Obama wants estate tax hike, corporate loophole cuts

[jefferson_dem]

Source: Reuters

Obama wants estate tax hike, corporate loophole cuts
Mon May 11, 2009 11:14am EDT
By Kim Dixon

WASHINGTON (Reuters) - The Obama administration on Monday will propose raising nearly $60 billion over 10 years through changes to the estate tax law and closing certain domestic tax loopholes, an administration official said.

Funds raised will go to beef up a health care reserve fund, a $634 billion pot of money President Barack Obama wants to use to revamp the health care system and expand insurance to tens of millions of Americans who lack it.

The White House wants to raise $24 billion over 10 years by tightening rules related to the estate tax, a levy on an inherited part of an estate if the value exceeds an exclusion limit set by law.

Currently, the first $3.5 million for an individual, or $7 million for a couple, are exempted.

The changes to the estate tax are related to how assets are valued, said the official, who was not authorized to be quoted.

Other proposals include denying tax deductions for firms with punitive damage claims, the official said.

Later Monday, the administration will provide details on a series of tax proposals unveiled last week, said to raise $210 billion over a decade, to tighten rules related to overseas investments.


Read more: http://www.reuters.com/articlePrint?articleId=USTRE54A3DL20090511

[bamacrat]

1. Good, taxes should reflect income..

or profit, ar anything. You or your company makes more money finds a way to spend less therefore increasing profits, you should pay more. Our country needs money now is not the time for creating a safe haven for get rich quick companies and ensuring we continue or bubble then bust economic style we have been mired in since Regan.

[onehandle]

2. How horrible. Won't somebody think of the billionaires!? nt

[FailureToCommunicate]

3. Good start, but Obama also needs to get the IRS to step up enforcement of

audits of, and collection from, WEALTHY tax cheats! The IRS had CUT BACK ON audits of the rich during the last few years for some reason...(IRS does not even deny it!)

[Vehl]

4. good point

one cheating billionaire would put a bigger dent on the nation's tax revenue than would 100 average income earner's.

[FailureToCommunicate]

5. Of course NO ONE should cheat. But since the tax laws are written and approved

by the (mostly) wealthy and powerful, they already have plenty of ways to hide income and assets. They should not ALSO cheat!

[Two Americas]

8. much worse than that

We are prone to chronically underestimating the wealth and income gap.

One billionaire paying half their income or more in taxes - as working class wage earners already do - could well be equal to 10,000 everyday people. $100,00 X 10,000 = one billion.


...

[Psephos]

12. Especially considering that half of the populace pays no income tax

which changes the idea of what an average income earner is actually contributing.

[Hannah Bell]

30. bullshit. plenty of people in lower brackets pay income tax.

the pr pieces saying they don't arrive at that conclusion by choosing the statistical configurations they need to get that result.

for example, if the bottom 10% gets a 5% subsidy & the next 10% pays income tax at an effective 5% rate, it averages to zero.

That doesn't mean the same thing as "twenty percent pay no income taxes," though the ruling class would like you to believe it does.

[Psephos]

32. Actually, 43% pay no Federal income tax

Sorry, but I don't control the facts, I just report them. And I'm not a member of the "ruling class" lol. But if there's ever an opening, I'm going to apply. ;)

http://www.cbsnews.com/stories/2009/04/15/politics/otherpeoplesmoney/main4945874.shtml

According to the Congressional Budget Office for last year:

The richest 1% paid 39% of the income taxes, up from 37% in 2000.
The richest 5% paid 60% of the income taxes, up from 56% in 2000.
The bottom 50% paid 3% of income taxes.


There are other payroll taxes besides Federal income tax. Perhaps you're thinking of SS/Medicare, or State and City taxes.

[Hannah Bell]

33. Tell me, do you know what a "tax unit" is?

and do you know why the table tells us 43% of units have no liability 2009-2019?

http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=2276&DocTypeID=7

None of those are real numbers. 2009 taxes haven't been paid, let alone 2019.

Take a look at the bottom of the chart. With the AMT in the mix, plenty of those "units" aren't poor people. If you don't check the data, you don't know the story.

