responsibility, while simultaneously enacting legislation to extract more and more money out of the non-wealthy by cutting unemployment benefits and any other social safety net they can get their hands on, and in the process tilting the playing board so far to one side that no one but them has a prayer of even staying on it. This “death tax” campaign is an arrogant land grab conducted by greedy and self-centered well-connected and well-to-do people, designed to screw the public at large while only looking out for themselves. Hypocrites. (And even better, many of these same repugnant people have the audacity to call themselves “Christians.” Try reading that bible you wave around sometime, buddy.)

    In my opinion the estate tax is the one tax we should keep — in fact, it should be the 28th amendment to the U.S. Constitution — and it should apply to *everybody*. You want to leave your cash hoard to your offspring… why? So we can have more Paris Hiltons in the world? Save it, pal. In *my* perfect world Paris Hilton, and every other able-bodied young person, wouldn’t get *shit* handed to them. They’d be told to get a job and work for what they want. Exemptions would be made only for those who can’t work due to injuries, no-fault disease (that means obesity doesn’t count), or physical and/or mental deformities they’ve had since birth that prevent them from being able to contribute. And those folks can get the care they need from society using only a *tiny* percentage of the absolutely obscene amount of money that wealthy dead people want to give to their own healthy offspring who don’t need it and don’t deserve it because they haven’t worked for it. The idea of America, and its greatest experiment, is freedom and opportunity. That means everybody gets a shot. And when the rich and powerful are allowed to rewrite the rules so only they can win, you can forget about America being a great country.

    You want my support to eliminate the estate tax? Fine, I’ll give it to you, if you agree to this condition with *no* loopholes: you don’t get to pass any wealth down to your able-bodied offspring. You have a daughter bed-ridden with Multiple Sclerosis and you want to set up a trust fund for her care? No problem; your family gets a free pass for that. But if you *really* believe in the importance of hard work and personal responsibility then you’ll enjoy distributing the rest of your wealth to charities, universities, or other worthy causes that benefit the public at large. Your healthy kid can get off his ass and get a job.

    Don’t want to agree to this? They I say you’re a hypocrite, and I will *never* support estate tax repeal or “reform” that reduces it in any way, and I will continue to campaign to friends, family, and coworkers to support *real* estate tax reform like the one I’ve just outlined.

    I apologize in advance for the tone, but not for the content, of my post. I like personal finance too, but when your ideas about taxes and public policy go so overboard that they threaten the well being of the population at large to benefit the few who don’t need it, you lose my support entirely.

  6. jim says:

    Chris – Thank you for your well thought out argument and for sharing it with me/us/whatever, with me you never have apologize for either content or tone because I know it’s not a personal attack but merely someone showing passion for something they believe in. That being said…

    “When you leave this realm of existence your money is useless to you.” I think that point is meaningless, why do you educate your children? So they may succeed in this world without you. Why do you clothe your children or feed them? So they can survive. If I work hard for my money and choose to pass it in its entirety to my children and give nothing to a charity, church, or needy group – that’s my choice. It is my money and I will use my own moral compass to guide my decisions on what to do with it, not someone else’s.

    “In my perfect world Paris Hilton, and every other able-bodied young person, wouldn’t get shit handed to them.” The “failure” of rich kids isn’t the product of the money, its the product of the upbringing. There are countless children who have grown up with wealth and not shown the characteristics you find so abhorrent in Paris Hilton or other media-exposed rich kids. Taking money away from the rich and giving it to who you believe to “need” it is nothing short of thievery. How much money do you (not you Chris, general you) donate a year to charity? How much blood do you donate? We have the choice to help each day and while many people do, many do not. It’s not our place to judge the ones who do not.

    “But if you really believe in the importance of hard work and personal responsibility then you’ll enjoy distributing the rest of your wealth to charities, universities, or other worthy causes that benefit the public at large.” Hard work and personal responsibility aren’t lessons learned only by the poor. It’s not the inherent responsibility of the rich to support the needs of the poor either. If I work hard and become fantastically wealthy, then I should be given the choice of where my money goes – the government shouldn’t decide.

    I suspect that because you have a computer and you weren’t born in a third world country. You were likely born here in the United States to an area which has running water and electricity. The fact that you read blogs and spent the time to write out a well formed well thought out arguments means you have at least a high school education and likely a college one as well. Depending on where someone sits in the wealth spectrum, they may see you as a Paris Hilton complaining about how much money Bill Gates has.

  7. CK says:

    Once again jealousy. The idea that without the death tax a super wealthy all powerful class will be created forever is stupid. I’m sure without the estate tax Bill Gates, the guys from Google, etc would have never had a chance right? What makes people so unhappy about others having money? And who are we to judge if they received their wealth “legitimatly” or not.

    Give me one compelling reason why I should care how much money the daughter of Bill Gates receives?

    One good reason why when he dies he should be forced to give some of it to the rest of us?

