Already found the tax loopholes...

[JasperL]

Because it doesn't meet the definition of income. The IRS added it to their list of taxable income to suit their purpose. All money may be taxed more than once, but not for the same type of tax.

First of all, there is no provision in the code preventing double tax. As to the estate tax provision, that's just not true.

Internal Revenue Code Section 61:

(a) General definition: Except as otherwise provided in this subtitle, gross income means all income from whatever source derived...

An inheritance meets any test of "income" from the IRC or the courts. It's not currently taxed as "income" because the IRC explicitly excludes it from 'income' in favor of the unified estate and gift tax regime. The House version repeals estate and gift taxes in 2025 as I recall, but it can't repeal the entire estate and gift tax section of the IRC because if they did, then all those transfers to kids or others would be 'income' and subject to income tax like any other form of 'income.' So they left in the special exclusions, but repealed the tax - took the tax rate on estate and gift transfers to $zero.

And the House gives the game away. Their estate provisions don't just exclude the transfer from tax, they allow all heirs an unlimited step up in basis to FMV on the date of death. It's probably the biggest gift to the super wealthy ever to pass the House or Senate. So for example Buffett owns $billions of Berkshire Hathaway stock with a basis to him of $0, and a current FMV of about $270,000 per share. So if Warren Buffett sells a share, he owes tax on $270,000 worth of capital gain - same rules we live under. FMV minus basis = capital gain, subject to tax.

Not only will his heirs inherit that stock free of estate tax, if they sell it the next day after death, they'll owe no income tax, and the capital gains tax of $270,000 of gain per share, $billions in untaxed gains, goes POOF, forever, and it's only because Buffett is wealthy enough to hold onto that stock until his death. If your mom cashes in a share of BRK.A to fund her nursing home, she'll owe the tax.

There is NOTHING else in the tax code that works that way. The House members drafting the bill might as well show a photo of themselves literally kissing the rear ends of their plutocrat donors, because that provision is just amazingly indefensible except as a payoff to big donors. Legal corruption at its finest - the perfect example.

 

[Absentglare]

You really think you're entitled to take more than a quarter of a person's bonus?

Fascinating.

What do you have to offer in return?

Let's not pretend that the economy is something that happens with every action in perfect isolation. When someone gets a $10,000,000 bonus, it's a big chunk of the economy.

 

[Critter7r]

The problem is that when you tax those transactions.. it makes it harder for the poor and the middle class to gain wealth. It decreases upward mobility.

the reason that we tax inheritances etc for the rich.. is really to help stabilized the economy.. It encourages the rich to do estate planning and to divest themselves of their business assets etc earlier.. and that makes less blips in the economy. Its much better for a business to have it pass from father to son.. or to some other entity well before the owner dies. It affords a smooth transition.

So?

I mean, I'd be ok with picking some slightly above median number and exempting those inheritances below that, but the right will bellow about "jealousy" and "envy". So tax them all. Tax that dead person as if they were still alive and actually cashed out whatever wealth they have, and then tax whatever is left over when it's given to their heirs. I really don't give a ****. The gov't taxes a person's income. When they die, they no longer have a way to create income, so let's just tic and tac their account and close it out before handing it off to their heirs and taxing them on their newly found income.

 

[iguanaman]

Yeah.. that makes no sense what so ever. You are as bad as the "conservatives" that think that lowering my taxes will cause me to expand my business and pay my workers more.

Raising my taxes is not going to make me pay my workers more..

but you please explain it to me.. why when my taxes go up.. I am going to pay my workers more (which by the way increases my overall taxes EVEN MORE).. regardless of competition, demand, etc.

It's simple. Since employee wages are deductible they reduce tax burden. Even the most greedy employer would rather pay the money to their employees than the Govt., don't you think? If they take it as income for themselves they will lose most of it to the Govt.

 

[JasperL]

Why do you begrudge someone who inherits money? You've posted about this issues several times.

I'll answer it for me.

1) Inheritances are income.
2) If we are going to exclude some source of income from tax, we should justify them on policy grounds.
3) We have huge future projected deficits, so the revenue loss will be eventually offset with higher taxes or spending cuts.
4) The math is that those spending cuts will come from one of a few areas - Defense, Medicaid, Medicare, Social Security, or the other safety nets because that's where we spend nearly all our money.
5) I don't see the wisdom is effectively transferring wealth through the tax code from the poor, old and sick to wealthy heirs at a time when the middle class and poor are struggling and by definition those enjoying the benefits of the new estate provisions are in the top 0.2%, those families with a net worth of more than about $15 million per family.

