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Old 07-04-2006, 01:22 PM   #61
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Originally posted by Irvine511




so do you think that people who make over $100,000 a year should pay a higher percentage of their income in taxes than someone who makes $25,000 a year?

because that's discrimination, too, isn't it?
Why would that be discrimination?

We´re talking about income taxes here.

If someone makes 25k a year and pays 12% of taxes because he really can´t afford to give away more, why shouldn´t someone who makes 100k a year give away 30% and someone who makes 750k a year give away 50%?

To reach a high income level you often need proper education, and/ or inherited wealth. Not always, yes there are examples of the dishwasher who becomes a millionaire, but you will agree that´s an exception. That means that someone who earns a lot in his adult life has profitted from the society that brought him up.

That´s a good thing as long as he gives back something to society. The very rich persons contribute a higher percentage of their wealth to the society that has contributed to their wealth in the first place. Plus it benefits the poor - when the politicians spend the taxes for welfare/ education programs instead of weapons.

Why would that be discrimination? If you are advocating the same tax percentage for everyone, why aren´t you advocating the same salary for everyone? When a higher percentage of taxes is dicriminating, isn´t a higher salary for the same labor time discriminating too?
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Old 07-04-2006, 05:36 PM   #62
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Why would that be discrimination?

We´re talking about income taxes here.

If someone makes 25k a year and pays 12% of taxes because he really can´t afford to give away more, why shouldn´t someone who makes 100k a year give away 30% and someone who makes 750k a year give away 50%?

To reach a high income level you often need proper education, and/ or inherited wealth. Not always, yes there are examples of the dishwasher who becomes a millionaire, but you will agree that´s an exception. That means that someone who earns a lot in his adult life has profitted from the society that brought him up.

That´s a good thing as long as he gives back something to society. The very rich persons contribute a higher percentage of their wealth to the society that has contributed to their wealth in the first place. Plus it benefits the poor - when the politicians spend the taxes for welfare/ education programs instead of weapons.

Why would that be discrimination? If you are advocating the same tax percentage for everyone, why aren´t you advocating the same salary for everyone? When a higher percentage of taxes is dicriminating, isn´t a higher salary for the same labor time discriminating too?


you've answered my rhetorical question very well.

thank you.

and this post only answers the question in relation to earned wealth, not inherited wealth.
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Old 07-05-2006, 02:05 PM   #63
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Personally, I think it's a little insulting that you reduce all of our opinions to "knee-jerk" reactions. Maybe we've actually all thought about this and similar subjects for a while and have formed our opinions not based on party lines or impulse, but on our own thought processes and value systems.
My apologies, 80s. It wasn't my desire to insult anyone or reduce your opinions in any way. I find all the posters on FYM (including yourself) to be intelligent, thoughtful people willing to look at issues from all angles. And I like that we hear from a variety of perspectives. So what I said wasn't intended to be "personal."

However, I do think there is a very natural human tendency to fall into a "standard" line of thinking (I'm as a much a victim of this as anyone else). It takes real effort to not do so (and the current hyperbolic poltical climate doesn't help), to question the givens, and I guess I was just challenging all of us to question those "standard" lines.

The few politicians I tend to admire are those that tend to buck the party line every now and then (people like McCain and Lieberman for example). Not surprisingly such people are not always appreciated in their own parties.

My feeling is that the Standard Conservative Stance and Standard Liberal Stance on taxes are extreme and ignore a lot of real-life complexities.

I also felt that the complicating issues on the subject of the tax should really make both sides think twice.

Warren Buffet, a paragon of free market capitalism, supports the estate tax. Shouldn't that make us ask why? (Rather than trying to somehow insist that somehow he really doesn't support the estate tax).

We've got a poster who illustrates that the estate tax causes real hardship for "regular" people. Shoudn't that make us ask whether the estate has some flaws that determine examination?

I don't want to insult anyone or denigrate anyone's point of view. I would like to see those two "complicating" factors addressed.
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Old 07-05-2006, 07:41 PM   #64
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Maycocksean gave a good general outline of the two sides to the issue with the Standard Stances, but I would share with 80sU2isBest’s assessment that all responses are necessarily “knee jerk” reactions. I will agree, however, that digging deeper into subjects (such as why does Warren Buffet support the estate tax and is that meaningful to the average American?) is often lost in FYM quip-fests and I appreciate your desire to generate more fruitful discussion.

Since we have lauded Buffet’s donation, we’ve really now redirected and split the discussion into two parts: the appropriateness of estate taxes and income taxes.

