Three Cheers for Death Taxes?

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Sunday, January 25. 2015

Three Cheers for Death Taxes?

Doesn't dying suck enough, unless you are in terrible shape?

Tomasky is in favor of death tax. He'd like the government to take most or all of your estate when you croak, and makes a moral case for it.

Leviathan will eat all he can, and it is never enough for him and never will be. There should be no death tax. Family, and free choice in saving and spending, trumps government. I can make moral cases in opposition to Tomasky. For starters:

- That money has already been taxed once. Why a double jeopardy?

- One reason people work and save is to provide for family and future. Isn't less dependency on government a good thing? In my view, more wealthy families are a good thing. The more, the better. They invest, and if they are not financially successful on their own, at least they do not become dependent on everybody else.

- Who is the government to tell me how much is "enough"?

- Despite Tomasky's dismissal of the loss of family farms and family businesses to pay taxes, I have seen it happen, and sadly. A damn shame.

- Very wealthy families (eg Kennedys, Rockefellers, Kerry-Heinzes, Clintons, etc) find ways around it. Middle class people with small businesses, farms, or small collections of real estate or gas stations, cannot.

Add your own arguments, for or against, in the comments.

Posted by The News Junkie in Our Essays, Politics at 11:44 | Comments (36) | Trackbacks (2)

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Just wondering, as I am not as smart as most of the people here, is the inheritance tax constitutional?

It strikes me as a confiscation of property without compensation which the 5th(?) Ammendment prohibits. Or is the power to tax estates one of the powers enumerated to the feds in the constitution?

Yeah yeah, they enact unconstitutional laws all time. They largely do what they want. The question is merely academic.

OTOH, suppose there were no federal income taxes levied against an individual during his lifetime. None. Would it then be OK to levy a hefty inheritance tax on his estate?

IOW, if government stays out on one's life and has created an environment where one can succeed, does that give them a claim on the estate?

#1 feeblemind on 2015-01-25 12:02 (Reply)

I don't know, feeble. That sounds pretty smart! I guess you could say that when a person dies, that he no longer owns anything but then what would the point of a will be?

It's just another way for the government to try to steal money from us.

#1.1 mudbug on 2015-01-25 14:11 (Reply)

You sell yourself too short. Were we to chronicle this and all the other unconstitutional acts of government, several of us would have no time for other activity.

#1.2 Walking Horse on 2015-01-25 16:15 (Reply)

What should I comment on Tomasky or the tax?

Arguing with Tomasky is like arguing with a pig, what's the point.

Arguing against the Death Tax is possible but a waste of time. The government is simply a bunch of sticky fingers and large estates are well large. The takers outnumber the doers and that settles that.
Democracy; Two wolves and a sheep discussing dinner.
Liberty; A well armed sheep.

2¢

#2 Dorf on 2015-01-25 12:23 (Reply)

Confiscation estate taxes will devastate saving and investment. If the savings from my work will go to the govt and not my grandchildren, I will spend down what I have left, leaving nothing invested in new companies or schools or tools that enhance productivity. Then, only the govt will be the source of investment capital, and we know how poorly those investment decisions have been. We will have high speed rail and windmills and no factories or Internet startups.

#3 Douglas on 2015-01-25 12:54 (Reply)

There is a saying that goes something like: If you can't see it, you don't own it. Banking is pretty much just numbers in a computer. If I was in the position to, and had time before I died, I would drain my bank accounts over time and turn the numbers into cash IN MY HAND. This cash would be hidden in the best place or places I could find for later distribution. I would liquidate my assets into cash also, or perhaps gold or silver. As much as I could, I would turn everything into physical cash or metals that I could see and hold in my hands. As a kid I dreamed of a Scrooge McDuck money bin. Perhaps I could build one underground in a secret location.

#4 Bodie on 2015-01-25 13:40 (Reply)

I think you win this round.

#4.1 John (Link) on 2015-01-25 20:41 (Reply)

Scrooge always looked so happy diving into his piles of gold coins. He made having wealth look fun!

I'm with you about converting my hard earned assets into cash and giving wherever I see fit.

#4.2 Portlandmermaid on 2015-01-26 10:09 (Reply)

One simple argument against;

Stealing at the point of gun or by majority vote is still stealing.

#5 Kevin 3% on 2015-01-25 13:40 (Reply)

Questioning points of asserted morality is an exercise best left to scribes and pharisees, however, a few questions.

How does one compensate for the old boy/girl/school tie network, fame/notoriety, advantages in education, health etc the richer than me have?

Why not take all estates if the goal is to remove inherited wealth? A follow up, what if the heirs are active participants in building the estate, e.g Sameer's sons who work in his store?

