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Free Minds & Free Markets

Simpler Tax Simplification

A tax law so simple everyone understands it, and that will keep as much money as possible out of government's hands, is the best formula for a growing economy.

As you read this, President Trump's tax plan is being debated. Congress will change it. Where this ends, no one knows.

I want two things:

1. Simplification.
2. More money in private hands.

Trump offers some of both.

His cuts would leave more money in private hands, where it will be used more efficiently. Politicians' spending decisions already put us $20 trillion in debt; they shouldn't be trusted with more money.

Cutting the corporate tax rate isn't popular (rich people!), but a cut is needed. Economic growth is really important. It's stifled when America's taxes are higher than other nations'.

Trump also offers some simplification. Good. The more complex the rules, the more time we waste hiring accountants and the more time lawyers spend fighting over who qualifies for what. Trump would double the personal exemption (fewer people will itemize) and kill the "death tax," deductions for local taxes and the alternative minimum tax.

It's a start. But that's not nearly good enough. Heck, the "simplification" bill itself is 400 pages long.

Americans spend about 7 billion hours trying to comply with today's tax rules. That's the equivalent of 3.7 million people working 40-hour weeks. What a waste.

I spend hours filling out forms and forwarding paperwork to an accountant. I distort my spending and investments because of tax rules. What a waste.

America's first 1040 form was four pages long. Today's code is more than 3.7 million words. No one understands it.

Even the tax specialists get things wrong.

Yet parts of Trump's plan make taxes more complex: He increases the child tax credit and creates a new credit for nonchild dependents. It may be fair to help people who care for helpless adults, but each new deduction creates complexity and parasites who feed off it. As usual, some rich people will game that credit, and some poor people will never figure it out.

Far better to lower everyone's taxes to, say, 15 percent, by getting rid of all deductions.

Then we could focus on creating wealth instead of filling out forms.

But good luck with that, President Trump.

Today's tax deductions are the main reason we've got a huge culture of lobbyists.

One of the most unfair tax breaks is the mortgage interest deduction. It encourages rich people to buy more homes than we need. It exacerbates housing bubbles.

Photo Credit: 401(K) 2013

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  • loveconstitution1789||

    Tax simplification:

    Big spending politicians hardest hit!

  • jogibew||

    I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

    This is what I do... www.netcash10.com

  • Deven||

    I still don't understand why we can't cut the budget 1% per year, across the board. Hell, even .5% per year and it wouldn't take long to balance, especially with a growing economy. Am I missing something with that?

  • Last of the Shitlords||

    The massive pork that all these assholes are tied into. If you cut into one asshole's pork, he threatens one of the others. So no one wants to upset the apple cart.

    "Nothing left to cut"

  • Brandybuck||

    We're cut right down to the bone! We're chewing on gristle as it is!

  • Johnimo||

    As if ....

  • Overt||

    Back in 2002 there was a plan floating from AEI or some other think tank just to freeze the budget. Not cut it, just freeze it. Based on our economic growth they were saying that we would close the deficit in a matter of years. Since then we have had a hand full of wars, plus the financial melt down. Depending on where you look, our spending has increased up to 21% of GDP, while revenues have stayed at around 18% of GDP. Revenues tanked during the financial crisis.

    If we had just frozen our budget, we probably wouldn't have closed the deficit yet, but we would be a lot closer today than ever. Of course, our budgeting process is silly and designed to turn language like "budget freeze" into "budget cut", so even that modest action would have been pilloried from both sides.

  • sarcasmic||

    Not to mention baseline budgeting.

  • Headache||

    Remember, government spending is included in GDP calculations.

  • Hank Phillips||

    According to President Calvin Coolidge, the Laffer Curve effect was large and immediate in 1924, when the Federal Budget was less than 5% the size of the economy. If we can make it to that part of the curve, smooth sailing.

  • Lester224||

    But, but, but you forgot about the urgent need to increase defense spending by at least 10% because you know terrorism and shit.

  • Tyler R||

    I'm most definitely a libertarian on most issues, but why does it make any sense to eliminate the estate tax? I'm all for reducing taxes on wages and earned income, but to the extent we are going to tax people, is there any better place than when someone in inheriting millions of dollars? The current estate tax only applies to estates over $5.5 million. Beyond the 'taxes are theft' type of mentality, is there any logic to getting rid of this tax, rather than just pandering to the richest people in our society?

  • Murray Rothtard||

    it's not about the person getting the inheritance and whether or not they deserve it.

    it's about the person who earned that money over their life (and paid taxes on all of it already) getting to choose what to do with their money.

    but i guess, "fuck that guy's wishes, he's dead now. let's steal his shit he won't notice," is some sort of argument too. just not a very libertarian one.

  • Tyler R||

    It is about the person inheriting the estate, though. That's the person who is the beneficiary of the estate. It's unearned income that's being passed down to them. I know this is basically a Bernie Sanders type of argument, but I think there is some truth to it. Where I'm from families who own tons of farm land pass it down from generation to generation, tax free. The rich families are rich not because of hard work, but because 150 years ago their great-great-great grandpa purchased up all the farm land.

    If we could, in theory, tax estates more and tax earned income less, would that be a move away from libertarian principles?

  • NotAnotherSkippy||

    So could that person be allowed to give their money to their heirs BEFORE they die? I'm guessing your answer is yes. Please explain the difference aside from the envy and greed aspect.

  • Tyler R||

    Hmmm, interesting. I would say no. When property (or income) is passed from one person to the next I would make the argument it's fair game to be taxed, if it's a significant amount. My whole theory here is based on the idea I'd rather people pay more tax on income they didn't earn and reduce the burden on people who are working for a wage.

