Wealth Tax - Discuss

[Chef Jim]

We are all well aware that Elizabeth Warren and others have been pushing for this Tax on Wealth for some time now.  Whether you agree with the concept that the top 1% of the top 1% need to pay more this is the dumbest idea ever and will likely never see the light of day.  It just proves how out of touch ALL politicians are.  Here are the challenges.

 

1.  This is essentially the same as filing an Estate Tax Return.  These often take years to sort out and locate and value all the assets.  And this law will require this to be done EVERY YEAR

2.  Even if they were able to place an accurate accounting value of the wealth a $2b estate would pay $30m in taxes.  2% on the first billion and and 1% on the second billion.  So there could be a huge liquidity issue to pay the tax. Most billionaire's wealth is in illiquid assets such as real estate and business entities. 

3.  Billionaires are usually smart and have teams of advisors that can help them avoid this.  Mainly hold the assets inside foreign entities.  How does that help the US?  If anything we need to bring foreign held assets back on shore so the income they produce can be properly taxed. 

 

I always find it interesting that politicians (left/right/center) always talk about ways to raise additional revenue but almost NEVER discuss ways to cut spending.  

 

So let the wah, wah, wah..poor billionaires replies come.  This is not my point.  It's that it's an impossible program to implement and maintain so it's a total waste of time.  The fact that politicians such as Warren think it makes sense and is doable is laughable.  

[RochesterRob]

13 minutes ago, Chef Jim said:

We are all well aware that Elizabeth Warren and others have been pushing for this Tax on Wealth for some time now.  Whether you agree with the concept that the top 1% of the top 1% need to pay more this is the dumbest idea ever and will likely never see the light of day.  It just proves how out of touch ALL politicians are.  Here are the challenges.

 

1.  This is essentially the same as filing an Estate Tax Return.  These often take years to sort out and locate and value all the assets.  And this law will require this to be done EVERY YEAR

2.  Even if they were able to place an accurate accounting value of the wealth a $2b estate would pay $30m in taxes.  2% on the first billion and and 1% on the second billion.  So there could be a huge liquidity issue to pay the tax. Most billionaire's wealth is in illiquid assets such as real estate and business entities. 

3.  Billionaires are usually smart and have teams of advisors that can help them avoid this.  Mainly hold the assets inside foreign entities.  How does that help the US?  If anything we need to bring foreign held assets back on shore so the income they produce can be properly taxed. 

 

I always find it interesting that politicians (left/right/center) always talk about ways to raise additional revenue but almost NEVER discuss ways to cut spending.  

 

So let the wah, wah, wah..poor billionaires replies come.  This is not my point.  It's that it's an impossible program to implement and maintain so it's a total waste of time.  The fact that politicians such as Warren think it makes sense and is doable is laughable.  

  At this point in time the proposed bar is set quite high but it will drift down in my opinion.  As the middle class is further depleted it would not surprise me if it reaches down to under 100,000 dollars per household.  That is what it will take to maintain the them versus us attitude by the liberals as the number of working poor increases.  

[Over 29 years of fanhood]

I’m a big proponent of inheritance wealth transfer tax.  These financial family empires that transcend generations seem like a very fair and reasonable target. 

[LeviF]

20 minutes ago, Over 29 years of fanhood said:

I’m a big proponent of inheritance wealth transfer tax.  These financial family empires that transcend generations seem like a very fair and reasonable target. 

 

How so?  What about large family farms?  With the Chinese driving up real estate prices some of these farms and ranches will break the threshold for the tax with no liquid with which to pay it.

[Chef Jim]

12 minutes ago, LeviF91 said:

 

How so?  What about large family farms?  With the Chinese driving up real estate prices some of these farms and ranches will break the threshold for the tax with no liquid with which to pay it.

 

Exactly.  Much of the wealth transferred is illiquid.  Estate taxes are due 9 months from date of death.  Sometimes it takes longer than that to get a business set to sell let alone get it liquidated.  Now there are ways to provide that liquidity but that often requires life insurance and there is no guarantee of insurability.  This doesn't even bring the whole issue of what to do if the heirs want to keep the business.  