[Hannah Bell]

34. So, according to the conservative/winger tax foundation, of those who filed tax returns in 2003/04:

& paid no income tax:

90.8% made 0-19K.
34% were 24 y/o or younger.
54% were female.
45% worked part time.
19.9% worked full time less than 50 weeks.
26.5% were single parents.

These people = about 1/3 of filers, 42 million people.

In addition:

"...roughly 15 million individuals and families earned some income last year but not enough to be required to file a tax return. When these non-filers are added to the non-payers, they add up to 57.5 million income-earning people who will be paying no income taxes."

"Not surprisingly, 93 percent of non-filing households are considered non-workers – meaning they worked less than 13 weeks out of the year. Only 1.46 percent of non-filers will have worked full-time during 2004."

That's where the "40%" or "43%" comes from. It includes non-filers.

http://www.taxfoundation.org/research/show/542.html

I repeat, plenty of lower bracket filers pay income tax.

[Hannah Bell]

36. What's really amazing about the data is that the top two income deciles take 75% of all income but =

only 31.5% of "tax units".

The top income quintile takes 55% of national cash income, but constitutes only 14.8% of "tax units".

The top 0.1%, about 100,000 "tax units," takes almost 10% of total cash income.

http://www.taxpolicycenter.org/numbers/Content/PDF/T08-0079.pdf

No explanation of how they dice "tax units".

[Psephos]

50. Yes, it’s hardly an esoteric concept

A tax unit is the quantum of basis that underlies calculation of a person’s taxable income. There are three choices: individuals, two married people, or families. Some latitude is possible, I suppose, in definitions of these terms, but it’s all pretty cut-and-dried.

The individual is the most natural tax unit for an income tax system, until political philosophies or historical considerations intervene. I don’t see much consensus. IMO, using units other than individuals leads to complexity and opportunity for tax-minimizing strategies not foreseen by tax code writers.

Because taxable income is an algebraic concept whose meaning is fixed periodically, a standard past-tense definition must be used to link a person/tax unit with a taxable income. I.e., we speak of liabilities accrued, or income earned, or whatever. Always looking backward a year (or whatever period is used).

Tax unit issues are tied to tax rate structures. With flat individual tax rates, there isn’t much difference between aggregating income and splitting income, regardless of unit. However, large tax-free brackets or social-incentive bands in the lower ranges amplify the differences in taxes paid between aggregated, split, and separated units. In other words, they make accountants and attorneys richer, but not so much Uncle Sam.

To return to the matter at hand, I don’t understand why you think tax units obfuscate the actual tax payments made by the lower-earning half of our country. If anything, they weight the argument opposite of what you seem to be saying.

Meanwhile, Federal income tax (as I stated earlier) is the only tax in discussion here. The “bottom half” pays plenty of other taxes, including MC/SS, State, City, sales taxes, gasoline taxes, excise taxes on telecommunications, FAA taxes on air travel, passport and document costs, miscellaneous fees, indirect taxes passed on in the higher prices of goods and services, and unfortunately, on and on and on and on. The indirect tax cost is probably the biggest of them all, but of course, it's "invisible" so no one bitches about it.

I stand by my earlier assertions and sources, and if anything, would nudge the numbers up based on reasonable inferences of tax strategizing caused by the choice of tax units.

[elifino]

42. I second that, start with all elected officials

[LiberalFighter]

6. The exemption level should be reduced. $3.5 million is way too high.

Anyone in line for over $3.5 million inheritance did not earn the income.

[anonymous171]

9. Exactly. In Capitalism, wealth must be earned.

Anything else is socialism. This line usually confuses the shit out of republicans and libertarians.

[imdjh]

14. Meh, it might need to be tweeked, but as a universal statement, I'd have to disagree

You could work on your father's farm for 40 years or more before he dies. I'm guessing there is a way to transfer the farm to you without it being a taxable event. But I could be wrong.

I'm with you on the blanket exemption at $3.5 million though, if you have that much in property, then you probably have the cash to go with it. A reasonable tax scheme could probably be devised. Of course, if we had a Hong Kong style flat tax, and no other taxes then we wouldn't have to worry about schemes.

