Estate Tax 1 trillion dollar misunderstanding?

[papau]

A One Trillion dollar misunderstanding – The need for Estate Tax repeal.

I was trying to understand the other day how discussion of the estate tax has lead to a vote in the next few days on repealing the estate tax. Do folks not know that portion of an estate that is exempt from taxation has doubled since 2000 to $2 million ($4 million per couple) in 2006, with the current law stating that it will rise to $3.5 million ($7 million per couple) in 2009? Do folks not know that the above has caused the number of estates being taxed each year to drop 75% compared to what it would have been under pre-20001 law, with the 2009 increase in the exemption level causing that low number to drop by about another 50%? In 2006 only five out of every 1,000 people who die this year (and about half that in 2009) will pay any estate tax. It is estimated that only 123 farms, and 135 small businesses, would have paid any estate tax in 2006, and that for 2009 this drops to 100 family businesses and only 65 farm estates (few call these "family farms"), with only 13 farms facing a liquidity constraint because of failure to put aside money in bank accounts, stocks, bonds or insurance, perhaps forcing them to use the allowed spreading of the estate tax payments over a 14-year period in order to avoid a sale of the farm estate.

The goal of any estate tax reform should be to relieve smaller estates from the tax while capturing the unpaid capital gains tax at the same tax rate applied to wage income, thereby preserving a large share of estate tax revenue and focusing the tax on those wealthy estates most able to pay. The GOP has no plan for replacing the One Trillion of revenue lost over 10 years, other than passing it onto the backs of future children as a “birth tax increase”. What is the reasoning for the repeal the "death tax" -and it is not a death tax since it only tries to capture the unpaid capital gains tax at the income tax rates applied to wages –that is a goal of the GOP despite the corresponding increase in the birth tax - the deficit caused national debt that future births must handle? Are the GOP being truthful when they say repeal is a needed benefit for Farms and Small Businesses?

Perhaps the GOP has not read the Congressional Budget Office study. “Effects of the Federal Estate Tax on Farms and Small Businesses,” July 2005, which exploded the myth that family farms and businesses must be sold to pay the tax? The CBO study analyzed how many farm and family-owned business estates would have been subject to tax in 2000 had the 2006 exemption level of $2 million ($4 million per couple) been in place. It found that the number of taxable farm estates would have fallen by more than 90 percent and the number of taxable family-owned businesses by almost three-quarters. Only 123 farms, and 135 small businesses, would have paid any estate tax

To fix this non-problem, Senator Jon Kyl wants to raise the exemption level to $5 million ($10 million per couple) and slash the rate by two-thirds, to 15 percent, at a cost in terms of an increase in the average kids birth tax that is only 84% of the cost of full repeal, based on estimates by the Joint Committee on Taxation, with as always under a GOP tax cut idea, about 76 percent of the tax cut benefit going to the unfortunate folks inheriting estates valued at more than $10 million.

I know the GOP would never lie to us so as to help the rich, so it is sad to see these poor folks showing themselves to be uninformed and incompetent legislators.

[brentspeak]

1. 20 of the richest families in the US have been lobbying Congress

(Republicans only) to repeal the estate tax. Republican congress-creeps have put all other national concerns to the side in order to cater to these billionaire families.

[havocmom]

4. Many probably keeping head of family alive on machines

until the law changes and they can safely unplug people.

[ClintonTyree]

2. DEATH TAX, DEATH TAX!

:eyes: That's the way the Repiglickens frame it anyway. No, the American people DON'T know the facts about this, as with most other things their government does to them. All they hear is the Repiglicken DEATH TAX and that's good enough for them, because it's going to affect each and every one of them, you know? :eyes: Why do I live in a country full of sheep who can't be bothered to find out the truth about their government but will watch "American Idol" ceaselessly? :shrug: Sometimes I don't even think it's even worth trying to reach them anymore. It's disgusting. :puke:

[Lefty48197]

3. One half of one percent pay the estate tax

"In 2006 only five out of every 1,000 people who die this year (and about half that in 2009) will pay any estate tax"

In 2009, that will drop to one quarter of one percent. Now the Republicans aren't even fighting for the top 1 or 2%, they're now only fighting for the top 1/2 or 1/4 of one percent. They're alienating the second top 1.75%.

