estate/death tax: pros and cons

by problembear

commentary by guests  – i want to listen and learn….if you would prefer that your comment be part of this post just email it to me at problembear@vzw.blackberry.net and i will cut and paste it into the pro and con portions of this post ….

to start this off i have included a link to a poll on whether this tax repeal should be allowed to sunset by congress this year or be re-enacted by varying degrees as described in the wall street journal recently. http://online.wsj.com/community/groups/estate-planning-291/topics/should-us-estate-tax-be

this article is a good start to understanding the issue:  http://online.wsj.com/article/SB10001424052748704763904575550442176217552.html?mod=WSJ_hps_MIDDLETopStories


  1. cosmicgarden

    Call it what it is. A few families who stand to lose billions have spent millions in a war of propaganda over the past years. http://www.citizen.org/documents/EstateTaxFinal.pdf Words are used as weapons to mislead. Referring to the “death tax” is fundamentally dishonest and misleading. Every single person dies –death in itself is a non-taxable event. In 2008, the 130 Montanan estate tax returns filed were required not because the person died, but because the estate was in excess of the 2 million dollar threshold. For the vast majority (98.5388 percent of Montanans who died in 2008) the estate tax is a non-issue– it does not apply. If one wishes to shoot the shit, bandy opinions, or frighten poor and working people, the drama of the “death tax” language can be persuasive on an emotional level. But if you want to discuss facts, “Estate Tax” is the name for the provisions in the tax code which determines taxes on transfers of inherited wealth.

  2. cosmicgarden

    You don’t have to believe the newspaper—just ask any tax practitioner how many family farms they’ve seen lost to the estate tax. The answer is that it just is not a big problem as portrayed by the propagandists. Yes, people hate to pay taxes. But when determining what’s best for our country, we need to insist on facts, search out the true information, and reject fiction and lies.
    ————————-
    http://is.gd/g5TGs
    “The farmland alone is worth more than $2.5 million, and so Mr. Riekena, 61, fretted that estate taxes would take a big chunk of his three grown daughters’ inheritance.

    That might seem a reasonable assumption, what with all the talk in Washington about the need to repeal the estate tax to save the family farm.”To keep farms in the family, we are going to get rid of the death tax,” President Bush vowed a month ago; he and many others have made the point repeatedly.

    But in fact the Riekenas will owe nothing in estate taxes. Almost no working farmers do, according to data from an Internal Revenue Service analysis of 1999 returns that has not yet been published.

    Neil Harl, an Iowa State University economist whose tax advice has made him a household name among Midwest farmers, said he had searched far and wide but had never found a case in which a farm was lost because of estate taxes. ”It’s a myth,” Mr. Harl said.

    Even one of the leading advocates for repeal of estate taxes, the American Farm Bureau Federation, said it could not cite a single example of a farm lost because of estate taxes. ”
    ————————-
    Remember, 10 years ago when they were wanting to repeal the estate tax, the promise was increased investment, more jobs, trickle down, increased prosperity. We got trickle down, all right. Do NOT piss on me and tell me it’s raining, though. Look around! This very year there is zero estate tax. Isn’t this just the best year ever?!? It really is! For some.

  3. mr benson

    It’s not a myth. You read personal testimony about it. I’ve talked to people who had to deal with it. It’s not a myth. To continue saying so, is insulting to hard working farmers and ranchers. You’re not that much smarter than me that I don’t understand what you’ve said, now, four or five times.

    So, unless you’ve got something new to add, maybe it would be better to start listening?

  4. mr benson

    Land valued for development, or for sale to a giant agribusiness acquirer, is generally valued much higher than the long term net proceeds from a family farm. That might not be much more than minimum wage. The federal govt becomes an enforcer of the “highest and best value” by inserting itself into the equation.