  • NotAnotherSkippy||

    So you think all gifts should be taxed? Presumably that includes in kind transfers so: cars, college tuition, all presents, vacations, private education...

    Sure you wanna go there?

    And if you want to untax income then go for a wholesale replacement with a national sales tax. That has the benefit of taxing the inheritors of wealth when they spend it.

  • Tyler R||

    Yes, I think gifts should be taxed. What's so awful about that? You'd rather wages be taxed than gifts? I'm accepting the fact government is going to spend way too much of our money, and proposing a less-awful way to pay for some of it.

    I think when small-government people hear someone saying they want to increase a tax they automatically want to argue it's a bad thing. But I'm not saying I want to increase taxes - I'm saying taxing inheritance makes a lot more sense than taxing wages.

  • NotAnotherSkippy||

    The inheritance has already been taxed. It's already after tax earnings (step up adjustments aside). The fact is that you don't expect any inheritance windfall and think this is a great way to pass off your bill to someone else.

    Again, if you want to favor income then advocate for no income tax and replace with a national sales tax. That achieves your goal without the greed and envy.

  • Johnimo||

    The inheritors of capital, in general, put it to much better use -- by investing it -- than the government that confiscates it will. The latter will attempt to "help" their preferred constituents (voters) by giving them confiscated money, thereby showing how much they care. The net result: there will be less money invested in factories, new jobs, training, manufacturing equipment and all the other factors of production which increase everyone's wealth.

  • loveconstitution1789||

    Single taxation. Double taxation. What's the difference, ammirite?

  • Last of the Shitlords||

    Octuple-taxation!

  • Murray Rothtard||

    you are getting too caught up in jealousy that some people are born rich. i get it. i would have liked to be born richer, but i wasn't.

    i have a kid though, and i want to work hard and leave him some of MY wealth. this is MY decision about MY money. as a rampant individualist, your stories about farm land passing through the generations in society is pretty irrelevant.

    hard work isn't the only way to get wealthy. luck works too. and no one should have to justify the source of their wealth to you and your sensibilities as long as it was obtained consensually.

    conversely, as you want to confiscate said wealth, the burden is on you to justify it with better reasons than envy.

  • Tyler R||

    Ok.. I want to incentivize work. And I think taxing income that was not earned, if it means taxing labor less, is a good thing. And the whole "you're not inheriting money" thing is nonsense. If I was inheriting money I would feel the exact same way. I know this because I have had investment earnings, and I think it's absolutely crazy that I pay a lower rate on the income I made from investments than someone who worked for the same amount of money pays. And investments still get taxed at 15%, and I risked my own money. While inheritance gets taxed at zero, and there is no risk by the beneficiary.

  • NotAnotherSkippy||

    Yeah, about that whole libertarian thing. You're not really getting it.

  • Tyler R||

    That's too bad, because I'm sure not a republican or democrat. And I agree with libertarians about 95% of the time.

    And switching to a more pragmatic argument, you do know the majority of people who vote libertarian now are low-income, right? So fighting the inheritance tax seems nuts to me. I know it's the party of principles, and I respect that people are more consumed with their principles than trying to win over new voters, but if the party could at least tolerate people who see these issues differently, I swear we'd get 35% of the vote.

  • NotAnotherSkippy||

    Ah, libertarian populism. So sweet. If we just bring in a little more class envy and dump the whole individualism thing, that's a total winner. See we'll be totally different from the left because we will believe in the labor theory of value properly taxing bourgeois entitlement so we can free thw working man from his burdens.

    I note that you still haven't addressed my proposal for a national sales tax. Wonder why...

  • Tyler R||

    I think the national sales tax would destroy so much commerce. If groceries are tax-free, and restaurants have to charge nearly a 40% sales tax (federal plus state), the industry will disappear. Or would the 30% national tax apply to everything, including groceries? If so, that would actually be more concerning.

  • NotAnotherSkippy||

    Yes the 30% would apply to everything but you also wouldn't pay any other federal tax. And that's concerning why? Oh, because it's not progressive enough. But you're totally libertarian, you just don't think the rich pay their fair share.

    Incidentally you can make a national sales tax progressive and I'm fine with the fair tax proposal of untaxing up to the poverty level.

  • Tyler R||

    Ok, maybe I'd be good with the national sales tax. Actually, the fair tax with untaxing up to the poverty level sounds like a really solid idea. Maybe we found common ground, after all.

  • NotAnotherSkippy||

    I never moved.

  • Tyler R||

    Common ground in the fact that our beliefs overlap on a way we could move towards a better tax system. Congrats on never moving #inspiration

  • NotAnotherSkippy||

    No, you just became a little more #woke.

  • Tyler R||

    And to the "class envy", I don't think of it as class envy, I think it as working towards a better tax system. Like, we can't talk about why inheritance is untaxed without it being class envy? I'm not even arguing for a progressive tax, I'm inquiring as to why the richest people get so much tax free money, if it's inherited. That's automatically class envy, huh?

  • NotAnotherSkippy||

    Being resentful over someone else's gift isn't envy. Nope. Look, you are entitles to a cut of that.

    And again NATIONAL SALES TAX.

    Why do you keep avoiding that?

  • Tyler R||

    So if tomorrow we instituted a tax system where anyone who earned over $1million annually was exempt from all taxes, would it be considered "class envy" if I thought that was a bad system? You can't just say it's class envy because I happen to object to the exemption on inherited money, which mostly benefits wealthy people. I'm not saying rich people should pay a higher rate, I'm saying they shouldn't be exempt from paying.

  • NotAnotherSkippy||

    It. Was. Already. Taxed. Should we tax a spouse when they spend joint income in excess of what they earned? Why not?

