Inheritance Tax vs Income Tax

[rathi]

Strangely enough, the inheritance tax seems to receive a lot of hatred from those normally critical of our current income tax system. The question is simple: Why is this so? Taxes, at least to some degree, are necessary for our current government. And taxes are going to be taken from someone at the end of the day. Thus it would make sense to try create a tax system that generates the required revenue while being as far as possible. An inheritance tax is probably the fairest tax their is. While every other tax takes the money of hardworking Americans, the inheritance tax does not take away the money a person has worked for. Now granted, its not like inheritance taxes are perfect, but compared to income taxes, don't they steal less from the working man?

 

[ARealConservative]

Strangely enough, the inheritance tax seems to receive a lot of hatred from those normally critical of our current income tax system. The question is simple: Why is this so? Taxes, at least to some degree, are necessary for our current government. And taxes are going to be taken from someone at the end of the day. Thus it would make sense to try create a tax system that generates the required revenue while being as far as possible. An inheritance tax is probably the fairest tax their is. While every other tax takes the money of hardworking Americans, the inheritance tax does not take away the money a person has worked for. Now granted, its not like inheritance taxes are perfect, but compared to income taxes, don't they steal less from the working man?

I would certainly have much less problems with an inheritance tax if an income tax didn't exist.

 

[Patrickt]

Let's see, I work for years, save my money, live frugally, and hope to give the money to someone I care about when I die. But, you think that's not fair. No, what's fair is for the government to take the money and give it to...you.

And, why should they wait until I die? Why not just say, no one can have more than $50,000 and if you get it we'll take it. Why not take everything someone has when they turn sixty-seven and force them to live on Social Security. Hey, that would be fair.

The government doesn't have an amount of money they need. They want all they can squeeze.

 

[rathi]

I would certainly have much less problems with an inheritance tax if an income tax didn't exist.

I don't see how they are connected. Please elaborate.

Let's see, I work for years, save my money, live frugally, and hope to give the money to someone I care about when I die. But, you think that's not fair. No, what's fair is for the government to take the money and give it to...you.

Actually, I'm going to have pay for the debt that the boomers have been racking up for the last 20 years. You think thats fair?

And, why should they wait until I die? Why not just say, no one can have more than $50,000 and if you get it we'll take it. Why not take everything someone has when they turn sixty-seven and force them to live on Social Security. Hey, that would be fair.

How is this connected to the topic?

The government doesn't have an amount of money they need. They want all they can squeeze.

How is that relevant to the discussion? They can either squeeze it from you when you are alive, or from when you are dead. Or are you an anarchist who wants to destroy taxation itself?

 

[Iriemon]

Let's see, I work for years, save my money, live frugally, and hope to give the money to someone I care about when I die. But, you think that's not fair. No, what's fair is for the government to take the money and give it to...you.

If they had a higher inheritance tax, you could pay less income taxes and save more money.

And, why should they wait until I die? Why not just say, no one can have more than $50,000 and if you get it we'll take it.

That would take away incentive for people to work hard.

Why not take everything someone has when they turn sixty-seven and force them to live on Social Security. Hey, that would be fair.

No one would save for retirement.

The government doesn't have an amount of money they need. They want all they can squeeze.

Folks in most other countries get squeezed a lot more. In this country in the 50s the top tax rate was 91%, not 35%. You could get squeezed a hell of a lot more.

 

[bigsmitty]

If it were up to me, I'd cut income taxes and spending proportionately by at least half.

On the inheritance- It's being taxed once when it's earned, taxed a few more times, then taxed again when it's inherited? Doesn't sound right to me.

 

[Mr. X]

Taxes, at least to some degree, are necessary for our current government. And taxes are going to be taken from someone at the end of the day. Thus it would make sense to try create a tax system that generates the required revenue while being as far as possible.

Clearly taxes are necessary to some degree to run the government. This raises two questions: What amount is necessary and what is the best way to raise this amount? Since your strictly talking about the inheritance tax here and not taxes in general, I'll stick to the second question.

An inheritance tax is probably the fairest tax their is. While every other tax takes the money of hardworking Americans, the inheritance tax does not take away the money a person has worked for. Now granted, its not like inheritance taxes are perfect, but compared to income taxes, don't they steal less from the working man?