  5. cosmicgarden

    Property must be valued at its fair market value for purposes of the estate tax. In turn, fair market value normally is determined by a property’s “highest and best use,” that is, the use which would make the property the most valuable. This is true even if the property currently is not being employed in its highest and best use. For example, if the deceased was using a gold bar as a paperweight, you’d have to base its value on the price of gold per ounce, not on the going rate for heavy paperweights.
    ***A significant exception applies to closely held farms and other family-owned businesses.***

  6. Ingemar Johansson

    A way around the “highest best use” is to put you farm/ranch into a conservation easement like our family has.

    That way property is valued on its ag value only.

    The other way is to convert all holdings into physically held gold and silver. All my parents have to do is to provide the combo to the safe with the last reading of the will.

  7. The Polish Wolf

    Why is this not resolved with exceptional ease – just add to the tax an exemption for agriculturally productive estate? Granted, it increases our economy-skewing policies toward agriculture, but as long as that’s the game we’re playing, exempting them from estate taxes seems like a pretty cheap way to keep family farms in family hands while not robbing ourselves of the revenue from the estate tax.

  8. Sorry, Mr Benson, but I don’t believe you. According to this 2005 NYTimes article, only 300 family farms in the country would be affected by the tax, and the paper’s reporters could find only 27 farmers that didn’t have the liquid assets to pay the tax. And that number was expected to shrink…

    But you’re not the first to claim that a lot of family farms would be affected by the tax. The American Farm Bureau Federation and the National Cattlemen’s Beef Association also claimed farmers would lose their land b/c of the Estate Tax, but when pressed, couldn’t name a single farmer who lost land when pressed.

    Maybe there are folks out there spreading fear about the Estate Tax in Montana — maybe even some folks who will be affected by the tax (Rehberg, say, who’s worth between 15 and 50 million) — but the fear is not justified.

    Obama’s proposal during the election was to set the threshhold at $3 million per estate, and have inheritors pay 45 percent after that. Not terribly restrictive, IMHO.

    But remember, this is a tax, not on currently held property, but on an inheritance, which is the ultimate lottery…and we don’t question taxing lottery winnings…It doesn’t prevent the children of the rich from earning their own living and accumulate their own half-dozen million through the dint of hard work.

    • mr benson

      ***if there doesn’t need to be a sale of some of the land to satisfy the terms of the estate***

    • mr benson

      Jay, the “hard work” that preserved the farm in the previous generation is worthy of protection. It’s not a “lottery”.

      You’ve never been supportive of the American notion of property rights, so it’s no wonder you’d want to help yourself no matter what the cost to agrarian families.

      One of the advantages the religious co-ops have in central montana is the ability to avoid these issues and to accumulate land with impunity and without estate planning issues.

    • mr b: the “american” notion of property rights rarely, if ever, stretched to exclusively protect the top 1% of all american households. Jefferson back in 1811 said that the rich should pay a majority of the taxes in order to support the system that made them wealthy. The reverse of that idea — that the rich should shuffle off most of their obligations — is a relatively new and radical idea.

  9. And we’re talking about a tax that affects something like 5 families in Montana…

  10. the party is over jay. we’re talking survival here. if agriculture is indeed given an exemption to at least 5 million i will take another look at this, but anyone who has been around farming or ranching knows that even 5 million in land rich can easily equal poor these days. every 7 years you make a little money and gamble on the next 6.

    also, i don’t think the people in general are in any mood to deal with even the chance of this tax being imposed on them in these dark days on their houses either. thats why is it overwhelmingly popular.

    and that old saw – if you give us this tax we will lessen the property tax is as popular as sales tax these days. if that is the best you can come up with to fight this, i pity your cause. i have been telling you guys that people are fighting for survival out in the real world while you offer what ifs and maybes. won’t wash anymore. not these days. better get out of the way cause this trainload of people who are tired of increasing taxes are rolling down the west side of the helena grade and picking up speed.

    people are in no mood for even the hint of more taxes anymore.

  11. PB: er…show me a Montana family that’s land rich and without the liquid assets to pay the taxes on a $3-million lot. You won’t be able to. They don’t exist. In 2005, 27 families fit into this category, and the number was expected to grow smaller every subsequent year. In Montana, only 5 families a year fall under the Estate Tax.

    Every poll I’ve seen on taxation shows that a vast majority of Americans favor an increase on taxes of the rich. Even Tea Partiers when confronted with the realities of our deficit and budget favor the Estate Tax.

    This country was not made great by an aristocracy.

    • i would like to level the playing field as much as anyone jay. but death tax is unpopular with virtually everyone. it is political suicide to support. dems need to come up with ways to appeal to the main stream besides taxation. underlying problem: nobody trusts the government anymore to do anything even remotely intelligent with the revenue they collect.

      at the same time i am as you are, concerned about the widening divide between rich and poor. i have written much more than you have about the disappearance of the middle class in this country. there is 12 trillion dollars in the top 2% in this country alone. we need to find more intelligent ways to harness that capital than waiting until they die to hope something slips through the defense shields of estate planning and end up in a budget system which is broken.

      what we need are incentives to harness that capital- not taxes. dems are drowning in a sea of their own lack of imagination and corruption of congress. people don’t trust you anymore but they don’t trust republicans either.

      we need a new vision in this country apart from the partisan politics of either party. a vision that is not grounded in division and hatred. a vision that builds futures and gives people hope. i reject the marching orders of either party and seek something different. something better than a vulture waiting for someone to die.

      what ever happened to this country that we find ourselves rewarding bad behavior and punishing good?

      the country was made great with vision backed up by leaders who pushed us to greatness – not back rooms full of timid political operatives running push polls while our leaders work behind the scenes with corporate lobbyists and give us technical excuses for failure.

    • (A) Since when does “politically popular” substitute for the right thing to do?

      (B) We need to pay for two wars GW Bush started and the tax breaks for the wealthy he got passed. We’re staring at a massive deficit that will need to be addressed eventually. I’m not talking implementing huge, new programs, I’m talking about paying for commitments we already have. H*ll, there’s not much budget to cut after SS, Medicare, and defense. So, to pay out the deficit, we need tax revenue. It’s got to come from somewhere. If we pass on taxing Paris Hilton’s trust fund, you and I will make up the difference. How popular will that be?

      (C) Last time I looked, I wasn’t a Democratic Congressional representative. I have no control over budget policy. Still, that Dems failed to implement good tax or spending policy is a Fox News meme: remember “pay-go,” which the GOP scuttled?

      (D) If you got a vision, speak up. Whenever I hear calls for an “end to partisanship,” I think, what’s the sound of one hand clapping? It takes two to tango and end partisanship. We know that the GOP would rather scuttle the country’s economy than engage in bipartisan policymaking. The side of the political divide that’s fostering hate and fear isn’t interested in bipartisanship; they find political and economic advantage in it. Good luck.

      (E) I love rewarding good behavior! But creating a plutocratic society is the antithesis of a meritocracy. Once you agglomerate wealth and political power, policy bends towards protecting the privileges of the power class, which — IMHO — is contrary to the interests of a vibrant republic. We’re already down that path. Tell me how abolishing the estate tax helps.

      • all good points jay. unfortunately, unless you can convince people all those arguments are for naught. what i see in your arguments is a lot of political scientology which bores the hell out of the average person.

        people don’t trust government anymore. ergo they don’t want any more of their money going toward failed budgets and well connected no-bid contractors.

        period. end of story.

        what good is a good argument if no one is listening except a tiny roomful of party connected wonks? good luck with your pr campaign to convince people to pay more money into that mess in washington.

        i told you that if those we elected in 06 and 08 didn’t enact real change for people that makes a real difference in their lives that all the words in the world and all the fancy pretty theories won’t be worth one stinking vote. now maybe you will listen.

        i am on the side of people who are sick of listening to excuses from their government, and no, i don’t give a shit about paying for debt that is continually subsidizing all the scoundrels that have been given the key to our treasury by our reps who load up bills with plenty of reward to their corporate masters.

