Big Country Posted January 25, 2012 Share Posted January 25, 2012 OK, fair enough but what about this piece? What I'm referring to here is not initial investment but reinvestment of gains, which are taxed at 15%. While I accept completely that 401k money has never been taxed at all, I still think the reinvestment of gains on a 401k should be subject to the same rate as capital gains. It would just be later is all, which is fair enough because of the restrictions on the money until age 59 1/2. Your point about capital being owned surely applies just as much to a 401k (pending tax). Ursa - One thought here, and I don't know the answer and am far from being a tax attorney or anything of the sort, but perhaps the reason that gains within a TRADITIONAL 401K are taxed as ordinary income is because the initial investment has never been taxed, meaning that the account holder has been given the potential benefit of greater gains by being able to invest a larger sum than they could have, had those initial monies previously been taxed. Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 25, 2012 Share Posted January 25, 2012 Ursa - One thought here, and I don't know the answer and am far from being a tax attorney or anything of the sort, but perhaps the reason that gains within a TRADITIONAL 401K are taxed as ordinary income is because the initial investment has never been taxed, meaning that the account holder has been given the potential benefit of greater gains by being able to invest a larger sum than they could have, had those initial monies previously been taxed. I had that thought too. It might be interesting to do the math but I can't be bothered with it. The cynic in me says it's more than that but some careful planning at withdrawal times minimizes the income tax liability anyway. Link to comment Share on other sites More sharing options...
Big Country Posted January 25, 2012 Share Posted January 25, 2012 I had that thought too. It might be interesting to do the math but I can't be bothered with it. The cynic in me says it's more than that but some careful planning at withdrawal times minimizes the income tax liability anyway. Well, if the assumption is that the tax rates etc. are the same, you could do some scenarios that show this to be the case. As Traditional 401K contributions 'come off the top" so to speak, you are reducing your current tax liability at your highest federal tax bracket that you hit. At withdrawal time, depending on different factors like other taxable income sources, amount of RMD, etc., you only pull out enough to fill out your lowest federal tax bracket. And, if you don;t need the distribution to live off of, you can then turn around and put $5K off that distribution into a ROTH IRA to grow tax free. I know I did not explain this to the fullest, but essentially one of the arguments suggesting that one go with the traditional 401K over the ROTH option is that most retirees taking distributions are at a lower income level than they were during their contribution stage. Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted January 25, 2012 Share Posted January 25, 2012 You and I agree more than we disagree on this subject. But why is it that every flat tax proposal also gets rid of the estate and gift tax and keeps capital gains taxed at a lower level than ordinary income? Tax it ALL at the same flat rate, not just wages, and then I'll get on board. Otherwise its a giveaway to the rich, which isn't fair. I am all for a flat or fair tax that keeps income and capital gains taxes and equal levels. I will never support a plan that taxes estates or gifts. Why on God's green earth does the government have a right to any portion of a person's wealth when they die? The whole idea is absolutely insane, Nor should the government be given a cut of a gift I give to a friend or family member. It's my money and has already been taxed - keep your damn hands off. Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 25, 2012 Share Posted January 25, 2012 I am all for a flat or fair tax that keeps income and capital gains taxes and equal levels. I will never support a plan that taxes estates or gifts. Why on God's green earth does the government have a right to any portion of a person's wealth when they die? The whole idea is absolutely insane, Nor should the government be given a cut of a gift I give to a friend or family member. It's my money and has already been taxed - keep your damn hands off. Not to rehash an old chestnut but I disagree with this. "Death tax" is a total misnomer used to raise the ire of those who don't do much thinking - the dead person is beyond taxes. At the moment of death, all assets effectively transferred elsewhere, according to their wishes (testate) or not (intestate). They didn't cease to exist and they didn't go with the dead person. What is for sure is that people enter the world with nothing and leave the same way. The taxation is levied on the recipient(s) of the money. I could get on board with a much lower rate of taxation and definitely on board with exemption for businesses, farms, etc (as long as they are retained and worked) but the fact is that it's income and furthermore it's unearned. Pretty much every other transfer of money of whatever type is taxed - corporation tax, income tax, sales tax, capital gains tax and on and on - why should an inheritance be any different? Link to comment Share on other sites More sharing options...
