"Death tax" loopholes are killing our economy.
By Thom Hartmann A...
The super rich have skipped out on paying $100 billion dollars in estate taxes since 2000. And, that incredible number doesn't even factor in the billions that they saved using loopholes like capital gains, or by stashing their money in tax havens around the world. A new report from Bloomberg News says that special tax loopholes used primarily by the super rich have made the estate tax system “essentially voluntary” for those at the top.
By funneling money into and out of various trusts and other legal structures, the wealthy have managed to eliminate taxes on money they pass down to their heirs, and even make a tax-free profit while doing so. Basically, billionaires like Shelly Adelson and the Walton family set up special trust funds, like the Walton-created “grantor-retained annuity trust” or GRAT, in which they stash millions of dollars worth of stock. Once those GRATs expire – typically after two years – the billionaires cash out the stock, keep their original investment, along with a profit, and pass on the balance to their heirs. All the while, avoiding taxes on the whole scheme.
By using these completely legal, but highly unethical, tactics, the super wealthy have stashed away $100 billion in a little over a decade. That amount is enough to pay for every child in our nation to go to preschool for ten years, and it could wipe out the entire first round of sequester cuts. One hundred billion could have provided a substantial benefit to our nation, and it's only one of many tax loopholes that the super rich use to get out of paying their fair share.
Republicans and the super rich like to call estate taxes “death taxes,” but, as this new report shows, trust-fund schemes like this that are actually killing investment in our nation. If billionaires want to do business in our great nation, it's about time that they start contributing to the commons that make it possible.
Comments
#2
"chuckle", I wouldn't feel too guilty if I were you. Just think how much of that tax money goes to the Pentagon and to corporate subsidies, for example... and the salaries, perks, benefits ad nauseam those deadbeats in Congress receive on a regular basis, at our expense! And how much are we picking up the slack for those tax breaks enjoyed by the richest Americans?! I'm only scratching the surface here, but you get my point. The government is not a wise investor and squanders our tax money on a myriad of unworthy causes. I'm glad you've been spared that burden as the heir to your mother's estate. I encourage you to ditch the guilt and just be thankful for your good fortune. You deserve those assets more than the bloody Pentagon. - Aliceinwonderland
#3
Quote Aliceinwonderland:The government is not a wise investor and squanders our tax money on a myriad of unworthy causes. I'm glad you've been spared that burden as the heir to your mother's estate. I encourage you to ditch the guilt and just be thankful for your good fortune. You deserve those assets more than the bloody Pentagon. - Aliceinwonderland
chuckle8 ~ I couldn't agree more with Aliceinwonderland. Sacrificing your family legacy isn't going to help anyone; or, encourage, force, or otherwise cause the wealthiest people in this nation to cough up any more than they can get away with. The more you have the more you can afford to work mischief. Also, the more you have the more you crave even more. Take your Mother's legacy and grow with it without guilt. It belongs to you hook, line, and sinker. Don't allow fluctuating fiscal values to cloud your judgement. Your mother paid the fair market value for the duplex when she bought it. Therefore, you are entitled to the fair market value of the property when you sell it. Your mother already paid adequate taxes on that cost when she earned the money to buy the property in the first place. Are you trying to tell me that you can buy today the same things with $50,000 that you could buy when your mother bought the property. No! I don't think so. It is not that the property has appreciated in value. In fact, the property has depreciated in value because it is older, out of date, and in more need of repair. It is the value of money itself that has depreciated. That is not your fault. Don't let the the guilt of living in a Capitalistic society and the phony numbers of the Federal Reserve fool you. That house belongs to you and your family free and clear. Besides, no amount of money or gold will ever be able to allow you to replace a cherished family home that already is rightfully yours. Hold tight to what you got.
#4
Apropos to #55 ~ Oh wait! Where's was my head? Property tax. You just inherited an estate. Unless you live in a state without property taxes I imagine that duplex got reassessed when it changed ownership and now you owe taxes based on $200K instead of $50K. That could be enough to bump that annual tax bill from a comfortable $500/yr to a WTF $2.8K/year. If so, you are now shelling out over $200/mo. just in property tax, as long as you own the property. Let's see. Assuming you make all your payments in full and on time without any late fees or penalties. Maintain your property well and not receive any fines or leins. Don't get dinged for a leaking sewer or other utility problem on your property. And don't get sued by anyone. Compound that annually over the next 20 years and we have a total bill of $56,000. That is, over the next 20 years you will pay more money in taxes than the house was originally purchased for. Still feel like your getting away with something?? Of course if you live in a state without property taxes I understand. Imagine how the average person living in California feels when you suggest adding more onto that? Enjoy your house without guilt.
Here in California, I've known people who had to sell their family homes simply because they couldn't afford to continue paying the property tax. I also know of many cases where the city has serendipitously sold someone's home right out from under them in auction just to pay their back property taxes; and, then swiftly kicked the same rightful owner(s) out into the street. Does that sound fair? Income tax, sales tax, property tax, and in addition a death tax. The only people who can easily afford all these taxes are rich people. The poor are the ones who really get screwed.
#5
D.A.M. -- All the taxes of which you speak should be continually reviewed and adjusted, However, for wealth above $12M (the 1% point), I think the death tax should be severe. Autocracy needs generational transfer of wealth to survive.
#6
Quote chuckle8:However, for wealth above $12M (the 1% point), I think the death tax should be severe.
chuckle8 ~ That I cannot argue with.
#7
Right on, guys! Peace, love an' grooviness... and stick it to the rich! - AIW
#8
I don't think of it as sticking it to the rich, I think of it as saving the poor, the middle class and democracy from the rich.
#9
Point well taken, "chuck". I was just being my ornery old self...
#10
Funny. Isn't there a bigger question here? Let's say you started from scratch and were a dirt poor person who grew up with nothing. Then with hard work, lots of risks, and innovation over 50 years earned a billion dollars and paid every single drop of taxes owed on that earned billion dollars… why on earth should you ever have to pay more tax on that a money just because you die? Most other countries don't do this. Really. Why is that fair? Why shouldn't it ALL go to your heirs or whoever you want. Why is there a double tax on almost half of your life's earnings? What kind of people make up laws like this?
- Tom from Life Ant
#11
Mr. Rockford, I respectfully disagree. The dead person isn't the one paying the taxes; it's the heirs. And since this law applies only to those inheriting multi-millions or more, why should you even care? The less tax the ultra-rich pay, the more we end up paying, and frankly I am tired of it. They can afford it; I can't. So they can just pay up and shut up. We've much more pressing issues to deal with than this. - AIW
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DAM -- My problem is that you said that by and large most inheritances have already been taxed. If my example applies to most inheritances (I think it applies to a lot of them) then most inheritances have not already been taxed.
My mother had a living trust. I have no problem except the guilt of not providing my government with the resources it needs. I could help the government on my own, but that would even provide less pressure on raising taxes on the rich.