The inheritance tax comes into play after the money of the hardworking American has already been taxed. Aside from filthy-rich-beyond-belief types such as Warren Buffett who has generously come out to support the inheritance tax, there are millions of hardworking Americans who oppose it. One reason is that many businesses and farms are family run. Many people would like to see their business remain that way and the inheritance tax places an unfair burden on them by taxing them twice.

The issue here isn't whether Bill Gates' kids deserve untold millions that they didn't work for, it's the middle class Americans who have worked hard for their money and would like to leave something for their children.

I think the inheritance tax is an incredibly unfair way of collecting taxes. A flat tax rate would be far more equitable and fair to everyone because you pay based on what you earned. Scrap the inheritance tax and if you believe that the government should collect on your things when you die, write them in your will.

 

[ARealConservative]

I don't see how they are connected. Please elaborate.

An income tax is a tax on labor for a year. An inheritance tax is a tax on the accumulated labor over ones lifetime. If we get rid of the yearly labor tax, I still wouldn't like the death tax, but I would hate it far less.

 

[Iriemon]

If it were up to me, I'd cut income taxes and spending proportionately by at least half.

On the inheritance- It's being taxed once when it's earned, taxed a few more times, then taxed again when it's inherited? Doesn't sound right to me.

No necessarily -- most of estates are made up of assets which have big capital gains which have never been taxed.

But money that has been earned is taxed over and over again. That is the way it works. You earn money, it is taxed. You buy a burger, it is taxed to the corporation. The Corp pays an employe, it is taxed again. And over and over.

That is the way it works. Every time the money is transferred, it becomes income to a new person, and that is a taxable event.

In an inheritance tax, the guy who earned the money is not taxed again, he's dead. It is effectively the heir who pays the tax.

And given that, why should Paris Hilton get a hundred million by inheritance tax free, so that people who work for money they get pay a higher tax?

 

[rathi]

The inheritance tax comes into play after the money of the hardworking American has already been taxed. Aside from filthy-rich-beyond-belief types such as Warren Buffett who has generously come out to support the inheritance tax, there are millions of hardworking Americans who oppose it. One reason is that many businesses and farms are family run. Many people would like to see their business remain that way and the inheritance tax places an unfair burden on them by taxing them twice

Very few Americans currently own 2/4million million in assets and need to worry about their farm and businesses. Small farms are a covered exemption. And getting taxed twice is a meaningless term. An increase in estate tax would create a corresponding decrease in income tax, so the money paid is the same. Its like taking 1000 bucks from your right now, or taking 500 now and 500 when you die.

The issue here isn't whether Bill Gates' kids deserve untold millions that they didn't work for, it's the middle class Americans who have worked hard for their money and would like to leave something for their children.

Middle Class American's tend to not to leave 2/4 million in assets over their lifetime. And they still can leave money, their kids just get 1.6 million instead of 2 million. Its not fair to deprive rich kids of their .3 million that they didn't work, is it?

I support inheritance taxes over income taxes simply because the working man deserves his money more than the kids of the rich man.

 

[Iriemon]

An income tax is a tax on labor for a year. An inheritance tax is a tax on the accumulated labor over ones lifetime. If we get rid of the yearly labor tax, I still wouldn't like the death tax, but I would hate it far less.

No, an inheritance tax is a tax upon unearned income received by the beneficiary.

 

[ARealConservative]

No, an inheritance tax is a tax upon unearned income received by the beneficiary.

If the husband works full time and the wife stays home to raise kids - calling this death tax "unearned income" is preposterous.

Maybe she didn't work directly for it - but she certainly has more right to the "unearned income" then the voting public who wishes to steal it from her.

 

[Mr. X]

Middle Class American's tend to not to leave 2/4 million in assets over their lifetime. And they still can leave money, their kids just get 1.6 million instead of 2 million. Its not fair to deprive rich kids of their .3 million that they didn't work, is it?

I support inheritance taxes over income taxes simply because the working man deserves his money more than the kids of the rich man.

I dislike this kind of class warfare rhetoric. Sure Paris Hilton is an obnoxious and spoiled young lady, but shouldn't her parents decide what is left to her rather than you or I?