[Iowa]

15. The poor, hard-working, farm kid argument has been used by the wealthy for decades...

It doesn't fly. As one who was raised on a farm and will inherit farmland, there's nothing special about that asset that deserves special consideration. Property is property. Assets are assets. The farm kid is no more entitled to special protection than the child of a business owner, or the child of a factory worker, or the child of parents who scraped and saved all their lives and accumulated some assets. Farmers would like everyone to believe that they have some special "way-of-life" that deserves special consideration, but that's bull. EVERYBODY has a way of life that means something to them. Farmers are nothing special (and they tend to be anti-union, conservative, and republican).

Bottom line: This country has been irreparably damaged by the shiftless offspring of the mega-wealthy and that's got to end. Pick a number... I'd say roughly one-million per child - maybe 3 million for a disabled child. Index it to inflation and tax 100% of the rest. Use the proceeds to fund:

--post-secondary training for students with promise
--small-business start-ups for young people with solid business plans
--R&D for those with innovative and promising technological innovations and ideas
--organic food start-ups
--and so on... whatever society deems as a need at the time.

Every generation would start with a more level playing field, and the trust-fund kids would be forced to compete and work for a living like everyone else - instead of making mischief for the rest of us. In that world, GW Bush would be doing what he was meant to do: selling vacuum cleaners door-to-door between taxpayer funded detox stays. And that farm kid would take his million and continue farming. If he wanted more than a million, he would either borrow it, save it, or do without it - just like everybody else.

[imdjh]

20. I agree with your sentiment.

But there are places, notably those where suburbia or vacation homes are edging into historically agricultural places, where a farm might be valued enormously as if it were residential property when it isn't.

As a rule, I support valuing property by its present use rather than "highest and best" use. We've had an apple out of that barrel around here, where a family business is grossly over valued as if it were a condo development or hotel, instead of being a small motel or restaurant.

Even so, I see the argument. Because in some cases the family really has no intent of farming forever or unto the next generation- they are simply hanging on to the land until its development value is maximized.

[KittyWampus]

24. I live in one of those areas. Let me tell you- a house on a half acre goes for 3.5 million here

DU'ers THINK they know what they are talking about.

[KittyWampus]

23. You are obviously NOT going to work on your family's farm. If you REALLY worked on yourfamily's farm

and were REALLY interested in taking it over, you'd know all the years of toil and sacrifice that you put into it.

[Iowa]

26. Nonsense...

This business about "years of toil" and sacrifice" is a crock. I was raised on a farm. I know the work. My father was a farmer all his life on a family farm that passed from great-great-grandfather, to great-grandfather, to grandfather, to my father. That said, I'd make the following observations:

1) There is nothing particularly difficult about farming. I have done many kinds of work, including farming. Farmers often like to push the idea that their work is harder than other peoples' work. It's not. I've had easier work, and I've had work that would bring many farmers to their knees. There's nothing particularly unique about farming.

2) During all of their "years of toil and sacrifice", farmers earn a living, just like everybody else. If they want to build equity, they can either borrow, save, use inherited money, or a combination - just like everybody else. If a farmer inherits a million and can't continue farming, or somehow feels cheated because all he got was a measly million bucks, they'd get no sympathy from me.

3) Factory workers don't feel entitled to ownership of their company after all the "years of toil and "sacrifice" they put into it... that sense of entitlement seems to be unique to the farming occupation.

There is a sense of entitlement to a big inheritance that seems to be unique to farming. My father is a rarity among farmers - a liberal Democrat, and he doesn't particularly like other farmers; he thinks many are whiners. They tend to feel that they're the only people in the world entitled to make a decent living. The truth is, they are no more or less deserving of special consideration when it comes to estate taxation.

[Thothmes]

25. Sounds OK to me. Wonder how FDR would have done

selling Vacuum Cleaners. He certainly didnt earn the wealth that he came into.

[KittyWampus]

22. Bullshit. The property my family's THIRD GENERATION business exists on is over that amount

We aren't' wealthy. We don't have cash.

