Eliminate the Death Tax

[gulliver]

Just tax the estates of the wealthy while they are still living. And tax them a lot more than the current death-triggered estate tax. Maybe give them a 20% bonus credit for paying the tax with repatriated funds or funds from the sale of foreign assets. That way no one could argue that the tax encouraged disinvestment in U.S. assets.

This idea would let Dems say we eliminated the Death Tax. Indeed, if a person were taxed at a higher level of net worth than they had at their death, we could refund the overage. It would be a Death Refund.

I also have a Balanced Budget Amendment. Any deficit that Congress fails to cover in a given fiscal year would automatically be paid by an excise tax on the net worth of the wealthy. It would be a win-win. Future generations would not be saddled with debt, and the wealthy would finally have "certainty" about the government's finances. We might even have fewer wars.

[Egalitarian Thug]

1. A confiscatory inheritance tax is the linchpin of a healthy national economy.

Unless you're prepared to institute some kind of unavoidable flat tax, just about the most regressive tax scheme conceived, preventing the formation of inter-generational pools of vast wealth is essential to breaking the cycle of a permanent parasite class.

[Recursion]

3. And inheritance is the hardest thing to hide from an excise

That's the main reason current wealth excises never work

[HardTimes99]

4. A confiscatory inheritance tax is the lynchpin of a healthy national republic, as

it works to prevent the establishment of hereditary aristocracies based on wealth.

[GiaGiovanni]

20. Would you call our current republic "healthy"?

The inheritance tax hurts individuals trying to leave a few bucks to their grandkids for college. It does not hurt the billion dollar multinational corporations that never die.

[kentuck]

22. Yeah...just a few bucks for the grandkids college fund....

Yeah...that's the ticket!

[gulliver]

7. My math works out better.

Old wealthy guy has $20 B in net worth. Just take the current estate tax out of his net worth while he is still alive. Then add an additional 10% or so. His heirs will inherit less than they would have, because he will have less to leave them.

[Egalitarian Thug]

13. You can't. People with net worths in the billions, or hundreds of millions, don't have the cash to

pay the taxes you propose, plus I'm certain the legal challenges would go on for decades. the mechanism for collecting inheritance taxes already exists so we can use it with far less trouble.

Bill Gates III can't pay a $10B tax without selling his shares of M$ which the SEC requires advanced notice of, which if given would cause the price to tank which reduces his net worth and his tax liability and so on.

Simplicity is the key. A one page law amending the existing law to take a graduated percentage of almost everything over some adequate number, say $5M, can be done. As our tax code clearly demonstrates, graft and corruption lie in complexities.

[muriel_volestrangler]

38. Describe your math

What is the threshold for starting your wealth tax? How frequently will it be taken? What rate is it taken at?

Things to consider are: what happens to someone whose house grows in value above the limit - it's one thing to say the house of someone who has died must be sold to pay taxes, it's quite another to do that to someone still living. How are investments designed to provide a retirement income treated? How is a personally-owned business treated - would an owner have to sell it while they're still trying to run it, to satisfy the tax?

[gulliver]

39. It would be all the same math as the Estate Tax

It would just be prorated over a lifespan so that the expected remaining tax at death would be zero. As with the Estate Tax, every possible loophole that protects small business, family farms, homes, would apply. If your net worth went down in a given year, you would be entitled to a refund of the taxes paid on the loss.

So start with it being net neutral vs. the Estate Tax. Suppose there were an option to pre-pay estate taxes so that there were no giant payment due on death. I'm sure if this is not available (estate taxes are not a problem for me) now, accounting arrangements are there to buffer the payment to allow continuity for assets like businesses.

The main idea of the post was to co-opt the framing of the "Death Tax" and the "Balanced Budget Amendment" and and redefine them in a way that would schock Republicans. But it seems to have backfired somehow and schocked DUers. Oh well.