As for the double taxation of income with the estate tax, there are no arguments offered in support of the tax other than (i) the government needs the money and (ii) passing on too much money (there is no principled argument for the amount of money that could be passed to the next generation) is somehow wrong. In opposition, we see real life material hardships created by the estate tax and no real reason the government should be given a second bite of the income apple.

Income taxes, or more appropriately progressive income taxes, are predicated on the idea that people with more income should pay more because they can. This is usually summed up by the “fair share” argument (a meaningless, yet emotionally powerful euphemism as there rarely is an effort to define what is “fair” and what should be one’s “share” – just a tool to say one group should pay more).

Hiphop captures part of the basis for higher incomes (more education), but this is only a small part of the equation. Hard work over a long period of time also plays into higher income levels, a process that is penalized when tax rates are increased. Those who were alive during the era of 70% tax rates would understand the destructive nature of such rates as increasing amounts of effort were funneled towards tax shelters, not income producing activities. The US economy has grown significantly stronger following the reduction in the top income tax rates and the US Government has received increased tax revenue at the lower rates.
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Old 07-06-2006, 02:19 AM   #65
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^Thanks Nbc. That's what I was looking for. You've made a strong case for your point of view. The most compelling part of your argument to me was: "How do you define 'fair share'. How much money makes you rich enough to pay more?" I think Martha's situtaion shows how what we perceive is "rich" may actually be "just scraping by."

Mind if I probe this argument a little? With estate taxes, when you're taxing assets, or income, isn't it the person who is inheriting the estate that is taxed, not the person who passed on? I guess what I'm getting at is something like this. . .hasn't my employer already paid revenue taxes on the money that goes into my paycheck? Couldn't I complain that I shouldn't have to pay income taxes on my pay because it's already been taxed once. Or let's say a company imports a product and there are import taxes. And then the state charges sales tax. Isn't that another example of the being "taxed twice?" I guess I'm just wondering if paying tax "twice" happens quite a bit, and as long as a PERSON isn't taxed twice on the same amount, wouldn't that be okay?
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Old 07-06-2006, 10:35 AM   #66
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[B]As for the double taxation of income with the estate tax, there are no arguments offered in support of the tax other than (i) the government needs the money and (ii) passing on too much money (there is no principled argument for the amount of money that could be passed to the next generation) is somehow wrong. In opposition, we see real life material hardships created by the estate tax and no real reason the government should be given a second bite of the income apple.

i'll leave aside your various assertions and remind you that i've offered several justifications for the estate tax that go well beyond the two (highly stilted and misleading) "arguments" that you've presented. yes, the government needs the money considering that we are $8 trillion in debt and with an endless war to pay for and the abolition of the estate tax would cost the government over a trillian dollars, and yes, the passing on of wealth (inherited wealth) places that money in a different category than earned wealth. we live in a society where the economic rules are strongly tilted in favor of the haves at the expense of the have-nots, where tax laws give generous loopholes to the wealthiest (Bermuda, anyone?). it strikes me that the occasion of passing on wealth to the next generation is an appropriate time to tax our accumulated fortunes. most of the appreciated value of these assets has never been taxed before -- and this affects approximately 1 in every 200 people. it is simply not a good thing to have a small number of people at the top who are enormously wealthy, and I think we continue to believe that that's not a healthy situation. economic polarization is not good for the stability of any society -- pre-revolutionary France comes to mind -- and given the growing disparity between the haves and the have-nots in contemporary America, an estate tax is ultimately democratic.



[q]Income taxes, or more appropriately progressive income taxes, are predicated on the idea that people with more income should pay more because they can. This is usually summed up by the “fair share” argument (a meaningless, yet emotionally powerful euphemism as there rarely is an effort to define what is “fair” and what should be one’s “share” – just a tool to say one group should pay more).[/q]


meaningless? what is meaningless is when people with wealth think they did it on their own and didn't benefit tremendously from the benefits of living in a society that has tax money to spend on things like roads, schools, police officers, firemen, and the million other things we take for granted. it's entirely reasonable to say that someone who has accumulated great wealth owes more to society than someone who has not -- and it's not me making this argument, it's the richest among us, the Bill Gates and the Warren Buffets who feel this way because they know they wouldn't be as rich as they are without a government to create and then regulate stable markets, educate children, give us law and order and a court system for resolving our disputes. government also funds research that gave us the Internet and genomic research, both of which created huge fortunes, and an army that protects our nation's accumulated wealth. all of these things are created by tax dollars and disproportionately benefit the already wealthy.

what Buffet and Gates realize is the fact is that their wealth is largely to be credited not to their own unique genius, but to the circumstances in which they grew up. there is no way for society to function without taxation. there is no right to hang on to every dollar you earn especially if you'd like schools and roads and an army.





