I hadn’t realized this.
It explains why Warren Buffet likes it.
Far from merely preventing people from buying “second yachts,” the death tax routinely forces small to medium-sized private businesses with a few million dollars in assets to be liquidated, simply in order to pay the tax. Such businesses usually have to be sold to large corporations at distressed prices. Two famous examples are the once-family-owned Buffalo News and Dairy Queen — both snapped up by Warren Buffett’s Berkshire Hathaway.
Moreover, the death tax is an effective $12 billion annual subsidy to the life insurance industry, according to Dick Patten of the American Family Business Institute. As the purveyors of the financial product of choice for avoiding the tax, the industry has lobbied heavily to keep it in place. (It should come as little surprise that Buffett, who also made a fortune in life insurance, is a big supporter of the tax.)
Leeches.
FYI the link is busted (Their problem, not yours.)
Just go to the corner and search for “Death Tax Foolishness”
Leeches are sometimes beneficial, and they drop off the host when fully fed.
These guys are looters, pure and simple. You’re confused because they don’t burn the village after they pillage.
I have yet to hear a logical reason for this tax. Stealing from the dead and bereaved is not something I would want associated with my name.
The other side of the coin is that if you have a lot of relatively liquid wealth, you set up a tax-exempt foundation with it. Your children get “jobs” with the foundation so they have respectable “careers” no matter how useless they are, and they can’t drink or drug it all away at once. And you pay no taxes on it, death or otherwise.
I believe Buffett has a share in the Bill and Melissa Gates Foundation. He didn’t even bother setting up his own.
The Buffalo News doesn’t really support the argument of the quoted post.
Kate Butler, the last private owner, rejected repeated advice to take legal steps that would have considerably reduced her estate tax obligation.
When the paper was sold, the price the heirs got was only a distressed price in the sense that the property itself was distressed: it was a not very profitable six day a week evening newspaper competing with the morning newspaper in Buffalo, which was hardly a growth market. It was heavily unionized in a very pro-union town. Buffet was not the only potential buyer.
Buffet eventually turned it into a profitable property, but only after making a lot of changes, adding morning and Sunday editions, absorbing millions of dollars of losses and a strike and fighting off a costly antitrust suit that was later overturned. It took a lot of skill and deep pockets.
The heirs got the equivalent of over $100 million in today’s money for the newspaper. They also sold television and radio stations on top of that.
“…routinely forces small to medium sized businesses with a few million dollars in assets to be liquidated” More evidence, please. Buffalo News doesn’t fit my definition of a small business, or a few million dollars, or routine.
If it was a routine thing, I’d expect examples more recent than thirty years ago.
I’m a big fan of family owned businesses, but the large corporation owning the Buffalo News has not been such a bad thing for the employees or the community.
Will, I wouldn’t count Dairy Queen as a small or
Medium Sized business either. The McCullough Family
sold DQ to Berkshire in 1998, while it currently has 5900
location, it must have had at least 5000 locations.
Now given B-H bought DQ corporate for 585 Million,
this was by no means a small or medium sized business.
http://findarticles.com/p/articles/mi_m3190/is_n44_v31/ai_20040408/
IDQ was turning over $2.49 Billion in profits, so,
that is not a small business.
If the National Review and the Randians could stop
crying for billionaires suffering under oppressive taxes
they may get some better ideas for our nation.
one minor error.
Berkshire did 2.49 Billion in profits, i misread that part.
IDQ reported 400 Million in proceeds.
Wait a second – Dairy Queen, a franchise with almost 6,000 stores in nearly 20 countries was a “small business sold under distress?”
A company with 2007 sales of $476 MILLION is some kind of “small business?”
A few posts ago Rand and the tea baggers were worried about huge deficits projected by that CBO chart. Now Rand is concerned about the injustice of taxing heirs on the part of their inheritance that exceeds $7 million. Clearly, Rand would rather make sure that trust fund babies never, ever have to work than chip away at that scary deficit.
