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Rich people who claim to favor the inheritance tax actually use loopholes to avoid it

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Rich people who claim to favor the inheritance tax actually use loopholes to avoid it

Old 06-10-06, 08:42 PM
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Rich people who claim to favor the inheritance tax actually use loopholes to avoid it

I think the inheritance tax should be eliminated.

However, as long as it does exist, I don't think it should have any loopholes. Such loopholes lead to the kind of dishonesty that is mentioned in the bolded part of this editorial.


http://www.opinionjournal.com/editor...l?id=110008487

Taxes Everlasting

Why the superrich don't mind the death tax.

Thursday, June 8, 2006 12:01 a.m. EDT

If you've followed the death tax debate, you know that few issues raise liberal blood pressure more. Liberal journalists in particular are around the bend: How in the world can the public support repealing a tax that most Americans will never pay? Good question, so let us try to answer.

Americans favor repealing the death tax not because they think it will help them directly. They're more principled than that. Two-thirds of the public wants to repeal it because they think taxing a lifetime of thrift due to the accident of death is unfair, and even immoral. They also understand that the really rich won't pay the tax anyway because they hire lawyers to avoid it.

For proof that they're right, they need only watch the current debate. The superrich or their kin--such as Bill Gates Sr. and Warren Buffett--are some of the loudest voices opposing repeal. Yet they are able to shelter their own vast wealth by creating foundations or via other crafty estate planning. Edward McCaffery, an estate tax expert at USC Law School, argues that "if breaking up large concentrations of wealth is the intention of the death tax, then it is a miserable failure."

Do the Kennedys or Rockefellers look any poorer from the existence of a tax first created in 1917? The real people who pay the levy are the thrifty middle class and entrepreneurs who've built up a modest nest egg or business and are hit by a 46% tax rate when they die. Americans want family businesses, ranches, farms and other assets to be passed from one generation to the next. Yet the U.S. has one of the highest death tax rates in the world.

By far the largest supporter of preserving the death tax is the life insurance lobby, which could lose billions of dollars from policies written to avoid the tax. The Los Angeles Times reported this week that the insurance industry is the main funder of an anti-repeal outfit known as the Coalition for America's Priorities. A Coalition ad features a sound-alike of heiress Paris Hilton praising the Senate as "like awesome" for cutting her family's taxes. But this is the opposite of the truth. The American Family Business Institute has found that the bulk of the Hilton estate has long been sheltered from the IRS in tax- free trusts.

Frank Keating, president of the American Council of Life Insurers, has criticized repeal by saying: "I am institutionally and intestinally against huge blocs of inherited wealth. I don't think we need the Viscount of Enron or the Duke of Microsoft." But while he was Oklahoma Governor in the 1990s, Mr. Keating took a different line: "I believe death taxes are un-American. They are rooted in the failed collectivist schemes of the past and have no place in a society that values entrepreneurship, work, saving, and families." We can appreciate how such a marked change of views would give Mr. Keating intestinal issues.

Which brings us back to the political paradox that, even with Republicans at a low ebb, voters still support death tax repeal. A majority in both houses of Congress also supports it, so Senate Democrats can stop repeal only with the procedural dodge of a filibuster. Even at that, several Democrats are clamoring for a compromise that would take the issue off the table in November. They recall what happened in 2004 to Tom Daschle in South Dakota.

But Republicans should accept a compromise only if it lowers the death tax rate enough (to 15%) to reduce the incentive for avoidance and eliminate its punitive nature. Voters have been saying clearly and for years that they don't want a tax whose only justification is government greed and envy.
Old 06-10-06, 09:00 PM
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Gotta love them loopholes.
Old 06-10-06, 09:18 PM
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Famous Grundle poll, with limited options.

How about a middleground, like "reduce the inheritance tax rates", "eliminate the death tax on amounts under $X dollars", or "reduce the inheritance tax on middle class folks". If your concern is really middle-class folks getting hit with the tax instead.
Old 06-10-06, 09:53 PM
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<i>Mod note: Removed generalization</i>

Last edited by nemein; 06-11-06 at 04:36 AM.
Old 06-10-06, 10:29 PM
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Originally Posted by GreenMonkey
Famous Grundle poll, with limited options.