    Frankly I don’t think the estate tax will apply in my family, so why should I care? Shouldn’t I be for it?

    No.
    It’s Jealousy, coveting what another has, check what your bible has to say about that.

  8. Tony says:

    Chris – whom I assume is from the great state of California – conspiracy theories are great fun and give you plenty of hypothetical fuel for your fire but the reality is you are misguided with what is true idea of America.

    America is about choices and freedoms and when you try to take away those freedoms with false rhetoric like yours, that is when I have to speak up. The heart of America lies in these freedoms and choices which are protected by a little know document called the Constitution, these freedoms also happen to form the basis for our free market economy. This free market economy in turn is the engine that generates all this wealth, but you are probably against that whole free market stuff too, huh?

  9. E. Uriel Acevedo says:

    This is a GREAT Topic!

    Let me start out by pointing-out that I am 100% in favor of repealing the Estate Tax (as well as our current Income taxation system for that matter).

    I am neither a Republican nor a Democrat- what I am is 100% Fortunate and Happy to be born in a country that was founded on one very sound principal which is that “men are born with certain unalienable rights that among these are LIFE, LIBERTY and the PERSUIT of HAPPINESS”.

    Liberty cannot exist if the individual rights of humans are not protected and valued first and foremost!

    When the PERSONAL property of an individual is claimed for the benefit of the masses it is called socialism, (and if you think that system works take a trip to France!).

    If we value individual rights then we cannot in good conscious lay claim to another man’s property- regardless of how much we might hate their spoiled children.

    The Estate Tax is a disgusting and very dangerous tax. It threatens the very core of what our Nation stands for and every effort should be made to abolish such an aberration.

    I must say that it is quite sad when individuals believe they have the right to dictate the lives (or property) of others.

    Regarding the technical aspects of the Estate Tax Law- it is a common misconception that avoiding Estate Taxes is as easy as setting-up a trust.

    Of course setting-up trusts are certainly great ways to minimize the impact but them alone do not avoid the payment of these taxes.

    Another misconception is that Estate Taxes only affect the wealthy- guess again!

    Estate Taxes take into account ALL of a persons assets- including real estate. In today’s inflated real estate market it not difficult for an average middle class family to end up having to pay Estate Taxes, which by the way are due 9 months after the person dies. In my practice I have seen many “average folk” have to fire sale property that has been in their family for generations just so that they could afford to pay the taxes (and I’m not talking mansions or hundred acres of land either!).

    A wrong is a wrong! And it is wrong to take away something that does not belong to you and give it away to someone else.

  10. E. Uriel Acevedo says:

    I forgot something…

    Chris there is a link to a 45 minute video on my lens. It is titled:

    Money, Banking and the Federal Reserve by the Mises Institute

    It will give you a concise, detailed and accurate report of the reason for the Great Depression- hint: It was NOT due to laissez faire policies; in fact it was quite the contrary!

    Peace!

  11. FMF says:

    BTW, with proper estate planning, estate taxes can be reduced dramatically if not by-passed altogether.

  12. John says:

    Just a note, but Paris Hilton does have a job. She has a tv series, book deals, a line of perfumes, a clothing company… it wasn’t wealth that got her these things. It was her notoriety. So if you want to blame her, you need to blame all the people that tune into her.

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  14. Kim says:

    Most of what is taxed in the so called “death tax” is capital gains on stock and property which, since it hadn’t been sold, hadn’t been taxed. Just as when you sell your house or a stock the gains are taxed, they are taxed when you die and effectively “sell” them to your heirs. Doesn’t sound so wrong to me, particularly with such a large exemption. As much as most people would like to believe they will leave behind a large chunk of change, the reality of the estate tax affecting less than 1% of Americans, the vast majority do not.

  15. jim says:

    Kim – That’s a valid point regarding capital gains, we should then accept one of the proposals that the cost basis of anything you inherit should not be updated to the current market value but be kept at whatever the deceased bought it at. Currently if you inherit shares of stock the cost basis is what the market value is right now, they should keep it at whatever your benefactor paid for it and go on as usual.

    Claiming that the estate tax is a proxy for capital gains in a special situation isn’t right and the fact that only 1% are affected shouldn’t matter. What’s right is right regardless of who it affects.

  16. JJ says:

    Thank you Chris. I have made essentially
    the same argument myself to our State’s Senators.

    The “death tax” was a brilliant PR ploy.
    I’d much rather it be called the
    “lazy rich kid tax” unless you can come up
    with something better.

    It is a transfer of money. If I pay a plumber, he gets income(after expenses) which
    is taxed at ordinary income. Apply this to the
    tranfer of money to heirs:

    Work: Estate Tax
    federal income tax Exempt first $1-5million
    (exempt a few thousand)
    state income tax
    (if applicable)

    Perhaps we should just say just lump the inhertance into income for that year.


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