 

They are also discussing doing away with the step up in cost basis.  I'm not so sure I have a problem with that.  As long as they do away with the estate tax completely.  

[RochesterRob]

19 minutes ago, Chef Jim said:

 

Exactly.  Much of the wealth transferred is illiquid.  Estate taxes are due 9 months from date of death.  Sometimes it takes longer than that to get a business set to sell let alone get it liquidated.  Now there are ways to provide that liquidity but that often requires life insurance and there is no guarantee of insurability.  This doesn't even bring the whole issue of what to do if the heirs want to keep the business.  

 

They are also discussing doing away with the step up in cost basis.  I'm not so sure I have a problem with that.  As long as they do away with the estate tax completely.  

  I don't expect the estate tax to go anywhere and am bracing for it to take a bigger bite.  I also expect that there will be far fewer deductions and allowances for basis.  I expect the thresh hold for being taxable to be greatly lowered or eliminated.  Not what I want once again but expecting our politicians to balance the budget on the backs of others.  

 

  Example :  100 acres prime vegetable ground in Western NY.  Value of 10,000 dollars per acre.  Gross value 1,000,000 dollars.  No allowance for basis so 1,000,000 dollars is the taxable amount.  For easy figuring lets say the federal and state tax rates have moved to 30 percent each of the gross amount which is not outside the realm of reason given who is running the show in DC and Albany.  The Feds get 300,000 and the state gets 300,000 dollars.  This is without counties imposing an income or wealth tax which there has been talk of.  600,000 paid in taxes leaving 400,000 dollars to disperse.    

[Chef Jim]

1 minute ago, RochesterRob said:

  I don't expect the estate tax to go anywhere and am bracing for it to take a bigger bite.  I also expect that there will be far fewer deductions and allowances for basis.  I expect the thresh hold for being taxable to be greatly lowered or eliminated.  Not what I want once again but expecting our politicians to balance the budget on the backs of others.  

 

  Example :  100 acres prime vegetable ground in Western NY.  Value of 10,000 dollars per acre.  Gross value 1,000,000 dollars.  No allowance for basis so 1,000,000 dollars is the taxable amount.  For easy figuring lets say the federal and state tax rates have moved to 30 percent each of the gross amount which is not outside the realm of reason given who is running the show in DC and Albany.  The Feds get 300,000 and the state gets 300,000 dollars.  This is without counties imposing an income or wealth tax which there has been talk of.  600,000 paid in taxes leaving 400,000 dollars to disperse.    

 

So how many vegetables and dirt equals $600k?  So you're going to force the potential sale of the land.  What if the heirs want to maintain the asset?  

 

And the basis has to do with the sale of the asset.  Under current tax laws let's say mom and dad bought that vegetable farm and the basis is $100k.  Mom and dad pass and the new basis to the heirs is $1m.  The heirs can turn around and sell the asset free and clear of any cap gains or estate taxes. Not sure I agree with that.  

[All_Pro_Bills]

23 minutes ago, RochesterRob said:

  I don't expect the estate tax to go anywhere and am bracing for it to take a bigger bite.  I also expect that there will be far fewer deductions and allowances for basis.  I expect the thresh hold for being taxable to be greatly lowered or eliminated.  Not what I want once again but expecting our politicians to balance the budget on the backs of others.  

 

  Example :  100 acres prime vegetable ground in Western NY.  Value of 10,000 dollars per acre.  Gross value 1,000,000 dollars.  No allowance for basis so 1,000,000 dollars is the taxable amount.  For easy figuring lets say the federal and state tax rates have moved to 30 percent each of the gross amount which is not outside the realm of reason given who is running the show in DC and Albany.  The Feds get 300,000 and the state gets 300,000 dollars.  This is without counties imposing an income or wealth tax which there has been talk of.  600,000 paid in taxes leaving 400,000 dollars to disperse.    

Counties and municipalities already impose a wealth tax.  Its called property taxes.  The amount of tax is based on the "value" of your property as determined by local assessment of market value.  As your primary residence generates no income or revenue the tax must be funded out of salary/wages and other sources of income like investments or interest income. 

