Report: Max Baucus wants to preserve estate-tax cut

 

Senate Finance Committee Chair Max Baucus wants to protect an estate tax reduction from any deal averting the fiscal cliff, according to his hometown newspaper.

Baucus told the Great Falls Tribune in an interview Sunday that he wants to keep the Bush-era rate for estate taxes in order to protect ranchers and farmers who pass their properties on to their children.

 

“…Baucus is working to preserve a reduction in estate taxes that exempts the first $5 million of an estate’s value for individuals and taxes the remainder at 35 percent,” the paper wrote, but didn’t include direct quotes from Baucus on the topic.

“Couples can combine their exemptions to total $10 million. They also can give away an estate and face similarly lower gift taxes. Those tax cuts, which help farmers and ranchers pass their agriculture assets on to their children, expire at the end of 2012. Without action by Congress, only the first $1 million of an estate will be exempt from taxes, and everything over that will be taxed at 55 percent.”

The Senator also told the paper he wanted to maintain a wind production tax credit, which has helped create almost 2,000 jobs in his state.

 

This strikes close to home for me. My wife's grandfather is close to dying and has a ton of land in Iowa. As things are setup now, if he does and "the fiscal cliff" occurs, his children will be liable for a crap load of taxes that will most likely require them to sell off a lot of land just to cover it. This is not what he wants for his children. The land is supposed to be passed on as whole to his kids.

Wealthy people would like to pass on generational wealth without taxation. Whether it's in the form of land or cash or stockholdings doesn't matter.

Report: Max Baucus wants to preserve estate-tax cut

 

 

 

This strikes close to home for me. My wife's grandfather is close to dying and has a ton of land in Iowa. As things are setup now, if he does and "the fiscal cliff" occurs, his children will be liable for a crap load of taxes that will most likely require them to sell off a lot of land just to cover it. This is not what he wants for his children. The land is supposed to be passed on as whole to his kids.

 

They need to pay their fair share

They need to pay their fair share

 

Seriously. What do farmers do for us anyway?

If the land is sold to pay taxes, clearly it will go fallow for generations.

 

Or the new owners will lease the land to farmers. Hard to know.

Wealthy people would like to pass on generational wealth without taxation. Whether it's in the form of land or cash or stockholdings doesn't matter.

 

couldnt agree more. No offense to the prior poster, but just because someone makes their wealth in farming, over investments, business, real estate, etc, doesnt mean that they should have special rules about inheritance.

 

 

couldnt agree more. No offense to the prior poster, but just because someone makes their wealth in farming, over investments, business, real estate, etc, doesnt mean that they should have special rules about inheritance.

Just to throw this in for discussion... there is a key difference between land holdings, and financial investment instruments: liquidity. If you inheret some big farm or ranch, and suddenly owe a large tax bill on it... how do you pay for that? You can sell the land itself, but that defeats the purpose of inheritance (in part). If you are given money, or stock, or bonds, etc., you can sell it in part to cover the taxes.

 

I realize that, on the other hand, the land also has value and is therefore a large income by device. Perhaps the solution here is, for illiquid assets, allow for a long-term payment schedule of taxes. You could put a tax lien of sorts on the property, like a tax mortgage or escrow type scenario, and allow for percentage payments over time. At least that way you won't prompt rapid sales that diminish the value of the relatively illiquid assets.

 

Just to throw this in for discussion... there is a key difference between land holdings, and financial investment instruments: liquidity. If you inheret some big farm or ranch, and suddenly owe a large tax bill on it... how do you pay for that? You can sell the land itself, but that defeats the purpose of inheritance (in part). If you are given money, or stock, or bonds, etc., you can sell it in part to cover the taxes.

 

I realize that, on the other hand, the land also has value and is therefore a large income by device. Perhaps the solution here is, for illiquid assets, allow for a long-term payment schedule of taxes. You could put a tax lien of sorts on the property, like a tax mortgage or escrow type scenario, and allow for percentage payments over time. At least that way you won't prompt rapid sales that diminish the value of the relatively illiquid assets.

 

While I hear your point, I imagine it would be easy to take out a loan for the taxes considering you have at least 1.5 million worth of property to back it up, I'm not sure what the proposal is. Because currently it is:

 

If an asset is left to a spouse or a (Federally recognized) charitable organization, the tax usually does not apply. For deaths occurring up to 2012, up to $5,000,000 can be passed from an individual upon his or her death without incurring federal estate tax.[2]

 

 

While I hear your point, I imagine it would be easy to take out a loan for the taxes considering you have at least 1.5 million worth of property to back it up, I'm not sure what the proposal is. Because currently it is:

 

If an asset is left to a spouse or a (Federally recognized) charitable organization, the tax usually does not apply. For deaths occurring up to 2012, up to $5,000,000 can be passed from an individual upon his or her death without incurring federal estate tax.[2]

As part of the austerity bomb, on January 1, current law as I've read it has that $5 million amount reducing back to $1 million.

