News-Record.com

I've got mixed feelings on this lte.

Are many CEO's little more than greedy parasites whose main concern is their own excessive financial appetite with a "workers be damned" attitude?

Yep.

Was the attachment of the "estate tax" change little more than a slimy attempt to tie a provision into another bill to better the chance of it's passing?

Ditto.

On the other hand as a self employed political independent I think it's up to corporate boards and stockholders to rein in their own ridiculous expenditures and compensate their employees in a more equitable manner. Additionally I have a strong philosophical aversion to government levying what is often a majority tax burden on assets that have already been taxed previously as earnings.

There is a fine line between "equity" and socialism in the initiation of government edict. I don't know where the lte writer stands in relation to that line so I'll just classify myself as being in partial agreement with her letter.

I am against the estate tax. I think that no matter how much you accumulate in a lifetime, your heirs should not be taxed...just doesn't seem fair. I have heard that it costs more to run the estate tax division than it brings in. Can someone verify or deny that?

For the republicans to link the minimum wage increase to estate taxes was the height of shameflu. So now we'll get to hear that Democrats were the reason that the minimum wage isn't going up. How does Bill Frist look in the mirror?

As for the estate tax, I disagree, Carol. We pay taxes on income. If I am an heir to a fortune, the fortune that I receive when my benefactor dies is income (that I haven't even really earned). I don't really see how being born into a rich family should entitle you to exemption from the same tax obligations we all share.

"Are many CEO's little more than greedy parasites whose main concern is their own excessive financial appetite with a "workers be damned" attitude?

Yep."

Janherman, would you tell us how you know that? There are a few documented cases of that coming off of the 90's, but "many" is a very encompassing word. This is much like taking a few cases of lazy, incompetent workers and saying that many, or most, workers are such.

The lte witer lost it with me with her last sentence. "These are the "family values" of this administration." She couldn't resist blaming everything on George Bush. If your argument isn't persuasive enough, just blame George. What's he got to do with it?

Great points Howie. I agree that estates should be taxed. Right now, we have exclusions that can translate into millions untaxed. That is fair. By having an estate tax, we encourage the mega wealthy to give away their wealth so that society may benefit. Without it, we will become like many countries with a Royal Family--except ours will be the Gates Royals, The Walton Royals, etc.
One of the great things about the estate tax is that we will avoid seeing conspicuous shows of wealth (witness the Bilmore Estate) during times of impoverished workers. The ONLY way William A.V. Cecil has been able to hold on to the Biltmore is by developing the real estate that lies adjacent, and by charging top dollar for tourists. You will never see school buses lined up at the Biltmore as long as it is in private hands. (That's actually a paraphrased quote from Bill Cecil)
Bottom line: The founding fathers did not envision our great country as an aristocracy--that is what they were running away from!

I'll admit to having no formal economic training whatsoever, so the following hypothetical is only posted as food for thought and not as a debating point wherein I assume correctness of ideology.

I pay taxes on my income. Upon her graduation from college I buy a house for my oldest daughter with that income.

Since the gift is over the $10,000 limit she has to list it as income and pay taxes on it accordingly.

Fair enough.

Suppose I were to die before presenting her with the house and doing all the necessary paperwork. In that my youngest daughter would still be a minor at that point my eldest would inherit the house instead of having it presented as a gift.

The tax liability, according to the value of the house, would then be increased as much as four times what she would have paid had it been income instead of inheritance.

Is the fact that I would see that as unfair an "expectation of entitlement" or simply a desire for equitable treatment?

ORR,

I used the word "many" on purpose, it was not one of my frequent typos. I don't claim to have conducted an all encompassing survey on the issue.

I have had occasion to deal with "many" CEO's in my lifetime. It is my opinion that for every greedy and self serving arrogant by product of human overindulgence in such a position there is generally another who is a socially responsible and caring individual.

But with the many thousands of corporations in existence, I stand by the word "many" as being both accurate and valid.

