According to an AP report:
A federal investigation of farm aid payments found an Indiana farmer continued to receive money nearly a decade after his death.
The U.S. Department of Agriculture made more than $200,000 in payments from 1999 to 2002 to a farm based on the ownership of a farmer who died in 1993, according to a recently released report from the Government Accountability Office.
It’s not fair to base any judgments on one incident, but this fed my feeling that I’d much rather be paying state and local taxes than federal taxes. I just feel like I get more bang for my buck with more local forms of taxation. It seems like the huge hunks of federal taxes that disappear from my paycheck go toward financing the federal debt run up in the Reagan administration, into the bottomless pit of Iraq, toward subsidizing the elimination of federal estate taxes, disaster relief for people who live in more scenic (and more volatile) regions of the U.S., and for any number of other purposes that don’t do me a lot of good.
Yes, because the only reason we ought to be taxed is for the ones that we perceive affect us personally and which we feel good about…
-j.
“Subsidizing the elimination of federal estate taxes?”
Doug, that indicates that you believe the state has the first claim on an estate! Egad!
You have children. Don’t you intend to leave something to them?
Government expenses didn’t go down. The federal estate tax was eliminated. The difference had to come from somewhere. I figure income taxes account for a lot of that “somewhere.”
I don’t know if the State has “first claim.” But, whether it be strong, weak, first or last, I figure the State has a claim on estates that is equal to its claim on wages. On the other hand, I think a wage earner’s claim to his wages is stronger than an heir’s claim to a decedent’s estate. Therefore, on balance, estates are a better target for taxes than wages.
Doug,
I remember debating the estate tax issue with you before.
I still say it is a matter of perception. Most people with estates the size of where this actually means anything put thought into it before they die… so they still see it as *their* money.
1) From the heir’s side of things – yes, it is money not worked for and is a logical sum to be taxed
2) From the…uh… sometime-to-be-deceased’s (?) side of things it’s money that has already been taxed once (when earned) and is now being taxed A SECOND TIME (when gifted).
However, your argument of “the tax money is going to come from somewhere, better from B (indirect) rather than A (direct), makes sense. I hadn’t gotten that part of the thought process from your previous postings… thanks.
Glad I was a little clearer this time.
As for the sensibilities of the deceased, I guess I’m a little insensitive in that regard – they’re dead, they don’t have further use for the wealth, and they’re beyond caring about it.
As to what the living will do in anticipation of future taxation of their wealth, that’s a legitimate question. But, then again, we deal with the same issue with income taxes – how will taxing the income affect the income earner’s decision making?
Doug –
I think a lot of estates are made up of productive enterprises – e.g., Bill Gates and his interest in Microsoft (or the perennial favorite in these discussions, the family farm).
In those cases, a requirement to pay significant estate tax can necessitate liquidation of the enterprise. The government gets money, sure – but new wealth is no longer being produced, or gets produced at a lesser rate than if the estate is passed on as the former owner intended.
Not true in every case, surely – but something that has a potential impact worth considering.
To the extent the estate tax retards the production of new wealth (which can also happen before death, from the discouraging effect on potential producers), I believe it is a bad thing.
I also suspect that I see this impact as larger than you do – I’m not sure how you can measure it objectively, as opposed to collecting anecdotal evidence.
If it’s really an engine of wealth, it shouldn’t be too hard to get a lending institution to loan the money on the taxes and allow the engine to keep generating the wealth at the same level. The heir just won’t get to keep as much of it.
I don’t see it as being much different than if the heir had to buy the business like anybody else except that he gets to buy the business at a steeply discounted price. (The first million is free!)
Doug,
Being the pro on debit you are, how does it work when the money is the other way around?
If I die and owe a ton of money, do my heirs need to pay it? Does the government pay for “their” share of my debit first? Or does the money just disappear?
Not a baited question, I really don’t know.
Creditors generally get stiffed unless you have assets in your estate. Children have no obligation as to debts of their parents — however, if the estate does have assets, creditors are in line before heirs.
I hope the cheaters that cashed those checks to deceased recipients get prosecuted. AG Gonzalez will probably just ask them for campaign donations though…
Hey Wilson, you DID read the part about the payments being made from 1999 to 2002 right?
This is a tough issue to be sure and with all of the uncertainty about where estate taxes will go effective 1/1/2011 it is even more so. I’m not sure where the economics fall in on this one. Part of my practice is estate planning and it sure as hell has been a roller coaster ride. One of the things I have seen throughout the years in doing tax and estate planning, whether it be a family farm or a business is that when we get to the third generation, there is a sense of entitlement, and a perception that the business (whatever it may be, and believe me, I have seen the gamut), is a personal checkbook for the family. I have been through enough forensic accounting (which is one reason I got into wanting to get my CFE), that I have come to the conclusion that not repealing the estate tax on a permanent basis may not necessarily be a bad move. I have to admit I am still studying this, I don’t think the government should be able to tax income a second time but I also don’t think a third generation (hell, for that matter, a second generation) should be able to rest on the laurels of the founding generation. I am a big supporter of family owned businesses, be they farms or other entities, but am not for second and third generations of founders who don’t want to work, and who just want to skate treating the business as a personal checkbook. It’s sort of funny and sort of sad that one of the running jokes is that if you have a wealthy beneficiary, make sure they pass away prior to 1/1/2011.
Sorry, just for the record also meant to say if you have a wealthy benefactor or beneficiary, make sure they pass away prior to 1/1/2011.
Uh-oh! Are you encouraging murder? ;-)
Pila –
Just try to be poor in December 2010, is all he’s saying.
unioncitynative –
As for resting on the laurels of prior generations, we all do that to some extent – much of what we enjoy today comes from the production of wealth by our predecessors.
The arguments revolve around both ownership and stewardship, and what the role of the state should be in determining them.
Key question: Does an estate tax produce a net social benefit?
I suspect that the larger the tax, the more likely the answer is to be no (consider the potential impact of a ridiculously extreme case of a 110% estate tax) – but I’m not sure how to test this, or how to determine what a good value would be.
All taxation is illegitimate anyway, so why is what gets taxed and what does not even a relevant question?