Biden Estate Tax Proposals

[Munger_Disciple]

Biden is proposing massive estate tax hikes including: (1) Lowering exemption amounts to $3.5M (from >$11M today), (2) Getting rid of step-up-in basis and (3) Increasing estate tax rates above the exemption amount. It is not clear how likely these proposals become law. However it looks like there is already a loophole to avoid these punitive tax increases in case they are approved by Congress:

 

https://www.bloomberg.com/news/articles/2021-09-02/richest-americans-have-tax-loophole-that-s-legal-easy-to-exploit-hard-to-close?srnd=premium

Edited September 2, 2021 by Munger_Disciple

[Guest]

Good for him. Hopefully they close the insurance loophole too.

[thepupil]

It’s not a “loophole” and life insurance is available to everyone*. All life insurance bypasses estate tax.

 

This is just a way of doing non traditional investments in a life insurance wrapper. it’s like variable life insurance but with hedge funds, credit etc. 
 

*though your standard Northwestern Mutual one will probably have higher commish and will invest in the general account and make a low single digit IRR. 

Edited September 3, 2021 by thepupil

[TwoCitiesCapital]

Estate taxes and inheritance taxes are one of the few taxes I do NOT have an issue with. 

 

I think they're superior to income taxes in just about every way and you can effectively target those who you intend to with it. 

[JRM]

The issue with estate taxes comes when a family farm or small family business cannot be passed onto heirs and must be sold to pay the tax.  That, and anyone with enough money bypasses it anyways.

[DooDiligence]

www.jdsupra.com/legalnews/estate-planning-for-family-farms-what-88012/

[JRM]

7 minutes ago, DooDiligence said:

www.jdsupra.com/legalnews/estate-planning-for-family-farms-what-88012/

 

https://www.fb.org/market-intel/estate-taxes-are-a-threat-to-family-farms

[DooDiligence]

10 minutes ago, JRM said:

 

https://www.fb.org/market-intel/estate-taxes-are-a-threat-to-family-farms

 

Complicated problem.

 

Thune seems like one of the decent ones.

[JRM]

My general position is that the estate tax is good thing if it was actually enforceable on people worth over $100M.  It tends not to be.  

[ERICOPOLY]

1 hour ago, DooDiligence said:

 

Complicated problem.

 

Thune seems like one of the decent ones.

 

The farmers are no better than anyone else.  They can get a mortgage, can't they?  Such baloney.

 

The issue I have is when people talk like $1m is some huge massive sum.  Give me a break.  Assess the tax on estates north of $50m or $100m.  

Edited September 3, 2021 by ERICOPOLY

[DooDiligence]

17 minutes ago, ERICOPOLY said:

 

The farmers are no better than anyone else.  They can get a mortgage, can't they?  Such baloney.

 

The issue I have is when people talk like $1m is some huge massive sum.  Give me a break.  Assess the tax on estates north of $50m or $100m.  

 

I agree but am not intelligent enough to decide where to draw the line.

Edited September 4, 2021 by DooDiligence

[JRM]

14 minutes ago, ERICOPOLY said:

 

The farmers are no better than anyone else.  They can get a mortgage, can't they?  Such baloney.

 

The issue I have is when people talk like $1m is some huge massive sum.  Give me a break.  Assess the tax on estates north of $50m or $100m.  

 

I think we agree ideologically.  Practically, this is not how it works.

[ERICOPOLY]

24 minutes ago, JRM said:

 

I think we agree ideologically.  Practically, this is not how it works.

 

The taxes are paid by the smaller sum families that lack sophisticated planning.  That's why I prefer a $50m or $100m floor.  I hate the culture that estate taxes create:  families are motivated to gift $30k to each of their kids every year or whatever the tax-free gift limit is.

 

How about instead of incentivizing annual gifting, make the estate free of tax so long as you don't give them a dime while you live?

 

They really know how to generate trust-fund babies.

Edited September 4, 2021 by ERICOPOLY

[TwoCitiesCapital]

7 hours ago, ERICOPOLY said:

 

The taxes are paid by the smaller sum families that lack sophisticated planning.  That's why I prefer a $50m or $100m floor.  I hate the culture that estate taxes create:  families are motivated to gift $30k to each of their kids every year or whatever the tax-free gift limit is.

 

How about instead of incentivizing annual gifting, make the estate free of tax so long as you don't give them a dime while you live?

 

They really know how to generate trust-fund babies.

 

Or just eliminate the tax benefits that trusts create

 

Ultimately, I'd rather rac inheritance than earned money/wealth any day. We could absolutely make it work, but would required coordination between the IRS and Congress to close loopholes. 

 

For those with small businesses? Get a fucking loan and stop pretending like its a burden to inherit something of value that is worthwhile just because it's taxed a bit

[Gamecock-YT]

lobbyist will just come up with a new mousetrap. millionaire senators/congressmen are incentivized not to put something into law that's going to be potentially punitive to themselves.

 

they'll just close the current loopholes, make a big show while patting themselves on the back, and then call up their accountants/bankers to switch to the new loopholes. 