Who do you trust to spend the revenue wisely?

What are your plans for our estate, Professor?

Lastly, I look forward to seeing all Democrats from County office seeker to the top of the ticket endorsing this notion.

#6 walt moffett on 2015-01-25 13:56 (Reply)

Here in Vermont we have an example of a legislator who has her "eyes on the prize".

http://ethanallen.org/1-22-15-estate-tax-who-in-montpelier-wants-you-dead/

#7 Lazarus Long on 2015-01-25 14:27 (Reply)

Can someone explain this to me? If I have a million dollars and ten children, and in the last year of my life I hire all ten at $100k for the year to be nice to me, care for me, stay with me, how is that different than if I will each $100k upon my death for the same reason? It is not a 'death tax'. It is income to the survivors, whether they get it before or after I die. In either case, there is no way to determine if the income is 'earned' or not.

The 'double taxation' argument is also a misplaced argument. Much of our income and assets are taxed multiple times. Think "property taxes." I pay a tax when I buy it, when I live on it, and when I sell it. All on the same asset.

#8 Peter Lorenzi (Link) on 2015-01-25 14:33 (Reply)

But your taxes on your house/home aren't on the item itself, it's on various services connected to it. Any, and particularly any heavy government taxation is an attack on the concept of private property.

It's a very slippery slope dealing with a government that thinks it has a right to take any of your property when you die, to one that thinks it has a right to interfere how you dispose of that property on your death, to one that thinks it has a right to decide how and when that death will happen.

Estate taxes (inheritance or death) are an affront to the idea that what you work for and own is really yours. They are a lot like eminent domain, without the requirement that you be fairly compensated.

#8.1 ruralcounsel on 2015-01-25 15:36 (Reply)

Property taxes are FOR the services, not ON the services, and most of the property taxes are not returned in services to the homeowner. I'm not talking about garbage collection, water or sewer, those are fees or taxes for services. And the tax is based on the value of the asset, not the service. Some states tax the value of your car each year, and not for a service.

The death tax is primarily an inheritance tax, a tax on the living descendants. If they take it as income, it should be treated as income. If they leave the inherited asset, e.g., a four-hundred acre farm, it should not be taxed or treated as income but when they start growing and selling crops, tax the income.

#8.1.1 Peter (Link) on 2015-01-25 22:10 (Reply)

That ought to drive property values up as older people buy land to leave instead of cash, if the cash is taxed and the land is not. You aren't in the real estate biz, are you?

There is no difference between income from a farm in production and a stream of interest or dividends from inherited investments. That's the old tax law distinction about the fruit of the tree - trying to distinguish between property and income generated from property.

Property is property, doesn't matter if it's cash , land, gold, ... it shouldn't be taxed when you die, and you should decide who you want to have it.

#8.1.1.1 ruralcounsel on 2015-01-26 22:44 (Reply)

The IRS actually will get severely on your case if they catch you paying lavish salaries to your heirs. They'd like nothing better than to recharacterize the salary as a gift and include it in your estate for the purpose of the unified gift/estate tax. That's one reason why we have strictly limited levels of annual gifts that are exempt from the gift/estate tax. A whole lot of gift/estate-tax law is aimed at exactly the problem of tax-free inter-generational wealth transfers. Progressives hate the idea of anyone starting life with financial advantages: they don't see it as a way of ensuring that that person never becomes a burden on society, they see it as unfair competition with the little man. Or they simply give themselves over to resentful envy and leave it at that.

But I agree with you. Why is it moral for rich parents to spend lavishly on their children, but not moral for them to leave a lot of money to them in their wills? Not that progressives, if given a chance, wouldn't prevent parents from spending lavishly on their kids if they could figure out a way to glom onto the money instead. It's just easier to grab upon someone's death, politically a little easier to sell.

#8.2 Texan99 on 2015-01-25 16:26 (Reply)

Sort of depends on your definition of lavish. Walk back my example a moment and make it $50,000 salaries and include it for various services rendered, e.g., cooking, lawn mowing, shopping, laundry, housekeeping, and the difference between a gift and income is trivial. And that's another problem: Do you want the government to decide what is a lavish salary for anybody?

#8.2.1 Peter (Link) on 2015-01-25 22:14 (Reply)

No, I don't want them to, but that's exactly what they typically do, and they have no hesitation in making a judgment about what's lavish. If you pay the kids more than you can easily demonstrate the market will bear, the IRS will recharacterize it as a gift.

But bear in mind, also, that if the kids insist it's income, they'll have to pay income tax on it. The taxman is going to get his cut one way or another.

