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  1. In Memory of LAJ_FETT: Please share your remembrances and condolences HERE

Senate Fiscal Cliff Doomsday Countdown Thread

Discussion in 'Archive: The Senate Floor' started by Jabbadabbado, Nov 8, 2012.

  1. VadersLaMent

    VadersLaMent Chosen One star 10

    Registered:
    Apr 3, 2002
  2. AAAAAH

    AAAAAH Jedi Knight star 4

    Registered:
    Nov 8, 2012
    Lowbacca edit: This thread has been warned about these posts before. If you're not contributing to the discussion of the fiscal cliff in some way, don't post it.
     
  3. Vaderize03

    Vaderize03 Manager Emeritus star 6 VIP - Former Mod/RSA

    Registered:
    Oct 25, 1999
    Ender, the estate tax was initially enacted to pay for WWI.

    IIRC, that particular conflict ended almost 100 years ago...but hey, Congress can do whatever it wants, right?

    Despite some of my more liberal leanings (for an American, anyway), I happen to be against this particular form of revenue. It's not even double taxation; more like quadruple.

    Do they have an estate tax in your neck of the woods?

    Peace,

    V-03
     
  4. New_York_Jedi

    New_York_Jedi Force Ghost star 6

    Registered:
    Mar 16, 2002
    People like it probably for hereditary fairness stuff.

    The estate tax strikes me as rather efficient tax, in the economic, non-distortion sense. Everyone dies; taxing your estate doesn't change that.

    I guess on the other hand that spending decisions will change based on whether money is being left to your kids or the state. If its going to the state you may as well blow it on stupid **** and expensive, fairly useless end of life treatment. Whereas if its going to your kids you'll want it to be in productive investments to continue to help them, which is beneficial.

    In conclusion, I have no strong opinions about it and I shouldn't use posts to think out loud.
     
  5. Ender Sai

    Ender Sai Chosen One star 10

    Registered:
    Feb 18, 2001
    Well no, because as I stated, the estate is not comprised of pre-tax monies. Your assets are subject to capital gains/losses when you crystalise their CG position and they are usually purchased with money that's been taxed at either the deceased's marginal income tax or the company rate, if they are directors of an investment company.

    So, if I own a house, a portfolio of shares which funds my retirement, and I want to leave that to my kids - I've already paid tax on that. Why should my kids also pay tax on it?

    Government figures there's little sympathy for the affected when they can present it as quadrillionaires leaving the entire GDP of Africa to their kids. Even though that's not going to be the most common scenario.

    V-03 - It's a bit different here because we have superannuation, which is a mandated 9% saving of your annual wages into your own retirement fund. In short, payments made to the beneficiaries of the deceased before a certain period is up (3/6mo) can be taxed at 15%. But we can also offset that with an anti-detriment payment at a Superannuation fund level.

    However, I note that the Government over here, stacked full of bone idle trade unionists who have never held real jobs and who acquire wealth through graft and nepotism, have their eyes fixed on Superannuation in the same way your politicos have their eyes on estate money. Super's taxed at 15% here, but you are capped at $150,000 per annum for post-tax contributions and $50,000 per annum for pre-taxed contributions. They want to lower the caps or increase the tax rate or anything because they love nothing more than the sweet, sweet taste of OPM.
     
  6. Platelet

    Platelet Jedi Knight star 1

    Registered:
    Sep 2, 2012
    Gotta be honest, I think exemption on the first million is fair enough; I doubt the majority people have to worry about the tax. I think it's a good source of revenue, though the Clinton administration levels do sound too high.
     
  7. Ender Sai

    Ender Sai Chosen One star 10

    Registered:
    Feb 18, 2001
    I forget that your house prices in the US are ridiculously low compared to Sydney - my family home, where my parents live, is worth about AU$2.2mil (roughly the same in USD). This was purchased in 1998 for about $700,000. Granted, it's in a suburb ranked in the top 25 in the country and has 4br, 3 bathrooms and a double garage but the same house in the US wouldn't cost nearly as much. I used to watch Entourage mildlly amused at the $2-4mil price tag attached to mansions.

    Anyway, so under that regime my brother and I would be taxed for a house that was bought and paid for with money that had already been taxed. That's no different between the US and Australia, so where's the fairness?
     
  8. yankee8255

    yankee8255 Force Ghost star 6

    Registered:
    May 31, 2005
    Not if you own a house or a business, in which case that million is gone pretty quickly. Like Ender says, the money or assets have already been taxed. Or will be (in the case of capital gains) in future when/if they're sold.

    I found a rather good article on why it should be repealed on HuffPo of all places, not exactly a bastion of right wing lunatics. Two good quotes:

     
  9. Darth Guy

    Darth Guy Chosen One star 10

    Registered:
    Aug 16, 2002
    Inherited wealth is a major cause of the class divide, so I'd be in favor of a steep estate tax. Of course, it would only be part of a number of reforms and as it stands today it would/does just harm people with smaller inheritances and the truly rich could easily get out of most of it. Sigh.
     
