Comments on: How Pete Peterson is driving the fiscal consensus http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: TFF http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-2/#comment-38252 Mon, 23 Apr 2012 23:25:06 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38252 “Bottom line: we had a working tax system before George W. Bush took power. Go back to that, and then we can talk reform.”

I’m fine with that bottom line… Unfortunately neither candidate for President supports anything like that, nor does anybody in Congress. They’ve already messed up the tax code royally, and are working feverishly to mess it up even worse for next year.

At what point does a rollback no longer suffice? At what point is a complete overhaul preferable?

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By: Dollared http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-2/#comment-38250 Mon, 23 Apr 2012 21:09:16 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38250 TFF, no family farm has ever been lost to the estate tax. None. Ever. For over 10 years, Bill Gates Sr. has offered $25k to anyone who can prove that a farm was sold to pay a family’s inheritance tax and the money has never been collected.

Bottom line: we had a working tax system before George W. Bush took power. Go back to that, and then we can talk reform. And yes, rich people have to pay more. Why? Because they make a bigger margin for themselves across all of society’s activities. And because labor’s share of gross profits is lower than it has been since the late 1920’s.

So the rich are getting more than they ever have, and should pay a bigger share of the costs.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38247 Mon, 23 Apr 2012 17:58:13 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38247 MrFox, I don’t want a system that’s easy to game, I’m just saying that relying on the accuracy and independence of appraisers will not prevent that from happening. But it sounds like you’re not that worried about this happening, or if it does, you don’t care that much? I realize the big money is in the ultra-wealthy, but if you’re going to only care about them, then you’ll have to align yourself with the OWS group, which I just don’t see happening.

I’m with TFF on questioning that $200B revenue. With a 100% tax on the top 100, that implies an average $2B estate for each of the top deaths. There aren’t that many billionaires in the U.S. to allow for 100 to die each year. And that would put a bounty on their heads, as militant socialists would be seeing their deaths as a way to re-distribute wealth. I know the idea of violent revolution doesn’t seem to both you, but can’t we avoid that and just tax them while they are in parasite mode?

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By: TFF http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38246 Mon, 23 Apr 2012 17:49:58 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38246 Apparently the present system ($1M exemption and rates up to 55%) is expected to presently generate about $60B/year. I’m not at all clear how you expect your LOOSENED proposal to more than triple revenues. When you shift from “$1M exemption” to “$1M exemption per direct descendant”, you are multiplying the exemption many-fold. Two children, four grandchildren, and a couple great-grandkids before you finally kick the bucket. Times two, for yourself and your spouse.

Moreover, the proposed 99% marginal tax rate (why not 100%?) will drive revenues to zero. People will do ANYTHING with their money before they give it all to the government. You are so far on the wrong side of the curve, it is Laffable!

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By: TFF http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38245 Mon, 23 Apr 2012 17:42:06 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38245 “This tax alone stands to generate over $200Bil per year for the Treasury.”

I’m seriously skeptical. Do you have support for this number? What are current estate tax receipts? If your proposal relies on a 100% marginal tax rate, then I’m pretty sure the wealthy will find ways to game it — such as off-shoring their wealth.

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By: MrRFox http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38244 Mon, 23 Apr 2012 17:32:41 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38244 KenG – If you’re looking to create a system that’s easy to game, then you and I are working at cross-purposes.

There actually aren’t that many of these multi-million dollar family estates to cope with. The big money is in the top 100 deaths (in the future possibly – sales) each year – where billions can be claimed. It’s a small enough number that IRS can watch them closely while giving more routine scrutiny to estates under $10Mil.

This tax alone stands to generate over $200Bil per year for the Treasury. Even if IRS spent $1Bil a year on enforcement of this program alone, the payoff is still huge. We need the money – bad.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38243 Mon, 23 Apr 2012 17:13:06 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38243 MrFox, we’ve seen the handiwork of “professional” appraisers in the last few years (they play an important role in all real estate bubbles), and if we’re given the option of a system that can be gamed by individuals without 3rd parties, and one that requires 3rd parties, I’ll take the former. It’s more efficient at exploiting loopholes.

Yes, the $1M home would not create an estate tax liability, but I was making the point that the exemption needs to be indexed to living costs. The numbers we are talking about apply today, but maybe not in 5 years, or ten. We need an adaptive system that does not leave everyone at the mercy of politicians in need of financing from special interests (like the AMT has become).

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By: MrRFox http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38241 Mon, 23 Apr 2012 17:05:50 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38241 KenG – since it’s not an “arm’s-length” transaction, but one between “related parties”, the transaction would have to be identified as such on the sellers’ return, and the “fairness” of the reported price would have to be documented by a credible, professional appraisal, and very likely there would be an audit of the sellers in the year of sale.

No doubt, people will try to find ways to beat the system – they always make the effort no matter what you do. The IRS just has to keep up with them and close gaps as they are uncovered. That’s what they do now.

OBTW: If you inherit a $1Mil home you wouldn’t have any estate tax, absent some prior gifts or the like.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38240 Mon, 23 Apr 2012 16:50:33 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38240 MrFox, what if Mom and Dad decide to sell the business to their kids at a huge discount? Who is going to value the business for them (maybe the people who marked AIG’s illiquid holdings to market?)? What if their business is worth $5M, but they “sell” it to the kids for $1M (avoiding not just estate and gift taxes, but most of the capital gains exposure), how will the IRS know? And who knows if they will do it right, in either direction? Do you trust them? I didn’t think so.

And I think I could guess where the government being the secured creditor would lead in this political climate – they would have to sell the mortgage to a company like BankofAmerica., or Citi, at a further discount.

TFF, If you inherit a $1M home and have to pay 55% tax, you will need a $550K mortgage. Not every heir will qualify for that mortgage.

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By: MrRFox http://blogs.reuters.com/felix-salmon/2012/04/20/how-pete-peterson-is-driving-the-fiscal-consensus/comment-page-1/#comment-38239 Mon, 23 Apr 2012 16:36:07 +0000 http://blogs.reuters.com/felix-salmon/?p=13373#comment-38239 I’m having a hard time seeing any need or ethical justification for making exceptions for family farms or other businesses. The methodology is easy enough –

During life Mom and Dad sell the business to the next generation, providing seller financing and taking a mortgage or other form of security. (Cap Gn tax will be payable for this transaction.) That, coupled with annual gifts below the limit can effectively pass the business on without the need of bank financing. At death, the government “inherits” the mortgage and becomes the secured creditor until it’s paid.

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