Cable Punditry Amateur Hour: Moore vs O'Reilly

[Mediocre]

I believe in the flat tax, but if you really want to make the rich pay more, the best way to do it is to add additional brackets for the "uber-wealthy".  The top 5% or the top 1% actually extend way down below $1,000,000 in income.  While I don't like it, as long as you have a graduated tax system I'm not opposed to adding a couple of more brackets at the top above $1,000,000.

From what I read, this appears to be one of the major failings of our current system.  I forget the name of the book, but I was reading it at B&N, and it laid out a convincing argument of how the super-rich, those making over $8,000,000 per year in annual income, end up paying little to no taxes compared to everyone else, as well as compared to the "rich but not *that* rich".

[SirBruce]

And it's a flaw Republicans often don't like to talk about, which is why they talk about the top 1%, the top 5%, the top 10%, etc.  And it is true that those people already pay a disproportionate share, but those figures include large numbers of the Lower Upper Class and Upper Middle Class.  But it's also true that the Upper Upper Class could, theoretically, support a much higher tax rate.

However, part of the Kennedy and Reagan tax cuts was reducing the burden on that very top, in order to spur economic growth and out of a sense of fairness.  So it's very hard politically to support the creation of new tax brackets, and it gets lost in a sea of alternative and complicated tax plans.

Anyway, you can take everything Bill Gates owns and you still won't pay for the war in Iraq or Universal Health Care.

Bruce

[Paelos]

Since when is there anything inherently, wrong, immoral, unethical, or otherwise bad about double taxation?  Taxation is means to an end, and there's no moral code that says "Thou shalt only be taxed once."  You're taxed double, and more than that, all the time.  There's local and state taxes, federal taxes, and then you're paying sales taxes on your purchases once you decide to buy something with your money.

Ah, but even though you fail to see how the government already gets "a double crack at your money", you won't see it happening to you this time.

No, not "fuck that".  It's called 'the program', and you're going to get with it sooner or later once America's entitlements come due and someone has to pay for them.  Republicans and Democrats whose concern is the monied constituency can minimize the estate tax for now with obfuscation and shifting America's focus to other issues, but when the big bills for the big entitlements come through, good luck arguing with the American populace that dead people aren't the best demographic to pay for it.  The estate tax, especially when only applied to estates over a couple million dollars, is a political slam dunk when the right pressures are exerting themselves on the American people.

Due to the political climate of the moment, the estate tax is on temporary hiatus.  But well before any of us die, it'll be back -- in spades.  And you can count on this; the confluence of forces which will bring it back is big enough that you (and those like you -- which will include me, as I'll probably end up in similar tax brackets, and my parent's estate certainly will) will have no say in the decision on the matter.

The fact I'm even responding to you on this is a matter for my own morbid interest, but you've got your head so far up your ass on this one its not even funny. Considering you don't have an accounting degree or have cracked even book one of Tax Law, I'll be gentle on you. There are very many reasons why the government doesn't tax individual money twice, and none of the reasons you listed count towards the double taxation principle I was talking about. You state, federal, and other income taxes are taken out before you even see your paycheck and held in trust so that you don't blow you dough before the taxman cometh. That in and of itself was a novel idea by the IRS. Couple that with the fact that sales taxes are entirely based and paid by businesses and passed on to consumers, not exactly a direct tax on our money. What you are suggesting is a double income tax with the estate tax, and that is where the problem begins. Taxes were already levied against money made in income be it salary, or even moreso in capital gains. You are bascially giving the government carte blanche to start raping the corpses of hard working Americans who wanted to pass on that wealth to anyone, including family members.

You don't want an American aristocracy? Too fucking bad, take a look around. The people with the money now are going to still have it later, and so will their kids. The main reason is that there are many laws in place with "Tax Planning" that allow them to totally dodge the estate tax even if it was harsher. That's all accountants do, they help rich people find loopholes in how to move money around. It can be through yearly limits, or spousal changeovers, or any of the above. Hell, I can tell you right now at least three or four ways that you can make yearly gifts to a trust for each one of your children that's set up to be realeased when you die tax free. That's the point, you can't beat the weathly at this game, they have too many resources at their disposal to influence politics and beat the system. So go ahead, start your "program". Then bitch about why the results aren't working out so well later.

[Johny Cee]

From the point of view of a tax accountant:

Use of effective tax planning in preparation for your death can get a large amount of money out of the pool considered for the estate tax.  Irrevocable trusts are a favorite,  but also gifting regular amounts to your relatives can get a fair amount of money around the estate tax.  It gets taxed when payments are distributed to beneficiaries,  but likely at a much lower tax rate.