"I am against the estate tax. I think that no matter how much you accumulate in a lifetime, your heirs should not be taxed...just doesn't seem fair."

And that, Carol, is why most folks with estates big enough to tax- currently $1.5 Million- have good tax lawyers, and don't pay at all.

Check out FactCheck.org's unbiased research:
http://www.factcheck.org/article328.html

Personally, I'm OK with the tax, even though it will bite my family in the near future if we don't lawyer-up pretty soon.

I am with you, Howie and DD on the estate tax.

When I work and earn money they tax it. They are taxing my labor. If I were to inherit money, that would be an income that I have not earned. Or at least earned only insofar as I was born with affluent relatives.

Anyway, I think it is much more appropriate to tax this unearned income that earned income.

Jan, your hypothetical is an interesting one though. What I would say is that the inheritance tax keeps us from having the use and enjoyment of our property all through our life AND thereafter. If I were able to keep it and transfer it tax free at the end, then then my use of the property would survive me.

I see this issue not as a tax on the deceased, but as a tax on the recipient. As soon as you die, you no longer have any title or right to property. You do not own anything. Your estate must wind up, but the stuff is not yours, as you are dead. The repipient is the one taxed on the income.

Additionally, when one has wealth, that person's heirs are generally better off with it notwithstanding any inheritance. Those people have gone their entire life with money at the disposal of their parents, and will probably have better education, contacts and chances in life than the average Joe.

The wealthy are able to avail themselves of the benefits of their wealth throughout their life. When it passes to another, it should be considered income to that person, not an extension of the deceased.

Carol,

Looks like the "it cost more to administer than it brings in" is a bit of a myth that may get thrown around by those with something to lose.

http://www.cbpp.org/6-14-05tax.htm

And Denzien, while I agree that the best tax attorneys work very hard to keep their clients from having to pay this tax, the money that is coming in has to come from somewhere, so someone's getting hit in the wallet. By the way, while looking for information on this topic, I read an article about seventeen very wealthy families (Waltons, Gallo, the family behind Mars, Inc., etc) are the driving force for the elimination of this tax. Talk about aristicracy, this small group of families lobbies for repeal of this tax, which could benefit them collectively over $70 billion. It sounds to me like the protection of wealth that DD talks about above.

Another interesting op-ed I read said that in 1998 when the auditing budget was slashed, the IRS was instructed to go after more middle and lower class filers, and pay less attention to the rich folks. Well one Senator has asked for investigation into why many of these estate tax loopholes are not examined. And one estimate is that the amount of owed but unpaid annually through estate tax shelters is $300 billion. Anyone recognize that number? (It's about the same as our deficit.) Here's the link, of course it's from the Boston Globe, which might as well be the Havana Daily News for some of our neighbors, but I found it interesting.

http://www.boston.com/news/globe/editorial_opinion/oped/articles/2006/08/05/tax_cuts_shameful_sham/

One at a time:
janherman sez: "... it's up to corporate boards and stockholders to rein in their own ridiculous expenditures and compensate their employees in a more equitable manner."
I agree, but ever read that statement that comes to you? They're all the same. First off, if you don't submit a vote - it's considered "Agrees with what ever the board says. Second, the board says people are our most valuable asset, and we need to pay the well; unspoken but obvioust to all - is "people" depends - send work overseas so you can lay laborers off and give the difference to the to upper crust. If you doubt this, there is other paragraphs in there that say for attending each board meeting, the board members get all expenses paid, a few thousand buck in spending money, and a few tousand shares. Note also that the board members and CEO are budy buddy, and I needn't go on - just read the papers. If you doubt all this - prove me wrong, but you wont be ably to in all be a very few examples.

As for the "strong philosophical aversion to government levying what is often a majority tax burden on assets that have already been taxed previously as earnings" ... Jan read up on the Bermuda Deal, used by many big boys. You have a profit? Before submitting it, set up Corp' headquarters in Bermuda, and send it there; it become a "LOSS", so your Profit not only is no more, it's tax deductabe. Thank you Mr. Reagen.