[havocmom]

5. Not a misunderstanding at all. Planned confusion and psy-ops by rich

to get those who are not in the top one half of one percent to do their bidding.

Hey, papau, can I circulate your concise explanation?

I live in one of those places where family farmers and ranchers are too easily bamboozled into thinking the estate tax has anything to do with them or their enterprises. Most have fallen for the PR blitz of the uber-rich and infamous that their kids will have to sell the place to pay some fuzzy 'death tax'.

It is particularly weird they fall for this crap considering few family farms and ranches get inherited around here anyway. For most, that agricultural concern is the only PENSION they have for their old age. They generally sell it off when they are getting too tired or frail to keep running it. If they are lucky, they have grown children who want to take over and can manage to qualify for a mortgage to buy the place.

Most family farms/ranches turn over in the usual land sale transaction around here. Death Tax is just another phrase to hit on nerves that don't route to the higher brain.
Been trying to get people to see it critically and see how is doesn't even apply to them.

[papau]

6. havocmom - I'd be honored if you'd circulate the explanation :-)

:-)

[havocmom]

7. Thank ye kindly

Here in the land of Conrad Burns, it is important to get people to really see what the issue is and who it really affects. Your use of "birth tax" really clarifies the result of continued cutting of taxes for the top.

[SheilaT]

8. It is pretty astonishing

how many people think they will personally be affected by the estate tax. We should all be so lucky as to have to worry about it.

[applegrove]

9. If farm subsidies were negotiated down in the next 5 years.. USA,

Canada, Australia and a few others would have a comparative advantage and would profit tremendously.

[ticktockman]

10. Why Tax Income and Not Wealth? - Both Benefit from Government Services

The goal of any estate tax reform should be to relieve smaller estates from the tax while capturing the unpaid capital gains tax at the same tax rate applied to wage income, thereby preserving a large share of estate tax revenue and focusing the tax on those wealthy estates most able to pay. The GOP has no plan for replacing the One Trillion of revenue lost over 10 years, other than passing it onto the backs of future children as a “birth tax increase”. What is the reasoning for the repeal the "death tax" -and it is not a death tax since it only tries to capture the unpaid capital gains tax at the income tax rates applied to wages –that is a goal of the GOP despite the corresponding increase in the birth tax - the deficit caused national debt that future births must handle?

Good points. Also, just as there is a rationale for a tax on income, there is a rationale for a tax on wealth. Those who have wealth benefit from the existence of the police, military, and courts in the task of protecting their wealth. In a country without those services, they would have to at least hire their own police force to guard it. In any case, the wealthy derive a greater benefit from some of these services than do the poor. It only makes sense that they pay more of the cost.

If wealth is to be taxed, the easiest time to do that is usually at the time of death. If there is more than one beneficiary, then there will have to be an accounting of the estate at that point anyhow. However, I do support a reasonably high limit below which estates are not taxed. For someone who is handling a relatively small estate, it can be quite a burden to have to handle the estate taxes as well as the final year's individual taxes of the deceased. For a large estate however, someone can be paid to do it. In addition, the beneficiaries are compensated with a larger inheritance in whose creation, in most cases, they played little or no role.

If the current $2 million limit is too small to handle some small farms an business then the law can be changed to handle them. For example, the taxes could be deferred to if and when the business or farm is sold. In any case, I don't have a major problem with raising the limit or changing the tax rate, as long as the lost revenues are made up and not just passed on as a debt to the next generation. However, totally abolishing the estate tax seems especially foolish. If a later Congress should conclude that an estate tax is justified, it will be much more difficult to reinstate it than to simply modify the rates or limit.