And the only reason the property is worth that much is because real estate values went insane.

[Hannah Bell]

31. no, it isn't "too high". a medium-sized regional family business can easily touch that.

some portion of the push for reducing estate tax limits is big capital trying to sock it to smaller capital. seriously.

[Theobald]

38. Actually anyone in line for any inheritance did not

earn the income. Inheritance, by definition, is unearned money.

[redqueen]

7. I hope Congress gets into gear on this stuff.

It all sounds great... now do it!

[OhioChick]

21. You got it. Action speaks louder than words. n/t

[Zorra]

10. Sounds like a good plan to me. The trend of redistributing wealth to the already wealthy

needs to be completely reversed.

The polarization of wealth that has taken place since the Reagan era has become a threat to our democracy.

"The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism—ownership of government by an individual, by a group, or by any other controlling private power." FDR

[B2G]

17. Redistributing wealth to the already wealthy??

Are you serious? It's an inheritance, it's not redistribution.

Not to mention the fact that that inheritance money was already taxed when it was earned. Double dipping at it's best.

[One_Life_To_Give]

11. What is the family farm worth?

Guess there are far fewer than years back. But the Estate Tax on Farmland caused much sympathy. What is 1000 Acres in west Texas or Montana worth? What other means does a family have to protect themselves?

[imdjh]

13. A good opportunity there with the family farm thing.

We can't define a family farm, some folks have 40 acres and farm as a sideline while others have 4000 acres and farm as a primary income, and some don't farm at all but are holding on to the land waiting for developers to make offers.

So how about tying a farm exemption to an agricultural preservation easement?

[Iowa]

16. The farm argument simply doesn't fly. It's a sham used by the wealthy to generate sympathy...

As one who was raised on a farm and would benefit, I'm of the opinion that there's nothing special about a farm that deserves special consideration. Property is property. Assets are assets. The farm kid is no more entitled to special protection than the child of a business owner, or the child of a factory worker, or the child of parents who scraped and saved all their lives and accumulated some assets. Farmers would like everyone to believe that they have some special "way-of-life" that deserves special consideration, but that's bull. Everyone has a way of life that means something to them. Farmers are nothing special. Furthermore, they tend to be anti-union, conservative, and republican.

Pick a number - I'd say a million indexed to inflation for a non-disabled heir. The farm kid can take his million and continue farming. If he wants more than a million, he can either borrow it, save it, or do without it - just like everybody else.

[Tansy_Gold]

19. Farms that are being farmed by the "heirs" are virtually NEVER

lost to inheritance taxes. Ownership is transferred prior to death. As long as the heirs continue to operate the land as a working farm, they will not be taxed. Most farmers have long had plans in place for transfer of the farming operation and/or they have life insurance to cover the taxes.

Heirs who do NOT farm and simply want to cash out their "gift" are indeed taxed, if the value of the estate is high enough. And there's something wrong with that?

My in-laws sold their Indiana farm in 2003. It had been in the family for at least four generations, maybe more. They paid taxes on the income they made from the sale of the farming operation the same as if it were any other business. They were able to deduct the value of their home and immediate non-farm (yard) acreage, which was then re-invested in another home.

The same is true of family non-farm businesses. If children or other heirs are brought into the business while the owner is still alive, they are usually "given" ownership over a period of time as a gift or they "buy" into it through profits. Only if the inheritance is over the limit -- and it's quite sizeable -- do they pay inheritance tax on what they've been given. Not on what they've EARNED and been given ownership of prior to the original owner's death.

Does that make sense? It doesn't to most "death tax" opponents, but I generally consider them in teh TSTL category.


Tansy Gold

[Iowa]

27. Yep... I'm of the opinion that the estate tax is crucial...

First and foremost, I see it as an essential means to protect the country from the ne'er-do-well offspring of the mega-wealthy - to take away their means to cause irreparable harm.

But I also tend to believe that inherited wealth beyond a certain point is trouble - even on a smaller scale - so I'd be in favor of roughly a million per heir (indexed to inflation) - maybe three million for a disabled heir. And I'd prefer it if the proceeds weren't thrown into the black-hole of welfare-for-rich-bankers and the war industry, so I'd like to see something done as I posted up-thread.

