The Wealthy Get Wealthier: No Estate Tax This Year

[amborin]

Legacy for One Billionaire: Death, but No Taxes

A Texas pipeline tycoon who died two months ago may become the first American billionaire allowed to pass his fortune to his children and grandchildren tax-free.
Dan L. Duncan, a soft-spoken farm boy who started with $10,000 and two propane trucks, and built a network of natural gas processing plants and pipelines that made him the richest person in Houston, died in late March of a brain hemorrhage at 77.
Had his life ended three months earlier, Mr. Duncan’s riches — Forbes magazine estimated his worth at $9 billion, ranking him as the 74th wealthiest in the world — would have been subject to a federal tax of at least 45 percent. If he had lived past Jan. 1, 2011, the rate would be even higher — 55 percent.
Instead, because Congress allowed the tax to lapse for one year and gave all estates a free pass in 2010, Mr. Duncan’s four children and four grandchildren stand to collect billions that in any other year would have gone to the Treasury.
The United States enacted an estate tax in 1916, and when John D. Rockefeller, America’s first billionaire, died in 1937, his estate paid 70 percent. Since then, the rates have fluctuated, but this is the first time the tax has been repealed altogether.

The bonanza in tax savings for Mr. Duncan’s descendants is sure to be unsettling to those who have paid estate taxes on more modest wealth — until Jan. 1 of this year, it applied to any estate valued at more than $3.5 million, taxing only the money exceeding that threshold, or $7 million for a couple’s estate.
Although the tax affects only about 5,500 estates a year, it is such an incendiary issue that when Congress unexpectedly let it lapse at the end of 2009, financial advisers warned that it might play a macabre factor in the end-of-life decisions being weighed by heirs of elderly Americans. Some estate lawyers worried that tax considerations might prompt their clients to keep an ill relative on life support through the end of 2009 to get the favorable treatment — or worse, resist life-prolonging measures to hasten a relative’s demise before the end of 2010.

The one-year lapse in the estate tax was signed into law by President George W. Bush in 2001, an accounting quirk in his package of tax cuts. Although Democrats pledged to close that gap and reinstate a tax for 2010 when they took control of Congress, they failed to reach an agreement last December. The Senate Finance Committee is now trying to forge a compromise that would reinstate the tax, but even if that effort succeeds, it is unclear whether any changes might be retroactive and applied to those who have died so far in 2010.
Many lawyers say Mr. Duncan’s heirs have the means and motivation to wage a fierce court battle to challenge the constitutionality of any retroactive tax.

snip

http://www.nytimes.com/2010/06/09/business/09estate.html?ref=todayspaper


http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=7732854&mesg_id=7740653

[Journeyman]

1. You get the feeling we may see a lot of old rich people 'kick the Ming Dynasty vase" this year. . .

[ProgressiveVictory]

2. hasn't that money already been taxed?

[girl gone mad]

4. Yes, in the same sense that the money..

you get in your paycheck, before payroll and income taxes, was already taxed; the money you use to pay sales tax was already taxed; the money you pay capital gains with was already taxed..

[ProgressiveVictory]

9. so why tax it again?

[FiveGoodMen]

11. That screen name won't fool anyone.

[ProgressiveVictory]

13. I don't know what your talking about.

So why should we tax it again? I don't understand?

[girl gone mad]

57. It's "you're", not "your".

And we tax the money again because it changed hands again, just like the money you get in your paycheck was probably taxed many times before you received it, as it changed hands.

It's not complicated.

[laughingliberal]

54. Did I miss the memo? Reagan appreciation day on DU again? nt

[girl gone mad]

56. lol..

Without taxes, your money would be worthless. Unless you plan on moving back to the gold standard and all of the significant restraints on capital that would accompany such a move, your best bet is keep a system which involves moderate taxation.

As a progressive, you should already understand why progressive forms of taxation bring the highest levels of stability and growth tp an economic system. The inheritance tax is one of the most progressive taxes we have. I shouldn't need to explain to a progressive why money gifted through inheritance should be taxed at a higher marginal rate than money earned through labor or investment.

[dorkulon]

78. Because it's new income for the heirs.

You might just as well say that if I give you money, it was already taxed when I received it. But now that it's you receiving it, it's new income for you.

[whopis01]

80. right - why ever tax money again?

I mean, the money people used to buy goods from the company I work for was already taxed, so why should I have to pay income tax when it comes to me?

[Hannah Bell]

5. no.

[ProgressiveVictory]

8. how can it not have been taxed already?

[Hannah Bell]

14. various methods to protect business, personal & real estate wealth from taxation.

the rich have more access to such methods than any wage earners, who are taxed on their income multiple times via income tax, sales taxes, fees, property taxes.

lots of people here don't like winger talking points, btw.

[ProgressiveVictory]

17. what winger talking points?

