Is Rich escaping Capital Gains tax via Estate tax a Dem issue?

[papau]

It should be. At death the capital gains tax that would normally be paid on transfer of an asset is never paid by the rich.

Annual tax should include years unrealized appreciation as income - with a 20,000 deduction per return, and with a 10 year phase in of the capital gain (unrealized) on all current assets to date law first takes effect - with 500,000 deduction on phase in per year to a max deduction of $5,000,000.

This tax would miss just about all the middle class - and hit the rich - fairly in my opinion.

And it would kill the bullshit about a "Death Tax" that is "unfair".

Does the Democratic Party know how to play offense?

[papau]

1. Comments from above thread responses on this issue:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x4387363

Comments from above thread responses on this issue:

for us The inheritance or estate tax is a tax on the rich who inherited their fortunes rather than working for it in order to encourage tax equity and egalitarianism.

Not everyone who leaves a large estate inherited it. Some have worked hard, had some luck and earned it. But part of their good fortune is due to living in a country with laws and courts and an interstate highway system and public schools and any number of other things we consider part of the public good. The public good is something we all pay for (or should) even if our careers don't pan out as well as those who do really well. As much as repukes like to say that estates are double taxed, most money is double (or more) taxed and that only really applies for that portion of the estate is in cash or equivalents. The capital gains on real estate or art or other valuables have never been taxed and without an estate tax, they never will be. Is it fair that I might have to pay a million $ for an apartment here in NYC but someone else might inherit a similar one tax free that originally cost under $50,000? And I say this as someone who stands to inherit some money from my parents.

No, but those that get a large estate do not earn it. Estate taxes do not apply to "some money". They apply to large estates of several million dollars. I remember having this discussion with my bone-head inlaws in 2000. They built a successful light industrial business. They were for Bush because he promised to phase out estate taxes in ten years. After than, the exemption expires. I told them Gore wanted an immediate exemption for all family businesses and farms with no sunset. They didn't care because Gore wasn't "talking about it", even though he was.

How about the "birth tax"??? About $120k per newborn!

it is not taxing the dead, it is taxing the dead's heirs And the gripes about it are from crybaby richer-than-thous who hate having to pay taxes like the plebes.

My take on the label "death tax" It's the one Casy and Cindy paid. A certain percentage of our population has to DIE for bushCo policies. Or, suffer from mercury poisoning, or etc.


10. BUT TAX WERE PAID... on this money originally. Think about it this way:If you make POST TAX contributions to your IRA, when you retire the money you've saved and earned isn't taxed. Now, if it was taxed, there would be no incentive for saving- you're getting taxed twice on the same amount of money. It's the same thing for the death tax. Say my parents leave me $50,000. During their lives, they paid taxes on this money-through earnings, capital gains tax, whatever. The gov. has already had it's cut. Why should they get a second bite?To call it the Paris Hilton break is ridiculous. There are many people who don't have a fraction of her wealth, and they get hit with this.

Response to Reply #10 ...Not True - there is a capital gain tax - and it will never be paid - If your parents had sold the items and the estate was in cash, they would indeed have paid a capital gain tax. But that is the whole point of the Estate tax - it is a super cheap way for the rich to avoid paying capital gains tax on items transferred to the kids - yet the kids get treated as if they have no liability for capital gains except going forward from today's market value. How Post tax IRA fits into this is that post tax IRA - under today's estate tax law - transfers as cash with no income tax - only the estate tax is paid - and no income tax is paid on pre-tax IRA if moved to a pre-tax IRA that will be taxed on withdrawal. Indeed getting IRA mixed into this discussion is a problem for the current Estate tax loophole folks - the suggestion I have avoids all that for middle class to low rich folks as the deductible is set very high. Indeed, the current Estate Tax deductible makes "IRA treatment" the least of the fairness issues to those that pay the estate tax - the rich. As an aside - all money gets taxed many times - mainly as you earn it via the income tax, and as you spend it via the sales tax.

Response to above: One quibble ... IRAs and other retirement plans are IRD, and as such don't qualify for a step up in basis, so they are inherited, in general, with the full associated income tax liability, ususally at ordinary income tax rates. They are terrible assets to die with. Better to spend that or leave it to charity, and leave the other assets eligible for step up to the kids.

Response to Reply #10... Say your parents bought a house with that $50,000...as I said above, and it's now worth over $500,000. That extra $450,000 (minus money for improvements) in value has never been taxed. The government has not had its cut (for needed money to function). If it doesn't get something from those capital gains it will have to make up the budget shortfall from wages. What's your preference?

