Vote for Obama

[WstateU]

The Estate Tax has to be the most insane and punitive tax there is and it should be eliminated forever. The same money shouldn't be taxed over and over, and there is no way the government is entitled to take away someone's inheritance. It's indefensible.

Amen!

[Smooth007]

Agreed the estate tax is wrong and stupid. I don't know why it has been a law for so many years. I trade you the estate tax law elimination, in return I ask that dividends and capital gains be taxed at marginal tax rates. We all know who makes out better on this one.

[Rocky Mountain Shock]

The Estate Tax has to be the most insane and punitive tax there is and it should be eliminated forever. The same money shouldn't be taxed over and over, and there is no way the government is entitled to take away someone's inheritance. It's indefensible.

One of the reasons the estate tax was enacted was super rich people were shielding large unrealized capital gains from eventual taxation by transfering their wealth to their heirs, literally by design upon their death. Because the basis of the assets is "stepped up" when they are transferred by a decedent, these capital gains would never be subject to taxation without the estate tax. Most of us will never be subject to it--right now estates under $5 million of an individual and $10 million of a couple are excluded from the tax, far above even most small business owners. But, yeah, it's a morbid tax--in anticipation of it going away in 2010, the firm I worked for at the time joked that we should advise our clients to die in 2010. A little creepy, sometimes tax accountants' sense of humor is off.

There's a back door to this, by gifting assets over time to your heirs. The lifetime cumulative exclusion is slightly more than the threshold when the estate tax kicks in, so with some effective tax planning, even most enormous estates can avoid paying large amounts of tax upon a decedent's death.

Anyway, my point is the bad rap on the estate tax is a little overblown. I don't know exactly how I feel about it. I'll do whatever I can to help my clients avoid it, but there are some interesting arguments both for and against these taxes.

[WuDrWu]

I'll tell you why, it's pure and simple class envy and class warfare. Nothing else.

Now, increasing the tax on dividends and capital gains will adversely affect any recovery. If you want to wait until the economic engine is churning along a rate fast enough to grow jobs at a rate to lower unemployment, then we can have that debate then, but again, this is not a revenue problem. It's a spending problem, and it's a ideological problem.

[WuDrWu]

One of the reasons the estate tax was enacted was super rich people were shielding large unrealized capital gains from eventual taxation by transfering their wealth to their heirs, literally by design upon their death. Because the basis of the assets is "stepped up" when they are transferred by a decedent, these capital gains would never be subject to taxation without the estate tax. Most of us will never be subject to it--right now estates under $5 million of an individual and $10 million of a couple are excluded from the tax, far above even most small business owners. But, yeah, it's a morbid tax--in anticipation of it going away in 2010, the firm I worked for at the time joked that we should advise our clients to die in 2010. A little creepy, sometimes tax accountants' sense of humor is off.

There's a back door to this, by gifting assets over time to your heirs. The lifetime cumulative exclusion is slightly more than the threshold when the estate tax kicks in, so with some effective tax planning, even most enormous estates can avoid paying large amounts of tax upon a decedent's death.

Anyway, my point is the bad rap on the estate tax is a little overblown. I don't know exactly how I feel about it. I'll do whatever I can to help my clients avoid it, but there are some interesting arguments both for and against these taxes.

I applaud your tactfulness and continued effort to have a logical discussion...well done!

You can't gift more than 13k a year to any one person. It's kind of hard to get to $5 million that way. Again, most, if not all, of this money has been taxed once, if not multiple times. And what's wrong with rich people keeping what's theirs? You say that as if it's wrong....

I realize there are other ways to "protect" assets, but it shouldn't be that hard. This is kind of like the discussion of Romney's tax returns. It's a guilty until proven innocent. The vast majority are paying boatloads of taxes. It needs to be simplified and streamlined. Now.

[Rocky Mountain Shock]

I applaud your tactfulness and continued effort to have a logical discussion...well done!

You can't gift more than 13k a year to any one person. It's kind of hard to get to $5 million that way. Again, most, if not all, of this money has been taxed once, if not multiple times. And what's wrong with rich people keeping what's theirs? You say that as if it's wrong....

I realize there are other ways to "protect" assets, but it shouldn't be that hard. This is kind of like the discussion of Romney's tax returns. It's a guilty until proven innocent. The vast majority are paying boatloads of taxes. It needs to be simplified and streamlined. Now.