Rand, it surprising that I don’t take your anti-deficit fervor at face value? Why not admit that charts aside, you don’t care about the deficit, you just care about the government not spending rich people’s money on programs for the less fortunate?
Jim, I’ve got your tea bag right here.
Taxing the dead is abhorrent no matter how much money they have. Of course, since you believe no one should have more than anyone else, why am I not surprised? Or is it just that YOU should get to decide how much more?
Mabey Rand simply is refusing to support an immoral policy as he has done so with a near-perfect record to date.
Would but that you would seek to emulate him.
Bill
Taxing the dead is great politics. Dead people don’t
complain, they don’t vote. As for the morality of
estate taxes, I’d propose that a decent estate tax would
mean we’d have never heard of Paris Hilton or George W Bush.
Mr. Maron asked what reason this has. In theory, it’s to prevent property from remaining in a single family like old landed nobility and to increase upward mobility. It may do that, but historically it’s part of Marx’s strategies to ease Socialism/Communism into a Democracy, like the minimum wage.
I seem to remember Megan McArdle supported this for the theoretical reason, regardless of the history and that’s a pretty good source.
Not that anyone cares, I’m sure, but I come from a family that also believes that inheriting wealth isn’t much good; if one’s wastrel children can’t earn their own money, they can’t be trusted with an inheritance; I think this is what Buffet has said (at least publicly). But, I also think there are long yards between what I think is right and what should be law.
I don’t know where I heard this, but one idea I’ve seen is that the death tax should be extended, not removed, in concept.
One reason for the ever-increasing concentration of resources into megacorporations is that corporations are legal persons (with some differences) that are immortal – and therefore never have to pay such a tax. This is also one of the reasons for the current problem of corporations “too big to fail” getting enormous subsidies.
The idea is that every corporation should have a limited lifespan, for example 70 years, and then be compelled to break up into pieces of less than a specified size – none of the officers of the new entities to be the same people.
I am quite aware that some things (steelmaking for example) can’t be done in small units. But just about anything else, banking for example, can be done by entities much smaller than those currently doing it, and in my admittedly unqualified opinion should be.
Notwithstanding all the former, the inheritance tax threshold ought to be a lot higher than it is. In the UK it’s approximately $300,000. Far too low. But on the other hand, is there any particular reason why the offspring of someone who got his fortune by hard work should be handed a fortune bigger than most people dream of, for doing nothing except choosing the right parents? I don’t think so. And the Paris Hiltons of this world are an example of just one reason.
It’s obvious Fletcher and Jack are into class envy. Flecter, Paris didn’t choose her parents, they chose her. All I hear from you two is it’s unfair to inherit wealth. Well cry me a river. Following your logic Jack, proper family planning means we never would have heard of you.
Bill Maron – well it’s obvious to me that the original article cited was ill-informed. Claiming that a multi-national company like Dairy Queen was somehow a “small business” suggests that the original author either didn’t do their research or is deliberately trying to mislead.
BTW, the “death tax” doesn’t tax the dead, it taxes the living heirs of the deceased. I don’t see why it’s any more immoral than any other tax.
People with sufficient resources don’t have to worry about the inheritance tax. You think Ted Kennedy or Nelson Rockefeller worry about paying it? Hardly. They know the loopholes and have sufficent means to exploit them – that’s how they inherited their money in the first place. However, most to the value of small businesses and farms is tied up in the equipment and/or land. These businesses are asset rich but cash poor. The only way to pay the estate planners is to sell off parts of the business.
Larry J:
If the rich could avoid the estate tax there wouldn’t be such a push to get rid of it — all of the people it applies to have enough money to get good legal and accounting advice.
And cash poor heirs don’t need to sell their businesses; they can borrow against the value of the business. Businesses that need cash do it all the time. Remember that the tax only applies to the value of the business beyond the first $7 million — the heirs will still have plenty of equity.
Larry
Consider a farm, the Estate tax didn’t cut in until it
was 2.5 Million and then was 50% on top of that.