I do see the point that the idea of an Inheritance Tax has a psychological appeal over the idea of a net worth tax. A lot of people don't like the idea of inherited wealth, including me. On the other hand, to me, there is a psychological appeal to simply creating an unavoidable wealth tax and taxing pots of money with the same attitude as taxing its flows.

We already do tax net worth to some extent anyway (property taxes, capital gains, and so forth), so it is not that great a leap. When a war is being pushed for, either legitimately or by Republicans, wouldn't it be better if the cost were allocated across all wealth, focusing as completely as possible on the wealth of the very wealthy? What about backing "too big to fail" institutions? What about "prosperity" measures designed to do the opposite of the now discredited "austerity" ones? If the wealth of the wealthy backed these ventures, they would be a lot more inclined (it seems to me) to use their political power to prevent wars, correct the abuses that create "too big to fail" failures, and maybe even back FDR-like, Keynesian stimulus over failed austerity.

[muriel_volestrangler]

40. It would require you to predict everyone's date of death

and so it cannot work.

"prorated over a lifespan so that the expected remaining tax at death would be zero" - this cannot be done for an individual until you know when they die.

[gulliver]

41. Life insurance actuaries do it routinely.

It doesn't need to be exact or specific to individuals.

Good luck with the voles btw.

[muriel_volestrangler]

42. So if someone lives longer, they'll pay a lot more in taxes, even though they're no richer?

How would you predict how much money they will have in the future, so that you work out how much to tax them now, even if you assume they will live an average lifespan?

I don't think what you're proposing can any longer be called "all the same math as the Estate Tax". That involves a computation of the net worth of an individual at one moment in time, and the application of a threshold and taxes above that.

If a 40 year old has $1.5 million, how much would they pay this year, if they are expected to live until 90? When do they next pay their "not dead yet" tax? How much would an 89 year old with $1.5 million pay, if they're expected to live another 4 years? What if they end up living 12 years?

[gulliver]

44. You're right.

There would have to be actuarial mathematics that are similar to those used for life insurance. For example, the payments could be based on normal life expectancy. If you lived longer than that, the payments would no longer be required, and you might in fact be entitled to interest on previous payments. If you lived a shorter than normal life, then the remainder would be assessed as an estate tax. If your net worth dropped, you would get a refund.

[Recursion]

2. OFFS. "Death tax" talk on DU.

The shark has been jumped several times now.

[hrmjustin]

5. Why can't we tax them when the rich are alive and dead? I say do both.

[nadinbrzezinski]

6. Hmmm...I find it curious you chose to use a Karl rove

Inspired framing...in fact it is not inspired...it is suggested by rove, after testing by Frank Luntz.

Hmmm

Curiouser and curiouser

[gulliver]

8. Ok, sometimes you are too inscrutable...

...even for me. And I like David Lynch. (Not a big Alice in Wonderland fan.)

What on Earth are you talking about? Take pity on me.

[BumRushDaShow]

9. "Death Tax" is a RW talking point.

Just like "Death Panels".

[gulliver]

10. I know. That's the point of the OP.

To turn the framing on its ear.

[nadinbrzezinski]

15. You failed horrible since you adopted some of it

Like getting rid of it.

[gulliver]

25. It's actually supposed to be "funny" but with a point.

But it did fizzle, I have to admit. If it has to be explained, it's a failure.

[Ilsa]

11. Inheritance taxes have been used for hundreds of years to

prevent families from taking over societies, governments, economies. We need a robust inheritance tax. And charities (all kinds, including education) would shrivel if it was eliminated, too.

[gulliver]

14. I think my intentions are being misunderstood here.

The OP is meant to be a smart-aleck counter-frame to the idea of the Death Tax as sold by Republicans. The same for the Balanced Budget Amendment I "propose."

The net worth tax I am talking about would actually be exactly the same (plus more) tax on the estate of the wealthy than the current estate tax. I'm talking about increasing the money taken out of the estate. Just take it out before the person dies. Then the Republicans can't call it a death tax.