#8.2.1.1 Texan99 on 2015-01-26 01:20 (Reply)

Your estate in $ is just one form of asset. Would you be equally happy to have some heirloom of some considerable value, say a perfect condition musket your ancestor used to shoot the general of an invading British army saving the town, and having it taken away or taxed so high it had to be sold. Or perhaps a business which the gov values at some book value but, like nearly all, short on cash to pay taxes and when selling the trucks, & machines & property to pay the tax receiving less than the IRS claimed it worth or in any case causing the business to fail? Cash is just another form of asset.

#8.3 tex on 2015-01-26 00:00 (Reply)

I think estate taxes started way back as a way to get tax money from the aristocracy to the king. Most people held no real property and little other assets. I'd have to defer to any historians about how large the tax was, but there was little interest in destroying the legacy so they must have been low. If you are in a modern state with both income and sales taxes, then there is no justification for an estate tax. Of all taxes they generate justifiable anger and distort more peoples lives in cruel ways. Having to sell a family house, farm or business to pay death taxes is nothing less than a direct attack on your person and puts the most solemn of times into a terrible accounting requirement.

#9 DirtyJobsGuy on 2015-01-25 15:52 (Reply)

Actually, I heard that an estate tax was a penalty levied on the deceased for dying and thus depriving the overlord of his services. Could be wrong, though.

#9.1 Frances on 2015-01-26 01:17 (Reply)

Death tax is a way for the government to dissuade people from saving money in bank accounts and investments, instead spending it on consumption items, bringing more money into the economy, which is taxed at sales tax/VAT levels every time it is circulated, eventually dissolving completely into the hands of the government bureaucracy.

That's also why the death tax is higher than the sales tax/VAT levels. If it weren't, there'd be no incentive to just spend the money now and give away the goods you purchased with those funds, rather than wait until you're dead and have your beneficiaries decide what to spend it on.
More money to the government now, rather than potentially to another party's administration after the next elections...

#10 J.T. Wenting on 2015-01-25 16:14 (Reply)

If the government were to take all from you when you die, then people would just give more of their money and stuff away while alive. Americans are a very smart lot; we find ways around the stupid rules all the time. We would find a way around this one, if it came into being.

Why would anyone but the poor or ignorant sit on a large pot of cash and assets until the day they die, if they know the government will benefit the minute they croak? They would not. They would start giving it away or having family members sign contracts that they will care for their elderly relative or let them live in their home or what have you until death for a transfer of $$ or assets.

#11 MissT on 2015-01-25 16:18 (Reply)

Tomasky, like most other Progressives, doesn't have the balls to be a highwayman, but instead wants to farm out the dirty work of robbery to others, in this case, the Feral Government. I a just world, he would be obligated to do his own thieving, and be dealt with personally by people like me.

#12 Walking Horse on 2015-01-25 16:19 (Reply)

I could maybe get behind taxing the huge estates as he advocates, but the Democrats depend too much on trust fund progressives to ever pass something like that. They will wind up screwing the middle class like they always have.

#13 b moe on 2015-01-25 16:21 (Reply)

As an argument, how about I just don't like A-holes deciding what should be done with the 'wealth' I've managed to save?

#14 JorgXMcKie on 2015-01-25 17:26 (Reply)

"I can make moral cases in opposition to Tomasky."

There's your problem right there - using the word "moral" when talking about a liberal or government.

Neither governments nor liberals are moral. Both hold to the idea that you have it, I want it, I'll take it. period.

#15 charles on 2015-01-25 17:58 (Reply)

Set up a family foundation. Your children will lose the land anyway. Might as well put it into a foundation and make the foundation such that only your children, children's children,children's children's children, etc. can operate the foundation. They can pay themselves some reasonable amount to operate the place, but most of the proceeds have to go to philanthropy. That way at least the spoiled brats have to do something constructive and those who love the farm can manage it without fear. The Kennedy Family Foundation, The . . .

#16 faculty wife on 2015-01-25 19:29 (Reply)

I want to try out a line of thinking I've had recently. Not being an economist or anything else related to financial issues, I made up terminology, etc.

The way I thought of it there are two kinds of taxes: one on transactions between two entities, and one on assets/wealth. Income is a transfer of value, hence taxed. So is shopping. [There is no such thing as "double taxing" because it's not the money that's taxed, it's the transaction (or gains).] Real estate taxes, on the other hand, are wealth taxes.

I posit that wealth taxes are morally inferior. When you tax wealth, you take some if it away. Eventually, unless you can compensate somehow, the thing being taxed ceases being yours; it's all owed in the taxes collected on it. With transaction taxes, you have the option of not transacting to avoid paying taxes; no so with wealth taxes.