    Blithe likes this.
  10. Vaderize03

    Vaderize03 Manager Emeritus star 6 VIP - Former Mod/RSA

    Registered:
    Oct 25, 1999
    Ender, great explanation, thanks!

    As I said before, this is one viewpoint where I am squarely conservative. While I do support progressive income taxation that is reasonable and does not stifle growth, estate taxation is generally a means of income redistribution. It's not the government's job to "level the playing" field when it comes to who gets to keep how much of their already-more-than-once-taxed estate; rather, the point of taxation should be to generate revenue to help fund vital government services.

    It comes down to the "equality of opportunity" vs "equality of outcome" argument, and steep estate taxes reek of the latter. Frankly, money tends to flow where it is treated best, and if you tax the heck out of people's assetts, they pull a Mitt Romney and do as much as they can to avoid paying. Now, Mr. Romney failed to articulate his position well, and played right into attacks that he was elitist and out-of-touch, but there are good points to be raised on why high estate taxes are damaging.

    At the very least, it hurts the ability of small businesses to be passed on to beneficiaries; I would even submit that it empowers those who favor loopholes and a complicated tax code, since the very-rich will always find ways around forking over half (or more, once you factor in state AND federal taxes) of their net worth to Uncle Sam upon shuffling off the mortal coil. It's the "low-rich", people who have net worths in the high-seven or low-eight figures (and many times, they are small businesses) that are hurt by these practices, and I just don't think it's right.

    Also, it comes down to "other people's money", which is always easy to spend. If you absolutely have to have an estate tax, then I would exempt the first $100 million, and make the maximum federal rate 10%, with a total combined rate of no more than 20%. The government shouldn't need more than that from a large estate, or they are probably spending too much.

    Peace,

    V-03
     
    Jedi Merkurian likes this.
  11. Ghost

    Ghost Chosen One star 8

    Registered:
    Oct 13, 2003
    Obama is saying that he will not budge on the tax rates.


    Does anyone know a webpage with a list of every personal & corporate tax deduction/credit, and how much they cost the federal government per year?
     
  12. Ender Sai

    Ender Sai Chosen One star 10

    Registered:
    Feb 18, 2001
    Good points V03 - did anyone notice how many UK high earners moved to the Channel Islands or Monaco when the Labour government had ridiculously high income tax rates?
     
    Vaderize03 likes this.
  13. Vaderize03

    Vaderize03 Manager Emeritus star 6 VIP - Former Mod/RSA

    Registered:
    Oct 25, 1999
    Thanks man :).

    Not only that, but case-in-point:

    With France's income taxes going up significantly, a flood of homes for the rich have now hit the market across the country there. I wonder why....

    Peace,

    V-03
     
  14. Rogue_Ten

    Rogue_Ten Chosen One star 7

    Registered:
    Aug 18, 2002
    im not sure why you two are harping on this. is "white flight" evidence that segregation was a good or moral idea?
     
    Darth Guy likes this.
  15. DarthLowBudget

    DarthLowBudget Jedi Grand Master star 5

    Registered:
    Jan 17, 2004
    Couldn't we just as easily make the argument that while the money was already taxed for the original earner, it needs to be taxed again as part of the transfer from one person to another? I guess the question is, are we taxing the money or are we taxing the transfer?
     
  16. Jabbadabbado

    Jabbadabbado Manager Emeritus star 7 VIP - Former Mod/RSA

    Registered:
    Mar 19, 1999
    Yes, also, I have been taxed against some arbitrary assessment of the value of my home so many times that I've lost count. If estate assets are only taxed twice, they're getting off easy.
     
  17. Darth Guy

    Darth Guy Chosen One star 10

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    Aug 16, 2002
    The point is that society should cater to sociopaths.
     
  18. Ender Sai

    Ender Sai Chosen One star 10

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    Feb 18, 2001
    The issue is not about the mega-rich and I note we have mentioned this more than once. Assuming that the deceased owns family property and has not diminished their retirement savings completely (and assuming a middle class salary, invested into a balanced or conservative asset allocation), if you leave behind $1.5mil in assets in 2013, according to proposed law, the beneficiaries will pay 55% on the $500,000 excess.

    $1.5mil is not a huge sum of money anymore, so it's not unreasonable to assume a lot of middle class beneficiaries would actually really benefit from the money their parents left behind. The 2012 level of ~$5mil makes more sense if your target is the uber rich.

    Anyway, so that $1.5mil estate has, over time, paid two forms of taxation. Firstly, the assets (including cash savings) have all come from money that has paid tax when it was earned, in the form of marginal income tax. Then, if the assets earn money, they are subject to capital gains tax at crystalisation. As a massively bigger kicker, if the CGT position (gain/loss) wasn't crystalised during the life of the deceased, then it will be if the estate liquidates the assets to pay the beneficiaries or if the beneficiaries liquidate them.