[PowerToThePeople]

12. Since a dead person is dead

they can not be taxed. They also can not own anything. Everything that was theirs in life should revert to the commons.

[Igel]

18. My neighbor a few doors down died last year.

Her house should become part of the commons?

Note that the commons was not government property or a government asset. It couldn't be sold because there was nobody to sell it. It belonged to everybody to use as they see fit. Hence it could be overgrazed (since the original commons was land next to or inside of the village).

Eventually, given enough time and bad management, much of the country would be commons. Except, of course, government and corporate land. They're immortal or, at least, don't "die".

[Pelican]

19. That's fucked up...

Work hard your whole life so you can leave everything that you have built to the government.

Fuck your family or your preferred charity or your junior business partner who helped you build it.

That's fucking fascist...

[PowerToThePeople]

21. Nothing fascist about it.

You have anger issues.

edit-
You are dead. If there are still assets tied to you, you have obviously taken more from this earth than what you needed to live out your life in the quality that you desired. They should be returned.

[Pelican]

23. So a husband works his whole life, builds a home and eventually dies...

... and the wife remains.

Is she now living in a government owned home? Can she sell it? What about the kids?

Can he deed his property to a charity of his choice before he dies?

[PowerToThePeople]

33. the specifics are always complicated =)

I do not have the answer. This has been discussed before and I think the tax rate for wealth transfer should be close to 100% beyond a certain point.

I have not had any coffee yet, so I am going to be lazy and just link what I have said before.

Here are links to other (old) discussions.
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=1575467
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=422168
http://www.democraticunderground.com/?com=view_post&forum=1002&pid=1383334

search for old discussions.
http://www.google.com/search?q=inheritance&sitesearch=democraticunderground.com

[xoom]

43. So screw their family they left behind? Pretty messed up.

I dont see why the government should get it before the family.

[MadrasT]

32. Right there with you

Family and children should get the bulk of the estate unless the will says otherwise

My great grandparents and grandparents and parents worked their asses off so their descendants could have more secure lives than they had

Redistibute the wealth my ass

I am a democrat but this uber-lefty socialist hogwash does not fly with me

[PowerToThePeople]

35. We need to be honest

ALL of us have what we have because prior generations KILLED innocent people. Think African slave traders. native Americans, Indigenous peoples from around the world.

Stored wealth while people are starving and homeless is a crime against humanity. We are all guilty of it.

[grantcart]

16. "Death Taz" "Balanced Budget Ammendment"

Why stop there?


Why not go for "Right to Work" and eliminate the EPA?

[reformist2]

17. Let's rename it the Living Tax! That'll catch the stupid GOP flatfooted.

Instead of 50% after a person dies, just 5% of their wealth over $5 million for every year they're alive.

[ErikJ]

28. Then they'll call it the "Breathing Tax".

Fred Luntz is good at this stuff.

[LostOne4Ever]

24. I would rather keep it

Taxing the inheritance of wealthy heirs coming into a huge some of money for doing nothing makes sense to me. Where it causes issues (lets say they can't afford their family home or something along those lines) some sort of reform could be passed.

I would rather fix it where it has problems rather than throw the baby out with the dish water.

[ErikJ]

26. "Death Tax" was Walmart's name for it.

THeyre the ones who campaigned the RW propaganda machine to rename inheritance tax the Death Tax.

[1-Old-Man]

27. We tax income, not wealth. The only way to tax wealth is with a robust inheritance tax.

I do not like to see people use the word confiscatory when referring to any tax. We may confiscate property for taxes not paid but taxes themselves should not be called a form of confiscation. Using that word only adds ammunition to the right wing no-tax idiots.

[gulliver]

34. If you can tax wealth after death, you can tax wealth before it.

The whole OP is a tongue-in-cheek, fizzled attempt to bring up replacing the Death Tax with a (higher) net worth tax and sell it as giving the Republicans their way on the the Death Tax. In principle net worth is obviously taxable since we tax it at death.