    Actually you seem to be suffering from middle class taxpayer martyrdom. I guess it's understandable given that that is what both parties and the media endlessly parade about. Speaking as one who has gone from the lowest decile to the highest my advice to you is to study a LOT more. I would recommend some milton friedman. He even has a whole response specifically on inheritance.

  • Tyler R||

    So much wisdom... But I asked if it is automatically "class envy" to question the way we've collected taxes from the wealthy.

    The "it was already taxed" thing is not really true. The person inheriting the money never paid any tax. But putting a period in between each word does make it seem more valid- I'll give you that.

  • NotAnotherSkippy||

    Yes it was already taxed. Again, you just want to shift your burden to someone else who has more than you. Remind me what the definition of envy is.

  • Gilbert Martin||

    "You can't just say it's class envy because I happen to object to the exemption on inherited money, which mostly benefits wealthy"

    Envy is the only reason the inheritance tax was ever created in the first place.

  • Tyler R||

    That's too bad, because I'm sure not a republican or democrat. And I agree with libertarians about 95% of the time.

    And switching to a more pragmatic argument, you do know the majority of people who vote libertarian now are low-income, right? So fighting the inheritance tax seems nuts to me. I know it's the party of principles, and I respect that people are more consumed with their principles than trying to win over new voters, but if the party could at least tolerate people who see these issues differently, I swear we'd get 35% of the vote.

  • DesigNate||

    It doesn't lead to taxing labor less, so your whole premise is shit.

  • Tyler R||

    It could, though. The repubs are saying tax reform should be "revenue neutral", meaning we can't cut taxes without raising them elsewhere. This is one place I'd be ok with raising them. That's what I'm saying.

  • NotAnotherSkippy||

    Hiw noble of you.

  • Headache||

    You get taxed 15% on long term investments(1 year or longer). 35% on short term investments(less than 1 year).

    And your farmland analysis is just plain wrong.

  • Curt2004||

    Incentive work? If kids are inheriting a farm or business more than likely they have been busting their butts for little or no pay to help build that business. Who are you to say what they deserve? If they'r lazy slackers the business will wither and the money will go to others anyways.

  • The Laissez-Ferret||

    There are many reasons, but foremost is that it's unconstitutional. That "estate" is comprised of property and income that has already been taxed at least once. Also, sometimes the estate includes a family business that is worth over $5.5 million when calculated in total worth (equipment, building, supplies, etc.). A business worth over that much isn't always IBM, often times it's gas station or a couple restaurants. Many heirs have to sell the small business they've worked their whole lives building just to pay for the estate tax.

    And fuck the government because they didn't build that.

  • Tyler R||

    It's unconstitutional to tax property more than once? That's news to me.

    I know sometimes it forces people to sell of parts of the family business. To me that's not a horrible thing, honestly. If someone is inheriting $15 million of farm land, I personally don't think it's an awful thing if they have to sell off some of that land that their great-great-great grandpa purchased and has passed down. I can see how a zero estate tax fuels the argument that wealth really isn't about working hard of producing much of anything, it's more about if your family was able to purchase land and property 100 years ago.

    I genuinely am a libertarian. I'm not trying to troll here. You don't see my point, though?

  • DaveSs||

    You are buying into class warfare BS.

    Its not dissimilar to the arguments that home school and private school should be abolished because it.
    Because 'rich' people can afford to do it, their kids have an unfair advantage.

  • NotAnotherSkippy||

    Work, saving, and investment must be punished once they exceed an arbitrary value I decide.

    Sounds pretty libertarian to me.

  • Tyler R||

    That is the exact opposite of the argument I'm making. I'm saying work, saving, and investment should be "punished", or taxed, less. And to the extent the government taxes people (which I think we'd all agree should be way less) I'd prefer they tax people who didn't work, save or invest, but rather inherited.

    If someone earns $50K a year they literally pay half in taxes after payroll taxes, income taxes, sales taxes, and excise taxes. But if someone inherits $5 million it is tax free. That's my objection.

  • Murray Rothtard||

    you clearly don't think people should be free to give each other things without government approval and tribute.

    seems like a conversational impasse to me. i can't really wrap my head around that level of statism.

  • NotAnotherSkippy||

    Bingo.

  • loveconstitution1789||

    Its not tax free. That is your mistake.

    The value of that estate has already been subject to taxes based on federal and state tax law.

  • Tyler R||

    Federal tax law excludes the first $5.5 million of the value of an estate from taxes. I know some states like Cali do impose state taxes, but most don't.

  • NotAnotherSkippy||

    No that is exactly what you ARE saying. If i work and save my whole life and accumulate 10MM that I wish to pass along to my kid, your answer is: give me my (unearned) cut first.

    Would you deign to allow me to spend that money on a house without taxing me in the process? Yes? Then explain how the hell it's any different aside from the fact that you're jealous that my kid will get that cash and you won't. NEITHER of you earned it, so why the hell do you get a say in what I do with my money?

  • Tyler R||

    The person who earned the money can spend it however they want. I'm saying the person who inherits it should pay taxes. They're two separate individuals. I'm saying your kid should pay taxes.

    I'm not really jealous of your kid, in your scenario. I guess maybe I am, a little, since I didn't inherit anything, but I don't think that's the driving force behind why I think he should pay taxes. I think he should pay taxes because it makes more sense to me to tax people on unearned income than on wages - I want to incentivize people to work their way out of poverty, so the less we can tax wages the better.

    Again, I don't want to tax you - I want to tax the person you gift your money to.

  • NotAnotherSkippy||

    It was already fucking taxed when *I* earned it! What part of that don't you understand? A gift is no different than purchasing something. Here, I'll make it even easier for you: that 10MM is payment for services from my kid, specifically the going rate is 10MM per hug. See, it's a wage now, so you shouldn't tax it, right?