Carol Dunn sez: "I think that no matter how much you accumulate in a lifetime, your heirs should not be taxed...just doesn't seem fair."
That sound good in principle - but a couple facts first. Contary to what "they" proclaim, the Inheritance Tax effects a Very Small count of people; the qualifying numbers are really high - several million and thats after both spouses die and deductions are taken and all loop holes are exploited. There are perhaps a dozen "farmers" with centuries old lands that get hurt annually, and those always get pushed onto the headlines; it would be so simple to exempt them.
Second, most of the people that still qualify didn't earn squat - they inherited it. Check it out and get back to me, I've already done the homework.
Finally - the few remaining others are only very rich because of the protections provide them by the US Government, including the laws of this land, or though exploitation of MY nartural resources (given to them at below value by the US Government). IMHO, the few remaining others need to give back to the Country. Our sons and daughters give their lives protecting those rights, we're only talking money here, how dare they be so selfish.

As a Caveat - the money needs to be used wisely, inotherwords, don't collect taxes for the sake of collecting taxes, but that's another LTE.

"As for the "strong philosophical aversion to government levying what is often a majority tax burden on assets that have already been taxed previously as earnings" ... Jan read up on the Bermuda Deal, used by many big boys. You have a profit? Before submitting it, set up Corp' headquarters in Bermuda, and send it there; it become a "LOSS", so your Profit not only is no more, it's tax deductabe. Thank you Mr. Reagen."

Furthermore, many of the earning vehicles used to accumulate this wealth have not yet been taxed.

Oak Ridge Runner wants to know how we know "... many CEO's little more than greedy parasites whose main concern is their own excessive financial appetite with a "workers be damned" attitude?" ... Sorry ORR - I find your question to be simple uninformed.
==
I hate to totally agree with DemonDeacon, but from what I've read, he's right. The founding fathers were very clear in their vision that our great country would not be an aristocracy.
==
janherman: Your example is moot unless to have several millions in your estate after you and your wife croke. If you have that much, you need to do what all the others in your position do - pay a freaking accountant and lawyer.
But this brings up key point. If you "only" have several millions in your estate, you may not think to hire the best bean counters ... but you can bet those several millions in your estate that those with much more that several millions in their estate hire the best bean counters. Make sense?
BTW - if you doubt this, read "Wealth and Democracy", and long boring read but it's very well documented and the history is in there.

PS. Sorry for all the typos
PPS: Thanks to others for the research

When Bob Dole was majority leader, he engineered a special tax break for the Gallo brothers in California, whereby they passsed the winery onto the family members WITHOUT estate taxation. One simple tax bill, for one large GOP donor. Is that fair? Hell no!
With the ability to shelter $3million legally today, we have absolutely no need to abolish the estate tax. Unless you want the rich to get richer and control our government more than they do today.

Okay guys, I apologize for not being a greedy capitalist pig that stays up nights trying to find tax shelters in hopes of providing for the future of my children.

I hate to admit this in a public forum, but golly and damn, I actually pay my taxes and at times I've even forgotten to list my charitable contributions. I give them for causes I believe in, not to get a tax discount.

What I find bothersome isn't that others disagree with my opinions, but that so many seem to have bought into the underlying "class warfare" ideology behind this whole debate.

I grew up in the mill village, went to school with kids who looked down on me for not having a car or the "right" clothes, and because I feel it's unfair for the government to take what I consider to be a disproportionate share of what I manage to acquire in my lifetime when I die, it seems many are willing to villify me as somehow being selfishly motivated on this issue.

Spew all you want, vent, send links and quote data and editorials, but at it's core all people such as myself are trying to do is give their children a decent portion of what they've worked for their whole lives.

As I said earlier, tax it as income? I have no problem with that. But to tax it at a higher rate because of my death seems ludicrous to an old man who is getting closer to that moment on a daily basis.

What constitutes a fair tax rate is in the end a subjective opinion, and our forefathers went to war with England over much smaller rates than we have now.

