If I save (the way I generate capital is through forbearance and saving) money and invest it to the point where my children and their mother will be taken care of (including therapy and special needs and college education paid for through my estate) why should the state or Federal government take one red cent of what I have managed to accumulate in the event of my/our untimely death? And so what if I want to continue working and saving and investing in an effort to get my children a leg up in business and finance? Why hate people who do that?

The biggest problem the estate tax lovers have is they are pigs. Although I don’t live in Oregon and never will due to its obscene political climate, high taxes and cost of living, as I understand it in Oregon estate taxes start at $1 million. The current Federal cut off of $5 million is more like it.

Pigs? Is that an animal farm reference?

Why is it the same people that favor untaxed inheritance are the same that spout the bootstrap theory of economic success? If it really were all about hard work and intelligence parents and their money wouldn't matter.

As it is the estate tax impact is easily mitigated and even avoided altogether. Also the children of the well off are going to be well off anyway due to increased connections, education and a culture of success. Zero death tax does make it all the easier.

I'm a fan of the estate tax but only with a massive exemption. It's meant to stop hoarding over generations, combating an entrenched and hereditary oligarchy. This is good for democracy but annoying to the individual. $5 mil exemption might be a little low, bump it up to $10 mil and tax it at the income tax rate and you got my vote. That's enough to combat oligarchy but not impact the small fry.

How about the classic example of the family far that has to be sold to pay the inheritance tax?

Is that a reality?

Thanks
JK

No one has ever produced an actual family whose farm was forced to be sold to pay estate taxes. And with all the death tax haters out there, if a real family existed with that as its true story, it would have been put on many a billboard.

The reason family farms get sold when the parents die is because the kids think that farming sucks.

BTW, Newleaf, the Oregon estate tax is a bit of a joke. There's no gift tax to back it up.

So, Jack, you believe in double taxation? Honestly, that surprises me.

I'm paying taxes now at very high rates. (To a state government that is not very well managed. I wouldn't mind so much if it was a well run state.)
If I have any left to leave my kids, why should they pay taxes on it again?

The notion of double taxation is based on an incorrect view of how taxation works.

Money is not taxed, events are taxed. A single dollar is subject to unknown numbers of taxes depending on events. It never gets a little stamp on it that says, "taxes paid."

The size of the tax is based on the size of the event. Get paid, tax due. Sell property, tax due. Own property at the tax date, tax due. Die and pass wealth, tax due. Buy something, sales tax.

When you or your estate engage in a taxable event, you owe the government money. Passing wealth at death is one of those events. There ends up being a good, long term reason for busting up huge hereditary estates. Mentioned above.

People worried about the estate tax nearly always forget that you have to have a rather large estate remaining after all bills are paid in order for it to matter anyway. I think that exemption is set a little low.

As for farms being sold? That doesn't happen. What really happens is kids hate farming because we've all been taught that going to school and sitting at a desk 50+ hours a week has more prestige. So the farms get sold when the folks die.

I'm just amused that these folks are using a report authored by Arthur Laffer, the inventor of the egregiously moronic 'Laffer Curve', as rationalization for their antisocial behavior.

Nothing like relying upon a "one handed economist", and a 'kept' one, at that, as an apologist for their asset wetdreams. Laffer is a minion of Dick Cheney. I would advise everyone to toss that crap into the trash. It's more than past time for the wealthy to start dragging their weight in a society which has made it possible for them to be as wealthy as they are now.

Estate taxes take from those who have, and give to those who deserve it more. We all know dead people don't deserve nor need their wealth anymore, so the state rightly takes a large chunk of it during the transfer events JO speaks so highly of. Who better to decide who needs that wealth, the dead person's Trustee or Executor, or the state?.

Oh Puleeze!
I wrote a fairly large check to the State of OR when my mom died 3 years ago. At that time the OR tax was on anything more that $1 million dollars. The fed rate was for over $3 million. Her estate was less than $3 million, after we gave away money and assets, to bring down the total value, so no fed tax was paid.
My personal feeling is that $1 million is probably too low a level; $3 to $5 million is probably about right range for tax free inheritance. A million dollars just isn't that much money any more. Anything over $5 million should be taxed, and probably at about 50%.
The kids and grandkids should be providing for themselves. Who says parents "owe" their offspring an inheritance?
I don't know the exact percentage of people who would fall into that category, but it isn't very many. The 1% can afford it and for the good of the country estate taxes should be used to collect revenue.
I may not approve of all the way government money is spent, but I understand the need.
OK fellow bloggers...have at me!

If only the state could do more.
Like tell us what kind of lightbulbs,shower heads,toilets,trees to plant,cars to drive,where to live , then the environment would be happy again. So, whats a little double taxation gonna hurt?
You're not against the environment , Are you ?