What you neglect to take into your calculations is that the $2 million dollar asset that is in place for the next three years. It will then revert to a $1 million amount. This amount is also on the gross estate, not just what's in the bank account and also includes any life insurance payments. It's not hard to imagine a middle class family with a home or business and having life insurance shelling out on this tax. And it's not just the federal government, many states have a tax that will be included on top of this.

Whether the heirs have earned the money or not is irrelevant. It's not our place to decide what others should leave to their families.

 

[Iriemon]

If the husband works full time and the wife stays home to raise kids - calling this death tax "unearned income" is preposterous.

Maybe she didn't work directly for it - but she certainly has more right to the "unearned income" then the voting public who wishes to steal it from her.

Since a wife is determined to own property jointly with her husband, there is no transfer on death and a wife has never been subjected to an inheritance tax.

 

[Iriemon]

I dislike this kind of class warfare rhetoric. Sure Paris Hilton is an obnoxious and spoiled young lady, but shouldn't her parents decide what is left to her rather than you or I?

What you neglect to take into your calculations is that the $2 million dollar asset that is in place for the next three years. It will then revert to a $1 million amount. This amount is also on the gross estate, not just what's in the bank account and also includes any life insurance payments. It's not hard to imagine a middle class family with a home or business and having life insurance shelling out on this tax. And it's not just the federal government, many states have a tax that will be included on top of this.

Whether the heirs have earned the money or not is irrelevant. It's not our place to decide what others should leave to their families.

But it is our place to decide whether a transfer or assets to someone who did not earn them should or should be subject to a tax, just as a transfer of assetsto soeone who earned them is.

 

[ARealConservative]

Since a wife is determined to own property jointly with her husband, there is no transfer on death and a wife has never been subjected to an inheritance tax.

fine - switch wife - with the sister of the deceased wife that stayed home with the kids.

You go to great lengths to ignore the concept behind an analogy.

 

[Iriemon]

fine - switch wife - with the sister of the deceased wife that stayed home with the kids.

You go to great lengths to ignore the concept behind an analogy.

If you pay your sister for taking care of your kids, those payments are taxable income. Transfers of assets to non-spousal family members are a taxable event, and should be IMO.

 

[rathi]

I dislike this kind of class warfare rhetoric. Sure Paris Hilton is an obnoxious and spoiled young lady, but shouldn't her parents decide what is left to her rather than you or I?

Not if the alternative is going to some working man and telling him what do with the money that he just earned. Taxable income has to come from somewhere, better those who deserve it less.

What you neglect to take into your calculations is that the $2 million dollar asset that is in place for the next three years. It will then revert to a $1 million amount. This amount is also on the gross estate, not just what's in the bank account and also includes any life insurance payments. It's not hard to imagine a middle class family with a home or business and having life insurance shelling out on this tax. And it's not just the federal government, many states have a tax that will be included on top of this.

A 2 parent family gets 4 million before they have to pay taxes. 4 million in assets is not middle class.

Whether the heirs have earned the money or not is irrelevant. It's not our place to decide what others should leave to their families.

They can leave whatever they wish, nobody is telling them what to leave.

 

[Mr. X]

I disagree with your reasoning. I will never like the idea of singling someone out and saying they don't deserve to have what they do. And I seriously doubt the middle class, working people of America have felt a great weight lifted from their shoulders because someone is paying the inheritance tax.

And because I'm against the inheritance tax does not mean that I'm for the rest of the tax system. I've said it before; the fairest and most equitable tax system would be a flat rate tax. Addressing wasteful spending and ineffective government policies and programs would go a lot further towards reducing the tax burden on the working class.

 

[Patrickt]

Can someone give me an example of taxes coming down because tax revenues went up? It doesn't work that way. I don't pay one penny more in income tax because most people in the U.S. don't pay income tax. If, by some miracle, they started paying my taxes would stay the same and politicians would spend more.

There is absolutely no connection between what the government needs and what they take.

For those, or the one, who was concerned about the debt baby boomers had run up, forget out it. It's nothing compared to what they'll run up in the next few years when they quit working and aren't prepared to take care of themselves. BTW, I'm not a baby boomer. I recently asked a baby boomer who is living large what he'd done to put something away for retirement. The response was, "Why should I? I'll get social security."