A philosophical reason for the estate tax is to prevent an American aristocracy, with mountains of unearned wealth flowing to people whose only contribution to society was being born to the right family, but who will wield tremendous, unearned power for generations in the absence of an estate tax. Let's face it - this provision really only benefits the $billionaire class.

 

[JasperL]

The problem is that when you tax those transactions.. it makes it harder for the poor and the middle class to gain wealth. It decreases upward mobility.

the reason that we tax inheritances etc for the rich.. is really to help stabilized the economy.. It encourages the rich to do estate planning and to divest themselves of their business assets etc earlier.. and that makes less blips in the economy. Its much better for a business to have it pass from father to son.. or to some other entity well before the owner dies. It affords a smooth transition.

A few years ago I also had a long discussion with a guy who effectively was a workout specialist for a big construction supplier. Their experience was that it was the exception that the kids could run businesses started by dad and passed down through the family nearly as well as when the dad was in charge. Basically his job was getting businesses screwed up by heirs unscrewed so the business could survive and pay for the products his company sold.

The point is there is no economic efficiency or growth argument for exempting estates from tax. There is no evidence that inherited wealth is somehow more productive than other sources of capital.

 

[HowardBThiname]

Let's not pretend that the economy is something that happens with every action in perfect isolation. When someone gets a $10,000,000 bonus, it's a big chunk of the economy.

Very few bonuses reach the 10mil mark but, even so, it is a chunk, you're right. But is it the chunk of the one it's given to, or the chunk of others who covet it?

 

[Manc Skipper]

The scam takes money from the old and disabled and gives it to private plane owners. Thanks Trump!

 

[holbritter]

I'll answer it for me.

1) Inheritances are income.
2) If we are going to exclude some source of income from tax, we should justify them on policy grounds.
3) We have huge future projected deficits, so the revenue loss will be eventually offset with higher taxes or spending cuts.
4) The math is that those spending cuts will come from one of a few areas - Defense, Medicaid, Medicare, Social Security, or the other safety nets because that's where we spend nearly all our money.
5) I don't see the wisdom is effectively transferring wealth through the tax code from the poor, old and sick to wealthy heirs at a time when the middle class and poor are struggling and by definition those enjoying the benefits of the new estate provisions are in the top 0.2%, those families with a net worth of more than about $15 million per family.

A philosophical reason for the estate tax is to prevent an American aristocracy, with mountains of unearned wealth flowing to people whose only contribution to society was being born to the right family, but who will wield tremendous, unearned power for generations in the absence of an estate tax. Let's face it - this provision really only benefits the $billionaire class.

The middle class benefit as well.

 

[upsideguy]

We ran up 20 Trillion in debt because we spent more money than we had coming in. Its that simple.

..to a great extent because we decided to take in less money and give people tax cuts when we were running deficits. We deliberately "lowered" that take in part of the equation. We are poised to do that lunacy once again.

We can talk about tax cuts after the budget is balance and the Korean conflict is defused. To do so beforehand is malpractice from our elected officials. We actually should be talking about tax increases right now, not reductions....wait, we ARE talking about raising the taxes of the middle class so we can get rid of the estate tax...

 

[upsideguy]

The middle class benefit as well.

...How?

 

[JasperL]

The middle class benefit as well.

Yes, they do benefit from the estate and gift tax regime. It's in fact a huge tax "loophole" for that bottom 99.8% right now, under current law.

The question is whether to extend that loophole to every Paris Hilton out there, the Buffett heirs, the Gates and Koch and Trump heirs. I don't see the wisdom is funneling expanded tax loopholes to the richest 0.2% of the population at this point, given our current budget restraints, projected deficits of $10 trillion in the next decade.

Just for example, doubling the exemption from the current $11 million per family to $22 million per family (the Senate plan) will save the wealthiest 0.2% about $10 billion per year. One way they paid for that is taxing moving expenses, so if your employer transfers you, any amount it reimburses you for that move is taxable income, and if you get no reimbursement, then you can't deduct the costs of a move related to your job. That costs families about $12 billion per year in tax increases.

Does that trade-off make sense to you? Doesn't me...

 

[Absentglare]

Very few bonuses reach the 10mil mark but, even so, it is a chunk, you're right. But is it the chunk of the one it's given to, or the chunk of others who covet it?

That's irrelevant.

I don't care that poor people simply want money, that means nothing. What means something to me is what they'll do with it. We have poor, young kids who are avoiding college because of the cost. That means that we're letting society become less prosperous because we're too chicken**** to invest in our own future. To me, it is absolutely inexcusable. Society has a fixed amount of resources at any given time: individuals become more productive if we invest in their productivity.