    So all an estate does is as follows:

    1) Aim to fill government coffers on questionable grounds;
    2) Gain support because it can be painted as a rich person's tax when in fact the main impact under the 2013 regime is the already struggling middle class;
    3) Make you two feel like the right thing is happening.

    In reality, the super-rich can easily avoid paying it by using offshore holdings, so arguing it helps with deficit reduction is at best wishful thinking. And in real terms, is the net gain from the tax statistically significant, as a percentage of tax revenue? Do you gain significantly more from this tax regime than you do from income tax and capital gains tax?

    Similarly, the $1mil threshold is too low to not make this a punitive money grab that will affect people who are probably already struggling with cost of living expenses.

    If you have to have one, (and I'm not convinced you do since you've already taxed the money once and will tax it again when a capital gain is crystalised), set it at a level at which it will do some good. That level is not $1mil.

    And if the concern is that US tax code allows for cost bases to be reset upon transfer to a beneficiary then you need to have stamp duty payable on all changes to beneficial ownership or to consider death a CGT crystalisation event (so the estate realises gains and losses and pays CGT instead of estate tax).
     
  19. Darth Guy

    Darth Guy Chosen One star 10

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    Aug 16, 2002
    Usually the "struggling middle class" can't afford to leave the country and become tax refugees. Rogue and I were responding to the assertion (which was in Vaderize's post immediately preceding Rogue_Ten's) that just because some rich would flee means that high (progressive income in that case) taxes are bad. And I already acknowledged that a steep estate tax alone would just end up hurting people on the lower end and could be easily avoided by the truly rich.
     
    Rogue_Ten likes this.
  20. Vaderize03

    Vaderize03 Manager Emeritus star 6 VIP - Former Mod/RSA

    Registered:
    Oct 25, 1999
    You made that assertion, not I. You also assumed I was referring solely to individuals, and that I was defending the practice on its face.

    I was doing none of those.

    My point was (and remains) that money flows where it's treated best, both individually and in the business world. While you might disagree with my position on purely sociological grounds, I will like to point out that countries with lower tax rates generally have more government revenue and growth than those who tax the heck out of the more successful in their societies.

    My point in the France example was that a high income tax rate (such as the one being imposed) won't a) generate enough revenue to offset government expenditures and b) will likely result in a capital flight. My example of in regards to millionaires' homes hitting the market "en massse" was simply to demonstrate the beginning of a larger problem: business capital will soon follow.

    If you read my second post on the estate tax (and why I am opposed to it), I said I was supportive of progressive taxation provided that it was reasonable. 75% income tax is an obscenly high rate, and will cause more harm than good.

    There was nothing sociopathic about my statement. It was an example to make a point, which you seem to have missed.

    Peace,

    V-03
     
  21. Ender Sai

    Ender Sai Chosen One star 10

    Registered:
    Feb 18, 2001
    That's probably a fair point, though, re: the flow of money vs the lower progressive tax rates. I'm not talking Hong Kong levels of low, but you're right that a punitive tax regime is a near-disincentive to work hard.
     
  22. Darth Guy

    Darth Guy Chosen One star 10

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    Aug 16, 2002
    I wasn't saying you were a sociopath. I was saying that wealthy individuals and businesses fleeing higher taxes was sociopathic.

    I don't know how it works in France, but in the United States a 75% income tax rate would only apply to income past a certain point. So, if the top bracket started at $250,000, people making more than that wouldn't be taxed 75% on their first $250,000. Maybe you know that, but I think when it works like that it's not unreasonable at all.

    EDIT: lol disincentive to work hard
     
    Vaderize03 likes this.
  23. Ender Sai

    Ender Sai Chosen One star 10

    Registered:
    Feb 18, 2001
    How is it now, Evan?

    You're right, it's progressive tax. But if it's 75% past the equivalent of, say, US$250,000 then people earning over that have every incentive to relocate for tax purposes south to a nice, friendly little principality called Monaco. After all, those taxes are paying for heavily unionised workforces (who are, by genetic disposition, workshy to the extreme) that refuse to work more than 36hrs a week. Looking at my 60+ hrs a week, that seems vaguely offensive. Especially since to earn that money, you aren't unionista doing 36hrs a week.

    So, you either move your money out because the tax regime is punitive and isn't bettering society; or you're overpaying tax, or you're limiting your assessable income to avoid bracket creep.

    I appreciate for you, these tax rates are defensible but they're actually not.

    Here's my question to you; do you use an accountant to do your tax? Do you claim back, say, charitable donations?
     
  24. Rogue_Ten

    Rogue_Ten Chosen One star 7

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    Aug 18, 2002
    haha and he didnt even dare say "disincentive"'; he said "near-disincentive", whatever the hell that means
     
  25. Ender Sai

    Ender Sai Chosen One star 10

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    Feb 18, 2001
    Because ultimately, a punitive tax regime such as the type favoured by unionists, socialists, and other economic cretins will impact on people's projected earnings. Why take a pay rise and promotion if you get bracket creep and less disposable income as a result?