You are welcome to your opinions, because disagreement can often be the source of enlightenment, but on this issue my own opinion will not change.

Hardheaded? Sure, but that's part of the reason WHY my children may live more comfortably than I have.

Bob Dole, do something to help out corporations? Now I've heard everything. Next you're going to tell me he was just about the last political figure to say that smoking had not been proven to cause health problems, while collecting money from tobacco companies. Oh, he did that too? And he even made those statements while he was running for president? Oh. Now I've really heard everything.

JH,

Please don't take this personally, because that is not how I intend it. But if you've amassed a fortune that you intend to pass along to your children, I think that $3 million tax-free, then 60-70% of everything above that is a pretty decent leg up. And I don't know your definition of "a decent portion of what they've worked for their whole lives", but to me, $3 million plus 65% sounds pretty good. Again, no disrespect, but aside from being born to you, what have your children done to earn more than that? (Sidebar: If we're into the big dollars, any chance you'd consider adopting a charming man in his 40's? I can promise you two delightful grandchildren and a wonderful daughter-in-law. :-)

Anyway, that's the crux of the argument to me. Earned income is taxed, and for descendants to be exempt from this is unfair. And I think you'll have a hard time convincing me that $3 million is not enough of a starting point.

JH:

I would argue that you did well because you made the effort - and that is key, but also because you live in America. As contrast, if you lived in India, your caste would be determined at birth, and all the effort in the world would be for naught.

Therefore, I conclude, you need to give back. That same "you need to give back" goes to all Americans, and I see many trying to avoid that responsibility - either by taking advantage of things (the so-called "Welfare Mom"), or by grabbing all they can just because they can.

... and that's my rub: "Grabbing all they can just because they can". Capitalism? I'm way-good with it, but all things in moderation, please.

" ...our forefathers went to war with England over much smaller rates than we have now."

Some argue that our forefathers went to war NOT over taxes, but over the right to own and operate a business - which at the time required King of England approval, which of course gave first priority to Citizens of England.

... and while we're talking about the caste system ... (wink)

"Spew all you want, vent, send links and quote data and editorials, but at it's core all people such as myself are trying to do is give their children a decent portion of what they've worked for their whole lives."

Jan- I provided a link so you'd have better figures to work from, so you would be better able to see through the spin on the issue. Let's get one big misconception out of the way here:

THE FIRST $1.5 MILLION OF YOUR ESTATE IS TAX FREE: That means that if you want to give your kids $1, 499,999.99, you are free to do so without being taxed.
Citation: http://www.factcheck.org/article328.html

But, it sounds as though you have heard all the evidence that you need to hear and will not respond to facts. Pity.

... besides as Ms. Helmsley said, "Taxes are for Poor People."

Denzien ... unless you die in 2011, when through the great wisdom of Congress, it is a Tax Free Death .. just do it before the stroke of midnight, Jan 1st, 2012.

JDR,

Imagine how nervous you'd be at your new year's eve party if you were a wealthy guy with untrustworthy heirs. I bet there will be a lot of headlines that say something like "Millionaire JT Moneybags slips in the shower" in December of 2011.

One final thought, then I'm done.

JH wants what we all want: to pass along to his kids the best he can.

think of it this way: If everyone were "fair" - no cheats or liars, everyone working for the common good, etc, we'd be passing along to our kids the wealth of good education, a land where there is no debt. Money and resources have been spent wisely. Roads and infrastructure are in good repair, and there is plenty of safe, clean energy. Food is save to eat and plentiful and affordable. Air can be breathed.

Now I'm really not a hippy dippy - but think it can be argued all these things are lost or damaged by cheats and liars, grabbing all they can - only because they can - and acting selfishly rather that for the common good.

And Denz,

The link is a bit out-of-date. The rate jumped to $2 million for 2006-2008. Then it jumps again in 2009 to $3.5 million.

Good catch, Howie- Thanks!

I'll be over here in the corner, hanging my head in outdated shame.... :)

I love it, there have been some good comments on this subject by various posters, but Denizen - give me a break.