  • Tyler R||

    Dude... that is my point. If he actually worked for that $10MM he would pay a ton of taxes. But since it's inherited he pays none (if it was really $10M he would actually pay some, but less than $5 M he wouldn't).

    If your kid is really inheriting $10M he is lucky. Congrats on giving him a huge leg up in life. But he should have to pay taxes, in my opinion.

  • NotAnotherSkippy||

    God you're dense. *I* worked for that. Me. Myself. I. I. I. And you're saying that I cannot dispense with my earnings the way I see fit.

    Why don't we tax imputed rent? Why don't we tax the labor when you help a friend move? When a grandparent babysits? When your dad gives you your first car (mine was a piece of shit and that's about all I ever got from my dad). When a neighbor loans you a tool or cuts your yard? Oh, but all of those are less than the 5.5MM theshold so that makes it ok. Now about that whole arbitrary threshold thing...

    And here's anothet fun scenario for you: let's say my kid is disabled. Severely disabled. Still feeling good about taxing his unearned income? I mean *you* need a break, right?

  • NotAnotherSkippy||

    And for the record my kid ain't inheriting 10MM on my current trajectory.

  • Tyler R||

    It's not going to me, in my perfect world it's going to the government which will then lower the tax rate on wages (a fantasy, I know). If your kid is severely disabled, and is inheriting $10M, he is waaayyyyyy luckier than a kid who is disabled and inheriting zero. It's not really an emotional argument. I think it's a bad system to tax working people and exempt inherited wealth. I seriously don't think I'm making a crazy big government argument here. It's interesting to hear your thoughts, which seem to be very much driven by emotion.

  • NotAnotherSkippy||

    Says the guy who's jealous of inheritance.

  • Gilbert Martin||

    "I think he should pay taxes because it makes more sense to me to tax people on unearned income than on wages - I want to incentivize people to work their way out of poverty, so the less we can tax wages the better."

    Social and economic engineering isn't the business of government to begin with.

    The only fair way to charge out the cost of actual government services is a on a user fee basis - the same way it works in the private sector. Neither my income level or amount of wealth is a "service" that has been provided to me by the federal government.

  • NotAnotherSkippy||

    And someone making 50k a year doesn't even come CLOSE to paying 50% in taxes. Shit, their federal rate is unlikely to even be over 10% given personal deductions, exemptions and pretax withholdings.

  • loveconstitution1789||

    Gas tax, property tax, sales tax, penal tax, medical tax, TSA tax, vehicle tag tax, government blah blah blah tax, cell phone taxes, tv taxes, internet taxes, government fines and fees, etc.

    Yeah, its probably closer to 75% tax during a year unless you know how to avoid most of those taxes.

  • Tyler R||

    Yes, someone who makes $50 K absolutely does pay close to half in taxes. Between federal income tax, state income tax, payroll tax, sales tax, property tax, and excise tax, they really do. I'm not saying they're in a 50% federal tax bracket.

    You obviously don't understand the distinction I'm making between you paying taxes and the person inheriting the money. Your whole I paid taxes thing doesn't even make sense. I pay taxes, then I buy something, that person pays taxes. That's how our system works. You obviously think the relationship between parent/child is way different, but I really don't. I think people who come into a bunch of unearned money should have to pay taxes, even if it was earned by their parents.

  • loveconstitution1789||

    There is no 50% federal tax bracket.

  • Tyler R||

    I said I was NOT arguing they were in a 50% federal tax bracket. But if you're pointing out the top federal tax bracket is 39%, thanks. Very wise.

  • NotAnotherSkippy||

    Ok you're officially obtuse. See longtobefree calc below. Not even close to 50% with absolutely the worst deduction profile possible including no pretax witholdings.

    You obviously don't understand the distinction between allowing someone to spend their resources the way they see fit and stealing. You think you're entitled to a cut of someone else's labor. The effect of taxing my kid's inheritance is no different than applying an additional wealth tax on ME before the inheritance. But you are constitutionally incapable of understanding this (see your lack of understanding of lower capital gains rates above).

  • Longtobefree||

    Your assertion that someone making $50,000.00 a year pays taxes of $25,000 is a bit high.
    To give you every break; use a single person, all income is wages, no dependents, no deductions.
    Federal taxes:
    FICA = $3,000 (50,000 * 8 6.2%)
    Medicare = $7,250 (50,000 * 1.45%)
    Gross income = 50,000
    Standard deduction = $9,400
    Personal exemption = $4,050
    Taxable income = $36,550
    Tax = $5,023
    Total federal tax burden = $18,473
    State sales taxes average 7%, assuming rent, utilities, medical care and groceries are not taxed, making up 45% of spending, about $20,000 taxed $20,000 * .07 = $1,400
    State income taxes are a mess because you can choose one with a rate of zero, but they seem to hit around 5% near the median. Most use federal taxable income, so $36,550 * 0.05 = $1,828
    Total state burden = $3,228
    Total tax burden = $21,701

    $25,000 - $21,701 = $3,299 over (About 14%) And that is for the highest tax paying group, single with no dependents and no itemized deductions and no dependents.

    Anyway, after paying all those taxes, you think an individual should pay taxes on an inheritance of money already taxed one or more times (some of the inheritance could be dividends)?
    How is an inheritance of a going business more or less than a life insurance bequest of an equal amount? Or do you want to tax insurance proceeds as well? How about all "unearned" income? Like your social security (if and when) ?

    (and yes, I have too much time on my hands today)

  • DaveSs||

    Fed burden is 8748 (medicare = 725 not 7250 you mucked up a decimal place)

  • NotAnotherSkippy||

    Std deduction is wrong too (high). Regardless the total tax burden is way under 50%.