bpwallace49 Posted January 25, 2012 Share Posted January 25, 2012 I am not mad at Romney at all . . . . he is playing the rules of the game. The rules of the game/tax code is what is messed up. Simplistic ranting about how much versus the proportionality is silly at best. Link to comment Share on other sites More sharing options...
bushwacked Posted January 25, 2012 Share Posted January 25, 2012 Not to rehash an old chestnut but I disagree with this. "Death tax" is a total misnomer used to raise the ire of those who don't do much thinking - the dead person is beyond taxes. At the moment of death, all assets effectively transferred elsewhere, according to their wishes (testate) or not (intestate). They didn't cease to exist and they didn't go with the dead person. What is for sure is that people enter the world with nothing and leave the same way. The taxation is levied on the recipient(s) of the money. I could get on board with a much lower rate of taxation and definitely on board with exemption for businesses, farms, etc (as long as they are retained and worked) but the fact is that it's income and furthermore it's unearned. Pretty much every other transfer of money of whatever type is taxed - corporation tax, income tax, sales tax, capital gains tax and on and on - why should an inheritance be any different? Exactly...name me one transaction that isn't taxed. When the dollar is produced from the mint and goes into circulation? Link to comment Share on other sites More sharing options...
Duchess Jack Posted January 25, 2012 Share Posted January 25, 2012 I am not mad at Romney at all . . . . he is playing the rules of the game. The rules of the game/tax code is what is messed up. Simplistic ranting about how much versus the proportionality is silly at best. People simple aren't asking the right questions: Q to Romney. Okay. So you didn't do anything wrong. In a Romeny tax plan - what percent do you think is fair to pay on that money? Q to AssJuice You said you believe in freedom. Does letting allowing for gay marriage infringe on anybody's freedom? Does not allowing for gay marriage infringe on anybody's freedom. Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted January 25, 2012 Share Posted January 25, 2012 The taxation is levied on the recipient(s) of the money. I could get on board with a much lower rate of taxation and definitely on board with exemption for businesses, farms, etc (as long as they are retained and worked) but the fact is that it's income and furthermore it's unearned. Pretty much every other transfer of money of whatever type is taxed - corporation tax, income tax, sales tax, capital gains tax and on and on - why should an inheritance be any different? How is a business or farm any different than cash or stock? It's all property - previously taxed property - built over a lifetime. We are not subjects of the state and do not owe them a part of our life's monetary legacy. Yeah - I realize it's the heirs being taxed, it's still a deeply immoral double dip. I'm 20+ years from retirement and hopefully further from death and I'm already trying to figure out how to give uncle sam the shaft on this one when I die. It's just unconscionable to me. Link to comment Share on other sites More sharing options...
gbpfan1231 Posted January 26, 2012 Share Posted January 26, 2012 I am not mad at Romney at all . . . . he is playing the rules of the game. The rules of the game/tax code is what is messed up. Simplistic ranting about how much versus the proportionality is silly at best. Link to comment Share on other sites More sharing options...