Please don't assume yourself as having such intellectual correctness of being to assume I have been a victim of "spin" on this issue.

It is merely a difference of opinion, nothing more.

Me bees not da ignurnt creatur yous thinks I is.

Let me pick my nit for a moment.

Some advocate for an estate tax because the children (heirs) have not 'earned' the money. My children haven't earned their dinner or the clothes they wear. Should they be taxed on that too?

I'd also like to add that I grew up wearing pic-and-pay shoes and Rustler jeans handed down from older relatives while my friends wore the latest and greatest NIKE shoes. Because of my parent's frugalness, I was never allowed to sit at the pretty people's table at lunch. In a way, I think that IS earning an inheritance.

I'd also like to say that I did not have all the breaks in life. In order to change the future of my family tree, I'm skimping, saving, and foregoing a lot of the pleasures in my life so that I may pass on more opportunities to my children. I shouldn't be penalized for not going out and blowing every dime I have.

One more note:

JH, I believe if you give your children a gift over $10,000, then you will be the one paying a tax in the form of a gift tax, not your children. I'm not sure if they would have to list the gift as income or not.

Last, but not least, what amount would be an acceptable amount NOT to tax? Everyone's definition of 'rich' is subjective. I know mine has changed several times over my life.

I'm not saying I'm against an estate tax because I also agree that it isn't entirely healthy to have aristocrats passing their wealth from generation to generation.

Anyway, my nits been picked so I'm gone.

Nit,

First of all, your argument makes a lot of sense to me as a parent. It is our obligation as parents to feed, clothe, protect ( maybe even embarass, punish, and send to therapy) our children. However, it is not our obligation as parents to make it so they never have to lift a finger other than to shake it at their servants.

I, too, am sacrificing now so that my children's life will be better than the one I had (which sounds very similar to yours). And if I'm able to leave them the equivalent (at the time of my demise) of $3 million or more, then I'll have done pretty well. If I'm able to give them more of a head start than that, then all the better. But I don't expect that they'll never have to work if they choose not to (and I hope they won't expect it either), because nothing in life in a capitalist society is free.

And for your last point, I think that to a certain extent, there should be an exemption. If it's $1 million or $4 million, I'm not a fanatic. But I think somewhere in that range is a good start. And remember, above that mark, it's only about a 20% tax (vs. the 30-40% I said above), so it's not like anyone's going broke over this.

"Please don't assume yourself as having such intellectual correctness of being to assume I have been a victim of "spin" on this issue."

Sorry, I got that impression from your comments about buying your kids a house, as well as others that gave me the idea that you had some misconceptions about the whole matter, misconceptions that are addressed in the article I linked.

That being the case, are you adopting? I'd love somebody buying me a $2 MILLION dollar house!

Thanks for all the info. I knew if I threw it out some would find it.

Since I won't be leaving over $2 million, I don't have to worry about the estate tax..unless I win the lottery. The quote about estate taxes came from a very wealthy friend who had to pay a lot of estate tax. Since she passed away at a very young 59, she also left much to be taxed..again. Still question whether it is fair or unfair. Really don't have strong feelings either way. When I win the lottery, I may change my mind.

Howie,

Thanks for the great response.

I want go as far as making my kids wear the pic-and-pay shoes but they won't be sporting the latest $200 Kobe Bryant Nike's either!

As far as my estate planning, I doubt I'll have to worry about going over the thresh-hold to be taxed.

Even if I could, I'm not sure I'd want to. Despite the hardships of having to work for everything I have, I think I've turned out to be a lot better person than if I would have been handed everything on a silver platter. (we all know those people and a small percentage of them are worth squat in my book)

So what will we do? If I set it up in a trust that pays a certain amount, will my kids become bums who just live for when daddy's check comes in? If I set it up for the money to kick in at a certain age, will my kids skimp to get by until Daddy's check comes in.

Heck, on second thought, maybe I'll just donate all my money to charity.

"Still question whether it is fair or unfair."