[q]Hard work over a long period of time also plays into higher income levels, a process that is penalized when tax rates are increased.[/q]

this stikes me as quite naive -- the idea that if one works harder, one makes more money (enough money to ascend tax brackets) is quite divorced from working class reality. i can't think of anything more demoralizing to the hard work of the striving classes than the cementing of an aristocracy of wealth.

you've also does a great job of making my point -- we should reward work and not birthright. what the estate tax does is make a contribution towards preventing the continued accumulation of enormous wealth in certain families and helps to level the playing field. and, ultimately, it is not small-businesses or individuals such as Marth who are dying to repeal the estate tax. it is a small group of very wealthy families which is why every time a repeal comes up in the Senate, it fails, because the impetus to eliminate the estate tax comes from these few extremely wealthy families.
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Old 07-06-2006, 06:43 PM   #67
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Good questions maycocksean. Estate tax is paid by the estate, not the recipients. The tax must be paid ahead of distributions to beneficiaries. This works the same way as the gift tax – if you give someone over $10,000 in one calendar year (it may be higher now), the giver must pay tax on the gift. These two taxing structures work in parallel to prevent tax avoidance (which is legal) by a simple matter of timing (distribution before or after death). The complications of this system allow the tax savvy (those who gain value in structuring their finances to avoid taxes) to structure methods of passing on value to subsequent generations while falling under the $10K per year cap.

The government gets paid first rule is what creates the most problems for the average citizen. If a house is passed on in an estate, the government will want its share even if all the value is tied up in the house (and for those who own property, you can find yourself over half a million very quickly). A forced sale of the house is the primary method of satisfying the estate tax. Taxing this value, just because they have it, is inherently unfair and destructive.

As for other examples of double taxation, there are some but they are very limited. Wages are considered an expense, thus are paid from pre-tax income (taxed only once). Dividends, however, are paid from after tax dollars, and then get taxed as income to the dividend recipient. This double taxation has caused a trend away from paying dividends and rewarding shareholders through stock appreciation.
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Old 07-07-2006, 04:33 AM   #68
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Good questions maycocksean.
Good answers, Nbc. Very informative. The following I found particularly compelling:

Quote:
Originally posted by nbcrusader
The government gets paid first rule is what creates the most problems for the average citizen. If a house is passed on in an estate, the government will want its share even if all the value is tied up in the house (and for those who own property, you can find yourself over half a million very quickly). A forced sale of the house is the primary method of satisfying the estate tax. Taxing this value, just because they have it, is inherently unfair and destructive.
[/B]
Irvine (or anyone else who supports the estate tax). How do you respond to this? This sounds like what happens to Martha, and it sounds like something that could totally happen to me. I've got this property but I don't have any cash with which to pay the taxes on that property.
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Old 07-07-2006, 10:33 AM   #69
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Irvine (or anyone else who supports the estate tax). How do you respond to this? This sounds like what happens to Martha, and it sounds like something that could totally happen to me. I've got this property but I don't have any cash with which to pay the taxes on that property.

firstly, the property would have to be worth over a million dollars, and soon over $1.5 million. and, the tax would be paid by the estate, not by you. while you might have to sell a house, you would not have to cough up the cash to pay the taxes on the house.

anyway, simply because there are certain parts of the estate tax that appear to be unfair doesn't create a good case for it's entire removal. reform, perhaps, but that's *never* been the goal of those who oppose the estate tax. it's argued against on vague notions of "fairness" (that it's unfair for rich people to be taxed) and not about specific situations like what happened to Martha. reform is one thing, repeal is something else. and besides, most Democrats support raising the threshold for eligibility to $3.5 million for an individual and $7 million for a couple

let's reiterate, again, the benefits of the estate tax -- over a trillion in revenue, a safeguard against the creation of a nation of landed gentry, an affirmation of the value of work over wealth, and let's keep in mind that the estate tax is the *only* significant federal tax on accumulated wealth in the United States. the estate tax reduces teh concentration of wealth in the hands of only a very few, it creates incentives for charitable giving supporting the delivery of vital services by nonprofits throughout the nation, and very, very few people pay an estate tax -- less than 3% of the population. it's also unaffordable right now.

notions of "double taxation" is only partly accurate. while some portion of a taxable estate might be made up of cash that was taxed before, many estates are made up of stocks, bonds, real estate or other holdings that have appreciated greatly in value and taxes were never paid because they weren't sold and the profits weren't turned into cash. heirs who inherit these assets won't have to pay tax on that unrealized profit either. the estate tax is the only tax that applies to such unrealized capital gains. and the more expensive the estate, the higher the percentage of that wealth is made up of unrealized capital gains.

in fact, the only merit i have seen in any of these arguments for the repeal of the estate tax was the situation presented by Martha.

