Even if one accepts that death should be a taxable event I don’t understand why it is applied the way it is for businesses, property, etc. The tax liability ought to be carried as something similar to a capital gains tax, levied only when the asset is sold. That way families wouldn’t have to sell the family business just to pay the taxes. Maybe you assess 5% of the liability every year to prevent a family from avoiding paying any tax if they never sell the asset.
OTOH, I suspect that forcing people like the O’Malleys to sell their business is a feature for some in this country. After all, they are rich so we have to punish them for their success.
What happened to the O’Malley’s happens with all sorts of family businesses, yet Democrats still claim to care about mom and pop businesses.
Democrats only care about “mom and pop businesses” if the business is something to do with hemp or really ugly clay pots, and they’d rather it was a “mom and mom” or “pop and pop” business.
Does the Weather Underground count as a mom and pop business?
No, that would be a NGO, probably tax-deductible.
Blaming it on the inheritance tax is an oversimplification. Peter O’Malley and his sister owned a volatile, illiquid, undiversified enterprise that he claims was losing money. They had 13 children, and apparently none of them was emerging a successor to lead the company when O’Malley retired, and he was aging. They had an opportunity to sell for over $300 million. They had plenty of reasons to sell beyond tax planning.
Certainly the tax wasn’t the reason News Corp. sold the franchise later.
Actually this is also an example of poor estate planning. If they had placed ownership in a closed corporation the shares could have been distributed to the different members of the family while he was alive. The taxes could then had been handled via revenues, a bond issue or sale of a limited portion of the sales outside the family, while the family retained controlled of the corporation and the team.
And it should be noted that a major lawsuit could have the same impact if there is not a corporation structure to shield the family.
This is why family firms especially NEED a good CPA.
I see that Governor Brown threw a large bone to the prison guards union. Maybe the next governor will be the serious one.
This is why family firms especially NEED a good CPA.
While this is good advice, Thomas, it’s worth noting that government is very good at creating rent-seeking. Tax consequences shouldn’t have the impact they do. My view is that estate taxes and other such things should be manageable enough so that if a business is profitable both before and after the death of a owner, then that should in itself be enough to pay for whatever taxes exist on the business as a result of the death.
Karl’s right. When people’s financial decisions are affected more by questions of tax impact than the direct questions of, “Is this thing I’m thinking of doing with my money worth it to me?”, the result is unsustainable market distortion that leads to, well, 2008.
In an age when we can transport goods around the world in days and have access to more information about goods and services at our fingertips than our 19th-century forebears could have learned in a lifetime, it might be worth experimenting with the idea that an economy based on people paying what it’s worth to buy what they want could lead to more economic stability than one based on the central-planning-lite that comes from a tax code with its own gravity well.
Even if one accepts that death should be a taxable event I don’t understand why it is applied the way it is for businesses, property, etc. The tax liability ought to be carried as something similar to a capital gains tax, levied only when the asset is sold. That way families wouldn’t have to sell the family business just to pay the taxes. Maybe you assess 5% of the liability every year to prevent a family from avoiding paying any tax if they never sell the asset.
OTOH, I suspect that forcing people like the O’Malleys to sell their business is a feature for some in this country. After all, they are rich so we have to punish them for their success.
What happened to the O’Malley’s happens with all sorts of family businesses, yet Democrats still claim to care about mom and pop businesses.
Democrats only care about “mom and pop businesses” if the business is something to do with hemp or really ugly clay pots, and they’d rather it was a “mom and mom” or “pop and pop” business.
Does the Weather Underground count as a mom and pop business?
No, that would be a NGO, probably tax-deductible.
Blaming it on the inheritance tax is an oversimplification. Peter O’Malley and his sister owned a volatile, illiquid, undiversified enterprise that he claims was losing money. They had 13 children, and apparently none of them was emerging a successor to lead the company when O’Malley retired, and he was aging. They had an opportunity to sell for over $300 million. They had plenty of reasons to sell beyond tax planning.
Certainly the tax wasn’t the reason News Corp. sold the franchise later.
Actually this is also an example of poor estate planning. If they had placed ownership in a closed corporation the shares could have been distributed to the different members of the family while he was alive. The taxes could then had been handled via revenues, a bond issue or sale of a limited portion of the sales outside the family, while the family retained controlled of the corporation and the team.
And it should be noted that a major lawsuit could have the same impact if there is not a corporation structure to shield the family.
This is why family firms especially NEED a good CPA.
I see that Governor Brown threw a large bone to the prison guards union. Maybe the next governor will be the serious one.
This is why family firms especially NEED a good CPA.
While this is good advice, Thomas, it’s worth noting that government is very good at creating rent-seeking. Tax consequences shouldn’t have the impact they do. My view is that estate taxes and other such things should be manageable enough so that if a business is profitable both before and after the death of a owner, then that should in itself be enough to pay for whatever taxes exist on the business as a result of the death.
Karl’s right. When people’s financial decisions are affected more by questions of tax impact than the direct questions of, “Is this thing I’m thinking of doing with my money worth it to me?”, the result is unsustainable market distortion that leads to, well, 2008.
In an age when we can transport goods around the world in days and have access to more information about goods and services at our fingertips than our 19th-century forebears could have learned in a lifetime, it might be worth experimenting with the idea that an economy based on people paying what it’s worth to buy what they want could lead to more economic stability than one based on the central-planning-lite that comes from a tax code with its own gravity well.