Vox article on inheritance

[Anonymous]

We will never do this, but the solution is actually quite simple. ALL income should be taxed the same, regardless of the source. Wages, inheritance, dividends, etc. It is all just “income”. Every dollar of income should be taxed at a progressively higher rate than the previous dollar. (Maybe you have a cut-on point where taxes kick in, e.g. at a yearly equivalent of full time minimum wage or something) There should be zero tax exemptions/breaks. The government should bot care if you are married, own a house, have kids, or donate to charity. You as a taxpayer receive some form of income, dollar 2 is taxed a little more than dollar 1. Dollar 3 is taxed a little more than dollar 2, etc. We could just have a GD formula where “x” is the total income you received in a year, from all sources, you plug it in and BAM - there’s your taxes owed.

[Anonymous]

Anonymous wrote:We will never do this, but the solution is actually quite simple. ALL income should be taxed the same, regardless of the source. Wages, inheritance, dividends, etc. It is all just “income”. Every dollar of income should be taxed at a progressively higher rate than the previous dollar. (Maybe you have a cut-on point where taxes kick in, e.g. at a yearly equivalent of full time minimum wage or something) There should be zero tax exemptions/breaks. The government should bot care if you are married, own a house, have kids, or donate to charity. You as a taxpayer receive some form of income, dollar 2 is taxed a little more than dollar 1. Dollar 3 is taxed a little more than dollar 2, etc. We could just have a GD formula where “x” is the total income you received in a year, from all sources, you plug it in and BAM - there’s your taxes owed.

You're correct that this won't happen. The reason is that in the US, tax policy substitutes for social policy. The government officially smiles upon some activities and frowns upon others and tax policy is one place where that is expressed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.

Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.

People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.

Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.

That money has already been taxed at least once, possibly multiple times.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Not really surprised by this, the net worth of the top 10% is >1M so why not a 500k+ inheritance?

This. My parents were very middle class, and my sister I should inherit about $1m each.

Listen, folks. Just because YOUR middle class parents are/were terrible with their money (thus leaving you little to nothing) doesn’t mean that other older people who were responsible and saved/invested their money throughout their lives (thus leaving an inheritance for their children - even *gasp* one million dollars!!!) were “rich” - they saved their money, now they have money! Some of you should try it.

That being said, I am struggling to even get through that article. It is structured in such a bizarre, haphazard way that it reads almost like a stream of consciousness. I really miss editors.

Vox is not journalism, I’m fact, not sure what purpose it serves at all.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is all so dependent on the family situation.

Barring unforeseen massive medical expenses (which certainly could happen), my sister and I are set to inherit a couple million dollars each + a fully paid off apartment in a pre-war building in Manhattan. Clearly we are exceptionally privileged.

That said, I do think we both have worked hard. My sister is a college professor and I’m a public servant. I don’t think we’ve taken our privilege for granted.

My parents did not come from money. My dad grew up middle class on Long Island, but his parents didn’t give him a penny after he turned 14. He was told to just go out and figure out how to make money. He got his first job from a friend who worked at a movie theatre, who was willing to look the other way around the fact that my dad wasn’t 16 yet (things were different in the late 60s).

My mom grew up working class in Queens (my grandma was a waitress and my grandpa was a glass blower). My mom was first in her family to go to college. My dad’s dad did go to college, but wouldn’t pay for my dad to go, so my dad got a scholarship.

They went to a law school ranked around 100, but graduated on the law review and both got excellent jobs. My mom stopped working when my sister and I were little, and my dad has worked his butt off as a lawyer for the last 40 years. Yes, he’s made a lot of money doing it, but he worked really hard at a job he did not like, to provide for his family.

So are my sister and I privileged? For sure.

Was there a lot of hard work involved? Absolutely.

No one is disputing your hard work of you or your parents. We just think that estates should be taxed. In this country assets are taxed everytime they change hands. Why should estates be different?

Actually most people don’t think estates should be taxed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.

Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.

People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.

Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.

That money has already been taxed at least once, possibly multiple times.

The exact same thing is true of the dollar you spend at a 7-11, but it doesn't stop that dollar from being taxed again.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.

Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.

People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.

Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.

That money has already been taxed at least once, possibly multiple times.

It's extremely clear that you don't know what the step up in basis is. No, that money has never been taxed.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How is it fair to heavily tax an estate but not life insurance proceeds?

I'm open to taxing life insurance appropriately. But as it stands now, most life insurance pay outs are WELL below the $11 million dollar estate tax exemption. There is no point in taxing life insurance without changing the estate tax exemption.

That may be true but if you're looking to tax all estates, and we know most estates are well below $11 million AND many people have life insurance coverage even with small estates, it seems to make sense that you'll likely get far more in taxes if you tax life insurance proceeds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is all so dependent on the family situation.

Barring unforeseen massive medical expenses (which certainly could happen), my sister and I are set to inherit a couple million dollars each + a fully paid off apartment in a pre-war building in Manhattan. Clearly we are exceptionally privileged.

That said, I do think we both have worked hard. My sister is a college professor and I’m a public servant. I don’t think we’ve taken our privilege for granted.

My parents did not come from money. My dad grew up middle class on Long Island, but his parents didn’t give him a penny after he turned 14. He was told to just go out and figure out how to make money. He got his first job from a friend who worked at a movie theatre, who was willing to look the other way around the fact that my dad wasn’t 16 yet (things were different in the late 60s).

My mom grew up working class in Queens (my grandma was a waitress and my grandpa was a glass blower). My mom was first in her family to go to college. My dad’s dad did go to college, but wouldn’t pay for my dad to go, so my dad got a scholarship.

They went to a law school ranked around 100, but graduated on the law review and both got excellent jobs. My mom stopped working when my sister and I were little, and my dad has worked his butt off as a lawyer for the last 40 years. Yes, he’s made a lot of money doing it, but he worked really hard at a job he did not like, to provide for his family.

So are my sister and I privileged? For sure.

Was there a lot of hard work involved? Absolutely.

No one is disputing your hard work of you or your parents. We just think that estates should be taxed. In this country assets are taxed everytime they change hands. Why should estates be different?

If my parents have already paid taxes on all of that money as they earned it, why should that money be taxed again?

Because you didn't earn it.

Ok fine, but what if that wealth was in the form of a business, as has been stated above, which makes it much more difficult to manage, tax-wise?

Are we supposed to put people inheriting small businesses in a tough situation? Do you propose somehow differentiating between liquid and non-liquid assets? How would one do that?

I don't have a proposal, but it's entirely possible to differentiate between liquid and non-liquid assets (or between people and businesses, or between real property and non-real property)--all of these things are done in the law all the time. Pretending that one would be starting from scratch in coming up with legislative language on this is silly. In Maryland, for example, if you're subject to the estate tax on the basis of the value of a business, you get multiple years to pay that tax.

If there is preferential treatment written into the code for certain asset types or classes you will immediately see wealthy people rebalancing to fit the new requirements. Tax and estate planning is a big business. Any loophole will be exploited. If you say farms are exempt, all of the sudden there will be a demand for whatever qualifies as a farm from people with a lot of assets.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:So just to be clear, specifically what estate tax are we proposing here?

Bernie has the most extreme proposal out that’s out there at the moment — 45% on estates between $3.5M and $10M and 77% for anything above $1 billion.

https://www.bloomberg.com/quicktake/the-estate-tax

Now, you may say that $3.5M is unequivocally a rich person’s estate (and on many metrics, it is), but it isn’t hard to imagine a lot of people in this area hitting that. If someone has a fully paid off home, and has invested relatively well over a 30-year career, it isn’t at all hard to imagine all of that coming out to at least $3.5M.

So people need to be ok with their kids paying 45% in taxes off of the sale proceeds from a home they inherited + any investments.

I’m trying to figure out what they want too. The current estate tax exempts everyone except the very rich. I thought that’s what liberals wanted. Progressive taxation that hits the very rich the hardest. But I seem to be hearing a lot of complaints that the estate tax doesn’t hit people who inherit small estates.

If you think $3.5m is s "small estate," I really don't know what to say to you.

Eliminating the step up in basis, which seems to be very popular here, would hit every single estate, down to grandma who leaves a single share of AT&T to her grandkid.