In the 100 acre example above the owner already pays a wealth tax to the county/municipality.  As do all homeowners and landowners.  Warren's idea is to extend this tax to the Federal level.  The problem with property taxes is that after the initial purchase transaction there is a growing disconnect between the value of homes, which tend to rise faster than your ability to fund the tax which is based on your income that generally rises much slower.  

[Tiberius]

It’s a sad fact of life we have to have taxes. Shouldn’t those with the most, pay the most? 

 

Not saying its fair, but it’s the only feasible option, right.? 

[Chef Jim]

48 minutes ago, Tiberius said:

It’s a sad fact of life we have to have taxes. Shouldn’t those with the most, pay the most? 

 

Not saying its fair, but it’s the only feasible option, right.? 

 

Feasible?  Glad to see you've chimed in with an intelligent addition to this conversation.   It's not the tax it's the fact that going through the annual assessment of the assets owned makes this idea asinine.  She knows it will never fly and I'm wondering if that's her intent.  So when it gets blocked (mostly by Republicans) she can scream "See!!! They protect BILLIONAIRES!!"   

[Tiberius]

2 minutes ago, Chef Jim said:

 

Feasible?  Glad to see you've chimed in with an intelligent addition to this conversation.   It's not the tax it's the fact that going through the annual assessment of the assets owned makes this idea asinine.  She knows it will never fly and I'm wondering if that's her intent.  So when it gets blocked (mostly by Republicans) she can scream "See!!! They protect BILLIONAIRES!!"   

I hope that works out for her on the politica front. 

[RochesterRob]

4 minutes ago, Chef Jim said:

 

So how many vegetables and dirt equals $600k?  So you're going to force the potential sale of the land.  What if the heirs want to maintain the asset?  

 

And the basis has to do with the sale of the asset.  Under current tax laws let's say mom and dad bought that vegetable farm and the basis is $100k.  Mom and dad pass and the new basis to the heirs is $1m.  The heirs can turn around and sell the asset free and clear of any cap gains or estate taxes. Not sure I agree with that.  

  I don't want to force a sale.  A forced sale is something I fear with the changing political climate.  I am allowing for it in my example to reflect what very well may happen.  I am also saying that a drastically altered tax code may not allow for a basis for the purpose of a tax deduction.  

1 hour ago, All_Pro_Bills said:

Counties and municipalities already impose a wealth tax.  Its called property taxes.  The amount of tax is based on the "value" of your property as determined by local assessment of market value.  As your primary residence generates no income or revenue the tax must be funded out of salary/wages and other sources of income like investments or interest income. 

In the 100 acre example above the owner already pays a wealth tax to the county/municipality.  As do all homeowners and landowners.  Warren's idea is to extend this tax to the Federal level.  The problem with property taxes is that after the initial purchase transaction there is a growing disconnect between the value of homes, which tend to rise faster than your ability to fund the tax which is based on your income that generally rises much slower.  

  I don't know about NJ but a county wealth tax in addition to property tax gets mentioned more and more frequently in current times.  One more thing that I am not in favor of but something I fear that may take place in the future.

[US Egg]

Never had much more money than enough to make ends meets into my 50's.

 

But then the kids were gone, along with their tuition we took on to help them and our mortgage. Last 8 years, well, we're sort of surprised at what we saved.

 

Hope Joe and his cohorts don't eff that up for us.

[Over 29 years of fanhood]

1 hour ago, Chef Jim said:

 

So how many vegetables and dirt equals $600k?  So you're going to force the potential sale of the land.  What if the heirs want to maintain the asset?  

 

And the basis has to do with the sale of the asset.  Under current tax laws let's say mom and dad bought that vegetable farm and the basis is $100k.  Mom and dad pass and the new basis to the heirs is $1m.  The heirs can turn around and sell the asset free and clear of any cap gains or estate taxes. Not sure I agree with that.  

I know the farm example is a common one, however fundamentally inheritance is an entitlement imo, particularly handing down a generation. It’s like a winning lottery ticket. It’s not earned. Therefore I see it as something that should be heavily taxed. And maybe even capped.
 

For most people, if they want to go start a business like a farm they need to figure how to obtain start up capital, not hope a rich uncle kicks the bucket. 