I also think it would be healthy for the country to level the playing field every generation. There's WAY too much concentration of wealth in this country - and not just with the mega-wealthy. Some people in our society don't stand a chance, so I'm in favor of spreading opportunity around. If that means that some farmer inherits only a million dollars worth of farmland instead of 3 million - so be it.

And you're right... it's my understanding that farms are almost never lost to inheritance taxes as things stand now. And even if limiting inheritances to a million bucks (indexed to inflation) did cause a parcel of some farms to be sold off... I wouldn't see that as any more egregious than the heir of a super-saver losing assets to the estate tax. There's nothing particularly special about farmers. Farmers in my area tend to be conservative republicans who raise corn for ethanol, patronize corporate trouble-makers like Monsanto in their chemical intensive corn/soybean operations, and raise hogs in factory-farm-like cesspools that pollute the environment. There IS a family farm near our community that raises organic vegetables, fruit, beef, pork, and chicken (they keep bees and sell organic honey too). We patronize those folks, and I would definitely be in favor of special treatment for farmers like that who are actually doing something to make the world healthier and better. But in my area those types of farmers are few and far between.

[Hannah Bell]

35. 1 million is 200 acres at $5000/acre with no house, barn, or other improvements.

Not the property of the "mega-wealthy".

1 million is the value of a 1-store motorcycle dealership in a small town, or a 30-unit apartment building in a small town.

The clear income produced by such property is nowhere near 1 million, more in the range of $50 to $150K.

The mega-rich would be happy to have such property dissipated, sold & divided through estate tax; more peons dependent on them, more cheap property for them to own.

Their mega-wealth is stored up in foundations, tax shelters & offshore accounts, out of the range of progressives such as yourself.

[Iowa]

43. The type of redistribution of wealth that I refer to in this thread would never occur...

The very idea that 1 million in assets (indexed to inflation over time) is "enough" for an heir is met with horror - even on a liberal site such as this. There's a real reluctance to redistribute wealth when it would involve us.

A million bucks in inherited assets would generate roughly $40,000 in income with annual raises for inflation - at least that's what it would have provided in the past. I happen to believe that's enough. That would be combined with earnings from work (for younger heirs), and SS, pension, and savings in retirement. With so many people living a bare subsistence, my conscience wouldn't allow for more. A million dollars is enough.

So where would you set the bar? Or are you opposed to estate taxes altogether?

[Hannah Bell]

45. I'm saying your plan takes assets from the middle classes, not from the big boys.

And I'm saying the big boys like your plan.

The mentality is identical to those cheering the take-backs from auto workers because they "make too much".

Local motorcycle shops aren't the reason others are in homeless shelters, nor are the $28/hr jobs of autoworkers.

[One_Life_To_Give]

37. Do the truly wealthy pay inheritance taxes?

I would expect that most anyone with more than $50Million in assets probably has them held by some type of Corporation and is paid as a board member. Hence the "Truly Rich" really won't be paying this tax.

I doubt you could get most parents to agree that "their" offspring should not benefit from what they may be able to provide for them.

[Tansy_Gold]

46. One thing that I think it getting lost in all this -- there is no

CONFISCATION of the estate. In other words, when the owner dies, he/she has a will (or not) that determines who gets what. IF the value of the estate is over the limit, a tax is paid on it -- and that tax goes to the Internal Revenue Service, not "the banks." But when the tax is paid, the property continues to belong to the heir/s.

And again, most people who have substantial estates make arrangements ahead of time to provide for the payment of these taxes, either through insurance policies or pre-death transfer of property. That's what the RW doesn't want anyone to know. Very few large estates are "lost" due to inheritance tax; they are far more often frittered away by moronic heirs.

Again, those heirs who continue a family business are almost always involved in the planning to secure the estate; most of those who "lose" their inheritance do so because all they really wanted to do was sell it and pocket the free cash to blow on cruises to Tahiti or antique cars. In that case, the dough is just a lavish gift, a windfall, and should be taxed like lottery winnings.