Yes. Seems fair.

Why? Because you just want some sort of weird vengeance?

Vengence? Nope. I just think people should pay the same capital gains taxes that I pay. I don't understand why estates should be exempt from this.

They aren’tt, here’s already pay capital gains tax when they sell, assets.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How is it fair to heavily tax an estate but not life insurance proceeds?

I'm open to taxing life insurance appropriately. But as it stands now, most life insurance pay outs are WELL below the $11 million dollar estate tax exemption. There is no point in taxing life insurance without changing the estate tax exemption.

That may be true but if you're looking to tax all estates, and we know most estates are well below $11 million AND many people have life insurance coverage even with small estates, it seems to make sense that you'll likely get far more in taxes if you tax life insurance proceeds.

I don't think turning life insurance payouts at all income and estate levels into taxable income is going to be a popular idea.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

As the very kind tax professional told me, this is what happens when people are working with incomplete knowledge. Complete knowledge, it turns out, is incredibly important when you’re dealing with the tax code.

Meanwhile, incomplete knowledge is kind of the human condition. Tax professionals cost money, which can be prohibitive for many people, especially those who’ve received a windfall but worry they’re about to be staring down some enormous bills.

Both parties, but especially Republicans, have made the tax code more complex.

Complexity advantages the rich, who have money to hire advisors.

Simplify the tax code. Raise the estate tax. No one deserves to be born with a silver spoon in their mouth. Make the playing field equal.

People whose parents were prudent with money dont “deserve” it but their parents deserve to pass on what they earned and saved and planned for their kids.

Sounds good. But let's update the tax code so that the step up in basis is eliminated. It's isn't right that people can make millions of dollars and never pay taxes on it.

That money has already been taxed at least once, possibly multiple times.

It's extremely clear that you don't know what the step up in basis is. No, that money has never been taxed.

You are strident, but not that bright. Say the asset is stock. Parent buys stock with salary , which is taxed. Any dividends accrued on stock while held are taxed, If heir sells stock, that is also taxed

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How is it fair to heavily tax an estate but not life insurance proceeds?

I'm open to taxing life insurance appropriately. But as it stands now, most life insurance pay outs are WELL below the $11 million dollar estate tax exemption. There is no point in taxing life insurance without changing the estate tax exemption.

That may be true but if you're looking to tax all estates, and we know most estates are well below $11 million AND many people have life insurance coverage even with small estates, it seems to make sense that you'll likely get far more in taxes if you tax life insurance proceeds.

The purchase of life insurance is a gamble--and unlike wealth that is accumulated in real estate or other assets (and notwithstanding the vicissitudes of the stock market), term life is an all or nothing proposition. But it's a gamble the government wants to incentivize (which is also why you or your employer can probably buy life insurance with pre-tax dollars in your workplace).

[Anonymous]

Anonymous wrote:

If there is preferential treatment written into the code for certain asset types or classes you will immediately see wealthy people rebalancing to fit the new requirements. Tax and estate planning is a big business. Any loophole will be exploited. If you say farms are exempt, all of the sudden there will be a demand for whatever qualifies as a farm from people with a lot of assets.

I'm sure that's true. You'd need stronger enforcement and bigger penalties to disincentivize that behavior...which is a cost to deciding to police it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How is it fair to heavily tax an estate but not life insurance proceeds?

I'm open to taxing life insurance appropriately. But as it stands now, most life insurance pay outs are WELL below the $11 million dollar estate tax exemption. There is no point in taxing life insurance without changing the estate tax exemption.

That may be true but if you're looking to tax all estates, and we know most estates are well below $11 million AND many people have life insurance coverage even with small estates, it seems to make sense that you'll likely get far more in taxes if you tax life insurance proceeds.

The purchase of life insurance is a gamble--and unlike wealth that is accumulated in real estate or other assets (and notwithstanding the vicissitudes of the stock market), term life is an all or nothing proposition. But it's a gamble the government wants to incentivize (which is also why you or your employer can probably buy life insurance with pre-tax dollars in your workplace).

Whole life is not a gamble though. And it’s special tax status is why it’s used in many estate tax strategies.