Death tax repeal would only help rich people???

[Ben E Lou]

Link

OBITUARIES: MARIETTA: J.C. Hyde, wanted no wealth but farm Derrick Henry - Staff Saturday, March 6, 2004 J.C. Hyde was an unassuming farmer, land-rich but cash-poor. For virtually his entire life, he plowed by mule on his 127-acre farm along the Chattahoochee River in east Cobb County, land he had lived on since his father bought it in 1920. Surrounded by pricey subdivisions, it had become one of the largest tracts of undeveloped land in metro Atlanta.. The land survived the boll weevil and the Great Depression. Mr. Hyde intended to make sure it would survive developers. "I remember being there when a real estate developer drove up, as many did, and said: 'J.C. Hyde, I can make you a wealthy man,' " said Rand Wentworth, head of the Atlanta office of the Trust for Public Land from 1990 to 2002. "J.C. answered : 'But then I would not be happy.' " Mr. Hyde was plenty happy to live the way he did, in the log house he grew up in, with heat from a pot-bellied stove and water from a well. "I have running water," he joked in a 1991 Atlanta Journal-Constitution article. "I run out to the well and get it." Working beside his brother, William "Buck" Hyde, he grew sweet potatoes, corn, okra, green beans, peas and tomatoes, selling them from the back of a pickup truck near Marietta Square. In 1996, Mr. Hyde was selling a bushel of his "Gold Nugget" sweet potatoes --- Grade 1 --- for $16. After a long day's work, he might pick up his fiddle and play some music. Mr. Hyde was a bachelor, not given to idle talk. "I remember picking sweet potatoes with him for six hours and during that period he never said more than four words," said Kevin Johnson of Atlanta, Chattahoochee River Program coordinator with the Trust for Public Land. He lived with his brother, also unmarried. While the men tended the fields, their four married sisters took turns cooking and helping with the domestic chores, said Mr. Wentworth. When Mr. Hyde's brother died in 1987 and left him his share of the farm, the IRS and state revenue collectors arrived. They assessed Mr. Hyde with a debt of $467,000 to the IRS and $96,000 to the state for estate taxes. "This is all something new to me," Mr. Hyde said in a Journal-Constitution story in 1991. "I never owed anybody nothing." The private, nonprofit Trust for Public Land worked out a deal in 1992 with the National Park Service to buy 40 acres of riverfront property from Mr. Hyde for $1 million, more than enough to pay the taxes. The deeded land would become part of the Chattahoochee National Recreation Area, safe from developers. Mr. Hyde, meanwhile, could continue living and working there. J.C. Hyde, 94, of Marietta died Wednesday. The funeral is 2 p.m. today at Roswell Funeral Home. "I have never met a better conservationist than J.C. Hyde," said Mr. Wentworth, now president of the Land Trust Alliance in Washington, a national umbrella of conservation organizations. "He cared for that land like it was family, like it was part of his body. When he feared he might have to sell part of it, he said, with tears in his eyes, 'Losing part of this land would be like cutting off my arm.' " The future of the nearly 90 acres not owned by the National Park Service remains to be determined, said Mr. Wentworth. "The challenge now is that the land could be lost to subdivisions." Survivors include three sisters, Rosa Lee Stroup of Atlanta, M. Maglee Mitchell of Mableton and Gladys A. Holcomb of Marietta.

[Ben E Lou]

To further explain this story for those not familiar with metro Atlanta, in 1920, East Cobb was a rural area. Today, other than the Hyde farm, it is one of the wealtheist suburbs of Atlanta, and the farm is in a prime land area. That's why the value went up so much. Pity that he had to sell a third of his land to pay the Imperial Federal Government.

[Jon]

Well, the value must have shot up dramatically for him to have to pay the estate tax. Because the exemption is so high, the tax does not apply to an overwhelming majority of people who die. My conservative Trusts and Estates teacher (who was opposed to the estate tax but admitted that the phrase "death tax" was designed to make it a wedge issue) told us this as she told us the tragic tale of the Mara family who would be forced to part with the only thing they ever loved, the N.Y. Football Giants, when Wellington passes into the great big owner's box in the sky.

My point is that he is an exception to the rule....

[Ksyrup]

So the argument against repealing this tax is the same as was used against the Bush tax cut - it's unfair to those who never had to pay taxes in the first place?

[QuikSand]

What a poor, destitute man. Sitting on how many millions of dollars worth of property?

This might be a story to raise my sympathies for people who struggle to resist the lure of development (I strongly suspect this is not your point)... but I don't see how someone, anyone, with net assets up in the millions of dollars is someone who ought to be exempt from taxes on grounds of indigence.

