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Mass

(27,315 posts) Tue Dec 11, 2012, 09:58 AM Dec 2012

Keepin’ It Real on the Estate Tax

http://jaredbernsteinblog.com/keepin-it-real-on-the-estate-tax/

The CBPP doc takes you through all the relevant arguments and counterarguments, but here are some of the most important factoids:

–the estate tax is very progressive: it currently hits the top 0.2% of estates and if it reverts back to the 2009 rules will hit 0.3%–that’s three out of a thousand estates. As my colleagues say, everybody dies, but only a tiny proportion of the richest estates pay any tax on their bequests.

Why?

–because it has large exemptions: currently the first $5 million of the estate’s value is exempt from the tax, hopefully going down to $3.5 million.

–though the top statutory rate is now 35%, because of the large exemption, the effective, or average rate is about 15%.

–bleeding heart cases hardly exist at all: “Only a handful of small, family-owned farms and businesses owe any estate tax at all, and virtually none would have to be liquidated to pay the tax. TPC estimates that only 40 small business and farm estates nationwide will owe any estate tax in 2012…these 40 estates will owe just 3.1 percent of the estate’s value in tax, on average.”

–the double taxation complaint is not valid on the richest estates: most of the value on estates greater than $10 million is from unrealized capital gains.

–most advanced economies have a similar tax: “Of the 34 members of the Organization for Economic Co-Operation and Development (OECD), 28 levied some form of estate tax, inheritance tax, or other wealth or wealth transfer tax in 2009 (the latest year for which full data are available).”

6 replies

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Keepin’ It Real on the Estate Tax (Original Post) Mass Dec 2012 OP

Sorry, but this part... ag_dude Dec 2012 #1

Nobody supports going back to $1 million. dawg Dec 2012 #3

I tend to agree with what you said ag_dude Dec 2012 #4

it will destroy 25% of family and small farms brokechris Dec 2012 #6

Some more fact: ProSense Dec 2012 #2

Large regions of family farms gone through the roof since Clinton ag_dude Dec 2012 #5

ag_dude

(562 posts)

1. Sorry, but this part...

Reply to Mass (Original post)

Tue Dec 11, 2012, 09:59 PM

Dec 2012

bleeding heart cases hardly exist at all: “Only a handful of small, family-owned farms and businesses owe any estate tax at all, and virtually none would have to be liquidated to pay the tax. TPC estimates that only 40 small business and farm estates nationwide will owe any estate tax in 2012…these 40 estates will owe just 3.1 percent of the estate’s value in tax, on average.”

...is absolute bull shit. The cap is 5,100,000 in 2012 and will go to 1,000,000 in 2013.

I know this isn’t popular here but the $1-million estate tax exemption does fuck a good portion of family farms pretty hard. We’re not Paris freaking Hilton. We ranch 400 acres, hold honest jobs in town, and rarely have five figures in the bank.

What we do have is family land that was bought over a century ago.

Land that’s just close enough to the Eagle Ford shale boom that the price have quadrupled in just the past half-decade but far enough away that we’re not one of the new mineral right tycoons you year of.

If my parents were to die in January we’d be responsible for paying the government somewhere in the range of 20-30 times what my great grandfather originally paid for the land in estate taxes. In reality, all that would mean is we’d sell the century old ranch.

dawg

(10,624 posts)

3. Nobody supports going back to $1 million.

Reply to ag_dude (Reply #1)

Tue Dec 11, 2012, 10:27 PM

Dec 2012

Well, I'm sure someone on here does, but most Dem proposals I have seen set the exemption at $3.5 million, plus they allow spouses to carryover unused exemptions, so a couple could effectively exempt $7 million. (Even more if they utilize annual gifting.)

ag_dude

(562 posts)

4. I tend to agree with what you said

Reply to dawg (Reply #3)

Wed Dec 12, 2012, 09:25 AM

Dec 2012

...but as of now, it's set to go back to $1-million.

Yesterday was the first time my father ever even thought of incorporating or putting the farm in trust. That's actually what caused me to look up any discussion on the subject.

People are oddly quiet regarding it.

brokechris

(192 posts)

6. it will destroy 25% of family and small farms

Reply to ag_dude (Reply #1)

Wed Dec 12, 2012, 09:55 AM

Dec 2012

FANTASTIC if we want to get all of our food from Monsanto in a generation.

ProSense

(116,464 posts)

2. Some more fact:

Reply to Mass (Original post)

Tue Dec 11, 2012, 10:12 PM

Dec 2012

The Senate’s partial extension of the Bush tax cuts Wednesday night did not include an extension of Bush’s cuts to the estate tax, passed in 2001. The Bush bill gradually phased out the tax such that it was fully eliminated in 2010. The extension of the cuts, passed as part of a deal between Obama and Senate Republicans in December 2010, imposed a top rate of 35 percent while exempting estates under $5 million...If no extension is passed, rates will return to where they were during the Clinton administration, with a 55 percent top tax and $1 million exemption. Republicans allege that would strike “millions of family farms and small businesses.”

They’re wrong. Even under the Clinton administration rates, the estate tax hit a tiny fraction of Americans, hovering around 2-3 percent of all deaths according to this paper (pdf) by IRS researchers Darien B. Jacobson, Brian G. Raub, and Barry W. Johnson:

<...>

The top tax bracket of 55 percent only affect estate assets above $3 million, so the vast majority of estate tax filers — themselves a tiny fraction of families whose relatives died — were not affected by it, and many more paid the much lower 18 percent starting rate. Indeed, there were only 4,796 filers with estates above $2.5 million.

So if you hear politicians worrying about the 55 percent rate, remember that when it was last in place, fewer than 5,000 people were affected every year. It’s simply not that big a part of the tax code, and the idea that “millions” of families and small businesses would be affected by a return to Clinton rates is just plain wrong.

http://www.washingtonpost.com/blogs/wonkblog/wp/2012/07/26/no-one-pays-the-estate-tax/

ag_dude

(562 posts)

5. Large regions of family farms gone through the roof since Clinton

Reply to ProSense (Reply #2)

Wed Dec 12, 2012, 09:28 AM

Dec 2012

We would have been well below it at that time, the land being worth $1,200/acre or so.

Now, with land around here going for up to $10,000/acre due to reasons that have nothing to do with the productive ability of the land, that's just not the case any more.

Switching to the Clinton rates would cause our specific ranch to pay 20+ times what was originally paid for the land in taxes just to keep it if it happened under the Clinton rates.

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