The question i asked? when is it bad to ask a question? I was jw if it was already taxed and i don't feel it is right to tax taxed money.

[Commie Pinko Dirtbag]

18. See #16. -nt

[alstephenson]

19. Figure it out, "Progressive" one.

Don't you have something better to do than troll the DU???

[ProgressiveVictory]

22. think im a troll. i dont care. im just curious and asked a question.

[Commie Pinko Dirtbag]

26. They're so cute when they play innocent, aren't they?

[WinkyDink]

82. We don't need to "think" in your case; we can see plainly.

[Commie Pinko Dirtbag]

16. Money is taxed when it changes hands.

- Payment of salaries
- Retail sales
- Payment of dividends and other financial gains
- Lottery gains
- Real estate sales
- Etc, etc, etc.

Money IS taxed "multiple times", as you put it. And it HAS to be.

Why should inheritances be any different?

[ProgressiveVictory]

20. because it is going from Father to Son

[Commie Pinko Dirtbag]

23. That's doesn't make it any more special. Still two different people.

By the way, love the male-centric phrasing.

Go watch a Western movie. That one starring Val Kilmer and Kurt Russell will be just right for you.

[fascisthunter]

24. so what?!

it's not as if they won't have enough left over. Christ, the parents made that money off the system itself that made it possible in the first place.

[ProgressiveVictory]

27. so if your family owned a small business you would be fine if the taxed the money

before it got to you?

[Commie Pinko Dirtbag]

29. The exemption floor is high enough that no small businesses are taxed already.

The cut is for filthy rich people to get more money they did NOTHING to earn. Period.

But you know that already.

[ProgressiveVictory]

32. cuz they just woke up one morning and earned billions of dollars

[Commie Pinko Dirtbag]

36. That's exactly what happens to the HEIRS when their "hard working" relative kicks the bucket.

Stop trying to pass this as a tax on the poor old dead person who earned their money.

The taxed persons are the heirs, who did NOT.

[ProgressiveVictory]

42. I work for my parents company and helped build it up

so i worked for it and should not be taxed because of that

[Commie Pinko Dirtbag]

47. So you should be earning your own compensation, just like a normal employee.

An estate tax doesn't affect THAT.

[ProgressiveVictory]

50. ahhhh I see. ok :)

[rasputin1952]

53. They didn't "earn" it...

it was given to them relative to their position in life. Do you think Paris Hilton actually "earns" money?

[joe black]

70. Contrary to popular belief.

Rich fucks are rich due to inheritance and not hard work.

[wolfgangmo]

35. Yes. Absolutely.

My parents own 6 companies including a publishing company that clears about 10 million a year as well as 6 newspapers (local and profitable and moving to becoming vital online communities that pay for themselves) and yes, it should be taxed. I currently own a medical clinic and no, my kids should not get it without having to pay an estate tax.

What is it that you stand for? No billionaires brats taxed? Trust fund kids for a free ride?

What's your story? As you say, I'm just askin' a question.

[ProgressiveVictory]

38. my family has our own cable company. i am an employee there and im helping build it up

and dont feel its right or fair for that money to be taxed when i get it

[Commie Pinko Dirtbag]

43. Money YOU worked for is yours.

Money your relatives worked for isn't yours. It's theirs.

[ProgressiveVictory]

46. and if they want to GIVE it to me it should be taxed first?

[Commie Pinko Dirtbag]

49. I don't know all legal technicalities, but...

...in some places, if a court determines a donation was made with the intent of bypassing inheritance law (tax or not), it will be frowned upon.

[ProgressiveVictory]

51. hmm ok.

[laughingliberal]

60. The first 3.5 million is exempt (7 million for a couple leaving their money to their heirs).

Not having an estate tax results in wealth, over time, becoming concentrated in fewer and fewer hands until you have 3 or 4,000 families controlling most of the money. We already have a situation here where the top 1% is controlling a very disproportionate percentage of the wealth. We do not need to encourage that to get worse.

[haele]

65. Well, if they want to give you more than $12000 or so as a birthday gift, it is taxed anyway.

If they wanted to give it to you as a loan or finance something for you (like college, or a car), no it isn't taxed. That's why if your parents or kindly auntie want to give you the money for the downpayment for a house, you must declare it as a loan if it's over a certain amount or the amount over the limit gets taxed.
And from what I can gather looking at estate planning (which I've got to start being serious about doing now that I'm over 50) if they wanted to give you more than $2 million or so worth of property, funds, and other gee-gaws when they died, then and only then do you, as an heir, get taxed at the end of the year for what is worth over $2 million.
But if you wanted to give half of that away to charity or put it into some sort of retirement, you could shelter some of that inheritance away.
If you're working with the family business, you should have some way of declaring your value to the business; even if you don't "get paid" by the profit, your hours of work given on the family business should be included when figuring out how much to tax what you inherit - again, if it's over a significant amount.
When my folks go to the great garden in the sky, they figure they're going to be leaving an estate close to 2 million in value to be split between me and my brother. And neither of us will probably pay one cent to the government in an estate tax.