Inheritance taxes seem more like transaction/transfer taxes than wealth taxes. The child is not the parent. Earned or not, the inheritance wasn't the child's until it became theirs.

Now, the government has lots of flexibility in deciding what and how things are taxed. I don't think inheritance should be taxed for the majority of people, and family businesses deserve special consideration. And overall, it's time to start starving our voracious government. But I think it's worth being clear about what exactly it is that we're debating, and why we would want to make an exception to a general principle.

Mark

#17 mark on 2015-01-25 21:56 (Reply)

I am not in favor of the death tax. It seems punitive and unfair to me. But it is important to understand that the tax is not applied evenly and the laws favor the rich. I can assure you that as each of the Kennedy's die very little if any of their wealth is taken as tax. But most of the family farms owned by hard working people who aren't "rich" in the classic sense will pay the full tax. Most of our congressmen and women are multi-millionaires and I am quite sure they have structured their finances to avoid death taxes. There are loopholes in the tax law specifically put there for that purpose alone. The intent is and always has been to tax/penalize the working and middle class (farmers, ranchers, small business owners, etc.) while allowing the very rich to escape scott free.
I would rather see some version of a flat tax with no exemptions where everyone pays taxes and the tax system is not used to subsidize, encourage or reward anyone.

#18 GoneWithTheWind on 2015-01-26 11:48 (Reply)

"I would rather see some version of a flat tax with no exemptions where everyone pays taxes and the tax system is not used to subsidize, encourage or reward anyone"

OK, fine - but there is something called politics.

#18.1 Bird Dog on 2015-01-26 19:01 (Reply)

The way I am reading it Tomasky is advocating more of a system to break up large trust funds than a straight inheritance tax, he is concerned with large heirships two or three generations removed from the original tycoon.

Which sounds interesting on the face of it, but the more I think about it what that would actually do is remove capital from investment brokers and give it to the government to redistribute, wouldn't it? And that isn't a good idea regardless of the morality or ethics.

#19 B Moe on 2015-01-26 20:06 (Reply)

I didn't see much value in Tomasky's argument, but I could certainly lay out an argument why we SHOULD consider a death tax.

The point of a tax is to pay for public goods.

Inheritance taxes are one way to collect this tax. Thus the argument becomes whether inheritance taxes are more or less disruptive or inefficient than alternative methods.

Thus the question becomes whether inheritance taxes are a better or worse way to find public goods than alternative methods. I am sure good arguments can be made, depending upon which alternative source we are talking about.

The other argument is that the government isn't using taxes to pay for public goods, but rather for redistribution. Fair enough. But again this just shifts the argument to whether the government should be doing what it is doing. Assuming it does what it does, the question still remains, what is the best way to fund it?

#20 Roger D. Parker on 2015-01-27 14:54 (Reply)

"The public good"

For 95% of people who work and support themselves (and thus pay taxes) the single biggest expense they have and the single factor in their life that makes it difficult to get ahead is taxes. For the average middle class worker in this country it takes 262 calendar days before they have earned enough to pay all their taxes. Taxes will consume more then the total cost of their housing, transportation, food, medical costs and entrtainment costs put together. What is the single thing that would be in "the public good"? Cutting taxes. Cuttng them to the bone. The second best thing n the public good? Stop supporting the free loading class. They would be SO much better off if they become self sufficient and so much less likely to get in trouble if they hd to work for a living. Literally millions and millions of welfare lives wasted by our penchant for giving out "free stuff" to get votes. Cut spending at least by 50% and cut taxes by the same amount. That would be a good "starting place".

#20.1 GoneWithTheWind on 2015-01-27 23:54 (Reply)

Just to clarify, I am not arguing against cutting taxes or against making government spending more focused or efficient. Indeed I broadly agree these are extremely wise.

The point is, are estate taxes better or worse ways to gather taxes than the alternatives.

#20.1.1 Roger D. Parker on 2015-01-30 10:47 (Reply)

Estate taxes have made Warren Buffet rich. He insures the life of wealthy people so that their heirs have the money to pay the estate taxes without selling the farm or business. Alternatively, he buys the business from the heirs and restructures it. Remember the years when the estate tax was so high most people didn't pay? Then in 2010 back it came. Most really wealthy people can pay lawyers and accountants to avoid the tax. Farmers and small business people not so much. "tax the middle class-it's where the money is".

#21 fiona on 2015-01-29 21:39 (Reply)

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Sunday, January 25. 2015

Three Cheers for Death Taxes?