How about a middleground, like "reduce the inheritance tax rates", "eliminate the death tax on amounts under $X dollars", or "reduce the inheritance tax on middle class folks". If your concern is really middle-class folks getting hit with the tax instead.
Those options fall under the category of loopholes, sort of.
Old 06-10-06, 11:00 PM
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So, if these aristocrats are using the loopholes, aren't all of them?
Old 06-11-06, 12:17 AM
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Originally Posted by grundle
Those options fall under the category of loopholes, sort of.
Reducing the rate and setting a threshold amount counts as a loophole? Then I vote to keep it, with loopholes -- loopholes like the ones GreenMonkey listed.

If I were in charge of the inheritence tax, there's be a very large exemption, indexed to inflation. Everything above the exemption would be taxed at confiscatory rates.
Old 06-11-06, 12:44 AM
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As long as there are taxes, lobbyists, and politicians, there will be loopholes. The trick is exploiting them to their fullest.
Old 06-11-06, 04:38 AM
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By far the largest supporter of preserving the death tax is the life insurance lobby, which could lose billions of dollars from policies written to avoid the tax.
Hadn't really thought about this angle before. Personally I'm for getting rid of it.
Old 06-11-06, 08:26 AM
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Keep the loopholes!
Old 06-11-06, 08:47 AM
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Originally Posted by JasonF
Reducing the rate and setting a threshold amount counts as a loophole? Then I vote to keep it, with loopholes -- loopholes like the ones GreenMonkey listed.

If I were in charge of the inheritence tax, there's be a very large exemption, indexed to inflation. Everything above the exemption would be taxed at confiscatory rates.

Well, they're not exactly loopholes. But they are a way for people to reduce what they pay.

Each extra choice in the poll has the potential to double the number of possible answers. I didn't want it to explode.

What size exemption would you have? Would your exemption apply to each estate, or to each heir? What would your top tax rate be?
Old 06-11-06, 09:56 AM
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Grundle, this may be a shock and surely unintentional on your part, but are you aware that your thread title is misleading and not supported by the article?

It said people LIKE Bill Gates Sr. and Warren Buffett are supporters of inheritance tax would be able to exploit loopholes. It does not even imply they do.
Old 06-11-06, 10:04 AM
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Originally Posted by Bushdog
It said people LIKE Bill Gates Sr. and Warren Buffett are supporters of inheritance tax would be able to exploit loopholes. It does not even imply they do.
Yeah, right.

I don't know how we get the data to settle any bet, but I want the side of the bet that says they planned the crap out of their estates and the government ain't getting much. I'd take long odds too.
Old 06-11-06, 10:29 AM
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Personally, I like the rebranding from the "Death Tax" to the "Paris Hilton Tax." Its certainly more descriptive.
Old 06-11-06, 10:41 AM
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Originally Posted by CRM114
Personally, I like the rebranding from the "Death Tax" to the "Paris Hilton Tax." Its certainly more descriptive.
I think you are implying that Paris Hilton didn't earn anything she got from her family, she just inherited it, which is true.

But that takes the wrong view of the situation. The money went to her because the person who earned it wanted it to (the actual earner(s) could have gone back more than one generation but it's still the same principle). The testator has the right to leave wealth to whomever he or she wants, even the useless "famous for being famous" Paris Hilton. That's why the document a testator executes is called a "will."

I voted "Eliminate the inheritance tax."
Old 06-11-06, 10:44 AM
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Originally Posted by OldDude
Yeah, right.

I don't know how we get the data to settle any bet, but I want the side of the bet that says they planned the crap out of their estates and the government ain't getting much. I'd take long odds too.
Ok, Bill has been on the record (with what to gain?) that he wasn't going to leave billions in inheritance. He was going to take care of his kids but give most of it away. Guess I'm a fool for trusting someone when they say something that seems very matter of fact for which they have little/no advantage in lying about.
Old 06-11-06, 10:45 AM
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Originally Posted by movielib
I think you are implying that Paris Hilton didn't earn anything she got from her family, she just inherited it, which is true.

But that takes the wrong view of the situation. The money went to her because the person who earned it wanted it to (the actual earner(s) could have gone back more than one generation but it's still the same principle). The testator has the right to leave wealth to whomever he or she wants, even the useless "famous for being famous" Paris Hilton. That's why the document a testator executes is called a "will."

I voted "Eliminate the inheritance tax."
Exactly. Why can't someone who wants to dispose of their property this way do so? Are we all capitalists until someone dies, and then we become socialists?
Old 06-11-06, 10:47 AM
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Hey if Bill wants to donate a few tens of millions to me...
Old 06-11-06, 11:03 AM
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Originally Posted by Bushdog
He was going to take care of his kids but give most of it away. Guess I'm a fool for trusting someone when they say something that seems very matter of fact for which they have little/no advantage in lying about.
I'm not saying you're a fool, but I believe in "trust 'em, but check 'em.