  • Tyler R||

    I appreciate that - actually a very good analysis. I say it's close to 50% because I also factor in the "employer" part of the payroll tax (which obviously results in a lower wage) and inflation. None-the-less, I think your analysis shows saying half goes to taxes is not unreasonable.

    The whole "already been taxed once" thing must be over my head. Money is constantly being taxed every time it switches hands. No one could possibly argue we have a tax system where we tax once, then it's over.

    I think it's reasonable to tax people on money that was inherited, yes. Social security benefit are taxed, aren't they? At least if the person is over a certain income level, right? Not sure I understand where you're going with that.

  • NotAnotherSkippy||

    It isn't close to 50% period. If you count the employer contribution then someone isn't making 50k, they're making 50k PLUS the employer contribution. And again there was ZERO pretax withholding in his calc.

    For the most part yes we do have a system where money is taxed once. The notable exceptions are... capital gains and dividends, which you also don't understand.

  • Tyler R||

    Here's the distinction that obviously we don't agree on - when money switches hands it gets taxed again, and again, and again, every time it goes to a new person. I think that giving money to your kids equates to it switching hands, since, you know, it's going to a new person.

  • NotAnotherSkippy||

    No the *work product* gets taxed. In your fantasy land taxation will eventually exceed the value of the money (wealth) itself.

  • Unicorn Abattoir||

    ^^THIS^^

    ...reminds me that I need to set up a trust.

  • Gilbert Martin||

    Money and income are not the same thing.

    Person A earns some income paid in cash - he pays tax on it.

    If he uses some of the after tax money to pay Person B for a service that creates a distinctly different block of income for person B that he is taxed on.

    That is not double taxation. Double taxation refers to taxing the same block of income twice.

  • DesigNate||

    "I know sometimes it forces people to sell of parts of the family business. To me that's not a horrible thing, honestly."

    Congratulations, you support making an international corporate conglomorate that routinely fucks its employees, even more money. (Berkshire Hathaway fights for the estate tax to stay so that it can prey on grieving families and steal their business.)

    I'm willing to give you the benefit of the doubt on being libertarian leaning, but what you said in that post is just evil.

  • Tyler R||

    I don't know if I want to open this can of warms, but how is it "preying" on someone to buy a business that they're selling? If Berkshire Hathaway treats their employees poorly, that's a different issue I know nothing about. And the fact that they're a corporate conglomerate doesn't really seem relevant here.

  • DesigNate||

    If the estate tax was lower or didn't exist, those people may not be looking to sell all or part of their family businesses in order to avoid getting fucked by the IRS. So they aren't necessarily willing, so much as desperate (this isn't controversial, they've made no bones about how they use the estate tax to acquire things).

    And with the way you talk about fairness, I thought you might be one of those left-libertarians that hate big multinational corporations.

  • Fairbanks||

    Income gets taxed twice all the time. It's hardly unique to money passed on via inheritance. When I earn a salary it gets taxed. When I use that aftertax money to pay my plumber it gets taxed again. Is it OK to tax the plumber when he provides labor to me but not OK to tax him if I hand him the money out of thin air as part of an inheritance? There are issues with inheritance taxes that need fixing, but double taxation isn't a reason.

  • loveconstitution1789||

    What state do you live in? You pay taxes on a plumber doing work at your house or business? What I pay him is income for him to pay taxes on.

    I guess people used to paying outrageous taxation continue to advocate for more.

  • Fairbanks||

    Are you really not following this? I didn't say I pay taxes when I pay a plumber. I said my aftertax earnings get taxed again (because the plumber gets taxed). In either scenario the plumber gets aftertax money from me, but we have a problem when the aftertax money is taxed again because the plumber got an inheritance but not if the money came from actually doing work?

  • loveconstitution1789||

    Are you not following what I said?

    You were saying that someone's income gets taxed and then taxed again to pay a plumber.

    Its now the plumber's income and he gets taxed.

    You are trying too hard to excuse government trying to steal money that has already been taxed.

  • Fairbanks||

    Rather than debate over the semantics of whose income gets taxed, which is irrelevant since the money gets taxed twice, why don't you respond to the germaine question: why does it make sense for plumbers to pay income tax when I use my aftertax money to pay them to provide a service but not to pay tax when I hand them my aftertax money when I die?

  • NotAnotherSkippy||

    Why don't you pay income tax on xmas presents? And then there's imputed rent. And if a friend helps you move, well where's the tax on that. Gosh, just look at all the revenue opportunities.

  • Tyler R||

    If you give a xmas present to a dependent child, no. But if you give an xmas present of a $15 million farm... yep, I think it should be taxed. This isn't the crazy tax grab you're making it out to be. If we tax labor we should tax inheritance.

  • NotAnotherSkippy||

    So again there's a magical threshold (sbove what you will trigger) so therefore it's ok. Totally not envy.

  • DesigNate||

    It's not semantics. When you pay the plumber, that money ceases being yours and becomes his. He pays taxes on HIS income.

  • Tyler R||

    And when you give money to your children, it ceases to be yours and becomes his or hers. I think that's the point we're trying to make here. To say when someone works for a wage it's not double taxation, but if you just give it to them it IS double taxation, doesn't add up.

  • NotAnotherSkippy||

    Aside from the whole new work product. So if I give you 10MM and you give me 10MM then both transactions should be taxed, right?

  • Tyler R||

    If I do electrical work for you, and you do roofing work for me, both are taxed. You're not helping your argument. I'm saying it's no more double taxation than labor creates double taxation.