I have always been uncomfortable with taxing any inheritance. For that matter, I don't like taxing the same money twice. I know that no one went broke paying taxes on profits, but I still find a certain unfairness after I have paid my income tax to then pay taxes on profits from the investments made with my post income tax dollars. I wish I had a better plan to propose.

Almost every dollar is taxed more than once.

 

I see inheritance as nothing more than another income source. It wasn't your money.

Almost every dollar is taxed more than once.

 

I see inheritance as nothing more than another income source. It wasn't your money.

 

Which is funny, because the whole point is to take it and give it to someone else, and then call it "fair".

Almost every dollar is taxed more than once.

 

I see inheritance as nothing more than another income source. It wasn't your money.

Do you apply this logic to spendthrift clauses in trusts?

 

EDIT: Legitimately curious, not trying to be a jerk.

Edited December 1, 201213 yr by farmteam

Do you apply this logic to spendthrift clauses in trusts?

 

EDIT: Legitimately curious, not trying to be a jerk.

 

legitimately don't know what this is!

Which is funny, because the whole point is to take it and give it to someone else, and then call it "fair".

 

idk about most government spending be direct transfers like that

idk about most government spending be direct transfers like that

 

The point still stands. It was a relatives who did earn it, paid taxes on it, and saved it so it could be passed down to the person of their choice. After all, they paid taxes on it already, probably more than once, so what they do with it, including handing it down to a child or relative, is their business, not yours and not the governments (so long as they're not doing anything illegal with it). As far as you and the government are concerned, you've already received your share of that money. And when the people who inherit it, start to spend it, it will surely get taxed again and again.

 

No, you and others obviously didn't receive direct payments, but you did benefit on it via the roads or services it helped build. Fostering a society that forces spending and discourages saving (in case you die) is absurd, especially when were talking about money that's already been taxed.

Edited December 2, 201213 yr by Y2HH

Actually, for the economy as a whole, encouraging spending of large inheritance sums rather than keepin them sequestered as assets almost certainly would e a good thing unless you're in an economy starved for investment capital, which we most certainly are not.

Yeah, let's remember about the level we're talking about here. Estate taxes hit very, very few estates. Preventing the accumulation of generational unearned wealth is going to be a net positive.

legitimately don't know what this is!

The gist is that they prevent a trust beneficiary's creditors from touching any of the money in the trust. So, let's say Bill Gates has a playboy son whose only income is from this billion dollar trust. When the playboy son racks up huge debt, the creditors are unable to touch any of the money in the trust, even though the son can still use it.

Actually, for the economy as a whole, encouraging spending of large inheritance sums rather than keepin them sequestered as assets almost certainly would e a good thing unless you're in an economy starved for investment capital, which we most certainly are not.

 

There is no need to encourage spending in a society built upon consumption. Look at the recent black Friday results. Recession going on? Check. 59.1 billion dollars spent over the 4 day weekend by American consumers despite recession gong on? Check again. Spending was up 13% from the prior year. People are still spending money they don't have...we don't need to encourage what's basically native to American culture, from the Government on down. And that's spending money.

One-day sales numbers don't really tell you much. Black Friday sales don't correlate all that strongly with the economy as a whole.

 

http://www.zerohedge.com/news/2012-11-28/b...-and-irrelevant

I have always been uncomfortable with taxing any inheritance. For that matter, I don't like taxing the same money twice. I know that no one went broke paying taxes on profits, but I still find a certain unfairness after I have paid my income tax to then pay taxes on profits from the investments made with my post income tax dollars. I wish I had a better plan to propose.

 

We aren't talking about a 25,000 inheritance from a dying relative, we are talking about receiving a 1,000,000 asset or more. (If that goes through, which likely will be higher). This isn't just to raise revenue, it was considered a fair tax early on to prevent the "family wealth" we see in Europe. Is it really so important that 5 generations of Vanderbilt not only get the best schools and connections there is to offer, but an untouched trust because of their great great grandfather? Yet these are the origins of this tax.

FWIW a few states do have inheritance taxes, e.g. Iowa. Inheritance taxes and estate taxes aren't the same thing.

 

 

One-day sales numbers don't really tell you much. Black Friday sales don't correlate all that strongly with the economy as a whole.

 

http://www.zerohedge.com/news/2012-11-28/b...-and-irrelevant

 

What it does show, is that people in a consumption based society spend money even during hard times, which they do. They don't need to be "feared" into spending money because if they die with too much the government will take it away.