[clintl]

It sounds like he came out OK on the deal. He still got to use the land, and the buyer is better equipped to keep it from development than he was, if that's really his main concern. And it looks like he probably got to pocket a couple hundred thousand dollars.

FWIW, I think the objections to estate taxes are misleading and overblown. When a person dies, the bases for capital gains of all of that person's assets are reset to the value at the time of death by law. This is probably a good thing, because it would be a hellacious task for the heirs to try to sort through the financial records and try to figure it all out. However, I don't think it's unfair for the government establish a tax to recoup the lost capital gains taxes. I think there's plenty of room for debate with regard to the formula or rates used, or the level that kicks it in. I would be fine with exempting the deceased's residence from the tax, and deferring taxes on family businesses until they're sold, so that families could keep them. But I support the basic concept of estate taxes. There is no reason that families members should get the free ride on capital gains of the deceased's assets.

[Ben E Lou]

Originally Posted by clintl

It sounds like he came out OK on the deal. He still got to use the land, and the buyer is better equipped to keep it from development than he was, if that's really his main concern. And it looks like he probably got to pocket a couple hundred thousand dollars.

By what standards did he come out ok though? By his? I'm rather skeptical of the "conservationist" slant in the story. I didn't get the impression that he was that political. It is fairly safe to guess that whatever money he got to pocket wasn't as important to him as his family land.

[clintl]

Originally Posted by SkyDog

By what standards did he come out ok though? By his?

By the standards of reading the information in the story, looking at where he was before, and where he was at the end, and seeing that while he did have to sell 1/3 of his land, he found a buyer that allowed him to pretty much continue living the same lifestyle he had lived before. I'm sure it was not a pleasant time for him, but he was able to continue living the way he wanted after it was all over. So I'll reverse the question. By what standards didn't he come out OK?

[QuikSand]

His deceased brother owned an asset. It skyrocketed in value while he owned it, bringing substantial benefit to him, whether he cashed it out or not. He dies, and wills it to an heir. What is wrong with recognizing that this was, essentially, income that had yet to be taxed?

If you want to say that only working people should pay income taxes, and those who derive their income from investments and other passive forms shoudl be exempt -- that's fine. But I get the sense that's not at all what you're saying here. I sense your argument is that because this guy wasn't walking around with a wheelbarrow full of cash, that he was "poor" and therefore he's being unfairly subjected to taxes. I disagree on both fronts.

[Ben E Lou]

Originally Posted by clintl

By what standards didn't he come out OK?

Obviously I can't speak for him, but land ownership seems so fundamental to me. That he had to give up his family land because of the Government Vultures swooping in when his brother died just seems grossly unfair to this simple-minded S.O.B.

[Ben E Lou]

Originally Posted by QuikSand

If you want to say that only working people should pay income taxes, and those who derive their income from investments and other passive forms shoudl be exempt -- that's fine. But I get the sense that's not at all what you're saying here. I sense your argument is that because this guy wasn't walking around with a wheelbarrow full of cash, that he was "poor" and therefore he's being unfairly subjected to taxes. I disagree on both fronts.

Actually neither. I don't really have any argument. I just want the government to stay out of my business as much as possible, and this reads to me like an example of them once again sticking their nose where it doesn't belong, and it therefore irks me to no end.

[clintl]

I have the same view as QuikSand. The increase in value was income that had not yet been taxed. It was not a case of "government vultures" swooping in to take what was rightfully his.

[Cringer]

Crap. atleast he didn't have the city take it away from him 15-20 years ago for a Wal-Mart, Wal-Mart is pretty good at talking cities into doing that.

[Ben E Lou]

Originally Posted by Cringer

Crap. atleast he didn't have the city take it away from him 15-20 years ago for a Wal-Mart, Wal-Mart is pretty good at talking cities into doing that.

Don't EVEN get me going on Imminent Domain abuses. You're right that Wal-Mart can be one of the worst at using the government to do their dirty work.

[JonInMiddleGA]

SD, you must have missed the memo ... if you own land (or pretty much anything else of any value), you're considered "rich".

[Solecismic]

There is no tax on the sale of a primary residence, and the death tax is separate from future taxes on investments, which would be subject to the capital gains tax.

The death tax is a separate money-grab entirely, and, unless you keep your money in cash or stock form, your heirs are going to have to sell businesses, land, homes, other assets, just to pay it.

It doesn't make a lot of sense, as the money used to pay for those assets was already taxed. The marginal rate of the death tax - 50% - makes it a huge burden. Often, the death of the original owner is also the death of a small business or farm.