Kind of on the fence about that myself. My parents have taken steps to ensure that the tax will not hit them (well, us, the kids) when they pass (no, not by spending it all!).

Most folks who really want their kids to have it all can make arrangements through their accountants or tax lawyers to make sure that it happens that way.

Hell, even if my inheritence was to be taxed, I'm OK with the government taking a cut of what is to be mostly unrealized capital gains. Meh.

Denzien - pay attention to my note to Carol.

Carol: I think you friend that died at the young age of 59, and paid estate taxes - probably fell into that lump of middle welth folks that had enough money to get taxed but not enough money to hire slippery lawyers and accountants.

We had to scrimp and scrape when our kids were young because I didn't work and my husband was a teacher and coach. Now that things have changed, I don't waste money because I am "cheap" but am not working to leaving my kids rich...want them to be sad when I leave this world. My brother's philosophy is that we should all work to go out even.

... speaking of dying at a young age, here's a sobering thought:

When Mozart was my age, he's been dead for 20 years.

speaking of dying young, here's a sobering thought:

When Mozart was my age, he'd been dead 20 years.

On a related thought - here's the advice I'm being given by Financial Advisors - I'm trying to decide if it's good advice:

Stop putting money in your 401K / IRA (unless it's employer matched, the put in only enough to get that extra 3% or whatever). Put money instead into a pernament life insurance policy (not term).

Why? The 401K / IRA money is taxed on withdrawl, so you lose 28% or whatver the bracket rate is. You can borrow the cash in Perm' Policy - effectively a withdrawl - and it's not taxed. They claim the difference is substantial - plus when you die, the Insrance value goes to your kids.

Anyone else heard this?

"Carol: I think you friend that died at the young age of 59, and paid estate taxes - probably fell into that lump of middle welth folks that had enough money to get taxed but not enough money to hire slippery lawyers and accountants."

I've been thinking the same thing. The ones who are filthy rich can weasel out of the bulk of the taxes, while the "merely rich" or "barely rich" have to foot the bill because they'd rather pay 20-30% on a million than give it to an attorney. Sounds like a class system within the upper class. Must make for interesting discussions around the country club locker rooms.

James,

I would say your financial advisor is nuts or is selling whole life insurance.

Now, he has a point about being taxed when withdrawing the 401k dividends. It all depends on what type of income you think you'll have when you start taking money out of your 401k. If you think you won't be in a top tax bracket, then a regular 401k plan should be fine.

However, if you anticipate that your income will be in a higher tax bracket, I'd recommend investing your money in a Roth 401k or Roth IRA. That way, you will be earning money that will be tax free when you take it out. It IS the greatest thing since sliced bread. There are very few tax-free investments that have the potential that a Roth 401-k has.

When it comes to life insurance, just about always buy term. Whole life insurance is a rip-off for most folks. The investment returns suck. Because whole life insurance is much higher, the savings from buying term could be invested in something with a MUCH better rate or return.

I think the other thing about WHOLE life insurance to remember is that if you die, you don't get any of that investment they talk about. You simply get whatever you are insured for.

Depending on how old you are and what financial obligations you have, you may not even need life insurance. The real purpose of life insurance for most people is to replace your earnings (if necessary) from the point you die until retirement so that your loved ones will not live in poverty. If your house is payed for and your kids are out of the house, you might seriously want to think about the need for life insurance and just how much you want.

Most younger folks are underinsured. A general guidelines is to take your annual salary and multiply it by the number of years before you retire. That's how much insurance you'll probably want on yourself.

The other rip off is accidental death and dismembership insurance. Drop that and increase your general life insurance.

Hope that helps.

My friend had high priced attorneys and accountants..I really don't know how much she had to pay. Very private person and wonderful person.

We put money in a tax sheltered annuity for years. Found out when we retired that we made more money than we did when we put half the money in, so taxes were just deferred. Oh well, glad we lived long enough and make enough to have that problem. Just leaving it in there and it has made great returns. Let our kids worry about taxes.