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Ugg
Sep 5, 2003, 10:36 PM
Link (http://www.csmonitor.com/2003/0902/p01s04-ussc.html)



Most people don't inherit

It's estimated that 8 percent of the population receives inheritances. Few receive more than $25,000.

Amount of inheritance
Percentage of Americans

$0 91.9%

1 - 25,000 4.3

25,000 - 50,000 1.1

50,000 - 100,000 1.1

over 100,000 1.6



So, abolishing the inheritance tax will only benefit 1.6% of the population. I believe the current tax free portion of an estate is $1 million so the percentage is probably even less.

Yes, family businesses suffer from the inheritance tax but good financial planning can usually avert most of the burden.


Why was this so important to gw & co. again? AH, that's right to benefit all of those who have contributed to his campaign fund, silly me.

zimv20
Sep 5, 2003, 10:42 PM
receive an inheritence? yeah, right. i'm saving up so i can pay for both my (divorced) parents' retirements.

a robust economy would certainly help my flagging investments...

IJ Reilly
Sep 6, 2003, 12:04 AM
Originally posted by Ugg
So, abolishing the inheritance tax will only benefit 1.6% of the population. I believe the current tax free portion of an estate is $1 million so the percentage is probably even less.

Far less, probably under 1% of estates are subject to any inheritance taxes.

pseudobrit
Sep 6, 2003, 12:54 AM
Originally posted by IJ Reilly
Far less, probably under 1% of estates are subject to any inheritance taxes.

What are you talking about? I thought all the evil death tax did was split up family farms (because the poor farming families can't pay the massive taxes owed when dad dies) and small businesses? :rolleyes:

Seriously though, there was one Congressman who pointed out that if Bush had his way with all taxes, a guy making just $20,000 a year would pay more in federal taxes over his lifetime than someone who inherited $100 million, put it in stocks and lived off the interest.

No estate tax, no dividend tax... if he lived in Delaware he'd never pay sales tax either, limiting his total lifetime tax responsibility to property taxes and other minor odds and ends.

How many people not in the oil business do these tax cuts help?

Waluigi
Sep 9, 2003, 10:56 AM
Originally posted by IJ Reilly
Far less, probably under 1% of estates are subject to any inheritance taxes.

Wow, that is an eye opening statistic! Al Gore wasn't kidding when he kept hitting on the top 1% in the debates.

--Waluigi

mactastic
Sep 9, 2003, 11:00 AM
Yeah, raising the cut-off level would have worked just fine to keep the small farm/business from getting reamed. But the Bush administration found it necessary to eliminate the "estate tax" entirely, mostly to the benefit of his wealthy campaign contributors and family friends.

IJ Reilly
Sep 9, 2003, 11:11 AM
A few months ago, the last time we talked about taxes on this board, I suggested eliminating the income tax in favor of a 100% inheritance tax. This is a semi-serious proposal, and I think worth discussing as a philosophical matter. Meritocracy or plutocracy -- we can choose which one we value most, by what we reward.

mactastic
Sep 9, 2003, 11:17 AM
Originally posted by IJ Reilly
A few months ago, the last time we talked about taxes on this board, I suggested eliminating the income tax in favor of a 100% inheritance tax. This is a semi-serious proposal, and I think worth discussing as a philosophical matter. Meritocracy or plutocracy -- we can choose which one we value most, by what we reward.

Interesting. Make as much as you want tax free during your life, but give it all back when you die. It has some appeal, but part of the whole "American Dream" is to make your kids lives better than yours. And what would stop people from just giving their kids the money before they die? Junior gets a $1.2 million dollar allowance when he's 50 still?

We probably need to tax wealth and income seperatly somehow.

IJ Reilly
Sep 9, 2003, 12:51 PM
Originally posted by mactastic
Interesting. Make as much as you want tax free during your life, but give it all back when you die. It has some appeal, but part of the whole "American Dream" is to make your kids lives better than yours. And what would stop people from just giving their kids the money before they die? Junior gets a $1.2 million dollar allowance when he's 50 still?

We probably need to tax wealth and income seperatly somehow.