I would actually like to see the wealthy declare their full net worth (whatever they control, wherever it is). If it's in the Caymans and they control it, it is in their net worth. Then it gets taxed under the net worth tax.

There is no special reason accumulated wealth needs to be taxed only at the death event. It is a "good event" to tax, because of the principles brought up by others in this thread. ("Reduces dynasties...can't take it with you and so forth.) But net worth should also be taxable if the country just "needs the money." For example, it would have been interesting to see Bush and the Republicans try to rush the country into the Iraq War if the established way of paying for wars were an excise tax on the net worth of the wealthy.

[AllINeedIsCoffee]

29. A tax that effects less than 1% of the population? No.

Let the spoiled rich kids pull themselves up by their own bootstraps, rather than their umbilical cords.

[4dsc]

30. no such thing as "death tax"

we need to keep right wing propaganda off the DU.

[SoCalDem]

31. The so-called "death-tax" is an INHERITANCE tax

which is perfectly okay. There has (for a very long time) been a hefty allowance for married couples, and now that the allowance has been given/will be given to the LGBT community , it's fairer than ever.

Children of wealthy people should have no "special/tax free" claim on the estates of their dead elderly kin.

The old canard about how families have to sell the farm/business when Dad/Grandpa dies, is just propaganda. In 99.9999999% of the time, they "have" to sell because they want CASH....not the farm land or business....and maybe the one or two who may actually want to run the business/farm, cannot afford to buy-out the others.

Especially in the case of large estates, the ONLY time that money even gets taxed (due to tax havens & clever accounting while the person was alive), is at their deaths.

[hughee99]

36. A constitutional amendment that lets congress spend the wealthy's money as if it's government money?

Sounds like a good idea.

I think the reason repukes and Democrats disagree so much on taxes it because repukes have this idea that the money they work for and take home is THEIR money, and when they pay taxes, they're giving THEIR money to the government. They need to look at it as all money they make, the product of their labor, belongs to the GOVERNMENT and what they take home is what the government chooses to let them keep. Their assets, their personal property, they all really belong to the government. The government can take those things (or force them to sell them) whenever they like, if they need the money, or even if they don't. We don't need to address the issue of wasteful government spending, what we really need to fix is problem of some people who have too much money.

Once we address the issue of people having too much money and the we gradually lower what we consider "wealthy" year after year as revenues decrease or spending increases, then we can tackle the government spending problem.

[Socal31]

47. There is a party with this viewpoint...

and it is not my party. You know, the one mentioned in this site's URL.

Good luck with that, however.

[Bunnahabhain]

49. So a constitutional amendment to

strip Fifth amendment rights from the wealthy? Yeah, that's a brilliant idea.

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

I also think people worry too much about dynasties. Mean reversion folks. By the third generation things usually start to implode and sometimes even the second generation squanders things. Slap a reasonable inheritance tax on folks, call it a day, and don't get hung up on being jealous of people that have a trust fund.

[hughee99]

57. Actually, I'm not serious.

Whenever I see one of these "the government should take the money from the wealthy because they have too much (or because it's easier than reigning in a budget properly)" sort of suggestions, I find it disturbing. Not because I have an issue with taxing the wealthy, but rather because the assumption seems to be that it's okay to take not only someone's income, but their assets, property, etc... Plenty of people are willing to support this as legal, but when someone suggests that it's NOT just the wealthy this would apply to but EVERYONE, people start to get pissed at the idea. I'm not sure exactly where in the code of laws or the constitution the authority arises for government to confiscate a person's property just because they "have too much", but if it's there, I'm willing to bet it doesn't say "but only for rich people" or only if it's because "they have too much". What your are left with is a government that can take what anyone has for virtually any reason and if that's the case, doesn't everything really belong to them?

I didn't add the sarcasm tag, though. Perhaps I should have.