  • NotAnotherSkippy||

    Try again, sport. No work was done. No net wealth was transferred. But in your totally not envious opinion they should be taxed because it would let you, the poor poor working stiff, get by with paying even less.

    Awesome argument, dude. And again totally not envy.

  • Tyler R||

    I think you realize now the double taxation argument is not logical, but I realize you're too dug in to admit that. No biggie..

    Your opinion that it shouldn't be taxed because it's a parent passing down money to their child is fine, it's just not one I happen to agree with. I think if your child gets money from inheritance, they should pay the same rate as if they made that money through their own labor. Apparently that makes me a big fan of class warfare.

  • MJBinAL||

    Tyler,

    Try this. I work my whole life to build a business. Upon my death, I want to leave my, let's say $12 million business to my child to run. Estate taxes, are NOT paid by my child, they are paid by MY ESTATE. (This is why they are called ESTATE TAXES.)

    However, now the lawyer taking care of my estate looks at what else is in there, and determines that since I devoted myself to my business in hopes have having it continued by my child, there is insufficient non-business property to pay the estate tax. So, the lawyer sells the business to someone with sufficient cash, pays off the government, and then gives my kid what is left. But my business .... is gone.

    You might notice, that my kid, will have to pay taxes on whatever is earned by the remaining money. But the "inheritance tax" or actually estate tax, was paid by the deceased. After the deceased had paid taxes on it over his life.

    Can you see the double tax yet?

    So how why do we do this? Because Berkshire-Hathaway (and others) make LOTS of money setting up accounts they manage with life insurance policies they are paid for, in order to pay a shit ton of cash into your estate upon your death for the purpose of clearing those estate taxes. So, the owner of the business, paid the tax on money earned, and paid money to Berkshire-Hathaway along the way to pay the SECOND TAX on his earnings upon his death.

    Yes, pilgrim, it IS double taxation.

  • MJBinAL||

    But what about the rich!

    Do you notice the Kennedy family in poverty these days? How about the Duponts? Of course not, all the stock and wealth was pumped in Trusts at great expense before rich daddy died. With separate trusties, and all the banks getting a cut, the government leaves to trust alone. Not taxes paid pilgrim. So you see, the REAL rich, do not pay estate taxes. The have enough wealth to set up managed Trusts to keep control in the hands of their descendents for generations.

    Estate taxes, are only to rip off the small business and let big business buy they our at the estate sale.

  • Tyler R||

    I can see the you think it's an unfair burden that your heir would have to pay taxes on the estate that's valued over $5.5 million. It is not double taxed, though, because it is no longer the person who passed away's estate, it is now the heirs estate. I guess I don't follow the whole idea that it's the dead guy who is paying the tax. I think it's the alive heir.

    And everyone pays tax on new income. The fact that you say "my kid will have to pay taxes on whatever is earned by the remaining money" is just an income tax. So it's not doubled taxed in a way that is uncommon in our tax system.

  • Hank Phillips||

    I want two things:
    1. Repeal of the 1848 Communist Manifesto income tax.
    2. More money in private hands.

  • loveconstitution1789||

    The money has already been taxed once for being earned.

  • Fairbanks||

    So what? Money gets taxed twice all the time. You use aftertax earnings to pay for your gardener and he gets taxed. Why is that a problem?

  • loveconstitution1789||

    Because I don't live in an outrageous tax state that charges ME tax to get my yard done. That is income for the gardener to claim as income.

  • Fairbanks||

    Do you read comments before you respond? I said the gardener gets taxed, not ME. Since you obviously realize that and don't seem to have a problem with it, why does it make sense to tax the gardener on my aftertax income when he does work for me but to tax him when he gets my aftertax income when I die?

  • loveconstitution1789||

    Do you not read my comments? You are saying there is zero problem with money getting taxed twice.
    "Money gets taxed twice all the time. You use aftertax earnings to pay for your gardener and he gets taxed."
    How is that taxed twice when someone's income is taxed and then payment is made to a gardener who is then taxed on their income from that yard work?

  • Fairbanks||

    It is the same concept as using my aftertax money to provide an inheritance. If you truly believe that my example is not double taxation of the money I earned then neither is it double taxation when a beneficiary of my aftertax money pays inheritance tax.

  • NotAnotherSkippy||

    About that whole work product thing...

  • NotAnotherSkippy||

    So what? People get mugged all the time. Why is that a problem?

  • Fairbanks||

    So you believe that gardeners and others who provide services to others for a fee shouldn't have to pay income taxes?

  • NotAnotherSkippy||

    Are you saying that no new work product was generated? Hint: that's kinda the key point.

  • Fairbanks||

    Why is that the point? Either way the person receives money.

  • NotAnotherSkippy||

    And we're back to my mugging point...

    So much for libertarian understanding of economics.

  • Fairbanks||

    I've been trolled. Well played.

  • DesigNate||

    Do you seriously not understand that there is a difference between you paying someone for a good or service with money that you paid income taxes on and giving your money to someone for whatever reason you come up with?

  • Tyler R||

    I'm with you on this, Fairbanks. If their position is that inheritance shouldn't be taxed, that's fine. But don't say it's double taxation, because it's just not.

  • Tyler R||

    DesigNate- yes, I understand the distinction between paying money for a good or service or just paying it to someone because they're your child (or just someone you like). But I guess I don't understand why one is more worthy of being taxed than the other. And if anything, I'd rather tax the person who got a bunch of new income... just because. It's still new income. It's not double taxation.

  • NotAnotherSkippy||

    Clearly you do not.

  • DesigNate||

    The estate of the dead person has to pay those taxes prior to any of the heirs receiving their cut.

    Proof

    So yes, it is IN FACT double taxation. Glad I could clear that all up for you.

  • NotAnotherSkippy||

    But that's ok because he wants it.