So should citizens want to give up the military, wars, highways, education, home loans, any controls on food safety, drugs, or transportation, the TSA, banking and investment rules (even if they are at present, wimpy in the extreme), police and fire protection, national parks, medicare, medicaid, regulation of any foreign or domestic trading and commerce, the entire department of justice, and all the other cabinet positions...oh hell...just eliminate the entire government and let total anarchy reign.
Mad Maxx rules

Thanks Harry and fancypants for getting it.

The rest of you, can you give me some motivation to continue working hard only so the state can redistribute MY "wealth" to people other than those I choose?

Do you realize that many "estates" leave bequests to charitable and environmental causes? People who accumulate assets are not evil.

And JO, I don't need education on how taxation works -- that's my background. You say I have "an incorrect view of how taxation works." No, my view is different than yours. I simply don't agree that all "events" should be taxed.

Inheritance is the most unfair and least meritocratic form of wealth transfer there is. It preserves and perpetuates all sorts of unjust racial and social inequities (how many African Americans, whose ancestors' wealth creation was all stolen from them through slavery, can look forward to a substantial inheritance even today?) Inherited wealth also does doing nothing to foster a work ethic or sense of responsibility in its beneficiaries, and too often leads to a life of idleness and recklessness stemming from a totally unearned sense of entitlement. Just pick up any gosssip tabloid for proof.

In my view, the most anyone should be allowed to inherit is somewhere in the neighborhood of $200K - enough for a good solid start in whatever line of work a heir might want to pursue, but not enough for a lifetime of idleness and socially destructive behavior. Everything else should either be willed to the charity of one's choice or return to the public treasury. Let your descendants earn their own living. You'll be doing them a favor.

I agree, semi-cynic.
And...if one wants to "give" to ones' relatives when they re "starting out" one can do that at the rate of about $13,000 a year every year, tax free, and to as many people as you want.
There are all sorts of other ways to get around the inheritance taxes, especially if you are really, really, really rich.

I think a legal system which debases itself to the sanctity of the contract should feel ever so comfortable collecting huge portions of the estates of those who benefited from that largess.

I agree wholeheartedly with Ptl Native and Semi-Cynic (are you a trucker?)

Every estate needs to be taxed as long as there are reasonable exclusions. The cut off line needs to be just a teensy bit above mine.

Well crap.
Now I'm a racist for wanting to pass a little along to my children..
Thanks for once more proving the moral insanity of leftists !

Hey Portland Native, if $1 million just isn't that much money, you'll be thrilled to know I only need half of that for my bitchin' business idea. Can you cut me a check?

I feel sorry for you L. O. -- really.

I work hard at my job. And my job is to make things better. I am rewarded for my efforts with money.

If you work hard for the sole purpose of making more money, well, this quote from a scene in the motion picture Key Largo (Bogart and Edward G. Robinson) comes to mind:

http://www.youtube.com/watch?v=HWa6vsXOKAU

Like an earlier commenter, a friend recently suggested that $1 million is just not that much money and that we should increase the exemption for the Oregon estate tax.

I asked her what percentage of estates she through should pay. What she didn’t realize is that after transfers to spouses, gifts to charity, and deductions for debts and for medical, funeral and accountant expenses, few estates are valued at more than $1,000,000. In the typical year 32,000 Oregonians die, but only 730 estates owe any Oregon estate taxes. That’s 2.3%.

If my friend’s son inherits only $1,900,000 instead of $2,000,000, will he be ok?

It’s a matter of priorities: a week of K-12 education for all our kids or more money for affluent kids?

The estate tax is a tax on the innumerate in the same way as the lottery. If you can't plan your estate well enough to avoid it then you deserve to be taxed.

Jack,

You don't think anyone has ever been forced to sell a family farm (or business) to pay estate taxes??

Don't you ever talk to estate tax people? It happens all the time.

My next door neighbor is going to be forced into that at some point. Older woman, cash poor, lots of land that is now inside the UGB. No way to pay the estate taxes so the family farm will be sold to developers. Cash poor and land rich will do that every time. There really aren't good estate planning tricks available to people who don't have any cash.

Andy, please provide AN example. That's all Jack is asking for. Don't pass along second hand information from an estate tax person who tells you this happens "all the time."

The claim that "family farms" (only those "family" farms worth > $1,000,000, btw, and even more at the federal level) or "small" businesses (those apparently without good accountants or estate planners) are being sold to pay the inheritance tax is a canard.

The claim is often made. The facts are never provided.

Your friend? It's not HER that "pays" the estate tax--it is her heirs. Are you sure they don't have the resources, or that they are as committed to the "family farm" as you believe, or that that "farm" isn't producing income so that a simple business loan could cover the tax? Or she could start transferring ownership to family and relatives now.

BTW L.O., if taxes are your background, then you know very well by careful estate planning, gifting, and other legal means, you can minimize or eliminate almost all estate taxes. If you leave portions to charity then this REDUCES YOUR TAX. You know this very well if you REALLY know taxes. You aren't believable.

I think if you drive around in Washington county around Aloha and Beaverton you can find some examples of family farms that ended up sold on the owners death..