TG

[WriteDown]

48. There is another plan that has merit...

Everything more than 250K, but less than 1M is taxed at roughly 40% with a 1% additional tax for every million. So if you are making 40M per year, you would pay a little less than 80% leaving you with roughly 8M. Hardly a pittance, but I think this may be favorable to any estate tax.

[Iowa]

18. Oh, one more thing...

Good Iowa farm land is bringing somewhere in the vicinity of $4,500 per acre. It fluctuates, so that could be off somewhat, but that was a fairly recent price.

As far as income... a farmer cash-renting a decent 160 acre farm in Iowa - right now - would be paid roughly $50,000 for a year. The farmer renting the land would also likely get some perks in the bargain - like all snow removal and lawn care. Out of that $50,000 the farmer must pay property tax, plus he/she would be responsible for paying for any land upkeep (drainage or erosion). A few years ago that $50,000 cash-rent would have been maybe $22,000. The amount varies wildly based on the price of corn and soybeans. Right now we're seeing some all-time highs that probably aren't sustainable.

[progressoid]

40. The family farm mostly disappeared in the 80's

Family farms are now Corporations

With proper tax and estate planning, estate taxes are not much of a concern for a family farm that is "property rich and cash poor." Many family-owned farms are incorporated exactly for this reason. The children receive shares of stock in the corporation from the parents every year. With the current Gift Tax exclusion the parents can transfer $26,000 worth of stock to each child every year for as long as they live.

When the parents retire and the children take over day-to-day operation of the farm they start buying out the parents' shares in the corporation. This provides an income stream for the parents and attracts the lower long-term capital gains taxes on those earnings. It's a win-win for all parties. The parents get an income stream, a sweet tax break, and the children get to buy out the farm without having to take out any loans or pay a dime in interest.


Eight myths about estate taxes:
http://www.tcf.org/list.asp?type=PB&pubid=38

[DCKit]

28. The best thing about re-instituting the inheritance tax on reasonably large estates...

is the incentive it gives the wealthy to gift to charitable organizations.

[Hannah Bell]

29. that would be good. let's see if it happens.

but $210 billion over 10 years = chicken feed.

bush's tax cuts for the top 1% ALONE saved them 2 trillion over 10 years.

TWO TRILLION.

[Tim01]

39. This will cause the family farm to be sold. I've seen it before.

Family farms don't make that much money no matter how big they are. People work long and hard to make ends meet, they have to, there isn't much money in being a farmer. And farmers are generally they types who will help their neighbors instead of building an empire for themselves.
The inheritance tax will make it so that the farm has to be sold to pay the taxes. It's almost like punishing the kids because the dad dies.
And I can tell you who buys the family farm too, developers. I have seen it, It is here. It is my home town.

Dad dies. Kids who have live on, worked, and loved the same dirt all their lives are kicked off the farm. They have to get a job and apartment in town. Their farm is sold to developers who turn it into sub divisions and Mcmansions.

This is reality. I have seen it. I'm making preparations to try to prevent my kids from loosing the dirt where they were born, where my dad is buried, all of our family pets are buried and where I will be buried.
Me and my family have worked for this farm, and the government will try to take it.

[Tansy_Gold]

44. You're jumping at shadows.

If you are going to maintain the property and operate it as a farm, you will not lose it to taxes.

Your father should have an estate planner preparing for your take-over long before his death.

You're spouting unadulterated bullshit.

Do some simple research.



Tansy Gold

[Tim01]

47. I've already seen it happen. So you don't carry much weight saying it doesn't.

Feel free to call me a liar again. It won't change the fact that I have seen farmers loose their farms to taxes the government collects. Go ahead and blame the farmers.
Maybe all farmers should be lawyers and protect themselves from the government coming to collect money every time somebody dies. But they are not. They are farmers who loose their farm to pay the death tax.

No matter how many times you say it doesn't happen, it won't change the fact that I have seen it for myself.

[progressoid]

41. Oooh, that's gonna get Hannity and Beck and Rush pissed!

:evilgrin:

[joshcryer]

49. Tax alcohol, worked for cigarettes.

Right?