  • Tyler R||

    No, they don't. That's my entire objection. The first $5.5 million of the estate is exempt from taxes.

    You might be confusing the estate tax with the fact that the estate has to pay income tax on the money that was made during the year. But the dead person does not have to pay estate taxes before they pass the wealth to the heirs. If so, that would actually be double tax, but that's not how it works.

    www.irs.gov/businesses/small-b.....estate-tax

  • MJBinAL||

    Tyler,

    Try this. I work my whole life to build a business. Upon my death, I want to leave my, let's say $12 million business to my child to run. Estate taxes, are NOT paid by my child, they are paid by MY ESTATE. (This is why they are called ESTATE TAXES.)

    However, now the lawyer taking care of my estate looks at what else is in there, and determines that since I devoted myself to my business in hopes have having it continued by my child, there is insufficient non-business property to pay the estate tax. So, the lawyer sells the business to someone with sufficient cash, pays off the government, and then gives my kid what is left. But my business .... is gone.

    You might notice, that my kid, will have to pay taxes on whatever is earned by the remaining money. But the "inheritance tax" or actually estate tax, was paid by the deceased. After the deceased had paid taxes on it over his life.

    Can you see the double tax yet?

    So how why do we do this? Because Berkshire-Hathaway (and others) make LOTS of money setting up accounts they manage with life insurance policies they are paid for, in order to pay a shit ton of cash into your estate upon your death for the purpose of clearing those estate taxes. So, the owner of the business, paid the tax on money earned, and paid money to Berkshire-Hathaway along the way to pay the SECOND TAX on his earnings upon his death.

    Yes, pilgrim, it IS double taxation.

  • MJBinAL||

    Did you READ the link you provided? Pasted directly from your link.

    The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death (Refer to Form 706 (PDF)). The fair market value of these items is used, not necessarily what you paid for them or what their values were when you acquired them. The total of all of these items is your "Gross Estate." The includible property may consist of cash and securities, real estate, insurance, trusts, annuities, business interests and other assets.

    Once you have accounted for the Gross Estate, certain deductions (and in special circumstances, reductions to value) are allowed in arriving at your "Taxable Estate." These deductions may include mortgages and other debts, estate administration expenses, property that passes to surviving spouses and qualified charities. The value of some operating business interests or farms may be reduced for estates that qualify.

  • MJBinAL||

    Lets look at that again, just for those who are reading comprehension challenged.

    The Estate Tax is a tax on your right to transfer property at your death.
    (A tax on who? A tax on the deceased upon his death.)

    It consists of an accounting of everything you own or have certain interests in at the date of death
    ( A tax on what? Everything you own. Not the same as your final year income taxes, but everything you own.)

    Everything you own. Stuff you paid for with AFTER TAX money. Income and Earnings that WERE ALREADY TAXED)

  • Tyler R||

    Yes, it's a tax on the value of the estate. But if you keep reading, it says there is a $5.5 million personal exemption. As to if it's a tax on the deceased person, or the heir, I suppose that's really just semantics. I don't think the dead person is really paying the tax, it sounds like you do. I guess we just see that differently..

  • Longtobefree||

    As long as no guns are used, there is no problem. It is just informal taxation.

  • NotAnotherSkippy||

    Page 58 of the krugman textbook? :p

  • Murray Rothtard||

    the only slightly positive thing about it is the financial disincentive on dying. if we raise it high enough, maybe people will just stop dying?

    probably overpowered by the disincentive on accumulating wealth though. that and people's natural desire to not die.

  • NotAnotherSkippy||

    Is there nothing the tax code cannot do?

  • Rich||

    Tax *itself*?

  • Longtobefree||

    Tax political contributions?

  • Mickey Rat||

    An estate is not cash. What an estate is worth is based on an estimate of what the estates assets might sell for. Many inheritences are asset rich and cash poor, which means part of the business will have to be sold off to pay the estate tax, this crwates perverse incentives.

    One reason sports franchises want governments to build them stadiums is because owning a staThe dium is an enormous non-liquid asset. The Robbie family had to sell the Miami Dolphins because they could not pay the tax on the stadium otherwise. A leased stadium is not counnted as that type of asset for the purposes of the tax so is more useful if the family wants to keep team.

  • R. K. Phillips||

    Because it's NOT YOUR MONEY.

  • Stilgar||

    What is the effective tax rate paid by corps in the US? Not the stated rate. And that is the problem. I have no issue with a reduction to 20% but I do if all the tax dodges are not eliminated, many of which are only practical/available to very large corps. 20% for all corps, period - whether Apple or Mom.

  • Eric Bana||

    This study looked at Fortune 500 companies that were profitable every year between 2008-2015, which included 258 corporations. They "paid an effective federal income tax rate of 21.2 percent over the eight-year period."

    https://tinyurl.com/y8m38gxm

  • Brandybuck||

    Corporations pay according to standard accounting principles. Profits matter, but so do losses and operating expenses and capital outlays. These are not tax dodges. Some corporations do play with the numbers and shift their profits around to hide them, but they can't do it every year without their stockholders catching on and demanding their rightful dividends.

  • Hank Phillips||

    Corporations are not individuals. Once individual rights have been secured, come talk to me about artificial persons not liable to incarceration or the death penalty.

  • Bra Ket||

    So let's summarize: the status quo benefits large business who are able to avoid or reduce taxes, while other businesses get fucked.

    Stilgar and others here would prefer to maintain that status quo, rather than cut taxes for all those other businesses getting fucked over, unless we first eliminate all corruption and regulatory capture from the earth.

    Did I get that about right?