It’s backward there are still Rockefeller billionaires running around 140 years later. 

[Chef Jim]

37 minutes ago, I am the egg man said:

Never had much more money than enough to make ends meets into my 50's.

 

But then the kids were gone, along with their tuition we took on to help them and our mortgage. Last 8 years, well, we're sort of surprised at what we saved.

 

Hope Joe and his cohorts don't eff that up for us.

 

I was just talking to my wife the other day. The fact that we never had kids has allowed us to save a shitload more money than if we had them.  How I'm able to retire early.  Well that and we have a GREAT advisor.   

27 minutes ago, Over 29 years of fanhood said:

I know the farm example is a common one, however fundamentally inheritance is an entitlement imo, particularly handing down a generation. It’s like a winning lottery ticket. It’s not earned. Therefore I see it as something that should be heavily taxed. And maybe even capped.
 

For most people, if they want to go start a business like a farm they need to figure how to obtain start up capital, not hope a rich uncle kicks the bucket. 

It’s backward there are still Rockefeller billionaires running around 140 years later. 

 

It's not earned so why should it be taxes as such.  How do you propose to tax it?  Where is the liquidity going to come from to pay the taxes on illiquid assets?  I say don't tax inheritances but get rid of the step up in basis.  This actually would help in some planning.  Lots of people don't want to sell gramma's home because she has a low basis and they want the step up so they can sell and inherit the whole value no tax.  Whereas if they sold the house before gramma kicks it they can use the now freed up equity to take better care of gramma.  

[RochesterRob]

51 minutes ago, Over 29 years of fanhood said:

I know the farm example is a common one, however fundamentally inheritance is an entitlement imo, particularly handing down a generation. It’s like a winning lottery ticket. It’s not earned. Therefore I see it as something that should be heavily taxed. And maybe even capped.
 

For most people, if they want to go start a business like a farm they need to figure how to obtain start up capital, not hope a rich uncle kicks the bucket. 

It’s backward there are still Rockefeller billionaires running around 140 years later. 

  Got to disagree with you on this.  Many farms are multi-generation in terms of effort but often one generation for various reasons in terms of actual ownership.  Failure to get a transfer done before death may be due to credit institution interest/liens that prevent a change in ownership status.  The younger generation may have been too young to go on a deed or be signatories on a note when that time came.  If the tax structure that I made as an example came to be in reality (which I fear which was why I made it as such) 400,000 dollars of collateral in the form of cash would not be enough equity to secure a loan on the 600,000 dollars needed to purchase the land in full from the estate.  Sometimes the window never opens in terms of establishing a trust to preserve a business due to ongoing liens against the business as it needs money to operate.  But if the window was ever there in terms of being debt free or debts not secured by business assets a trust should be set up so the business can continue after the death of a primary stake holder.  As to rich uncles agriculture has pretty well moved on from that.  A foreign entity is a primary player in agriculture where I live and there are other exotic financiers as well which I suspect includes drug money.  An uncle who left his nephew a half million dollars is not going far in WNY when quite a bit of good farmland values at 5,000 dollars per acre or more and new tractors are well into six figures.  

[Over 29 years of fanhood]

23 minutes ago, RochesterRob said:

  Got to disagree with you on this.  Many farms are multi-generation in terms of effort but often one generation for various reasons in terms of actual ownership.  Failure to get a transfer done before death may be due to credit institution interest/liens that prevent a change in ownership status.  The younger generation may have been too young to go on a deed or be signatories on a note when that time came.  If the tax structure that I made as an example came to be in reality (which I fear which was why I made it as such) 400,000 dollars of collateral in the form of cash would not be enough equity to secure a loan on the 600,000 dollars needed to purchase the land in full from the estate.  Sometimes the window never opens in terms of establishing a trust to preserve a business due to ongoing liens against the business as it needs money to operate.  But if the window was ever there in terms of being debt free or debts not secured by business assets a trust should be set up so the business can continue after the death of a primary stake holder.  As to rich uncles agriculture has pretty well moved on from that.  A foreign entity is a primary player in agriculture where I live and there are other exotic financiers as well which I suspect includes drug money.  An uncle who left his nephew a half million dollars is not going far in WNY when quite a bit of good farmland values at 5,000 dollars per acre or more and new tractors are well into six figures.  