Our image of this only affecting idle rich folk living in million-dollar estates with a caderie of chauffeurs, maids and butlers is completely erroneous.

[clintl]

While technically what you said is true, Jim, I think you are leaving out something very important. Because the cost basis of an investment gets reset at the time of death to the value of the investment at the time of death, the taxes from past capital gains is lost. That income was never taxed while the deceased was alive. As I said earlier, while there is plenty of room for debate about the formula, and plenty of good arguments for deferring taxes on some things, and exempting them on others, it is perfectly reasonable to me that an estate tax in principle is a fair way to recoup the lost taxes on this previous income.

[GrantDawg]

Originally Posted by Solecismic

There is no tax on the sale of a primary residence, and the death tax is separate from future taxes on investments, which would be subject to the capital gains tax.

The death tax is a separate money-grab entirely, and, unless you keep your money in cash or stock form, your heirs are going to have to sell businesses, land, homes, other assets, just to pay it.

It doesn't make a lot of sense, as the money used to pay for those assets was already taxed. The marginal rate of the death tax - 50% - makes it a huge burden. Often, the death of the original owner is also the death of a small business or farm.

Our image of this only affecting idle rich folk living in million-dollar estates with a caderie of chauffeurs, maids and butlers is completely erroneous.

But they have money and I don't. So I should hate them and hope the government takes stuff from them, right?

[Solecismic]

Originally Posted by clintl

While technically what you said is true, Jim, I think you are leaving out something very important. Because the cost basis of an investment gets reset at the time of death to the value of the investment at the time of death, the taxes from past capital gains is lost. That income was never taxed while the deceased was alive. As I said earlier, while there is plenty of room for debate about the formula, and plenty of good arguments for deferring taxes on some things, and exempting them on others, it is perfectly reasonable to me that an estate tax in principle is a fair way to recoup the lost taxes on this previous income.

That's true about some investments, not true about just about any other asset, and nothing justifies the enormous tax rate - that's a penalty, not the recouping of anything.

No question that there shouldn't be a switching of the tax basis of the investment in that situation. That doesn't justify, in any way, the rest of the death tax.

The death tax was put in place as an emergency fund-raiser during WWI. At the time, the threshold was comparitively higher, so it affected far fewer people. It was supposed to go away when the emergency was over. Instead, because the threshold has not kept pace with inflation, it's become the death of thousands of family businesses, and has all but eliminated the family farm.

But, what the heck, let's hate the rich. I guess that means we had better start loving major corporations again, because they're the only ones that can afford to provide jobs once the family businesses are gone.

[Ksyrup]

Originally Posted by GrantDawg

But they have money and I don't. So I should hate them and hope the government takes stuff from them, right?

That's right. What's bad for them is good for me. If I'm miserable, they should be, too.

[QuikSand]

Is it possible for someone to actually advocate a system of taxation, without being berated for "hating" whomever it is who would bear those taxes? Or is this simply a can't win proposition -- either rail against all taxes on anyone (a very popular position, of course) or else shut your mouth?

[Fritz]

I wonder how he paid his annual tax assesment.

[Ben E Lou]

Originally Posted by QuikSand

Is it possible for someone to actually advocate a system of taxation, without being berated for "hating" whomever it is who would bear those taxes? Or is this simply a can't win proposition -- either rail against all taxes on anyone (a very popular position, of course) or else shut your mouth?

Well, there's the Fair Tax plan. {ducking}

[Ksyrup]

Originally Posted by QuikSand

Is it possible for someone to actually advocate a system of taxation, without being berated for "hating" whomever it is who would bear those taxes? Or is this simply a can't win proposition -- either rail against all taxes on anyone (a very popular position, of course) or else shut your mouth?

It's not the people advocating a particular tax system who are being berated for hating whomever would bear those taxes, it's the "class warfare" arguments put forth by those advocates that are being berated. Few and far between are the arguments for a tax system that don't ultimately come down to
"rich vs. poor."

[KevinNU7]

Originally Posted by QuikSand

What a poor, destitute man. Sitting on how many millions of dollars worth of property?

This might be a story to raise my sympathies for people who struggle to resist the lure of development (I strongly suspect this is not your point)... but I don't see how someone, anyone, with net assets up in the millions of dollars is someone who ought to be exempt from taxes on grounds of indigence.

I agree. If he was so concerned he could ask the government to make the land a national park

[Ben E Lou]

Originally Posted by KevinNU7

I agree. If he was so concerned he could ask the government to make the land a national park

AFAIC, the man shouldn't have to ask the government for jack squat. It is his family's land.