  • MJBinAL||

    This is actually a nonsense question. Corporations do not actually pay taxes. The collect taxes buried in the cost of their products and remit them to government. If the company need to achieve a 6% Return On Investment, they are going to get it by raising prices to cover the taxes. Since competetitors are doing likewise, the overall effect is much like an very inefficient VAT.

  • Eric Bana||

    When you take into account payroll taxes people pay on their wages and salaries on top of local, state, and federal income tax, people pay a large chunk of the money they earn in taxes. It's shitty that the government doesn't have something better to show for it.

  • NotAnotherSkippy||

    And when you count all of the welfare goodies they get in exchange for those payroll taxes, no they really don't pay much. The Ponzi pyramid that is SS is finally starting to bit the subsidized middle class, but medicare is still a sweet, sweet deal.

  • Brandybuck||

    Medicare is only a sweet deal because government has driven up the cost of healthcare.

  • NotAnotherSkippy||

    Fine, throw in long term care a la medicaid. An even sweeter deal.

  • R. K. Phillips||

    Who is "they"? How do I get a piece of the action? I pay higher rates and don't get subsidies because I'm moderately successful. At least I'll get some back when I hit Medicare in a few years. I'm gonna have every joint replaced twice.

  • NotAnotherSkippy||

    "They" are people for whom payroll taxes are a significant fraction of their total tax bill. And "they" (and you if that's the case) will get back far more than "they" paid in.

  • MJBinAL||

    As with most welfare, it is a good deal for those who had small amounts taken, and a really bad deal for those who had a great deal taken. In general, if you were not in the middle of the baby boom or before, you are getting screwed.

  • Rich||

    How about a scheme something like the following?

    "The yearly membership fee for belonging to our 'Gentleperson's Club' is $15K. However, if you choose not to contribute, you forfeit your right to voHAHAHAHAAA!! Damn, couldn't quite get it out!

  • Brandybuck||

    You guys could have voted for Forbes when you had the chance. Put the 1040 on a postcard. But NO! You picked Booosh for the nominee. Sigh.

  • Let freedom ring||

    Rothbard would disagree. Give me that long, complicated tax return that allows me to deduct any and everything I can was what he said. Now libertarians are begging for simplicity! Why?
    But the great Rothbard did not understand the income tax, and neither does Stossel, or the Reason staff.
    If you did not earn money paid from the federal treasury, or its agencies and instrumentalities, you can file a CTC educated return, and ask for and receive a full refund of all federal and state income taxes, including payroll taxes. Thousands of real Americans have over the last 15 years. Hundreds of thousands have saved billions in taxes other Americans sheeple are paying.
    And it is so easy to fill out a 1040 that is a CTC educated return! It takes 10 minutes! What could be simpler?
    Go ahead and challenge yourselves, visit www.losthorizons.com and view what a CTC educated return looks like. Average refund-$12,000.00

  • Brandybuck||

    Lost Horizons. The title of a novel about a fictional utopia full of creepy mystics. And a bad movie staring a commie. How appropriate.

  • Longtobefree||

    Name for the country to be when California finally secedes, or name of a bad rock band?

  • Sevo is my bitch||

    "more houses than we need "

    Really, Stossel?

    you get to decide what someone needs?

  • R. K. Phillips||

    Yeah, I don't understand that one; I wouldn't buy another house for the tax deduction, I'd invest that money in a decent fund.

  • MJBinAL||

    Bad way to put it, but he is just observing the market distortion by favoring one type of investment over another.

  • DrZ||

    "One of the most unfair tax breaks is the mortgage interest deduction. It encourages rich people to buy more homes than we need. It exacerbates housing bubbles."

    The irony is that the interest deduction and the capital gains exclusion has artificially raised the price of homes. The who idea with these 2 breaks was that it would make home ownership more affordable.

    Ahhh, the unintended consequences thingy again.

  • Longtobefree||

    "One of the most unfair tax breaks is the mortgage interest deduction. It encourages rich people to buy more homes than we need. It exacerbates housing bubbles."

    Only for two, and only if you do NOT rent out the second one.
    IRS publication 936 (2016)
    The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.

  • ranrod||

    Marxist Stossel wants to raise the poorest taxes from 10 to 15%

    yep......Stossel and this group are pushing to make the poor....poorer

  • MJBinAL||

    Awe, the poor, pause for a moment to wipe the corner of my eye.

    The poor, who get money from everyone else (EBT), Housing (Section 8), and myriad other programs. The poor, who pay no taxes on the income they report and report as little as possible so as not to endanger eligibility for government goodies.

    The poor, who qualify for free state paid healthcare.

    The poor, who be definition, contribute little to their fellow man, but demand much.

    How interesting, that we feel such pity for the folks riding in the wagon, and so little for those pulling the wagon.

  • Lester224||

    I still wouldn't want to be one of those lucky poor people even with all those great freebies.

  • conservativemom||

    Yet why not get rid of the IRS completely with the consumption tax, the FAIR TAX!! We will never satisfy the thousands of special interest groups. Scrap it all. Even prostitutes will be taxes....on consumption!!

  • cjones1||

    Raise the standard deduction to make up for the elimination of other deductions.
    How to pay for it? As the business tax rates are reduced, eliminate more business deductions. For example, there is a $200+ billion/year write off of advertising as a business expense that should be capped or eliminated. That would be $2 trillion over 10 years that could help maintain "revenue neutrality" and minimize the criticism and pain attributed to the personal elimination of credits or deductions.
    I understand that personal exemptions should minimize hybridization of certain favored industries. I support deductions for philanthropic donations.
    Elimination of the write off for advertising would stop the subsidization of multi-million salaries for overpaid sports figures, actors, newsrooms, agents, and all the rest of a parasitic media industry that often diverts attention from virtuous behavior.

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