Ok then exempt legitimate farms maybe.

 

My point is wealthy inheritances seems like a fair target in some shape or form to get tax revenues assuming they have to come from somewhere. People shouldn’t be dependent on their parents to make their own way in the world in my opinion and these families that structure generational family wealth also tend to be tied to corruption around the political elite. 

[Chef Jim]

2 minutes ago, Over 29 years of fanhood said:

Ok then exempt legitimate farms maybe.

 

My point is wealthy inheritances seems like a fair target in some shape or form to get tax revenues assuming they have to come from somewhere. People shouldn’t be dependent on their parents to make their own way in the world in my opinion and these families that structure generational family wealth also tend to be tied to corruption around the political elite. 

 

What value of Estate would you suggest being taxes?  Do you think the step up in basis should be kept in place too? 

[RochesterRob]

35 minutes ago, Over 29 years of fanhood said:

Ok then exempt legitimate farms maybe.

 

My point is wealthy inheritances seems like a fair target in some shape or form to get tax revenues assuming they have to come from somewhere. People shouldn’t be dependent on their parents to make their own way in the world in my opinion and these families that structure generational family wealth also tend to be tied to corruption around the political elite. 

  Where do you draw the line at?  100 acres can be very little in terms of an overall family farm or everything that is needed if vertical integration is there.  That the farm sells raw product retail or processes product to make it salable.  Apples or apple juice?  People in many facets of life are involved with other family members in order to make a living.  Many businesses are well past the boot strap stage in terms of starting from scratch.  My mother's uncle made a go of being a Chrysler-Pontiac dealer many years ago by constantly reinvesting in the business.  The margins are so slim at times you can't count on that in the auto business today.  Look at all the consolidation in the auto business.  It happened in part because as an average person with average means can't walk into a bank to borrow a million dollars to buy or build a facility.  If you try and tell a GM territory manager you want to be a Chevy dealer but need to operate out of a crap hole facility that would end the meeting and any hopes right then and there.  Too much consolidation in business as it is which results in higher prices to the consumer never mind an unfriendly tax system which would accelerate that.  By the way the Rockefeller's and Kennedy's are not big names in generational wealth anymore.  Walton's (not John Boy or Jim Bob) Walmart are in that group among others.

[Over 29 years of fanhood]

43 minutes ago, RochesterRob said:

  Where do you draw the line at?  100 acres can be very little in terms of an overall family farm or everything that is needed if vertical integration is there.  That the farm sells raw product retail or processes product to make it salable.  Apples or apple juice?  People in many facets of life are involved with other family members in order to make a living.  Many businesses are well past the boot strap stage in terms of starting from scratch.  My mother's uncle made a go of being a Chrysler-Pontiac dealer many years ago by constantly reinvesting in the business.  The margins are so slim at times you can't count on that in the auto business today.  Look at all the consolidation in the auto business.  It happened in part because as an average person with average means can't walk into a bank to borrow a million dollars to buy or build a facility.  If you try and tell a GM territory manager you want to be a Chevy dealer but need to operate out of a crap hole facility that would end the meeting and any hopes right then and there.  Too much consolidation in business as it is which results in higher prices to the consumer never mind an unfriendly tax system which would accelerate that.  By the way the Rockefeller's and Kennedy's are not big names in generational wealth anymore.  Walton's (not John Boy or Jim Bob) Walmart are in that group among others.

I only point to the Rockefeller’s because they’ve resulted in 140 years of billionaires.

 

Waltons another perfectly great example.

 

as far as how to delineate, it’s a problem to be thought about, but if society really values equal opportunity, target the generational wealth transfers that have absolutely nothing to do with someone’s work ethic, abilities and merit to society. 
 

just like Bill Gates capped his own children’s inheritance. 
 

The top 1% own 30+ trillion of wealth. The bottom half own 2.5 trillion of wealth.
 

Curtail the ability to build defacto royalty.  These are the same people that control and influence all the worst aspects of our political systems.