“If some of us grow rich in our sleep, where do we think this wealth is coming from?* It doesn’t materialise out of thin air. It doesn’t come without costing someone, another human being. It comes from the fruits of others’ labours, which they don’t receive.”

 

[upsideguy]

Sorry, but that post is just utter nonsense. $10 trillion of that $20 trillion deficit you complain about were rung up by Obama and we still have progressive tax rates. So, you just don't know what you are talking about.

Please tell us what Obama specifically did to increase the DEBT (not deficit -- as the deficit dropped during the Obama years - its the debt that is $20T)....

I can help you: practically nothing.

Our debt increased because of the budget infrastructure that existed before Obama took office. Some of the biggest components to that debt (which went up during the Obama, but for which he had little do with) included the tax reductions during the Bush years (about $2T of the increase) and the wars in Iraq/Afghanistan (about $5T of the increase).

I know how they like to blame Obama for running up the debt over there a Fox news. It plays well to their uneducated viewers that have little clue about how the government actually works. If you can actually show us what the Obama administration specifically did to make that debt happen, I and the rest of us, would love to hear it.

 

[JasperL]

Very few bonuses reach the 10mil mark but, even so, it is a chunk, you're right. But is it the chunk of the one it's given to, or the chunk of others who covet it?

It works both ways. If we tax income at a maximum 25% rate, we will some way or another transfer wealth from the poor and old and middle class to the already rich who "covet" THAT wealth now going to those groups who are struggling right now.

 

[FieldTheorist]

https://www.nytimes.com/2017/11/17/your-money/tax-cuts-small-business.html

I think when historians look back on this legislation, and what it promised to do (drive growth and increase wages) and what it actually will do (create massive economy stifling deficits, decrease social mobility, and further increase income inequality) they will share a collective sigh because of how predictable it all was.

I mean, what I love is that Lindsay Graham is openly admitting that this is just to give their donors a return on investment: "[If this doesn't pass, then the] party fractures, most incumbents in 2018 will get a severe primary challenge, a lot of them will probably lose, the base will fracture, the financial contributions will stop, other than that it'll be fine," and a Republican congressman said "My donors are basically saying, 'Get it done or don't ever call me again.'"

LOL, but don't worry. Money in politics isn't a problem. Like at all.

 

[JasperL]

Please tell us what Obama specifically did to increase the DEBT (not deficit -- as the deficit dropped during the Obama years - its the debt that is $20T)....

I can help you: practically nothing.

Our debt increased because of the budget infrastructure that existed before Obama took office. Some of the biggest components to that debt (which went up during the Obama, but for which he had little do with) included the tax reductions during the Bush years (about $2T of the increase) and the wars in Iraq/Afghanistan (about $5T of the increase).

I know how they like to blame Obama for running up the debt over there a Fox news. It plays well to their uneducated viewers that have little clue about how the government actually works. If you can actually show us what the Obama administration specifically did to make that debt happen, I and the rest of us, would love to hear it.

It will be especially hard to point to Obama spending after 2010, given the GOP took the House in the 2010 elections and any Big Spending Program after that point had to be approved by the Republicans.

He did two really big things - the $700B stimulus package, which was all borrowed, and PPACA which was fully funded. Beyond that he was in a pretty constant stalemate with the GOP in the House for the last 6 years. Might have been a good thing because it did keep overall spending growth down to 16% (inflation adjusted), versus a 30% increase in real spending by Bush II over eight years.

 

[molten_dragon]

All money may be taxed more than once, but not for the same type of tax.

Of course it is. What a ridiculous claim. I earn a paycheck, that money is taxed. I use some of my paycheck to pay my cleaning lady. She has to pay taxes on that income. Same kind of tax, applied twice to the same money, because it has changed hands. Exactly the same scenario as if I left that money to my heirs instead. The only difference is the cleaning lady did something to earn it.

 

[jaeger19]

So?

I mean, I'd be ok with picking some slightly above median number and exempting those inheritances below that, but the right will bellow about "jealousy" and "envy". So tax them all. Tax that dead person as if they were still alive and actually cashed out whatever wealth they have, and then tax whatever is left over when it's given to their heirs. I really don't give a ****. The gov't taxes a person's income. When they die, they no longer have a way to create income, so let's just tic and tac their account and close it out before handing it off to their heirs and taxing them on their newly found income.

Yeah.. I don't think you can argue that the right will below about jealousy and envy. Currently the exemption is about 5.49 million. and I don't hear the right screaming for taxing that poor person that;s going to get moms house to live in.

 

[jaeger19]

It's simple. Since employee wages are deductible they reduce tax burden. Even the most greedy employer would rather pay the money to their employees than the Govt., don't you think? If they take it as income for themselves they will lose most of it to the Govt.

