British Tories Propose Cutting Taxes.

[Glocksman]

The Indiana form is interesting in that I had no idea we had a state inheritance tax.
Good thing that the exemption for children and grandchildren is $100,000, or I'd be in trouble.

Though I expect that as executor of my Mother's estate, my older sister (advised free of charge by a lawyer friend of my Mom) filed all of the necessary paperwork.

When Mom died in 2000, her only assets were her car, personal belongings, and $10k of basic life insurance through her job**.
The house was left to me and my two sisters by my Grandmother in a trust* back in 1976.

The terms specified that the trust was to be used for my mother's benefit until she died, and then the assets were to be divided equally between me and my two sisters.

After the mortgage note was paid, each of us wound up with $17k from the house sale.
Mom's insurance and personal property barely paid for her funeral and grave marker.


*If you ever find yourself dealing with a certain lawyer from southwestern Indiana, shoot the motherfucker and claim self defense.
The SOB looted the trust and almost lost us the house for nonpayment of taxes.
Only my granduncle Russ who was a classmate and buddy of a local judge managed to save the house for us before the Sheriff's sale.


**On the advice of her bankruptcy attorney, Mom canceled the additional $150k life insurance policy through her job that only cost $15/weekly.
At the time of her death in 2000, she was an RN making $26/hr plus good benefits.

Ironically enough, though I make much less an hour even today, in what some will undoubtedly decry as union extortion, my employer provided death benefit is one year's pay (currently about $26k), plus another one year's pay from my union itself and a $10k payout from my credit union.

I half jokingly tell my sisters to not spend it all in one place.

Note: edited to remove lawyer's name.

Bah, I meant to edit my previous post, not quote it.
Could a mod fix it please?

[Darth Holbytlan]

Gross Estate

Your gross estate includes the value of all property in which you had an interest at the time of death. Your gross estate also includes the following:

• Life insurance proceeds payable to your estate or, if you owned the policy, to your heirs;
• The value of certain annuities payable to your estate or your heirs; and
• The value of certain property you transferred within 3 years before your death.

Your wife won't get taxed on the payout, but then she won't get taxed for any of your estate. Your kids are another matter.

That's only if I'm dumb enough to pay the proceeds to my estate. (BTW, if I pay the benefits of my own life insurance policy to my estate then I pay estate tax on those). The proceeds of a life insurance policy I buy, presumably, are going to the kids (or to my wife, and to my kids if my wife is dead, etc.).

The situation you're describing could commonly come up if A buys a life insurance in favor of B and then B dies. The life insurance benefits, then, pass through B's estate.

Wrong. It applies when A buys life insurance in favor of B, and A dies. The insurance A bought (and still owns) counts as part of the estate and is taxed as such no matter who the beneficiary is. That's what the "if you owned the policy, to your heirs" refers to.

That's clearly not the situation I was describing, since no one buys a life insurance policy to pay to themselves when they die (or, at least, that's not a common structure). You buy the policy and then give ownership to the beneficiary, hold it in an irrevocable trust, etc. etc. etc..

Then it's hardly part of your estate anymore, is it? How does the fact that it isn't taxed as such when you die supposed to prove anything? Besides, to give it to the beneficiary or to an irrevocable trust in their favor in the first place, it's subject to gift taxes instead. This still cuts into the lifetime limit on the size of the estate before taxes are owed, so it doesn't fundamentally change anything.

Now, it is true that there are real financial advantages to using an irrevocable trust, mostly due to the $12K/yr exemption to the gift tax, but your claim is that the entire concept of an estate tax is a bad idea. The fact that there are oddities in its current implementation in the tax code proves nothing about that concept.

[bobalot]

why don't you tell people that they can't write wills or otherwise make plans for their inheritance? The Soviets even tried this for a VERY short amount of time before they realized how awful such a plan was for society.

No one in this thread has advocated that that people "can't write wills or otherwise make plans for their inheritance" or anything resembling that, you fucking retard. There is no fucking point to answer.

Nonsense--taxation is precisely telling someone what to do with their assets. "You have assets--give some portion of them to the government where we get to decide what happens to them." Incidentally, for those too stupid to follow along, the point of the Soviet statement was that extremely high estate taxes have been tried, in the past, and they've failed miserably, in the past. Even by Soviet standards, very high estate taxes were a disaster and the Soviets gave up on them almost as soon as they instituted them.

Strangely enough, nobody is advocating really high estate taxes levied on the general population in this entire thread or in the article. Which is why this a fucking retarded point. All you are arguing is that something done to excess is counter productive as if this invalidates everything.

Moreover, since you have the reading comprehension of Koko the Gorilla, the point of the wills statement is to refute your idiocy that an estate tax can't possibly punish someone since the person being taxed is dead. That's total bullshit--people who write wills write them for after they die. There is no reason to write a will if you don't care what happens to your assets when you die. But people do write wills. And if they care about what happens to their assets after they die, presumably they care about the size and quantity of assets they can dispose of by wills, trusts, and other estate planning tools.

I also address this line on reasoning, Koko. If counting someone being effected by estate tax as "punishment", you have to argue that every other tax out there is "punishment" in order to have a coherent argument. Every fucking tax out there effects the way you save spend,save and give money.

There is no reason to write a will if you don't care what happens to your assets when you die.

Talk about blowing it out of proportion, 94%+ of people in the UK don't pay any estate tax, 99%+ in the US don't pay any estate tax. The majoriy who do pay get to keep the vast majority of their inheritance.

Talk about a massive fucking straw man. You are implying that any estate tax proposal is at a 100% rate for sake of argument, and continue making assumptions based on this. Nobody would give a shit what happens to their estate if the estate tax is 100%. The problem with this line of reasoning, is the estate tax is nowhere near 100%. It's an effective rate of about 20% in the U.S for a tiny proportion of the population (See Below). So the more you work and save, the more your kids get to keep.

1. People are motivated to work partly because they want to leave a better life for their kids.
2. High estate taxes remove this motivation--work as hard as you want, your kids don't get it.
3. Yes, there is empirical evidence to support this. Among other reasons, this is why the Soviets stopped their ban on inheritance.
4. Yes, Wills and Estates lawyers deal with this all the fucking time.

There should be a fucking retard alert every time you enter a thread so we can all take cover from your stupidity.

NOBODY IN THIS THREAD HAS ADVOCATED HIGH ESTATE TAXES ALONG EX SOVIET LINES.

I'm putting this here just in case you miss it. Nobody has advocated a rate as high as the soviets. This thread is about the UK estate tax which is 40% above 325k, no where near soviet lines. I don't know where you get this soviet bullshit from. Do you use this type of bullshit in every debate?

English guy: The current highest income tax level is 40%, I believe this is at a suitable level.
Master of Ossus: The soviets tried an income tax rate of effectively of near 100% and it didn't work! I win!
English guy: What the fuck?

All you have "proven", is that something done to excess is counter productive, which can be said of pretty much every other tax (Income, Corporate, etc.) .

Congratulations you have proven jack shit.

As for your "points":
1. Agreed.
2. Wrong. Since the estate tax is 40% above 325k (Since this article is about the UK), the more they work, the more their kids get. Effective tax rates in the US, are about 20% at most (See below). The more you save, the more your kids get to keep. Epic fail.
3. Your "empirical evidence" is the 100% inheritance tax from a communist nation. Nobody in this thread or the article has advocated such a system. Massive straw man.
4. I'm not quite sure what you are referring to here. I was asking for evidence that estate tax stops people from working.

1. But the living are affected, you fucking idiot. This is the whole point of the argument about wills.
2. It's totally arbitrary--not only are other forms of "unearned" income not taxed upon death, but there is an exemption for the first X dollars of assets, where X is some number that Congress has no idea what the fuck to do with.

1. They get taxed on the transaction of getting a lot of assets while doing nothing to earn it. If you are going to deem this punishment, then you would have to deem a whole plethora of other taxes as "punishment".
2. Lots of taxes are fucking arbitrary. The tax brackets are arbitrary, sale tax rates, etc. Exemptions all over the fucking place. The estate tax is hardly unique. If this is your argument against estate tax, to be coherent you would have to argue against pretty much every other tax out there.

You honestly have no fucking clue, do you? The estate tax has been linked to the dissolution of businesses (particularly small family ones), cessation of income earning, and distortive transfer behavior like putting money into trusts where the next generation has difficulty effectively investing or spending it and creating a net loss for society. And let's not mention their effects on forcing people to move out of family homes, or to liquidate other treasured assets.

I love this, I ask for evidence you give me the Tax Foundation, a right think tank known for misleading statements. I love the way when comparing tax corporate rates in Europe and America they did an unweighted average of the corporate tax rates. This effectively elevated states like Greece to be on par with Germany. They conveniently used the “statutory” tax rate instead of the effective tax rate. The “statutory” rate is the theoretical maximum rate without taking into consideration tax breaks for R&D, deductions etc. They conveniently forgot to use what companies actually paid. They do this bullshit all the time.

I read through that article. It provides no numbers or collected data to back up any of their statements. No citations, references, nothing. It is a series of models with their unsupported assumptions built into them. It comes up with fantastic howlers like this one:

"The effective tax rate on estates as small as $5 million is currently 44 percent ."

Numbers, reference to IRS documents, etc aren't provided. They link to their own fucking model. Not one shred of evidence. A cursory search on the internet found me this article, which does actual source its data from the IRS. It shows in 2004, the effective tax rate for an estate of $5 million was 16.8%. Even your second article points out the effective estate tax rate is significantly less than the statutory rate. Epic Self Pwn.



As for your second article, did you even bother to read it? Or did you just look at the title and thought it supported your case?

Here's a few choice quotes from the article.

In recent years, fewer than 2 percent of all estates have had to pay estate taxes. But critics argue that the tax may pose a particular hardship for a small business or family farm.

However, when you look up table 8. For 2008 it shows, 138 out of 1659 farm estates who were eligible for estate tax did not have the liquid assets on hand to pay the estate tax*. About 8%. It also shows that out of 154 out of 1470 family owned business who were eligible for estate tax* didn't have liquid assets on hand to pay, about 10%. While there is no official count of family owned businesses in the U.S. (that I'm aware of), this article numbers it at around 4.1 million (browsing the internet I have found numbers of 12 million thrown around).

*Note: The vast majority of these estates are not legible for the estate tax. Most don't even have to file a return.

Using data from the Internal Revenue Service and a broad definition of a family business, Shanker and Astrachan (1996) estimated a total of 20.3 million family businesses in the United States. A stricter defintion of "family business" resulted in a total of 4.1 million family businesses.

Out of 4.1 million family owned businesses (I'm assuming this includes family owned farms), 292 in 2000 did not have enough liquid assets on hand to pay the estate tax (about 0.06%).

The report states:

Moreover, the definition of liquid assets used on estate tax returns excludes money held in certain types of trusts, such as life insurance trusts, that could be used to pay estate taxes.

So the number of people who couldn't actually pay the estate tax is even less.

Out of the 108,322, that actually paid estate tax in 2000, 2834 had insufficient on hand assets to pay (2.6%).

This is your evidence that the estate tax discourages people to save and forces many businesses to shut down and dissolve? The fact that only 2% of estates even have to file returns? (Page 11) Or that of those 2%, a further 2% of that minuscule amount didn't have the liquid assets on hand to pay? ( Table 8 ). We are looking for country wide negative economic effects from the estate tax you got this?

1. The estate tax is a federal tax--no state has been dumb enough to impose such a retarded scheme, largely because the estate tax is the least popular tax in the US, today--it's less popular than sales taxes.

Do you even bother look up this stuff?

Many states in the U.S have their own estate tax. Hint: Look up the Ohio estate tax. It's not the only one.

2. Part of the Bush tax cuts included "slashing" the highest rate for the estate tax from 55% (graduated) down to 47%. So the beneficiaries do not "get the vast amount of their inheritance for doing jack shit" (at least for the sizeable estates you're obviously talking about), contrary to your bullshit speculation on a topic about which you obviously know nothing. Curiously, Congress' bill also set the rate at ZERO percent in 2010, but in 2011 it goes all the way back up to 55%.

It appears I do know jack shit, because the effective estate tax rate is about 20% (Above, IRS source), so the beneficiaries do get the majority of their estate. Your article that you provided to back your assertions that you obviously didn't bother read (Nice Self Pwn) also states the effective rate is significantly less than the "official rate". It also states that only 2% of any estates even need to file a return, and half of those that did file a tax return that :

More than half of the estates filing returns in 1999 and 2000 had a net value that was too low to owe any estate tax.

This "nice widow" of yours has a 99% chance of paying nothing.

Great work finding "evidence" for your claims.

[bobalot]

I forgot to add this in.

The American Estate Tax can be paid over 14 years. Meaning, it is highly unlikely the business or farm has to be sold off to meet the estate tax.

Despite the oft-repeated claim that the estate tax has dire consequences for family farms and small businesses, no evidence supports that charge. Indeed, the American Farm Bureau Federation acknowledged to the New York Times several years ago, when the estate tax was more expansive than it is today, that even then it could not cite a single example of a farm having to be sold to pay the estate tax.

A Congressional Budget Office study, as well, exploded the myth that small businesses and farms have to be liquidated to pay the estate tax. CBO found that of the few farm and family business estates that would owe any estate tax under the 2009 parameters, the overwhelming majority would have sufficient liquid assets (such as bank accounts, stocks, bonds, and insurance) in the estate to pay the tax without having to touch the farm or business. For instance, of the 65 farm estates that would owe any tax after the $3.5 million exemption, just 13 could potentially face liquidity constraints, and CBO
explained that even this figure likely overestimates the number of farm estates with liquidity constraints, because CBO was unable to take into account certain assets held in trusts (such as life insurance trusts) when calculating the liquid assets available to estates to pay the tax. Furthermore, the few, if any, farm estates that would face any liquidity constraints would have other important options available to them — such as spreading their estate tax payments over a 14-year period — that would allow them to pay the tax without having to sell off any of the farm assets.

Source

The source they refer to, is the second source that you provided.