But I'm not a tax guru, so you really need to talk to someone who does that for a living, instead of getting your info from somebody's blog - or even wikipedia.

Haele

[alstephenson]

67. YES.

Now go away.

[whopis01]

81. It has to be done that way - think about it

Otherwise what would stop me from giving my time to my employer and them giving me some money and there being no taxes to be paid.

Or I go into a shop and give some money to the merchant and the shop gives me a new TV and then there are no sales taxes paid.

If you, on the other hand, were a qualified charity, then I suppose someone could donate to you - but I doubt that is the case.

[alstephenson]

66. Will you share the company with the other "employees" that are also helping build it up???

No? Why not?

[HillbillyBob]

30. The Idea was to keep wealthy from becoming like

the inherited aristocracy of Europe and gain too much wealth and power over our government..too late the rpigs have been twisting the power into their own hands since raygun.

[ProgressiveVictory]

33. so if they are successful and wealthy we have tp figure out ways to keep them down?

[Commie Pinko Dirtbag]

40. Two falsities in three words -- keep them down.

First, a progressive tax is hardly "keeping someone down".

Second, the "them" you mention -- the successful persons -- aren't the ones taxed, it's their heirs.

[ProgressiveVictory]

45. so me as an heir, who has worked for my parents company should be taxed when i sell it?

[laughingliberal]

63. Taxed on the profits of the sale, yes. eom

[alstephenson]

68. When you sell it?

Now WTH are you talking about?

[haele]

69. I think we're talking to Samuel Wertzerberger (sp?) -

Sounds like the talking points he was parroting during the 08 election. Just exchange "cable company" with "plumbing company"...
Progressive Victory? Right. Titles and catch phrases can be used any way the propagandist actually wants them to be used, so long as difficult to figure out the actual attitudes and actions they're being put in front of.

Haele

[laughingliberal]

64. +1000 nt

[laughingliberal]

62. Now I know I missed the memo about Reagan talking points day on DU. nt

[fascisthunter]

48. danke

some don't see that as a problem, yet if one were to open their eyes and see what has happened since the 50's, they'd notice how the middle class was disappearing, and how the wealthy are getting wealthier(all while their tax rate has gone down). Kids are born into wealth, and become extremely detached from the rest of us, because they do not share our lifestyles, our work life, our "circles". Our current problem can be directly attributed to unfettered wealth and it's power. This country didn't go into debt just because of social programs meant to aid the poorest, most desperate among us. No, now the rich are doing all they can to strip us of our rights as citizens, influencing our government with their money, yet they bitch about paying taxes.


edited: last line not necessary.

[WCGreen]

28. Accumulated wealth in the guise of capital gains have not been taxed...

which, in case you aren't aware of, is the value of an asset between what was paid for and the amount of value it will sell for...

So in that sense, the money captured in the capital gain will not be taxed until the item is sold. and then at a much lower rate than money that is earned in real time.

[Solomon]

73. Ah! Somebody finally touched on a point not mentioned in the

article. The article is flawed because although there is no federal estate tax this year, there is also no free step up in basis either. (Well, there is a 1.2 million basis adjustment available but for a billionaire, it's not going to help much)

This means that under the estate tax system when a person dies, their property is valued and taxed on it's fair market value on date of death. When the property is passed to another, it receives a "step-up" in value, i.e. the personal receiving it gets it at fair market value as of date of decedent's death.

Since there is no federal estate tax this year, there is also no step up in basis, which means that if the property was aquired at a cost of $2.00 but is worth 2 million on date of death, the estate has to pay income tax for the gain between what it cost decedent to acquire an asset, and what it's worth when he dies.

So they are not exactly getting away scot free here. And the irony is there will be some estates below the 3.5 million (last year's) threshold, that will get taxed because there's no federal estate tax this year when if there was, they wouldn't get taxed at all.

[WinkyDink]

59. Why are you giving the Republican argument?

[mhatrw]

79. That's the most bullshit argument ever invented.

http://en.wikipedia.org/wiki/Estate_tax_in_the_United_States

Furthermore, supporters argue that many large fortunes do not represent taxed income or savings, that wealth is not being taxed but merely the transfer of that wealth, and that many large fortunes represent unrealized capital gains which (because of a step up in basis at the time of death) will never be taxed as capital gains under the federal income tax.

Another argument in favor of the estate tax relates to comparative incentives. Proponents argue that the estate tax is a better source of revenue than the income tax, which is said to directly disincentivize work. ...