 

[Iriemon]

I disagree with your reasoning. I will never like the idea of singling someone out and saying they don't deserve to have what they do.

Yet that is what happens every year we pay taxes on our income.

Why should it be OK to single someone out and say they don't deserve to have what they do when it comes to income, but it is not OK with when it comes to inheritance?

And I seriously doubt the middle class, working people of America have felt a great weight lifted from their shoulders because someone is paying the inheritance tax.

This is true, it's probably about 3% higher taxes on working folks to make up the difference. Though of course currently its just adding on to the debt.

And because I'm against the inheritance tax does not mean that I'm for the rest of the tax system. I've said it before; the fairest and most equitable tax system would be a flat rate tax. Addressing wasteful spending and ineffective government policies and programs would go a lot further towards reducing the tax burden on the working class.

Irrelevant to whether there should be an inheritance tax.

 

[Iriemon]

Can someone give me an example of taxes coming down because tax revenues went up?

Sure. Don't you remember Bush slashing taxes on the basis that we were going to have all those years of surpluses that would pay down the debt?

It doesn't work that way. I don't pay one penny more in income tax because most people in the U.S. don't pay income tax. If, by some miracle, they started paying my taxes would stay the same and politicians would spend more. There is absolutely no connection between what the government needs and what they take.

Revenue have to come from somewhere. If the Paris Hiltons don't have to pay it on their inheritance, then someone else does, unless you think debt is a great thing.

For those, or the one, who was concerned about the debt baby boomers had run up, forget out it. It's nothing compared to what they'll run up in the next few years when they quit working and aren't prepared to take care of themselves. BTW, I'm not a baby boomer. I recently asked a baby boomer who is living large what he'd done to put something away for retirement. The response was, "Why should I? I'll get social security."

That fellow should be concerned. Because the Govt has stolen over $2 trillion from the SS trust fund to fund the deficits, there's a good chance that fellow won't be getting the benefit he's expecting.

Because the pass the buck generation has blown the SS trust fund, part of the $9 trillion in debt, it will be an interesting battle fought between the baby boomers and gen-x and beyond. The boomer generation, who have had decades of lower taxes financed by a huge debt, will en masse want to sharply raise taxes to pay for their retirement benefits, as well as the necessary interest on their debt. The Gen-xers will balk at the sharply higher tax rates required, and want to slash boomer pension and health benefits.

A titanic inter-generational struggle is coming, thanks to the fiscal irresponsibility of pass the buck leaders like Ron, George and George. Alas, it could have been avoided.

 

[Mr. X]

Irrelevant to whether there should be an inheritance tax.

But isn't, at least a small part of your argument, based on the fairness and equity of this tax? That's the only reason I mentioned it. I don't want to derail the subject of discussion, but to say an advocacy of a flat tax has no relevance to the inheritance tax, or any other form of tax, isn't accurate.

 

[Patrickt]

"Revenue have to come from somewhere. If the Paris Hiltons don't have to pay it on their inheritance, then someone else does, unless you think debt is a great thing."

You seem to be under the impression there is a specific amount of money the government needs and they tax to raise that amount and when they get enough, well, golly, they're done. In fact, it's the other way around. They raise all they can and then set a budget to spend it.

I worked for years and saved my money. I really would like to leave it to people I love so they can spend it. Some are family and some aren't. I understand that some of you would rather the government take it and spend it. It's easy for people to be jealous of Paris Hilton or, for that matter, me. It's so much easier than working and living within your means.

Let's face it. People love a tax, that's on someone else. John Kerry pays a lower tax rate than I do and he thinks my taxes should go up. Senator Kennedy has overseas trust funds to protect his family's money so he feels comfortable taking mine and buying votes with it. Folks, it's getting old.

 

[Iriemon]

But isn't, at least a small part of your argument, based on the fairness and equity of this tax? That's the only reason I mentioned it. I don't want to derail the subject of discussion, but to say an advocacy of a flat tax has no relevance to the inheritance tax, or any other form of tax, isn't accurate.

If you think a flat tax is fair, why if it fair that a worker pay a higher 25% flat so the Parises pay -0-% tax on their inheritances?