Obviously, this isn't a fully detailed proposal -- it's a concept put out mainly for discussion purposes. In any event, we could tax gifts and other methods of gross wealth transfer.

Either way, the tax system can't prevent a great deal of privilege from being handed down through generations. Wealth isn't just money, it's access and associations -- so the mediocre son of a multi-millionaire is still going to have options not available to the bright child of a crack addict. The philosophical question I'm raising is whether people should enjoy comfortable lives based on the labors of their parents or grandparents, rather then their own talents and efforts.

zimv20
Sep 9, 2003, 01:02 PM
Originally posted by IJ Reilly
The philosophical question I'm raising is whether people should enjoy comfortable lives based on the labors of their parents or grandparents, rather then their own talents and efforts.

it is natural for a parent to want their kids to live better. removing the means of doing that would be grossly unfair.

also, The Millionaire Next Door is an enlightenting book. it indicates that those who receive their fortune via inheritence tend to spend it. let them, i say.

of course, not all do. some are self-starters and would have developed a fortune on their own, anyway. let them keep it.

IJ Reilly
Sep 9, 2003, 01:53 PM
Originally posted by zimv20
it is natural for a parent to want their kids to live better. removing the means of doing that would be grossly unfair.

A lot of things are "natural," but that does not make them either right or fair. I can make a much stronger argument (IMO) for the gross unfairness of a system that allows privilege to be handed to the deserving only by virtue of their birth and no other merit. Continuing that system is just an argument for building and perpetuating a monied aristocracy. Under my proposal, wealthy parents could still give their children all manner of advantages over the children of impoverished (or even middle-class) children. The only thing they couldn't give them was their money. That, the kids would have to earn on their own.

Desertrat
Sep 9, 2003, 08:54 PM
Just for some perspective: 25 years back, the inheritance tax kicked in for all value above $200,000. At that time, an economically profitable farm in the Plains was some 1,000 to 2,000 acres. (Net profit after expenses runs in the $20 to $50 per acre range, varying with rainfall.) The cost of farmland if you were going to expand or get started would run you in the range of $1,000 to $2,000 per acre.

It was easy for an estate to be in the $1 million to $4 million range. Subtract $200,000 and then urp up 38% tax on the remaining value. You had (IIRC) six months to come up with the money.

Same sort of deal for larger ranches, with the per-acre value generally less.

The bottom line is that part, if not all, of a farm or ranch had to be sold off to pay the taxes. This led to an uneconomical size, and a lower income from the remaining land.

The above refers to family-owned or family-corporation owned lands, with the majority being owner-in-residence.

There are a lot of small business people in similar situations. They build or buy a building and start up a business and work 20 to 40 years and make it successful. They have the real estate value, the inventory, and the intangible goodwill. They've accumulated a home and investments over the years, plus such interest as may accumulate. And they'd like to leave it intact, to their kids.

The thing about inheritance is that it allows an accumulation through generations, each one being able to build on what went before. Never forget the incentives of such a system, which not only functions in terms of monetary betterment of the next generation, but provides a social stability. This stability stems from the responsibilities inherent in wise use of time, money and the business itself. It is this sort of stability which allows a strong middle class--dependent also on the sanctity of property rights and a reasonable level of taxation and regulation.

Now, if folks go through life with a maxed-out credit card, I'm not at all surprised at the probable small size of an estate...

'Rat

IJ Reilly
Sep 9, 2003, 11:45 PM
D-rat,

You make an excellent argument for the positive side of accumulated capital through family generations. I don't know if we can place anything more then a small fraction of blame for the family farm debacle of the last 30 years on inheritance taxes, though. I've heard time and again that good tax planning avoids most these tax sales, and I believe that the inheritance tax laws as they've stood for some time include exemptions for family farms.

In any case, the purpose of my bringing up the 100% inheritance tax scheme was to start a discussion about the kinds of results and behaviors we might want to encourage or discourage through the tax code. So it turns out, the debate in Washington about these issues isn't half as enlightened as what we've seen here. I don't know if that's some sort of tribute to the denizens of this board, or... something else.

Take care of yourself... lick that disease.