And I applaud my conservative friends here for the same, and for keeping me on my toes. Man, you guys put on a rigorous debate!! :)

Yes, the annual exclusion right now is $13k, so yes, it can be very hard to get to the $5 million, but not necessarily impossible, and certainly you can take a big chunk of it if done properly over a long period of time. But I disagree that "most, if not all, of this money has been taxed once." Common misconception. We have clients with millions of untaxed unrealized capital gains. This stuff would go entirely untaxed without the estate tax, if it was transferred to an heir upon the death of decedent. Some wealth is double taxed, but like I mentioned, there's some interesting arguments for that. Thanks to the exclusion amounts, the vast majority are actually not paying boatloads of taxes. A very, very small minority of estates, those with astronomically large amounts of wealth, pay the estate tax. Many of us here won't ever have to worry about the estate tax, so rest easy--and congratulations to those who have or will, Grandma did well!! You won't find me disagreeing with anyone who wants to rethink this system, though--there's always a better way to make a lightbulb--I'm just not sure that getting rid of the lightbulb is a good idea.

[Capitol Shock II]

Let's talk about fair. Let's say you and three others were adrift on the ocean in a life raft. Before jumping into the life raft, each of you grabbed what supplies you could and stuffed them in your own pack back. Is fair allowing each person to eat whatever they have in their own backpack? Or is emptying all backpacks and dividing up all of the food between all four people most "Fair"? Or based on prior calorie consumption, do you tell the heaviest person on the raft that they only get to consume 15% of the total take because of the extra calories they have stored and the others get to divide the additional 10% among themselves? Or do you tell the guy that collected 50% of the food on board that he only gets to keep 25% of all the food to be "Fair"?

I think from a tax standpoint, everybody should pay the same amount in taxes if you want to be "Fair". For example $1500. I would even settle for the same percentage per tax payer even though that's really not "Fair". Whether you think the answer is $1500 or 15%, both of those options are far more simple than the thousands of pages of tax code that we have now and would eliminate all of the favoritism that currently exists.

It worries me to have somebody like Obama determining who gets what in the life raft of life.

[Smooth007]

Let's talk about fair. Let's say you and three others were adrift on the ocean in a life raft. Before jumping into the life raft, each of you grabbed what supplies you could and stuffed them in your own pack back. Is fair allowing each person to eat whatever they have in their own backpack? Or is emptying all backpacks and dividing up all of the food between all four people most "Fair"? Or based on prior calorie consumption, do you tell the heaviest person on the raft that they only get to consume 15% of the total take because of the extra calories they have stored and the others get to divide the additional 10% among themselves? Or do you tell the guy that collected 50% of the food on board that he only gets to keep 25% of all the food to be "Fair"?

I think from a tax standpoint, everybody should pay the same amount in taxes if you want to be "Fair". For example $1500. I would even settle for the same percentage per tax payer even though that's really not "Fair". Whether you think the answer is $1500 or 15%, both of those options are far more simple than the thousands of pages of tax code that we have now and would eliminate all of the favoritism that currently exists.

It worries me to have somebody like Obama determining who gets what in the life raft of life.

That is a fine and fair representation how you feel. On the flip side, others would worry Romney wouldnt even have the hard working middle class in the boat. They were left to sink with the titanic when in reality, there was plenty of space and food for all working classes. Again I agree that this is a spending problem that is turning into a taxation issue.

[Smooth007]

I applaud your tactfulness and continued effort to have a logical discussion...well done!

You can't gift more than 13k a year to any one person. It's kind of hard to get to $5 million that way. Again, most, if not all, of this money has been taxed once, if not multiple times. And what's wrong with rich people keeping what's theirs? You say that as if it's wrong....

I realize there are other ways to "protect" assets, but it shouldn't be that hard. This is kind of like the discussion of Romney's tax returns. It's a guilty until proven innocent. The vast majority are paying boatloads of taxes. It needs to be simplified and streamlined. Now.

Generally agreed with everything said here. However, let's be fair, just as there are idiots crying foul on tax returns their were once idiots crying foul on a birth certificate. It goes both ways and both are equally wasteful of everyone's time. Tax shelters aside, I think we all know what we would see in Romney's 2009 return. I ton of capital losses that were not deductible in 2008, carried forward, offset against large 2009 gains. Resulting in a very high AGI for 2009 with minimal tax. He just won't release it because the public won't understand how someone could make hundreds on millions in AGI and pay minimal taxes. Additionally, Obama would use the return to distroy Romney in the lower class's perception.

[1979Shocker]

Generally agreed with everything said here. However, let's be fair, just as there are idiots crying foul on tax returns their were once idiots crying foul on a birth certificate. It goes both ways and both are equally wasteful of everyone's time. Tax shelters aside, I think we all know what we would see in Romney's 2009 return. I ton of capital losses that were not deductible in 2008, carried forward, offset against large 2009 gains. Resulting in a very high AGI for 2009 with minimal tax. He just won't release it because the public won't understand how someone could make hundreds on millions in AGI and pay minimal taxes. Additionally, Obama would use the return to distroy Romney in the lower class's perception.

You have to wonder what John McCain saw in Romney's tax returns that he would pick Sarah Palin over him.

