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Facebook's IPO Debacle, Day 3: Un-Friended and Dis-Liked on Wall…In testimony to congress, Warren Buffett expressed his opinion that the inheritance taxes were meant to recirculate accumulated great wealth and that repealing them would support an undesirable "aristocratic dynasty of wealth."
Republican arguments in favor of repealing the so called "death tax," permanently, mention two concepts they think are unfair. One is that the money has already been taxed and the other is that to satisfy inheritance tax requirements, heirs are forced to break up family businesses or farms and sell assets at what might not be an appropriate time or fair value.
The idea that our earnings are taxed more than one time is pretty weak to me. First of all, we are not taxing the one that earned it (they're dead), we're taxing the heirs who did not earn it. Besides, most money is taxed every time it changes hands. It is taxed when earned, when you buy or sell something, when you win the lottery, gamble or make money on a game show, receive a large gift and more. Using gift taxes as the most similar -- are not the heirs receiving a large gift?
The idea that business or property has to be sold to pay the taxes is also fallacious. Often some heirs want the cash and not the property or in the case of multiple heirs some want to be bought out and some want to remain active in the enterprise. This is actually very common.
I agree with Buffett that permanently repealing the estate tax is a mistake. The wealthy already receive the majority of tax breaks. In 2011 when the current law is set to expire heirs will still receive up to one million dollars tax free. In addition through various tax planning methods involving foundations, gifts, and life insurance programs plenty of loopholes still exist.
Compromise discussions on both sides of the debate are ongoing. They are considering things like freezing the exemption rate at $3.5 billion and capping the tax rate at 35 percent. They must be kidding, right? I'm all for compromise but . . . raise the exemption rate from $1 million to $3.5 billion -- what 'family' farms are they talking about?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.
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Reader Comments (Page 2 of 2)
11-15-2007 @ 6:30PM
John said...
My dad thinks I'm stupid, but he apparently has never thought I was stupid enough to hit me up to pay his income taxes for him.
I've never paid a dime in taxes on the money I'll inherit.
11-15-2007 @ 7:17PM
Nilo said...
"I've never paid a dime in taxes on the money I'll inherit."
I don't think you're stupid. How did you manage to not pay taxes on money you haven't seen yet?
11-15-2007 @ 8:03PM
Sam said...
Seriously, do you really think ultra-rich people (like the Kennedys, Hiltons, Trumps, etc) pay 55% estate taxes? I don't think so. They can afford the best tax attorneys and advisers to avoid that while middle class and small business owners pay more. I live in LA and typical middle class house is close to $1 million and a small business can easily go for $2 million. Read this book, gives you some insight on how rich people minimize estate taxes:
http://www.amazon.com/Own-Your-Corporation-Companies-Everyone/dp/0446678619/ref=sr_1_2?ie=UTF8&s=books&qid=1195174397&sr=8-2
11-15-2007 @ 9:25PM
Nilo said...
Sam
Why do you think that the richest families are trying to kill the estate tax. There are no loopholes, there used to be (The Kennedys have billions overseas) but there aren't anymore.
11-15-2007 @ 9:55PM
Mr. noitall said...
I think our pal Warren is wrong on this issue. Don't we all pay too much in taxes already? Our government just shouldn't get any more of our money until they learn act responsibly with it.
If Warren REALLY believes what he is telling Congress then I would challenge him to start donating large parts of his fortune to the U.S Treasury. (Not his buddy Bill). Come on Mr. Buffet,
put your money where your mouth is. I don't think you will, Warren.
11-16-2007 @ 6:51AM
African guy in Kenya said...
Kenya is the place to be if you have some money. A 10oz bottle of Coke costs $0.24, you can get a haircut for $1, there's no capital gains tax, self-employed people with sales of not more than $75,757.58 per annum pay a sales tax of only 3% and no income taxes, and most importantly, there are no death taxes. I'm self-employed (I export IT services to the United States over the Internet from my bedroom) and since I have no COGS (cost of goods sold), my sales tax rate is the equivalent of a 3% income tax rate. Our stockmarket has very many shilling billionaires (KSh 1bn = US$15.15m) which is lovely in a country with no capital gains tax. Nairobi weather isn't humid and has average monthly highs of 71-80 and average monthly lows of 48-56. Our people are laid back and friendly unlike in the West where they're in one big hurry trying to hustle for money to finance the outrageous cost of living and unfair taxes.
11-28-2007 @ 3:50PM
DocWho said...
The many must struggle and labor so the few can live well ! Give me a break - 5,000,000 @ a meager 5 % tax free return provides 250,000 tax free dollars a year - mot enough to live on ??????