[cherokeeprogressive]

59. I apologize. n/t

[hughee99]

60. No problem.

Given the idiocy I wrote, and without the sarcasm tag, my reaction would have been similar.

[Gothmog]

37. This tax is progressive

Elimination of the inheritance tax would make the system less progressive and increase income inequality.

[MH1]

45. Get off the right wing whacko language, would you?

It's not a "death tax". No one is taxed for dying, and if you were, you wouldn't care, because, you know, YOU'RE DEAD.

It's an inheritance tax and it is generally fine in principle, we just need to stop lowering it.

The most hilarious thing about the right-wingers trying to get rid of the inheritance tax is that they otherwise claim to be against "giving" anything to anyone that didn't "work" for it. LOL.

[gulliver]

46. I prefer to address their framings head on.

I could have put "Death Tax" in quotes or used "so-called" in front of it I suppose.

[MH1]

48. Yeah, I think that would help

When you use their words without a qualifier, it could be interpreted as validating their frame. Whether you meant it that way or not.

[Chan790]

50. A better idea, one based on a restrained capitalism of a limited-resource system.

Raise the inheritance tax substantially over a certain initial estate-valuation threshold (let's say $3M), exempt inheritances to spouses and inheritances under a threshold (The smaller of $3M total or 50% of estate-value) to other familial heirs, allow deductions for donations to charity and a national trust, prorate asset-holdings of corporations over the share-value of shareholders. (This eliminates the immortality benefit of corporations by taxing stock-transfers of estates except where those shares are donated to charity.) Let's also allow National Trusts to sell certain specific-and-restricted classes of assets to the government and public only to fund operations and maintenance of other Trust assets so that they don't end up owning the entirety of suburbia. Likewise, off-shoring assets does not decrease the valuation of domestic estates or those of US citizens. (Well, they could renounce their citizenship but then they'd be subject to other duties and taxes.)

The net outcome is that the most someone like Mitt Romney can leave his kids is $3M unless he wants his estate to inescapably either pay or divest the majority of its value. There is no value in sheltering his assets in his corporations or willing those shares as they're going to be taxed upon his death. The system so proposed encourages donations and divestment to charity, the public-welfare and the commons.

The dirty tricks therein:

Because estates will donate stock to avoid taxation and corporations will encourage this practice to avoid taxation, it's just about inevitable that the plurality of stock will end up being held by NPOs, foundations and non-government trusts in fairly short order who are far more likely to display institutional-conscience than private shareholders or investment banks. (An Exxon owned in any substantial part by Oceana isn't fracking or deepwater drilling. A Starbucks owned in any substantial part by Oxfam or Amnesty Intl. isn't exploiting coffee farmers in the poorest parts of the world or condoning the human rights violations of those farmers by their governments.)

The primary owner and seller of real-estate over the same range will almost certainly become the National Trust. It's equally likewise that we will see an increase in middle-class public housing and proliferation of parks and public-use facilities as Britain as seen as a result of its national trust.

[Bunnahabhain]

51. So before I even finished reading your post

I had a work around. As you are allowing deductions for donations to nonprofits one merely creates a nonprofit designed to provide for one's heirs and endows it with the bulk of one's fortune. One's heirs will run the nonprofit, be paid very well for doing very little, and populate the board by handpicked cronies that have their own NPOs designed to do the same. This is of course already being done.

What all this tax discussion concerning blocking intergenerational fails to mention is social capital. No matter what tax legislation is enacted the elite will still bestow their children with a life that fosters eliteness. Good schools, knowing the right people, exposure to a certain way of life.

[Chan790]

55. This isn't necessarily a bad thing you've hit on.

I come to this as the child of top-5% parents who sent me to those schools, raised me around the right people and exposure to that lifestyle. I grew up with money. In fact, when my parents die, hopefully decades from now...I'm going to get smacked with estate taxes. A lot: my parents came into a lot more money after I was an adult. I don't have a problem with paying those taxes. I will probably also set up a family foundation and/or donate a large chunk to charity.

