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Friday, December 4. 2009
Kill the Death Tax
House votes to make death tax permanent.
I recently posted on the subject of Death, taxes, and death taxes in view of upcoming legislative considerations of current death taxes, and I see a post by Patten at NRO which echoes my views. He explains:
Read his whole brief and to-the-point post. Estate taxes are wealth and asset destroyers. I want more wealthy people and wealthy families, not fewer.
Posted by The Barrister in Our Essays, Politics at 15:43 | Comments (14) | Trackbacks (0)
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The estate tax itself does not "destroy capital", it is the government's reallocation of that capital that is the problem. Hypothetically, if the benefactors of the estate are less adept at handling wealth or even downright more evil in their handling of it (Theresa Heinz Kerry comes to mind) than the more moderate government entity that would acquire said capital, the reverse would be true.
In the aggregate, this is likely true, just not definitively so. It depends on the values of the benefactors of the wealthy relative to the government as a whole. Of course this is muddied by the collateral damage to the society's perception of property rights.
And aren't property rights a good part of the foundation that Liberty is built on?
A good part, most definitely. But in this situation the person to whom the property belongs has ceased to exist. He has no more rights. He's joined the bleedin' choir invisible. He has (or should say had) wishes and desires, but he's not around to defend or enforse his "rights". Flipping the "evil" factor to which I refer from the benefactors to the deceased, if the deceased wished to leave his property to Al Qaeda, well it ain't gonna happen. And especially as that property applies to real estate.
I agree with you that death taxes are unfair. Income and property are subjected to taxation throughout the existence of an estate. Likewise the income and property that is passed onto the heirs will continue to be taxed. To me, an estate should not be considered a taxable entity, nor should death be considered a taxable event.
It is especially unfair in cases where assets of the estate have to be liquidated in order to pay for the taxes! I mean, you are essentially destroying a viable and ongoing concern., such as a business. It just doesn't make sense.
Unfortunately this is only the tip of the iceberg. I am a CPA, and I attended a tax update class this week. The news is grim and disheartening. At some point in the near future, it is possible that taxpayers in the top bracket will be assessed at a 60% rate. This includes payroll taxes, etc. Think about that! I realize that many people do not have sympathy for the wealthy. However, consider having to pay $120,000 of taxes on income of $200,000. To me, that is simply outrageous and unacceptable.
Beyond the question of property rights, "the problem that arises is the government that receives the taxes is removing productive assets from the GNP and turning them into monies to finance non-productive, mindless tasks for the paper-pushing, bureaucratic syncophants whose only usefulness is becoming part of a voting bloc for whatever political party that got to hire them. And I include all the lawyers and accountants who make a living off such tyranny." -- C. C. Hoffman (1951)
Wonder what he'd think now?
I absolutely agree with C. C. Hoffman, including the part about lawyers and accountants. In his post, the Barrister advised everyone to get the best estate planning they can afford. He is right, although to be honest, as a CPA, it has always bothered me that people have to resort to that in the first place. In other words, they shouldn't have to go to such great lengths in order to protect their assets and avoid taxes. Yet, ultimately that is what it is all about. In reality, like many other aspects of life, it is nothing more than a game.
For example, what the Barrister is implying is that if you don't plan prudently, you will most likely get screwed. As to the question of fairness, is it really fair that some people avoid taxes while others get screwed? All because of planning? To me, it shouldn't come down to that. Should an estate have to be liquidated to pay taxes, just because of imprudent planning? I hope that all of you understand what I mean.
Or for that matter, what if the accountant or estate planner makes a mistake? Let's be honest, accountants are no different than doctors or attorneys. The bottom line is that some are better than others.
In my case, it has come to the point where even average taxpayers have to consult a CPA to prepare their taxes. I am seeing more and more of what I would call "easy" tax clients and "simple" tax returns. Again, that seems ridiculous to me. As I mentioned earlier, I attended a tax update seminar the other day. And as I was listening, it occured to me how absurd the tax code is. It has occured to me before, however, never to this extent. I mean, it has reached the level of absurdity. Heck, it takes a CPA just to figure out the dependancy deduction for God sakes!