[Rocky Mountain Shock]

Generally agreed with everything said here. However, let's be fair, just as there are idiots crying foul on tax returns their were once idiots crying foul on a birth certificate. It goes both ways and both are equally wasteful of everyone's time. Tax shelters aside, I think we all know what we would see in Romney's 2009 return. I ton of capital losses that were not deductible in 2008, carried forward, offset against large 2009 gains. Resulting in a very high AGI for 2009 with minimal tax. He just won't release it because the public won't understand how someone could make hundreds on millions in AGI and pay minimal taxes. Additionally, Obama would use the return to distroy Romney in the lower class's perception.

Very true.

[Good News]

This paragraph is so chalk full of inaccuracies I don't know where to begin.

In 2000 the U.S. National Debt was: 5,674,178,209,886 (5.6 Trillion)

In Clinton's BEST year he ran a 260 Billion surplus. (Hats off to him on that). If you take his absolute BEST year and divide it through, it would take over 20 years. Medicare and social security expenses are compounding, while taxes cannot.

His surplus, and anybody else's, is unsustainable until the welfare programs are wound down. This is what is hurting Obama, and is what will plague any other president after Obama, until one takes drastic measures.

Even though it’s a very general statement, I’ll roughly agree with what Aargh said. Kung, as far as your point, some additional thoughts:


I was a bond trader in early 2000, and I can assure you firsthand that – whether Republican or Democrat – the hot topic among traders in the most important market in the world (the bond market) was what was going to replace Treasuries as a risk-free instrument after there weren’t any more of them left. And that window was believed to be 10 years (at most).

As for compounding, it works both ways. The rate on the long bond peaked around 14% in the early 80s, and there was a lot of other debt couponed above 10% that was still outstanding in 2000. This was some of the debt that was being retired (or maturing), and those coupon payments weren’t being made any more.

In addition, at that time Social Security was cash flow positive since the amount of withholding exceeded payments (I think this finally flipped in 2010 as boomers started retiring), so the compounding was actually working in favor of accelerated debt reduction… unless somebody wants to make a case that social security obligations were compounding faster than the weighted average coupon of 10% or so on the debt that was being retired. I don’t know, but I seriously doubt it.

In other words, it’s not just $5.6T divided by $260B = X payoff period. There were other dynamics (refunding, calls, shortening duration, etc.) that were in play that could also create an accelerating/compounding effect, but I have a feeling everybody’s crosseyed by now anyway.


Anyway, just throwing another viewpoint and some more data out there.

[SubGod22]

You have to wonder what John McCain saw in Romney's tax returns that he would pick Sarah Palin over him.

It had nothing to do with that. McCain had little if any support from conservatives. Romney wouldn't have done much of anything to change that. Palin has more conservative views and ideas that made her more attractive as a running mate. In my opinion, had McCain had Romney, he would have been beaten by a wider margin than he was.

[Rocky Mountain Shock]

Even though it’s a very general statement, I’ll roughly agree with what Aargh said. Kung, as far as your point, some additional thoughts:


I was a bond trader in early 2000, and I can assure you firsthand that – whether Republican or Democrat – the hot topic among traders in the most important market in the world (the bond market) was what was going to replace Treasuries as a risk-free instrument after there weren’t any more of them left. And that window was believed to be 10 years (at most).

As for compounding, it works both ways. The rate on the long bond peaked around 14% in the early 80s, and there was a lot of other debt couponed above 10% that was still outstanding in 2000. This was some of the debt that was being retired (or maturing), and those coupon payments weren’t being made any more.

In addition, at that time Social Security was cash flow positive since the amount of withholding exceeded payments (I think this finally flipped in 2010 as boomers started retiring), so the compounding was actually working in favor of accelerated debt reduction… unless somebody wants to make a case that social security obligations were compounding faster than the weighted average coupon of 10% or so on the debt that was being retired. I don’t know, but I seriously doubt it.

In other words, it’s not just $5.6T divided by $260B = X payoff period. There were other dynamics (refunding, calls, shortening duration, etc.) that were in play that could also create an accelerating/compounding effect, but I have a feeling everybody’s crosseyed by now anyway.


Anyway, just throwing another viewpoint and some more data out there.

Fascinating. Obviously, even with a surplus of $260B it will take much longer than 20 years. By using the social security trust fund like we did for so long, I'm not sure that the system is even salvagable at this point. That's scary, because getting rid of it leaves millions of people who counted on it hanging out to dry, but fixing it by re-funding it might take longer than the time it has left. It's a timebomb we totally ignored.

It looks like you guys were pretty darn accurate in your estimate of how long Treasuries would at least be risk-free. Hit that nail pretty square.

[1979Shocker]

It had nothing to do with that. McCain had little if any support from conservatives. Romney wouldn't have done much of anything to change that. Palin has more conservative views and ideas that made her more attractive as a running mate. In my opinion, had McCain had Romney, he would have been beaten by a wider margin than he was.

I guess that really doesn't look very good for Romney in this election then, unless Ryan than pull him up.