Social capital only gets you so far, it's a leg up but without anything else going for you, it takes you nowhere.

The things you hit on were not coincidental but for the most part by-intent. I want them to put their money there thinking of the reasons you cite. The non-profit sector is very regulated, far more than people think and substantially more than corporations are. They get audited yearly, they have to account for every dollar spent and file reports called 990s on what they spend the money on and how it fulfills the mission of the NPO. Even if they set up family charities, the vast bulk of the benefit of the estate will be in the public interest.

Yes, you can set up a foundation and donate the bulk of your estate to it to avoid taxes, in fact most billionaires already do that...but the law is narrow as to what the purpose of that foundation can be...you can't use it to benefit your heirs primarily or else you forfeit tax-exemption and the tax-deduction of donations. It has to serve a public benefit and be approved by the IRS.

It's strict on what percentage of holdings and donations can be applied to salaries and overhead...you can hire family members and even give them nice benefits and nice paychecks but you're never going to be able to pay them anything approaching on what they're not inheriting. It's not a viable means of transfer of generational wealth or skirting the system. Paying board-members gets tricky as board members drawing salaries have to be employed in legitimate and necessary work for the organization...and the IRS determines what constitutes legitimate work. Generally it means 20+ hours/week and busywork & paper-pushing aren't going to pass muster.

[Bunnahabhain]

56. I am more than vaguely familiar with 990s.

I am more than vaguely familiar with this entire realm but will not get into details. You are making the mistake thinking salary is the only way to compensate. Go Google 457(f) plans for just a starter. Then think luxury company cars, expense accounts, business travel and various other ways a lifestyle can be supported quite legally.

As to 990s and mission...well yes and no. For instance, one non-profit board I sit on, has a wholely owned for profit subsidiary and engages in something called "UBI" or unrelated business income. This non-profit came across a niche market for a very specialized service but it had nothing to do with its mission so formed a for profit to house the UBI. The retained income of the for profit belongs to the non-profit as it owns the for profit. The ED draws a salary from the NPO, have various other compensations, and then draws a salary from the for profit which fills his 401(b) for him too. Missions can also be defined quite broadly and are nearly infinite in possibilities. I know a non-profit that has a mission to do with the art world. The ED gets to spend time in cities like Paris, Rome, and London on the organization's dime, so again, a certain lifestyle is being supported.

You are also mistaken about audits. The role of an audit is to ascertain whether the financial statements generated materially reflect the finances of the organization. They most certainly do not "account for every penny spent" but rather sample various financial functions, test for things like segregation of duties, assess financial controls, etc. There is a concept in accounting called "materiality" and below this limit, which will vary based on things such as the size of revenues, fairly significant amounts in terms of raw dollars can be omitted or misstated and it is no harm, no foul in the audit process.

Paying the board members of an NPO is generally frowned upon and not best practices.

I could go on but I think my point has been made.

[VanillaRhapsody]

52. Estate tax does NOT effect the vast vast majority of Americans...

Unless you are inheriting over 4 million dollars individually....you won't be paying an Estate tax on that money.

[DonCoquixote]

53. when people make fun of me

for saying this place is infested with right wing operatives, I will point to this op, with framing right out of Karl Rove, arguing for a favorite right wing cause.

[rustydog]

58. First of all, there is NO death tax.

You know when Willard "car elevator" Romney kicks the Mormon version of the bucket, any hundreds of millions he leaves to family becomes immediate INCOME and therefore taxable....tax the shit out of those entitled, welfare-seeking (insane rich-only and corporat only tax breaks simply because Willard's dad was rich and he became a vulture capitalist. filthy rich snots. They avoid taxes throughout their lives paying rates half of what I pay.
Their snide, privileged, secluded off-spring simply had to come from the womb of Willies' wife and bang-o! when he dies THEY are rich!!!! Tax them.

[Iggo]

61. "Death Tax"? Really?