For me personally, it has reached the point where I feel that I can't keep up with it anymore. The rules change drastically from one year to the next. Again, it seems like every aspect of a basic 1040 has now become complex. Furthermore, as I listened to the instructor, it also occured to me that I am not as knowledgeable or as competent as him, therefore, my clients would be better off and better served to go to him than me. Does that make sense to anyone? Understand that I have 25 years of tax experience, at every level. I have prepared or reviewed thousands of tax returns. And yet, I get the sense that it has gone beyond me.
Getting back to my original point, it seems that it shouldn't come down to that. Forgive me for the rant. I haven't posted to this site for long time, or any other site for that matter. The tax issue obviously struck a nerve.
If you've been dealing with tax returns for 25 years, you deserve a rant, especially when you realize that there's no way you can do the best possible job for your clients due to the machinations of a bunch of idiots who haven't the foggiest idea how they impact the future of entrepreneurs and just-plain-darn-hardworkers.
Defenders all say, "But it affects less than one percent of the population" --this is the pro argument!
It's also the anti argument! The amount collected is a fraction of a drop in the federal bucket.
The economic effect, however, in that it injures the forward edge of the national entrepreneurship potential, is everything BUT a drop in the bucket.
It confiscates capital (of course, from the very people who have proven adept at capital deployment), is highly punitive, and is in effect an artifact of the envious having a larger voting block than the successful.
No. no - it only confiscates capital from those whose fortunes are small or whose lawyers are stupid. See the above mentioned Teresa Heinz-Kerry for a counter example.
This was inevitable once you knew that Warren Buffet supported Obama - he has made a profession and several billion by buying up medium sized businesses whose founders suddenly deceased.
If they JUST didn't waste and steal so much of it --or even if they felt a little bit bad about wasting and stealing so much of it (you know, at least once in a awhile during the Obamacare campaign mention the two out of every five medicare dollars paid to organized crime) --then maybe the idea of robbing the successful --who've already paid several levels of taxation of what the antecedant left --would be a little bit less sickening.
IMO the Estate or Death Tax (I prefer Estate since the dead person pays nothing) is among the hardest of taxes to take a firm position on.
Overall, I take the Roman position on death. "The dead have no rights."
Offsetting that, I also believe that a government does not have a right to money just because they notice it.
First, dismiss the idea that the dead person has paid the taxes while alive. Suppose the estate contains billions in gains upon stock. Since the deceased never sold the stock he/she paid no taxes on the gains.
So with no Estate tax the deceased does not pay, the estate does not pay, and the heirs do not pay (Since they inherit at the market price. A provision which may be changed at any time by statute.)
So in the stock case there is no tax anywhere but who will argue the heirs have not received income?
The family owned farm or business case is often akin to the stock ownership case. Normally that farm will have been incorporated as it grew in value and produced revenue. Ditto other family businesses.
But the family farm or business is certainly a far more emotional situation. There may be a lot of sweat equity involved too.
But in other cases the deceased will have paid taxes on parts of the estate when received. So taxing that again is hard to justify.
Totally untaxed estates will concentrate wealth. over decades or centuries. Yet, concentrating wealth is not a criminal act. Whether it is immoral or leads to social unrest is a separate matter.
The way this works in the US: The tax code always includes ways to protect the very wealthy. That is done by complexities which require hiring specialized tax attorneys and planners.
The rich pay the attorneys and planners who in turn have lobbies to pay the politicians who keep the tax code complex. And the politicians do just that.
I am against the estate tax. There is no moral reason for it. Democrats favor it as they favor any and all taxes. If they want to be absolutely fair(according to their statements), they would set an absolutely flat rate and tax all estates equally. From $1000 to a gadzillion. If every family or heirs knew all estates were taxed I think there would be more of a public outrage. Instead it is now tax just the "rich" because we are all jealous of the rich.
You are all missing the point. Estate taxes are about fairness. It is not fair that some people work harder than others, sacrifice to get ahead, are maybe born into a family that has worked hard to build wealth for generations. It is not fair that one person doesn't earn as much as another, just because that person chose a low paying job over a high paying, much more demanding job. It is not fair that poor personal choices and a general lack of discipline and ambition keep some people in low paying professions, sometimes for generations as those people pass down their philosophy to their children, while others have a work ethic and personal responsibility hammered into them from an early age. So we must take away what these people have accumulated when they die, so their chosen heirs don't benefit, undeservedly from their "luck". Because when it is all said and done, that is what it comes down to. Some people are just lucky, others aren't. The estate tax is how those who view themselves as unlucky punish those who are.