[KevinNU7]

So when my parents die and I get their house I shouldn't pay tax on it?

[Ben E Lou]

Originally Posted by KevinNU7

So when my parents die and I get their house I shouldn't pay tax on it?

Wasn't the income with which they acquired the house already taxed?

[gstelmack]

Originally Posted by SkyDog

AFAIC, the man shouldn't have to ask the government for jack squat. It is his family's land.

Agreed 100%. My problem with the death tax is that there is no income involved until the land is sold. If the heirs decide to sell the land, then the value of the land should be taxed, not because someone just died. Much like you aren't taxed on your investments until you cash them in. When the only choice is to cash the investment in order to pay taxes on the investment, something is seriously screwed up (and it acts as a deterrent on investing).

[Fritz]

FWIW SkyDog, I am with you on this. At least in spirit.

[Barkeep49]

I think Kevin is bring up a good point: The idea of an estate tax is to tax people who haven't earned what they are recieving. The idea that a person should succeed or fail on their own, and not on the wealth (or lack there of) of a person's parents seems like a core American value to me.

[CamEdwards]

Originally Posted by Ksyrup

That's right. What's bad for them is good for me. If I'm miserable, they should be, too.

What's this "them" crap, lawyer boy?

[CamEdwards]

Originally Posted by gstelmack

Agreed 100%. My problem with the death tax is that there is no income involved until the land is sold. If the heirs decide to sell the land, then the value of the land should be taxed, not because someone just died. Much like you aren't taxed on your investments until you cash them in. When the only choice is to cash the investment in order to pay taxes on the investment, something is seriously screwed up (and it acts as a deterrent on investing).

absolutely right.

[Ben E Lou]

Originally Posted by Barkeep49

I think Kevin is bring up a good point: The idea of an estate tax is to tax people who haven't earned what they are recieving. The idea that a person should succeed or fail on their own, and not on the wealth (or lack there of) of a person's parents seems like a core American value to me.

HUH???????????????????????????????



How about the idea that a father can pass down his wealth to his son? Even Fred Sanford declared of the junkyard, "One day son, all this will be yours!"

[SplitPersonality1]

Originally Posted by SkyDog

HUH???????????????????????????????



How about the idea that a father can pass down his wealth to his son? Even Fred Sanford declared of the junkyard, "One day son, all this will be yours!"

Alright SkyDog.

Any credibility you had just went out the window.I never though I 'd see the day where a quote from Sanford and Son would be used to make a point. j/k

[Barkeep49]

But why does the child deserve to accumulate everything the parent has accumulated? Have you heard of any of the Walton's doing great things with their lives? In a rich family the children have already recieved the benefit of the money throughout their lives through such things as better schooling, clothes, vacations, and other oppertunities. Inheriting, or not, wealth shows nothing about the value of the inheritor and thus I belive is completely appropriate to be taxed.

[Buzzbee]

Originally Posted by Barkeep49

But why does the child deserve to accumulate everything the parent has accumulated? Have you heard of any of the Walton's doing great things with their lives? In a rich family the children have already recieved the benefit of the money throughout their lives through such things as better schooling, clothes, vacations, and other oppertunities. Inheriting, or not, wealth shows nothing about the value of the inheritor and thus I belive is completely appropriate to be taxed.

So you're argument is that, since people didn't earn that money, they aren't entitled to it? Is that correct? And since they aren't entitled to it, the accumulated wealth should be "returned" to the government?

[QuikSand]

For what it's worth... I really don't have a strong opinion on whether having an estate tax is good public policy. While I think it bears some fair comparison to a tax on income derived from capital gains, it's also perfectly sensible in my mind that we would only tax gains when they are actualy realized. If property stays within the family, and remains in consistent use - I think there is a sensible policy argument that we ought to treat that the same as if its ownership had never changed.

My original point, before being lured a bit off the trail, was that the title of this thread strongy suggests that this tax was being aplied to someone who was far too poor to deserve it. I would still argue that an owner of millions of dollars in net assets (very valuable property and no debt, according to the article) isn't exactly a poverty case, regardless of his other cash flow.

[Barkeep49]

I'm saying that indeed since people didn't earn the wealth that society has a right to use some of that wealth.

[CamEdwards]

Originally Posted by Barkeep49

But why does the child deserve to accumulate everything the parent has accumulated? Have you heard of any of the Walton's doing great things with their lives? In a rich family the children have already recieved the benefit of the money throughout their lives through such things as better schooling, clothes, vacations, and other oppertunities. Inheriting, or not, wealth shows nothing about the value of the inheritor and thus I belive is completely appropriate to be taxed.

oh. my. god.