Response to Reply #10 ...Here are the fallacies in your argument....

1. Your parents earned that money, you didn't. You've never been taxed on it, and without an estate tax (and even with the estate tax in most cases) you never will.

2. Your parents might not have been income taxed on it, either. If it is appreciated property, such as stock, here's how the income tax works. Assume they bought it at $10--that is their basis in the stock. At the time they died, it was worth $50. If they sold it the day before they died, they would pay capital gains tax on $40. If you inherit it and sell it the next day at $50, your basis is "stepped up" to $50, your sales price is $50, all the capital gain disappears (*poof*) and no tax is ever paid on the appreciation, by your parents or by you.

4. By the way, if that $50,000 was in insurance, the build up of the cash value of the insurance during your parents life time was income tax free, and 99% of the time, the death proceeds are income tax free. And, if done correctly, can be estate tax free with a minimum of planning.

3. The definition of income is an "accession to wealth", so one would normally think that that would include gifts or inheritances. But there is a special exception to this rule, excluding gifts and inheritances from your income. So your inheritances (except for IRAs and other retirement plans) and gifts are free from income tax in your hands. And, if done correctly, can be free from estate or gift tax within certain limits.

4. Okay, its all wages your parents scrimped and save so they can leave you $50k. Fine. Currently law allows each individual to leave $1.5 million at death before the tax is paid. In 2005, that goes to $2.0m per person, $3.5m in 2009. Current scuttlebutt is that there will be a compromise of $5.0m per person.

5. Okay, you've got a farm or business. There are ALREADY a number of special breaks for farms and businesses. Although this is a rallying cry for the death tax folks, I can tell you from my practice that the "forced sale" thing rarely happens. Want more breaks for these? Fine, but its not an argument for repeal.

6. What is an argument for repeal? Encouraging heirs to be productive members of society, valuing worth, encouraging equality of opportunity, and undercutting the impact of the de facto aristocracy occuring in this country based on birth and not on accomplishment.


It affects a very some percentage of people, the wealthist - the reality is if they get rid of this tax, reduce other taxes, and increase spending on the military and the war in Iraq, something will have to give - This is what the neocons have been planning for years, to use that as an argument for why we need to cut and prvitize entitlement programs

Here is there hit list:

1. Social security
2. Medicare
3. other social programs

please look at what deregulation has brought us:

1. higher energy prices, with new monopolies created which are less and less regulated
2. higher phone prices with new monopolies created which are less and less regulated

remember when they degregulated the banking and S&Ls?


They are now talking about deregulating water

The middle class is slowly being destroyed in this country


But couldn't this issue somewhat neutralize the Repubs #1 issue... about lower taxes? Isn't this the issue to educate people about taxes being a necessary part of government and when everyone refuses to pay, what will we have left? Would it be better to tax Joe Six-Pack or Paris Hilton? Bill Gates is worth more than many countries GNP. Should his family be able to keep all his wealth once he dies? What have they done to deserve it? Simply being the "child" of a wealthy person entitles you everything that the parent may have earned in his life?

Those who inherit large sums of money, rather than a family-owned business or farm, should be taxed for the same reason lottery winners are taxed, for that is exactly what they are. Why on earth should some dimbulb asswipe like Dan Quayle, Paris Hilton or ANY member of the Chimp clan NOT have to pay taxes on what is, in effect, money from the sky? If people like Bill Gates, Sr. and Jr., and Warren Buffet have no problem with it why should we drones? The only reason the 'pukes are upset is because they wish to establish dynasties of, in FDR's words, malefactors of great wealth.

funny you should mention this.. I just had a discussion with my plumber about this. He saw all of my bumper stickers and started on a repug rant while he was fixing my pipes. Among other things, he said that FDR ruined this country with social programs and that no one should get a free ride "If you don't work, you don't eat." He added that if we quit giving handouts we would not need so many taxes. Which ties this to the death tax. I asked him about the death tax, which he was, of course, against. He gave me the usual "Tax twice, tax twice, awwkk!." And the old well it's their money bit. I pointed out that his view was contradictory. First, no one person is being "taxed twice". The earner of the money is dead, the new owner is being taxed, and we tax PEOPLE not money. Secondly, the children of the wealthy did not themselves earn the money, so an inheritance is a selective handout. The heirs have already been handed an expensive education and powerful connections via their family ties. Isn't that enough? Society/consumers made the dead person wealthy and the money, therefore, should go back into social coffers.