Proponents of the estate tax tend to object to characterizations that it operates as a double or triple taxation. Proponents point out that many of the earnings that are subject to the estate tax were never taxed because they were "unrealized" gains.<23> Others note that double and triple taxation is common (through income, property, and sales taxes, for instance) or argue that the estate tax should be seen as a single tax on the inheritors of large estates.

Supporters of the estate tax also point to longstanding historical precedent for limiting inheritance, and note that current generational transfers of wealth are greater than they have been historically. In ancient times, funeral rites for lords and chieftains involved significant wealth expenditure on sacrifices to religious deities, feasting, and ceremonies. The well-to-do were literally buried or burned along with most of their wealth. These traditions may have been imposed by religious edict but they served a real purpose, which was to prevent accumulation of great disparities of wealth, which tended to destabilize societies and lead to social imbalance, eventual revolution, or disruption of functioning economic systems. This economic safety valve is now partially imposed via the estate tax, which strips excess wealth from the recently dead and diverts it back to the society as a whole

[Hannah Bell]

3. no estate taxes for capital, but they want to increase social security taxes on workers -- & cut the

benefits.

[Catherina]

7. We are slaves n/t

[scheming daemons]

6. Yeah... but at least the Bush tax cuts expire at the end of the year to hit the rich back

...

[Kievan Rus]

10. And yet Beck and Rush will use that to say Obama raised taxes

[Johonny]

15. if the Republicans win in Nov

you think they'll wait 2 years to reinstate the old Bush tax rates... cause I don't.

[IndianaJoe]

12. This is ridiculous. Our wealth disparity is awful. n/t

[OneTenthofOnePercent]

21. RE: the thread title... technically, "The Wealthy Dont Get Poorer"

They already had the money before it get taxed... which would make them "poorer"

The family simply has the same amount of money in this instance.
They are not "wealthier" for having him die.

[Hannah Bell]

25. if they're not subject to taxes that used to be assessed, they're getting richer.

[OneTenthofOnePercent]

34. If they are not subject to the tax thay maintain wealth.

Sure, they are wealthier THAN if the money had been taken from them. But it was thier money to start with. Unless the presumption exists that the money never belonged to them to begin with... they merely maintain wealth after the death of the father.

they have $9000000000... the father dies... no tax is assessed... they still have $9000000000
The family is no wealthier.

[Hannah Bell]

37. they are wealthier than what they would have been had dad died last year under the old law.

all else being equal.

at least the heirs are.

and the heirs are richer than they would have been were daddy still alive, or dead under the old system.

so yes, *someone* is getting richer, either way.

[Commie Pinko Dirtbag]

31. The person who had the money is dead. This is about the heirs. -nt

[OneTenthofOnePercent]

41. One can presume that while the father's name is on the accounts...

That money has been the family's money. This is why I disagree with estate taxes...
If the money stays within close family it should not be taxed.

This is dissimilar than other taxes that tax good and services when money changes hands.
I do support "lottery" taxes though because it's like a source of income.

[Commie Pinko Dirtbag]

52. The distinction is artificial. It passes from one person to another.

And when it does, it is a form of income.

[amborin]

39. aren't they

wealthier in the sense that they get the inheritance w/o having estate taxes taken out, as would occur in other years?

i meant it in the sense that this enables the inter-generational transfer of wealth in this country

[underpants]

44. There is no way his money wasn't hidden from the estate tax

it was never "in danger"

at least anyone with half a brain and enough wealth to worry about it would have an estate planner and they would never get taxed

[Initech]

55. The rich get richer and we get fucked. Thanks reagonomics!

[WinkyDink]

58. Thank goodness those tax dodgers are patriots!

[kath]

61. Absofuckinlutely disgusting that Dems couldn't get their fokkin' act together to close that loophole

Worthless sumbitches.

[inna]

71. And... insult to injury is that this obscenity actually goes into effect

under the Democratic administration and Democratic Congress.

Maddening. Indefensible. Welfare for the filthy rich at its extreme worst and tens of billion in lost revenue when the working people are hurting and the social safety net is being distroyed.

How the American people put up with this crap is simply beyond me.

[joe black]

72. As I said yesterday...

Before some asshole deleted my thread, I hope the animals are carring the guns and hunting this asshole in hell!

[Karmadillo]

74. Just wait until the Democrats take back the White House & the Congress. Then this crap

will come to a speedy end.

[warren pease]

75. One can only hope for an epidemic of suspicious deaths among the moneyed elite...

... as their idiot scions move quickly to avoid paying "the death tax."

wp

[Solomon]

83. LOL I thought about that too. The superrich need to be

paranoid about their own family this year.

[mhatrw]

76. Is there any question who is in charge of our government right now?

We live in an oligarchy.

[Warren DeMontague]

77. You know what they say...

timing is everything. :shrug: