WWTBAM Bored

...to the point of making the same mistakes FDR made.

http://www.washingtonpost.com/wp-dyn/co ... 11_pf.html

Raising taxes in a recession/depression.

Nice job.

At least FDR waited until HIS stimulus package had been operating for a few years.

Jeemie wrote:...to the point of making the same mistakes FDR made.

http://www.washingtonpost.com/wp-dyn/co ... 11_pf.html

Raising taxes in a recession/depression.

Nice job.

At least FDR waited until HIS stimulus package had been operating for a few years.

Yeah, but who can believe The Washington Post?

Bob Juch wrote:

Jeemie wrote:...to the point of making the same mistakes FDR made.

http://www.washingtonpost.com/wp-dyn/co ... 11_pf.html

Raising taxes in a recession/depression.

Nice job.

At least FDR waited until HIS stimulus package had been operating for a few years.

Yeah, but who can believe The Washington Post?

You got your Washington newspapers messed up.

The Times is the conservative rag, not the Post.

Anyhow, here it is on MSNBC, as an AP story, so my guess is...it's real.

http://www.msnbc.msn.com/id/29319055/

Obama is bending to the winds- if he wants to be a Keynesian, be a Keynesian.

But don't work at cross-purposes. I am under no illusions that tax hikes will be needed eventually...either that or draconian cuts in government spending, which is about as likely as SSS professing his absolute love for Obama.

But a tax hike now...in a recession as bad as this one...would be a complete disaster.

Jeemie wrote:

Bob Juch wrote:

Jeemie wrote:...to the point of making the same mistakes FDR made.

http://www.washingtonpost.com/wp-dyn/co ... 11_pf.html

Raising taxes in a recession/depression.

Nice job.

At least FDR waited until HIS stimulus package had been operating for a few years.

Yeah, but who can believe The Washington Post?

You got your Washington newspapers messed up.

The Times is the conservative rag, not the Post.

Anyhow, here it is on MSNBC, as an AP story, so my guess is...it's real.

http://www.msnbc.msn.com/id/29319055/

Obama is bending to the winds- if he wants to be a Keynesian, be a Keynesian.

But don't work at cross-purposes. I am under no illusions that tax hikes will be needed eventually...either that or draconian cuts in government spending, which is about as likely as SSS professing his absolute love for Obama.

But a tax hike now...in a recession as bad as this one...would be a complete disaster.

No, I didn't mix up my papers.

Most of the tax increases will affect only the richest citizens. The tax cuts won't affect me - when I start getting a paycheck again.

Obama said he'd let Bush's temporary reductions expire all during the campaign.

Bob Juch wrote:No, I didn't mix up my papers.

Most of the tax increases will affect only the richest citizens. The tax cuts won't affect me - when I start getting a paycheck again.

Obama said he'd let Bush's temporary reductions expire all during the campaign.

Yes- "the rich" got most of the tax cuts...but everyone got a little bit of Bush's tax cuts (I know I did), so many people's taxes...at all levels...will go up if this comes to pass.

They have to at any rate- "the rich" don't have enough money to finance Obama's deficit reduction targets.

And I know what he promised...but he also suggested he would review tax policy in light of the recession. Some of his own advisors suggested increasing taxes was unwise.

Finally, recessions are as much psychological as they are economic. ANY mention of tax increases is likely to not sit well...in the same manner that FDR's attempts to balance the budget in 1936 helped lead to the recession in 1937-38, killing a recovery that was underway at the time.

It's going to be hard for him to cut the deficit in half when his response to every crisis is to spend $787 billion.

The bulk of Obama's spending bill will occur in 2010 and beyond, so he's going to have to do something to address that. Tax fixes for that period would have been needed no matter who was president due to the bizarre compromise under which the Bush "temporary" tax cuts were passed.

I don't look for much in the way of increased taxes in the forseeable future other than keeping the estate tax around in some form (actually, the estate tax benefits the life insurance industry because they sell policies specifically to enable people to pay estate taxes)

silverscreenselect wrote: I don't look for much in the way of increased taxes in the forseeable future other than keeping the estate tax around in some form (actually, the estate tax benefits the life insurance industry because they sell policies specifically to enable people to pay estate taxes)

I guess you can consider it helping the life insurance industry. I tend to think of the government (as SSS describes it) acting like a mob enforcer-"Nice little estate you have here-It certainly would be a shame if something were to happen to it."

Spock wrote:I guess you can consider it helping the life insurance industry. I tend to think of the government (as SSS describes it) acting like a mob enforcer-"Nice little estate you have here-It certainly would be a shame if something were to happen to it."

All taxes take people's property and turn it over to the government. At least, the estate tax takes property that isn't being used by the person who accumulated it.

Spock wrote:

silverscreenselect wrote: I don't look for much in the way of increased taxes in the forseeable future other than keeping the estate tax around in some form (actually, the estate tax benefits the life insurance industry because they sell policies specifically to enable people to pay estate taxes)

I guess you can consider it helping the life insurance industry. I tend to think of the government (as SSS describes it) acting like a mob enforcer-"Nice little estate you have here-It certainly would be a shame if something were to happen to it."

Trust me. The estate tax and its consequences is very probably a net positive for almost everyone on the Bored (and in the country). The problem with repealing the estate tax is that the step-up in basis at death also goes with it.

Let me give an example and I'll be specific (albeit hypothetical). I make a fairly good living, but my estate is comfortably below the estate tax threshold. Let's assume I get hit by a bus in 2010 (when, under current law, the estate tax disappears). Ms. 63 decides she doesn't need such a big house for just her and Sparky, so she wants to sell. She'll pay capital gains, whereas if I'd had the good grace to die in 2009, her basis in the entire house (since we live in a community property state) would step up to its value on the date of my death.

And if she wants to sell some of our investments for cash flow, she's facing the same phenomenon. She'd pay capital gains taxes on the increase (and we're buy-and-hold investors, so even in this market, there would be an increase), whereas she'd enjoy a stepped-up basis if the estate tax were in force.

Not to mention, by the way, the accounting nightmare that becomes possible. Suppose you sell property (say, a piece of a family farm) that you inherited from your parents, who in turn inherited it from their parents, for a few generations back. Do you really want to try to figure out what your, say, great grandparents' basis in the property was? It's much easier to simply get an appraisal as of the last relevant date of death, which is what's required under current law. --Bob

Bob78164 wrote:

Spock wrote:

silverscreenselect wrote: I don't look for much in the way of increased taxes in the forseeable future other than keeping the estate tax around in some form (actually, the estate tax benefits the life insurance industry because they sell policies specifically to enable people to pay estate taxes)

I guess you can consider it helping the life insurance industry. I tend to think of the government (as SSS describes it) acting like a mob enforcer-"Nice little estate you have here-It certainly would be a shame if something were to happen to it."

Trust me. The estate tax and its consequences is very probably a net positive for almost everyone on the Bored (and in the country). The problem with repealing the estate tax is that the step-up in basis at death also goes with it.

Let me give an example and I'll be specific (albeit hypothetical). I make a fairly good living, but my estate is comfortably below the estate tax threshold. Let's assume I get hit by a bus in 2010 (when, under current law, the estate tax disappears). Ms. 63 decides she doesn't need such a big house for just her and Sparky, so she wants to sell. She'll pay capital gains, whereas if I'd had the good grace to die in 2009, her basis in the entire house (since we live in a community property state) would step up to its value on the date of my death.

And if she wants to sell some of our investments for cash flow, she's facing the same phenomenon. She'd pay capital gains taxes on the increase (and we're buy-and-hold investors, so even in this market, there would be an increase), whereas she'd enjoy a stepped-up basis if the estate tax were in force.

Not to mention, by the way, the accounting nightmare that becomes possible. Suppose you sell property (say, a piece of a family farm) that you inherited from your parents, who in turn inherited it from their parents, for a few generations back. Do you really want to try to figure out what your, say, great grandparents' basis in the property was? It's much easier to simply get an appraisal as of the last relevant date of death, which is what's required under current law. --Bob

I can't follow your argument or examples at all. Exactly how is basis affected by the Estate Tax?

If there is no Estate Tax, I should still get the benefit of my basis being the value at the time I received the property as a gift.

If you want to argue that the Estate Tax is not "unfair" because all it really does is re-capture the lost Capital Gains tax, then that might make sense (except for how most homesteads don't fall within Capital Gains tax levels anyway).

TheCalvinator24 wrote:

Bob78164 wrote:

Spock wrote: I guess you can consider it helping the life insurance industry. I tend to think of the government (as SSS describes it) acting like a mob enforcer-"Nice little estate you have here-It certainly would be a shame if something were to happen to it."

Trust me. The estate tax and its consequences is very probably a net positive for almost everyone on the Bored (and in the country). The problem with repealing the estate tax is that the step-up in basis at death also goes with it.

Let me give an example and I'll be specific (albeit hypothetical). I make a fairly good living, but my estate is comfortably below the estate tax threshold. Let's assume I get hit by a bus in 2010 (when, under current law, the estate tax disappears). Ms. 63 decides she doesn't need such a big house for just her and Sparky, so she wants to sell. She'll pay capital gains, whereas if I'd had the good grace to die in 2009, her basis in the entire house (since we live in a community property state) would step up to its value on the date of my death.

And if she wants to sell some of our investments for cash flow, she's facing the same phenomenon. She'd pay capital gains taxes on the increase (and we're buy-and-hold investors, so even in this market, there would be an increase), whereas she'd enjoy a stepped-up basis if the estate tax were in force.

Not to mention, by the way, the accounting nightmare that becomes possible. Suppose you sell property (say, a piece of a family farm) that you inherited from your parents, who in turn inherited it from their parents, for a few generations back. Do you really want to try to figure out what your, say, great grandparents' basis in the property was? It's much easier to simply get an appraisal as of the last relevant date of death, which is what's required under current law. --Bob

I can't follow your argument or examples at all. Exactly how is basis affected by the Estate Tax?

If there is no Estate Tax, I should still get the benefit of my basis being the value at the time I received the property as a gift.

If you want to argue that the Estate Tax is not "unfair" because all it really does is re-capture the lost Capital Gains tax, then that might make sense (except for how most homesteads don't fall within Capital Gains tax levels anyway).

Upon death, basis is stepped up to the value of the property at the date of death (with some wrinkles that aren't relevant to this discussion). So, for example, my wife's basis in my late mother-in-law's house is her share of its value at the date of death, not her share of her mother's basis in the property. That will save her a chunk of change, because even in this market, the property has appreciated. And if her mother had owned the house for 50 years or so, or if she hadn't died in the early stages of an economic depression/severe recession, it would have saved her a lot more.

Your characterization is essentially correct. The primary difference, though, is that the estate tax only hits big estates whereas in the absence of a step-up in basis, capital gains taxes upon liquidation will hit everyone.

Bear in mind, by the way, that what you're describing as the "homestead" exemption only applies to people who have owned and lived in the house for two of the last five years. So it probably applies to an inheriting spouse, but likely not to any other inheriting family member. --Bob

It appears you are misinformed, Bob. From MSN money:

The estate tax repeal law preserves the step-up for up to $1.3 million of assets you bequeath, plus an additional $3 million of assets given to a spouse. That means that up to $4.3 million of your estate will retain the step-up in basis. That should prevent the vast majority of heirs from having to worry about the issue.

Bob78164 wrote:

Spock wrote:

silverscreenselect wrote: I don't look for much in the way of increased taxes in the forseeable future other than keeping the estate tax around in some form (actually, the estate tax benefits the life insurance industry because they sell policies specifically to enable people to pay estate taxes)

I guess you can consider it helping the life insurance industry. I tend to think of the government (as SSS describes it) acting like a mob enforcer-"Nice little estate you have here-It certainly would be a shame if something were to happen to it."

Trust me. The estate tax and its consequences is very probably a net positive for almost everyone on the Bored (and in the country). The problem with repealing the estate tax is that the step-up in basis at death also goes with it.

Let me give an example and I'll be specific (albeit hypothetical). I make a fairly good living, but my estate is comfortably below the estate tax threshold. Let's assume I get hit by a bus in 2010 (when, under current law, the estate tax disappears). Ms. 63 decides she doesn't need such a big house for just her and Sparky, so she wants to sell. She'll pay capital gains, whereas if I'd had the good grace to die in 2009, her basis in the entire house (since we live in a community property state) would step up to its value on the date of my death.

And if she wants to sell some of our investments for cash flow, she's facing the same phenomenon. She'd pay capital gains taxes on the increase (and we're buy-and-hold investors, so even in this market, there would be an increase), whereas she'd enjoy a stepped-up basis if the estate tax were in force.

Not to mention, by the way, the accounting nightmare that becomes possible. Suppose you sell property (say, a piece of a family farm) that you inherited from your parents, who in turn inherited it from their parents, for a few generations back. Do you really want to try to figure out what your, say, great grandparents' basis in the property was? It's much easier to simply get an appraisal as of the last relevant date of death, which is what's required under current law. --Bob

Thank you Bob for your explanation - the argument against the estate tax is that you are taxing that has already been taxed. In many (if not most) bases this is simply not true. In most cases to get to an estate that is taxable, it must contain significant capital gains taxes that have not been taxed. If you want the step up, there should be some taxation (although to be honest the 55% number always seemed too high to me). It seems like there is likely to be an agreement of an exclusion between $3-5 million and a top rate of 35% - that seems reasonable to me.

TheCalvinator24 wrote: I can't follow your argument or examples at all. Exactly how is basis affected by the Estate Tax?

If there is no Estate Tax, I should still get the benefit of my basis being the value at the time I received the property as a gift.

I'm having a hard time following your questions. Under current law if you inherit an asset, you get a step-up in basis to the value of the asset on the date of death - if the total value of the estate exceeds the exclusion amount, taxes are due on the estate - there are brackets and the estate tax is a percentage of the value of the estate in excess of the exclusion amount. The tax is paid by the estate before assets are distributed to heirs.

If you receive a gift of assets from another living person, your basis in those assets is the givers basis in those assets (not the basis on the date of the gift). When you sell the asset taxes are due on the gain over the giver's basis, not the basis on the date of gift.