We may wish to compare his definition of "take care of" vs the federal estate tax exemption, and see if he does anything to "take better care of" by using the loopholes the Taxocrats wrote into the law.

I believe its purpose is not to raise money but to provide job security for estate lawyers and planners. On the other hand, I spent my $2500 to secure the more obvious loopholes. My estate won't be enough to require the really complex ones, but that would be extra. Some are so complex I'm not sure I understand how they benefit the estate, but the lawyers swear by them.
Old 06-11-06, 11:08 AM
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Originally Posted by CRM114
Personally, I like the rebranding from the "Death Tax" to the "Paris Hilton Tax." Its certainly more descriptive.
If getting rid of the Paris Hilton tax would get rid of Pais Hilton, I'd be all for it!
Old 06-11-06, 12:38 PM
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Originally Posted by Bushdog
Ok, Bill has been on the record (with what to gain?) that he wasn't going to leave billions in inheritance. He was going to take care of his kids but give most of it away. Guess I'm a fool for trusting someone when they say something that seems very matter of fact for which they have little/no advantage in lying about.
The above references were to Bill Gates Sr., father of the man who founded Microsoft. Bill Sr. is very rich in his own right (he founded one of the biggest law firms in Seattle).
Old 06-11-06, 12:51 PM
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Originally Posted by CRM114
Personally, I like the rebranding from the "Death Tax" to the "Paris Hilton Tax." Its certainly more descriptive.
Even better -- the "Michael Skakel Tax." We could even have a poll about it:

Do you support tax breaks for people who murder 15-year-old girls?

-- Yes
-- No
Old 06-11-06, 01:14 PM
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Originally Posted by CRM114
Personally, I like the rebranding from the "Death Tax" to the "Paris Hilton Tax." Its certainly more descriptive.


any article that uses "death tax" as it's prime descriptor triggers my ignore button automatically.
Old 06-11-06, 04:03 PM
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Originally Posted by movielib
I think you are implying that Paris Hilton didn't earn anything she got from her family, she just inherited it, which is true.

But that takes the wrong view of the situation. The money went to her because the person who earned it wanted it to (the actual earner(s) could have gone back more than one generation but it's still the same principle). The testator has the right to leave wealth to whomever he or she wants, even the useless "famous for being famous" Paris Hilton. That's why the document a testator executes is called a "will."

I voted "Eliminate the inheritance tax."
I don't believe folks should earn money and never pay tax. That is exactly what is happening. These folks like Paris earn (get) money that for the most part is a the result of untaxed, unrealized capital gains.

Its no wonder that the Waltons of Arkansas are the biggest proponents of doing away with the tax. About a half dozen other such families are fighting tooth and nail and propping up the bogus lobby. They even try to paint it as an everyman's dilemma with stories about family farms being lost. In a word, HOGWASH!
Old 06-11-06, 04:19 PM
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Originally Posted by CRM114
I don't believe folks should earn money and never pay tax. That is exactly what is happening. These folks like Paris earn (get) money that for the most part is a the result of untaxed, unrealized capital gains.

Its no wonder that the Waltons of Arkansas are the biggest proponents of doing away with the tax. About a half dozen other such families are fighting tooth and nail and propping up the bogus lobby. They even try to paint it as an every man's dilemma with stories about family farms being lost. In a word, HOGWASH!
But the money was already taxed. The Waltons & Hiltons paid whatever income tax, business tax or whatever there was on the money when it was earned, made, invested, whatever. So you feel we should tax that money yet again just because it is passed on to kids? How many times does the same money need to get taxed?

To me the question about loopholes is much bigger then this tax. People always get upset because the "rich" find ways of reducing their tax liability. How do you think they got rich??? Because they are smart with their money. Good for them!!!

If there are loopholes then anyone should be able to take advantage of them. Besides as mentioned, these are really not loopholes but legal ways of reducing tax liability. Everyone of us should do that. Find every legal way to pay as little tax as possible, that is how the system is set up.

Now, if you want to eliminate ALL tax loopholes (or whatever you want to call them) for ALL people for ALL types of income, then that would be an interesting discussion. I think it would an interesting idea to have every single person in America pay say what 22% tax with absolutely no exceptions. If you earned it in any way shape or fashion, you pay 22% period.

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