  12. The Polish Wolf

    But pb – the estate tax is unpopular with nearly everyone, but nearly everyone hates ti because they believe that it will hurt agriculture. Indeed it is rare for it to affect agriculture, but I do agree that taxing the inheritance of agricultural land puts families at a disadvantage compared to corporations, which would be free from these taxes. So, make an ag loophole and I think you’ll find an issue that the majority of people can support that will bring additional revenue while affecting only those families that can most afford it and supporting an American ideal – the elimination of inherited social positions.

  13. mr benson

    “To take from one because it is thought that his own industry and that of his father’s has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association—the guarantee to every one of a free exercise of his industry and the fruits acquired by it.” Thomas Jefferson

  14. John Henry

    Deatg tax sounds more like a punishment to the families that have worked hard and done well for themselves.

  15. I am reminded of sleight-of-hand magicians working their magic. *Look over here!* Funny that even many who otherwise favor a progressive tax structure are willing to cut the wealthy a break on this issue. Jamie Johnson (granson of Johnson and Johnson) made an informative film about “The One Percent.” They are *not* “family farmers!” The simplest way to avoid the estate tax would be to give it to your kids while you’re still alive. If you pay for their education, give them a house and cars, set them up in the business of their choice, put assets in trust to pay for their kids’ educations, hell, give the grandkids some bonds and real estate, too, set up a trust to pay their bills for the rest of their lives… it’s ridiculous to pretend the descendants are being deprived of an advantageous future that most Americans do not enjoy. Remember, there are exceptions to the estate tax for qualified family-owned businesses. A lot of the people bitching are the ones that want to call their hobbies a “business.”

    http://www.fa-mag.com/fa-news/6457-congress-battling-over-proposed-estate-tax-solutions.html

    “The federal levy on estates is set to increase Jan. 1…on fortunes worth more than $1 million at death. President Barack Obama and Democrats in Congress barely mention it as they spar with Republicans over whether to keep income-tax reductions for top earners.”

    “A new tax on multimillion-dollar estates may emerge as the final hurdle to a deal that preserves most or all of former President George W. Bush’s tax cuts, analysts said.”

    “One includes Republicans such as South Carolina’s Jim DeMint who favor permanent repeal. Another is led by Democrats, including Majority Leader Harry Reid, who support a top rate of 45 percent that would apply after a $3.5 million tax-free allowance. A third faction, led by Arizona Republican Jon Kyl and Arkansas Democrat Blanche Lincoln and embraced by Republican leader Mitch McConnell of Kentucky, backs setting the top rate at 35 percent after a $5 million exemption. A fourth, smaller group led by Vermont Senator Bernard Sanders and Washington Representative James McDermott––both of whom have put forth separate plans––has advocated allowing estate-tax rates to increase to 55 percent on larger estates.

    Sanders’ proposal calls for an estate tax exemption at $3.5 million and includes a graduated rate structure that starts with estates up to $10 million being taxed at 45%. McDermott’s proposal calls for an exemption at $2 million and a graduated scale starting with estates up to $5 million being taxed at 45%.

    Forging an agreement has proven more complicated than splitting the difference on the numbers because this has been cast as a moral issue, said Lee Farris, senior organizer on estate-tax policy for United for a Fair Economy, a Boston-based group that advocates reinstating the estate tax….proponents of the tax, who include billionaires Warren Buffett and Bill Gates, view it as essential to preserving meritocracy in U.S. society. That argument has gained steam this past year with the deaths of at least five U.S. billionaires, including New York Yankees owner George Steinbrenner. ”
    (One group) “refers to the levy as the “death tax,” even though 99 percent of U.S. residents don’t accrue a large enough fortune in their lifetime to pay it.”




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