Many kids in Washington county do not want to farm. Many are not up to it. The point of the death tax / estate tax is that it is intended to prevent the establishment of financial dynasties. Nevertheless, the tax does not take a big nip out of the estate and really does not function to stop dynasties. In my opinion it ought to be far more progressive. In today's bought off politics passed on fortunes are a means of social control and the 97% of us not at the tippy top have less and less of the pie.


I imagine you are with me in the 97%. I see so many people who with half a picture of this issue argue against their own interest.

If anyone really wanted to prevent the establishment of financial dynasties then they would be lobbying to get rid of the estate tax.

Nature has her own method of destroying financial dynasties and her means are much more effective than the estate tax. The estate tax actually creates financial dynasties. It forces money into perpetual motion machines such as trusts and foundations which have long lives.

If the money was just handed over to the heirs it would be gone by the third generation. Rich kids are spoiled and often foolish with their money, but rich grandkids are usually idiots and fools. Just pick up a newspaper and see for yourself.

I retired as the Inheritance Tax Auditor for the State of Oregon, 3 years ago.

Oregon law allows estates with farm, forest, and fishing property, a special $7.5 million exemption. If they choose to continue farming, they are allowed 14 years to pay the tax. During my tenure, the only family farms being sold were for families, who did NOT want to continue farming. When those farms are close to growing cities with avaricious developers, the heirs have a huge profit motive. Most estates that are large enough to owe, have enough liquidity to pay the taxes.

I agree with the taxation analysis of JO. "Selling the Farm" or Double Taxation" are just red herring terms used by the people trying to repeal estate tax.

L.O Resident: Using the term DOUBLE TAXATION makes you sound ignorant. So I assumed you were. So I educated you. I didn't mean it as a personal affront.

I don't agree that all events should be taxed either.

The "double-taxation" claim is a bunch of nonsense. The estate tax is a tax on the value of the estate. Much of the value in an estate has never been taxed.

Nevermind that Oregon has no sales tax so there is no tax paid when many of the assets of the estate are purchased, if they were purchased in Oregon.

What really matters here is that assets such as life insurance proceeds & the appreciation on paper of real estate, financial investments and certain types of collections (art, stamps, coins, antiques) count as part of the estate for determining its value. However this appreciation in value has never been taxed.

Appreciation, also known as "gain", is taxed when an asset is sold. If it's still in the estate at death, then clearly it hasn't been sold yet.

Inherited assets are deemed to be "long-term" assets when they are sold, even if they were bought the day before the death. Being long-term assets, they then qualify for the extremely low capital gains rates.

In addition, when these assets are sold after death, they receive this appreciated basis, instead of their original cost basis, so their gain on sale is neglible. In fact it is often a loss if there are selling expenses, like one sees when selling real estate.

Life insurance proceeds are not taxed when they are paid out to the beneficiaries. The only time they are taxed is at the estate level.

Most Oregonians won't have an estate worth $1 million when they die. Most AMERICANS won't have an estate worth $1 million estate, much less one worth $5 million, when they die.

Don't be horn-swaggled by any of this "death tax" nonsense. It just another way the rich want to use to duck paying their fair share of social costs.

life insurance proceeds * * * count as part of the estate for determining its value.

Actually, if planned properly, life insurance proceeds are not subject to estate tax. So the avoidance scenario is even more egregious than you think.

Inherited assets are deemed to be "long-term" assets when they are sold, even if they were bought the day before the death. Being long-term assets, they then qualify for the extremely low capital gains rates.

A minor advantage. "Long term" is only one year, and so this matters only if the assets are sold within a year of the decedent's death. Moreover, since, as you point out, the income tax basis "steps up (or down)" to fair market value at death, there usually isn't much gain or loss to talk about if the property is promptly sold by the estate.

The clean solution to all of this would be to tax capital gains at death under the income tax. It would still be portrayed as a "death tax" by the 1% and their dupes, but it would avoid all criticisms of "double tax." It would insure than only unrealized appreciation is taxed to the estate. Fine with me.

However you work out the taxing of the capital gains, the anti-tax crowd will scream "double-taxation" because it sells their product.

These same people don't complain about the "double-taxastion" that almost everyone experiences: our wages being taxed. After all, at one point the money those wages are paid with were income to our employer and were "taxed" then. And so on back up the transaction chain.

This goes back to events being taxed, not income.

Employers generally get to deduct salaries paid, and so they are not taxed under the income tax on the money they pay their employees.

I don't understand all this talk of double taxation. My 92 year old mother will never pay a cent in estate tax, because she will be dead. My parents raised three children, none of whom are sitting around waiting for the gravy boat when she dies. We are all successful, and none of us have paid a penny in taxes on Mom's assets.

When Dad died, Mom didn't pay any estate taxes, because all inheritance by a spouse is exempt. Still no double taxation.

Whatever we inherit will be a big wad of money that we didn't work for and didn't earn. I can't see any justification for making that tax free.