Consider a farm in most areas sells for $1,000/acre.
you can buy range land in west texas for $300/acre.
so say 3 SQ Miles is 1920 acres, maybe 1.9 Million,
add 50K for the farm house. a tractor, 100K, combine
300K, other equipment 200K. all that before
your first dollar of estate tax is paid.
If you do even a dollop of estate planning, you can
girt 13K/year to the kids per parent, so, spend
10 years gift 260K into a life trust for the kids,
it’s a decent nut you pass on.
As for a small business, say a DQ? Those sell for
$300K, so, unless you own 10 DQ’s, you once again
don’t need to worry about it.
now if mike and rand want to cry for the rich, that’s cool,
but, say it.
as for the estate tax being marxist? The first US estate tax was instituted in 1797,so Marx appears to be a time traveller.
BTW, the “death tax” doesn’t tax the dead, it taxes the living heirs of the deceased. I don’t see why it’s any more immoral than any other tax.
BS, if there isn’t any living heirs, the state takes it all. If their are living heirs, the taxes can either come out of the estate or the heirs can pay the tax in order to avoid liquidation (if they can afford it).
I didn’t read the article. I simply didn’t need to. My family just went through this stuff with my grandparent’s estate. Simply put, Bush’s $2 million mark gave us enough room. If that didn’t happen, we would have to sell land the family has had for nearly a century to a major corporation, that was unwilling to purchase it for 1/4 of it’s tax appraised price. This is what liberals call redistribution.
I know of family farms being lost because of this absurd tax, because the land value was high although the cash flow from the farming business wasn’t nearly enough to pay greedy liberals.
If the death tax is okay because it’s avoidable, why is it necessary? Is there some social good to paying lawyers and accountants to implement said avoidance that I don’t know about?
This is what I always felt: the death tax concentrates wealth for the reasons you give. It does not help redistribute wealth which is what its proponents want.
Expensive regulation has the same effect: putting small businesses out of business and concentrating wealth only in larger businesses that can afford the team of lawyers necessary to deal with it. Thus we concentrate wealth in larger businesses that probably will care less about the local environment or following the law than a small business of people who live in the community will care.
All you proponents are pushing is redistribution. Chris almost has a glimmer of truth. income taxes while necessary are still confiscatory. We are taking money to provide infrastructure so people can get to work and spreading the cost across everyone. This is a reasonable rationale. Taking someones possessions because they’re dead has no reasonable rationale. Tax has already been paid on the cash and assets unless it’s a tax deferred IRA or 401k. This is double taxation. Sorry about your loss, I’ll take half to ease the pain. That is immoral, like so much of the Socialist agenda. Have nots love to take from the haves.
Again Jim thinks he gets to decide how much someone should have. Jack is rationalizing confiscating someone else’s property. Talk about hubris.
“Not that anyone cares, I’m sure, but I come from a family that also believes that inheriting wealth isn’t much good;”
Buffet believes the same thing. Actually if you read the Millionaire Next Door he goes on and on about not spoiling your kids.
But that is the difference, it’s not inheriting the wealth, it’s spoiling your children when they are young that affects them negatively. In their 30s or 40s, by the time they receive an inheritance, their personality is already set, you’re not going to corrupt them. But while they are young is when you teach them to work hard and to have good values.
it should also be noted that Buffett’s Berkshire Hathaway bought the life insurance division of Safeco company. As such, Buffett makes money selling insurance to people trying to mitigate the estate tax. One could argue that he supports the estate tax more for mercenary, than altruistic reasons.
Consider a farm in most areas sells for $1,000/acre.
you can buy range land in west texas for $300/acre.
You obviously have never priced farmland in most of the country, especially farmland that’s located outside of a growing population center. Land in those areas often costs many thousand dollars per acre, driving up the value of the farm on paper. However, the only way to get cash is to borrow against the land’s value (increasing debt in a stupid way just to avoid blood-sucking leeches) or sell off some land. That’s hardly a good way to run a farm and the only reason some people have to is in response to the greed of people like you.