Umm.. first.. it doesn't work that way.

I pay 10 dollars an hour for an employee and I gross 20 dollars per employee hour and that means I have 10 dollars of profit . After taxes.. that's say 6 dollars of profit per hour.

But you say.. "Okay.. now we tax at 50% instead of 40%."

Lets get this straight.. so now I will pay 15 dollars an hour (gross of 20 dollars per employee hour) .. so now I have 5 dollars of profit per hour.. and THEN I will pay a tax of 50% on that as well. so now I have 2.50 dollars of profit per hour.

Your position makes absolutely no sense at all.

and it gets worse.. because as an employer I pay 1/2 of the FICA taxes on that employee. So before.. I was paying 75 cents an hour for that 10 dollar employee (on top of his wages). And now at 15 dollars an hour I am paying 1.12 (on top of higher wages).

Your position is absurd. .

 

[jaeger19]

A few years ago I also had a long discussion with a guy who effectively was a workout specialist for a big construction supplier. Their experience was that it was the exception that the kids could run businesses started by dad and passed down through the family nearly as well as when the dad was in charge. Basically his job was getting businesses screwed up by heirs unscrewed so the business could survive and pay for the products his company sold.

The point is there is no economic efficiency or growth argument for exempting estates from tax. There is no evidence that inherited wealth is somehow more productive than other sources of capital.

My experience is the first generation starts it.. the second generation expands it.. and the third generation loses it.

 

[JasperL]

My experience is the first generation starts it.. the second generation expands it.. and the third generation loses it.

Could be, but these guys were dealing with businesses started by WWII vets mostly (been a few years) and they had lots of stories of that generation handing off to their kids and the absolute disasters that arose, often immediately. A lot of it was people starting the business were frugal and lived frugally, but their kids were brought up in relative wealth and didn't have the same values, and in those businesses it was often catastrophic.... One of our clients was in that boat and we worked with these guys for two weeks and the stories were pretty hilarious. They said the transfer was the biggest single risk facing their overall business at that time, which is why really talented guys like we worked with were spread out across the country serving as effectively unpaid but very effective business advisors. They were also hard nosed, and imposed sometimes harsh spending discipline as conditions for extending credit, and if they failed, would shut them down. Their approach was fascinating - learned a lot from them.

Anyway the point is there is no good reason to believe kids of extraordinary business people inherit that extremely RARE ability, which isn't intelligence really but a unique gift at making money.

 

[Fletch]

Please tell us what Obama specifically did to increase the DEBT (not deficit -- as the deficit dropped during the Obama years - its the debt that is $20T)....

I can help you: practically nothing.

Our debt increased because of the budget infrastructure that existed before Obama took office. Some of the biggest components to that debt (which went up during the Obama, but for which he had little do with) included the tax reductions during the Bush years (about $2T of the increase) and the wars in Iraq/Afghanistan (about $5T of the increase).

I know how they like to blame Obama for running up the debt over there a Fox news. It plays well to their uneducated viewers that have little clue about how the government actually works. If you can actually show us what the Obama administration specifically did to make that debt happen, I and the rest of us, would love to hear it.

Right, Obama was just a bystander to history. I guess we agree on one thing: he is one of the least consequential presidents in recent history.

 

[upsideguy]

Right, Obama was just a bystander to history. I guess we agree on one thing: he is one of the least consequential presidents in recent history.

So you agree that he is not responsible for running up the debt. You inability to meet the challenge pretty much affirms that, but it would healthy for you to say it.

 

[iguanaman]

Umm.. first.. it doesn't work that way.

I pay 10 dollars an hour for an employee and I gross 20 dollars per employee hour and that means I have 10 dollars of profit . After taxes.. that's say 6 dollars of profit per hour.

But you say.. "Okay.. now we tax at 50% instead of 40%."

Lets get this straight.. so now I will pay 15 dollars an hour (gross of 20 dollars per employee hour) .. so now I have 5 dollars of profit per hour.. and THEN I will pay a tax of 50% on that as well. so now I have 2.50 dollars of profit per hour.

Your position makes absolutely no sense at all.

and it gets worse.. because as an employer I pay 1/2 of the FICA taxes on that employee. So before.. I was paying 75 cents an hour for that 10 dollar employee (on top of his wages). And now at 15 dollars an hour I am paying 1.12 (on top of higher wages).

Your position is absurd. .

Except that "absurd position" worked extremely well for decades. We had CEO's making 30 times their average employee not 300. How do you think that happened? How much would an average worker make today if CEO's still made 30 times what they make?