[Gregmal]

Its just another scam to screw the aspiring middle- upper middle class people. If your family already paid taxes on it, why does the government deserve anymore? Personally I think the estate tax should be 80% on any income earned as a result of being a "public servant" or government employee. Same for working at a public school/university. Do these tenured teachers really earn the $200k a year plus benefits? How much of it comes at the expense of those outrageous tuitions and bogus student loan programs? For the rest, anything over maybe $25M or $50M I think is a reasonable threshold. But $3.5M or whatever theyre proposing right now? What a crock. 

[JRM]

Interesting that under the proposed tax rule they will limit 1031 exchanges to $500,000.  I think they should eliminate it all together.

[boilermaker75]

2 hours ago, Gregmal said:

Its just another scam to screw the aspiring middle- upper middle class people. If your family already paid taxes on it, why does the government deserve anymore? Personally I think the estate tax should be 80% on any income earned as a result of being a "public servant" or government employee. Same for working at a public school/university. Do these tenured teachers really earn the $200k a year plus benefits? How much of it comes at the expense of those outrageous tuitions and bogus student loan programs? For the rest, anything over maybe $25M or $50M I think is a reasonable threshold. But $3.5M or whatever theyre proposing right now? What a crock. 

 

Some university professors are worth what they are paid,  , others not so much.

 

The high tuition goes for paying the faculty salary part of the research that goes on, which is necessary for the US to keep a competitive advantage now that Bell Labs, TJ Watson Research Center, TI Central Research Labs, RCA Laboratories, Dupont Research & Development Lab, etc. essentially don't exist, or are skeletons of what they once were.

 

 

Edited September 4, 2021 by boilermaker75

[Munger_Disciple]

10 hours ago, TwoCitiesCapital said:

Ultimately, I'd rather rac inheritance than earned money/wealth any day.

Perhaps you are not aware that there are large income taxes and significant capital gains taxes in the US. The proposed estate taxes and step-up-in-basis changes are in addition to  increases in income and capital gains taxes which are assessed on an ongoing basis every year. BTW Biden is also proposing to tax LT capital gains at the same rate as income for high earners. So it is not either/or, but tax everything. 

 

I agree with Ericopoly that the estate tax changes (if enacted) will really screw the families that don't have the resources for sophisticated estate planning and will not affect the truly rich.  

Edited September 4, 2021 by Munger_Disciple

[Gregmal]

2 hours ago, boilermaker75 said:

 

Some university professors are worth what they are paid,  , others not so much.

 

The high tuition goes for paying the faculty salary part of the research that goes on, which is necessary for the US to keep a competitive advantage now that Bell Labs, TJ Watson Research Center, TI Central Research Labs, RCA Laboratories, Dupont Research & Development Lab, etc. essentially don't exist, or are skeletons of what they once were.

 

 

Yea no you do make a good point there. My brother does a lot fo that stuff currently. Was at Stony Brook and now at Penn with their genetics team. Nothing but respect there. Many of his friends are the ones doing a lot of the covid research thats been making news. There was one recently about possible links to snake venom which was neat. The academic end I'm talking about the English and History professors making investment banker base salaries....Those estates IMO should be taxed higher than the estates of farmers who worked 5ams to 8pms for 60 years. The latter still not making any money but simply leaving a huge piece of valuable land at a low basis that their kids could not afford on market to market resets. 

[fareastwarriors]

Tax gap.

We can't even collect what is owed with current rates and rules.  

 

[wachtwoord]

20 hours ago, Gregmal said:

Its just another scam to screw the aspiring middle- upper middle class people. If your family already paid taxes on it, why does the government deserve anymore? Personally I think the estate tax should be 80% on any income earned as a result of being a "public servant" or government employee. Same for working at a public school/university. Do these tenured teachers really earn the $200k a year plus benefits? How much of it comes at the expense of those outrageous tuitions and bogus student loan programs? For the rest, anything over maybe $25M or $50M I think is a reasonable threshold. But $3.5M or whatever theyre proposing right now? What a crock. 

 

And once again Greg nails the thread.

 

Estate, inheritance, death taxes are the most unfair taxes out of the lot of them. It's already taxed wealth (usually several times over) and sometimes even originated abroad (in situ assets are covered).

[DooDiligence]

1 hour ago, wachtwoord said:

 

And once again Greg nails the thread.

 

Estate, inheritance, death taxes are the most unfair taxes out of the lot of them. It's already taxed wealth (usually several times over) and sometimes even originated abroad (in situ assets are covered).

 

Inheritance is a form of income and income is legit taxable.

 

Silver spoons don't feed based on merit. Misaligned incentives make for bad executives / legislators / legislation / adjudicators.

 

https://ips-dc.org/press-release-americas-wealth-dynasties-2021/

[ERICOPOLY]

 It's all fees fees fees for the financial services industry as families scramble for advice every time outrageous minimums are threatened by the Dems.

[ERICOPOLY]

On that note, which firm is going to have a blowout quarter from this?