[kcchief19]

Originally Posted by QuikSand

What a poor, destitute man. Sitting on how many millions of dollars worth of property?

This might be a story to raise my sympathies for people who struggle to resist the lure of development (I strongly suspect this is not your point)... but I don't see how someone, anyone, with net assets up in the millions of dollars is someone who ought to be exempt from taxes on grounds of indigence.

I've said it before, I'll say it again -- I heart QuikSand.

[Franklinnoble]

Proper estate planning could have prevented this. There's no excuse for sitting on a piece of property you know to be worth a ton of cash and not preparing for the inevitable.

[Buzzbee]

Originally Posted by Barkeep49

I'm saying that indeed since people didn't earn the wealth that society has a right to use some of that wealth.

But how can "society" have a right to use that wealth since they didn't earn it?

[Ben E Lou]

Originally Posted by QuikSand

My original point, before being lured a bit off the trail, was that the title of this thread strongy suggests that this tax was being aplied to someone who was far too poor to deserve it. I would still argue that an owner of millions of dollars in net assets (very valuable property and no debt, according to the article) isn't exactly a poverty case, regardless of his other cash flow.

I see what you're saying...but again that is according to the value that you (and I to a degree) hold. Clearly, the dollar value of the land was meaningless to this guy--otherwise he would have sold a long time ago.

[CentralMassHokie]

I tend to stay out of political discussions on this board, so I'm going to attempt to make less of a political observation and more of a psychological one. I doubt I'll be successful, but it's worth a shot.

It is amazing to me that groups in this country have been able to convince the American public that the estate tax and the top marginal income tax rate of the highest brackets are the biggest tax issues facing them.

The estate tax currently affects, I believe, 2% of all estates. That number has been decreasing as the exemption level rises. Family-owned farms and businesses make up an even smaller portion of that, something like .06% of all estates.

The 3 highest brackets of the marginal tax rate affects a fairly small portion of the American public. In 2001, I think it was just under 5% of tax payers.

However, if you polled the American people on tax issues, I'd be willing to bet a large sum of money that these issues would rank in the top 2 for pretty much everyone polled.

I doubt anyone would mention the regressive nature of payroll taxes as an issue. Of course, this tax issue *does* effect pretty much the entirety of the American tax payers.

I have to believe that it's because everyone wants to believe they will be rich some day, and that the estate tax and top tax rates are going to hurt them come that magic day. In the meantime, they'll give up the large chunk of their pay to payroll taxes without batting an eyelash.

That's what I think of everytime I read an article about the estate tax or see someone complaining about it. It's a non-issue for about 98% of the country. I'm not arguing the validity of the tax itself, simply the fact that somehow people have been able to create an issue out of this since it impacts so few people.

[Ben E Lou]

Originally Posted by Franklinnoble

Proper estate planning could have prevented this. There's no excuse for sitting on a piece of property you know to be worth a ton of cash and not preparing for the inevitable.

No excuse? Do you seriously think these ol' salt-of-the-earths had any clue that something like this could happen?

[BigJohn&TheLions]

This is a prime example of how Urban Sprawl is destroying this land. There was a story similar to this in Macomb County Michigan where the city and neighbors were pressuring a guy to sell his farm because the smells of a farm were considered offensive to the people who bought expensive homes in the newly developed land surrounding the farm. His family had been on that property for years and some idiots were quated as that they bought the homes because they though it would be nice to live by the farm, but the smell of a cow pasture soon changed their minds, so the farmer has to go! Ridiculous.

SD, you know how bad the sprawl is in Hotlanta. I read where two-hour car commutes are fairly commonplace down there. And it keeps getting worse...

[cuervo72]

Originally Posted by SkyDog

HUH???????????????????????????????



How about the idea that a father can pass down his wealth to his son? Even Fred Sanford declared of the junkyard, "One day son, all this will be yours!"

*fires up Quincy Jones in WinAmp*

[Barkeep49]

Because the organization of our society is what enables a person to accumulate wealth in the first place.

[QuikSand]

Originally Posted by SkyDog

No excuse? Do you seriously think these ol' salt-of-the-earths had any clue that something like this could happen?

If you own an estate worth multimillions, you do a disservice to your heir(s) by clinging to pithy nicknames instead of getting some advance preparation done.

I'm not really a big fan of the entire concept of "estate planning" itself, but Franklin is absolutely right. Nobody in this situation actually needs to pay taxes on his estate - only some legal fees to advisors who will help you legally skirt the taxes when you effect the exact same transfers upon your passing.