You obviously have never priced farmland in most of the country, especially farmland that’s located outside of a growing population center. Land in those areas often costs many thousand dollars per acre, driving up the value of the farm on paper. However, the only way to get cash is to borrow against the land’s value (increasing debt in a stupid way just to avoid blood-sucking leeches) or sell off some land. That’s hardly a good way to run a farm and the only reason some people have to is in response to the greed of people like you.
The world is about more than running a family farm. I have no problem with turning farmland into city. The farmer can always buy cheaper farmland elsewhere or get a different job.
Let me add that I’m not advocating estate taxes here. But farming is a notorious poor business with persistent cashflow problems. It’d be a lot smaller sector, if it weren’t for the massive government subsidies.
Further, I don’t see the reason for the hate on old Warren Buffet. So he’s a scavenger and favors political policies that benefit him. This wouldn’t be the first time someone has confused policies that benefit them or their identity with policies that are morally right. At least Buffet’s activities increase the value of estates and insure that those assets are decently managed.
Substitute “small business” for farm and the problem is the same. Should a small business owner have to sell off assets in order to pay (or avoid paying) the inheritance tax? It’s said that “the power to tax is the power to destroy” and this was never more evident than in inheritance taxes.
You have to tax something, and given the choice you should tax things you want less of (e.g. cigarettes, gasoline use, heirs inheriting huge fortunes) and not what you want more of (earned income). The exemption is so high ($7M for a couple) that it affects only a handful of estates. The people leading the charge against it aren’t small farmers or business owners, it’s families like the Waltons where billions are at stake.
There’s a long distance between $7 million and billions. I know of a lot of small businesses like trucking firms that can easily bust the $7 million cap due to the value of their assets. Face it, your greed for other people’s money is what drives your opinion, not any sense of “fairness”.
It’s not the state’s money. How’s that for a reason to abolish the death tax? Assertions about the evils of concentrated wealth are sophistry, given that contracts and other methods of transferring property from one person to another have long existed. Arguments for inhertiance taxes are essentially arguments against private property.
The fact that other private wealth and income also don’t belong to the state, yet are subject to tax, is no reason to commit a second wrong by confiscating the post-tax wealth of a lifetime. Also, the death tax generates little or no net revenue for the state. What justification, other than the crudest envy, is there for it?
Finally, I would think that more people would see the advantages of encouraging non-state, non-corporate wealth accumulation. A healthy society has multiple, competing power centers, and you can’t have those without private wealth. Why the urge to centralize and monopolize wealth accumulation in the government?
Jim, you wrote:
You have to tax something, and given the choice you should tax things you want less of (e.g. cigarettes, gasoline use, heirs inheriting huge fortunes) and not what you want more of (earned income).
Why do we want less cigarettes, gasoline, and heirs inheriting huge fortunes? I think the premise is broken which doesn’t bode well for the conclusions.
Karl, farm’s do have small cash flow yet can be self-sufficient and profitable because the capital costs were taken care of a generation before. Lots of businesses operate this way just fine. If a government needs the farmers land to grow urban environments, then thats provided by eminent domain.
And its pretty easy for scavangers to make a profit on estates decimated by taxes. That’s the point, the farm or small business is profitable and doing fine until, because of a death, the goverment then decides to steal 40% or more of the farm’s or business’s capital investments. All the scavanger needs is liquid assets slightly above the governments 40% to take the business. Once the capital is taken over at half price, its pretty easy to look like the economic hero.
The reason our tax code is so cumbersome is because of exemptions like the death tax.
Income is income.
If My employer transfers money from himself to me, I have to pay taxes on it.
So why shouldn’t I have to pay taxes if I pass money on to my children. It’s income to them, is it not?
I own a family business and we employ our daughter. Should I be allowed to contribute tax free to her inheritance instead of payroling her?
Listen. If we are going to want a strong military, medicare and all the other goodies that the government provides we are going to have to pay for it.
Borrowing money from the Chinese isn’t the way to finance our country.
Sure, I would love to reduce my taxes. But with our 12 trillion dollar debt perhaps we should start thinking of ways to pay it off instead of ways to duck it.
After all, the Chinese aren’t going to let us out of our obligations to repay the debt