and to get some perspective, let's take a look at who really benefits from the repeal of the estate tax:

[q]an estate tax repeal would save the estate of Vice President Cheney between $13 million and $61 million, according to the publicly available data on his net worth. It would save the estate of Defense Secretary Donald Rumsfeld between $32 million and $101 million. The estate of retired Exxon Mobil chairman Lee Raymond would pocket a cozy $164 million. As for the late Sam Walton's kids, whose company already makes taxpayers foot the bill for the medical expenses of thousands of its employees, the cost to the government for not taxing their estates would run into the multiple billions.

http://www.washingtonpost.com/wp-dyn...053001182.html

[/q]
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Old 07-07-2006, 06:45 PM   #70
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At least we have some general recognition that the estate tax is unfair.

I think it is somewhat misguided that the estate tax is a protection against “landed gentry” (we’ve never really established why that is improper or unfair either). To the contrary, lower value property owners are the ones who are forced out of their properties while higher value property owners have the ability or find the means to retain the property and pay the taxes from other sources. The estate tax becomes an effective tool to prevent families from climbing the wealth scale.

Irvine raises a good point on the capital gains aspect of the estate. Capital gains represent the increased value that has not been taxed, though our current revenue collection system taxes capital gains at a lower rate than income. However, the value of these assets cannot be realized until they are sold, at which point they are taxed at the capital gains rate. Again, you can pay the tax by selling some of the assets, but it may not be the optimal time to sell such assets (downturn in the stock market, etc.).

What adds a wrinkle to the arguments presented is that estate tax captures capital gains on everything except real property. A transfer by an estate includes a step up in basis for the property – thereby eliminating the increased value on which capital gains is based.

I would hope we do not base our tax philosophy on the incomes of a few demonized individuals.
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Old 07-08-2006, 10:07 AM   #71
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I'm not completely opposed to some form of an estate tax. To whom much is given, much is expected. But the 45-55% rates set for the next 5 years seem to be punitive, to say the least.

I'd settle for an increase in the tax threshold (which is happening slowly) and a substantial decrease in the effective rate.
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Old 07-08-2006, 05:43 PM   #72
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I've learned alot from reading this stuff about taxes. Thanks, guys.
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Old 07-09-2006, 01:33 AM   #73
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firstly, the property would have to be worth over a million dollars, and soon over $1.5 million. and, the tax would be paid by the estate, not by you. while you might have to sell a house, you would not have to cough up the cash to pay the taxes on the house.
But what if I didn't want to sell the house? Maybe I'd want to keep it in the family. It seems like many people HAVE to sell the house to pay the taxes and that seems unfair.

After reading both Irvine's and Nbc very informative responses, I think I'm ready to take my stand. (And thanks by the way to both of you for really getting down to brass tacks with this thing). I like Bluer White's take: "I'm not completely opposed to some form of an estate tax. To whom much is given, much is expected. But the 45-55% rates set for the next 5 years seem to be punitive, to say the least.

I'd settle for an increase in the tax threshold (which is happening slowly) and a substantial decrease in the effective rate."

I especially think the following is definitely a good idea, with cost of housing what it is today, a million bucks is no longer what it used to be:
Quote:
Originally posted by Irvine511

most Democrats support raising the threshold for eligibility to $3.5 million for an individual and $7 million for a couple

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Old 07-10-2006, 07:56 PM   #74
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As we have seen, an estate tax as a form of social engineering is inherently unfair and produces plenty of economic collateral damage in an effort to control a small, wealthy group of people.

Like Bluer White and Maycocksean, I think we can use an estate tax as an integral part of an overall tax philosophy – balancing income, consumption, and estate taxes together. I would argue for a shift towards consumption taxes over income taxes, especially if there are societal goals to achieve in addition to simple government funding.
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Old 07-10-2006, 10:04 PM   #75
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As we have seen, an estate tax as a form of social engineering is inherently unfair and produces plenty of economic collateral damage in an effort to control a small, wealthy group of people.


talk about being presuptuous!

the removal of the estate tax is a far greater exercise in social engineering, and keeping the estate tax gives the government an extra trillion dollars to spend on road, schools, and the police who guard such wealth to begin with in an effort to cement an aristocracy that values birthright over work.


[q]I would argue for a shift towards consumption taxes over income taxes, especially if there are societal goals to achieve in addition to simple government funding.[/q]


i find this very interesting. it seems to me that an estate tax is far more akin to a consumption tax than an income tax. i would be receptive to the idea of lowered income taxes if it were balanced with increased consumption taxes, especially for certain goods that could be deemed "luxury" goods -- such as yachts, or estates.
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