Currently,  because the Estate tax is being scaled down there isn't as much need for many clients to go these routes.  Basically,  you're running into the Gift Tax/taxes on distributions from Trusts producing more of a tax liability than the Estate tax would.  The profession joke now is the best kind of estate tax planning is planning to die in the year the tax is fazed out.  (2009?  Don't have my reference material in front of me)  

Very hard floors on the estate tax,  in general,  tend to get moderately wealthy people who own/run their own business.  What do you think the wealth of a medium to large farmer,  a car dealership owner, etc. is?  Probably in the range of 1-5ish million.  And this wealth can not be transferred to relatives/trust because its made up of fixed assets, land (acres of farm land),  plant and equipment (your business office), inventory (cars,  any high turnover and expensive product), etc.  If all these assets are in a corp,  than the estate tax would be directly targeting that person's stock in the corp.  The estate tax would effectively gut the business,  or mean that the decedents would have to assume loans to pay off the estate tax liability.

An example of hard minimum floors at work is the present impending crisis with the Alternative Minimum Tax.  Created by Congress as another way to calculate income tax,  it essentially throws out alot of the dedcutions/adjustments to income the regular tax code allows you to take.  The problem is that the floor was set 15 or 20 years ago.  The number of Americans subject to Alt Min will rise from a few hundred thousand at the time of it's creation to the tens of millions in 2014,  firmly impacting the upper middle class.  And the Alt Min effectively ignores alot of the tax credits/new deductions Congress authorizes every year.

Am I against an estate tax altogether?  No.  But moves to massively increase either it's rate or it's complexity are going to have very little real effect on the amount of tax collected.  It will probably lead to an increase in my salary, though,  so.... have fun either way.

The rich will continue to use estate tax planning,  minimizing as much as possible their liability,  while most negatively affecting the upper middle class/lower upper class who can't afford to take advantage of the most appropriate/advantageous tax shelter.

[Mediocre]

You don't want an American aristocracy? Too fucking bad, take a look around.

Wrong.  I plan to be a member of that aristocracy.  However, I don't like the idea of aristocracy being an inherited thing, rather I prefer the 'meritocracy' concept.  That goes somewhat against the traditional definition, but take that for what you will.

Appreciate the informative post, Cee.  The general point, which is that there are a fuckton of loopholes in the tax law, is a given.  There's no political will to close those loopholes, even in times of depression, and a good accountant will almost always find a way to shelter an estate from taxation.  However, the upcoming entitlement bust will create a force of political will strong enough that I believe it will rival, if not far surpass, the kind of clout that FDR had during the hundred days.  If that day comes, and the estate tax is looked to as part of a comprehensive solution, I don't think the loopholes will survive.  Our system, as it stands now, isn't solvent forever.

And will, as Paelos put it, this have some inevitable "raping the corpses of hard working Americans"?  Sure.  So does everything.  Fuck, global capitalism is going to rape some blue-collar workers sooner or later in ways that'll make the estate tax look like it took them to dinner and a movie first.  When America moves into true global capitalism and tosses protectionism aside for good, as it ultimately will, those little economic principles of specialization of trade are going to mean a hell of a lot of worker retraining and natural restructuring of the economy.  The whole concept of "fair trade" is a farce that works fine as an individual, personal value but is pie-in-the-sky to implement politically.  You want to cry that something is going to hurt the American worker, then globalization can be your bogeyman.

The bottom line: the estate tax, without a massive political upheaval to remove tax loopholes, would be nigh impossible to implement in a way that made rich people actually affected by it.  However, that doesn't mean it's *wrong*, or even that I'm a dick for wanting to tax people twice; if what's best for our system is taxing them seven ways to sunday, whoo-dee-fucking-doo.  However, back in the real world, and aside from all the hypotheticals of whether it's right or wrong, the winds of political change are coming in such a way that the estate tax will be on its way back in.

[Mediocre]

Oh, and apparently George Bush is taking a page from some on this thread in his latest stump speech from Ohio:

He said he's only going to raise the tax on the so-called rich. But you know how the rich is, they've got accountants. That means you pay. That means your small business pays. It means the farmers and ranchers pay. That's the wrong medicine for this economy, and we're not going to let him prescribe it.

...Okay.

[SirBruce]

Another trick to avoiding estate taxes is to have your life insurance owned by your beneficiary, not yourself.  If you die with life insurance policy in your name, the value of that policy is included in potential estate tax calculations, and if it's a large policy, it may be just enough to make your estate eligible for the estate tax.  Instead, you should transfer ownership of the policy to your beneficiary; then when you die, they still get the money, but it's never subject to the tax.  Note that you must have done this at least 3 years before you die, or it won't work.

Bruce

[daveNYC]

There is a sort of grim humor in the fact that most schemes that try to soak the rich are thawarted by the fact that the rich have the resources to hire people to help them avoid the soaking technique.

And so it goes.