yo mama Posted January 26, 2012 Share Posted January 26, 2012 I am all for a flat or fair tax that keeps income and capital gains taxes and equal levels. I will never support a plan that taxes estates or gifts. Why on God's green earth does the government have a right to any portion of a person's wealth when they die? The whole idea is absolutely insane, Nor should the government be given a cut of a gift I give to a friend or family member. It's my money and has already been taxed - keep your damn hands off. So under your logic, I go to work and EARN my money and I MUST pay tax. But the beneficiary of a gift or inheritance does NO work for their money, and they pay ZERO tax? Your thinking punishes the guy who works and rewards the guy who doesn't. Where is the logic in that? And ALL money has been previously taxed. My clients paid tax on the money they earned. By your logic, I shouldn't pay income tax when they use that same money to pay for my services? *That* would be crazy. And yet that's what you (and others) suggest should happen when money changes hands in a context that is more akin to winning the lottery than anything else. This really comes down to a policy question about which reasonable minds can disagree - should we favor capital over labor? If they are of equal value, then accessions to wealth from either source should be taxed the same. Right now our economic policies favor capital because capital gains/dividends/carried interests, etc. are taxed at 15% versus ordinary income rates for wages. Estate and gift tax is all over the place year to year, but a married couple can currently pass $10,000,000 in assets free of estate and gift tax. That's pretty generous compared to the income tax hit someone take if they actually WORK for $10,000,000 in wages, or simply won the lottery. Link to comment Share on other sites More sharing options...
yo mama Posted January 26, 2012 Share Posted January 26, 2012 Exactly...name me one transaction that isn't taxed. When the dollar is produced from the mint and goes into circulation? Charities do not pay tax on the donations the receive because charities have a special status in society. Some people (rightly or wrongly) feel that non-charitable beneficiaries of a gift or inheritance should receive the same special treatment. Personally, I don't agree with that line of thinking because charities are required by law to better society. Beneficiaries aren't. I do, however, agree there should be a rational exemption amount that keeps regular folks outside the reach of the IRS. I always thought $2.5 million per person ($5mm per married couple) sounded about right. Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 26, 2012 Share Posted January 26, 2012 How is a business or farm any different than cash or stock? It's all property - previously taxed property - built over a lifetime. We are not subjects of the state and do not owe them a part of our life's monetary legacy. Yeah - I realize it's the heirs being taxed, it's still a deeply immoral double dip. I'm 20+ years from retirement and hopefully further from death and I'm already trying to figure out how to give uncle sam the shaft on this one when I die. It's just unconscionable to me. Non-cash inheritance ideally would be exempt to enable the continuation of business and employment. And unless you and Mrs Neutron have over 10 million bucks when you kick the bucket, don't waste your time estate planning - it's currently tax free anyway. Link to comment Share on other sites More sharing options...
Yukon Cornelius Posted January 26, 2012 Share Posted January 26, 2012 So under your logic, I go to work and EARN my money and I MUST pay tax. But the beneficiary of a gift or inheritance does NO work for their money, and they pay ZERO tax? yup thats how we keep that 1% . there are ways to keep uncle sam off the farm, ask any estate lawyer. Link to comment Share on other sites More sharing options...
Big Country Posted January 26, 2012 Share Posted January 26, 2012 Non-cash inheritance ideally would be exempt to enable the continuation of business and employment. And unless you and Mrs Neutron have over 10 million bucks when you kick the bucket, don't waste your time estate planning - it's currently tax free anyway. It may be tax free, but without proper estate planning, it will go through probate, which means lawyers and other fees eating at the amount, and your desired beneficiaries may not be the saem as what the probate court determines. So, regardless of your assets, have a will, possibly have a trust if it fits your situation, but don;t leave it to the whims of the court to decide where your assets should go once you kick the bucket. Link to comment Share on other sites More sharing options...
SEC=UGA Posted January 26, 2012 Share Posted January 26, 2012 It may be tax free, but without proper estate planning, it will go through probate, which means lawyers and other fees eating at the amount, and your desired beneficiaries may not be the saem as what the probate court determines. So, regardless of your assets, have a will, possibly have a trust if it fits your situation, but don;t leave it to the whims of the court to decide where your assets should go once you kick the bucket. My daughter will get the money... I have no one to leave my hand planes to, though. Link to comment Share on other sites More sharing options...
Yukon Cornelius Posted January 26, 2012 Share Posted January 26, 2012 It may be tax free, but without proper estate planning, it will go through probate, which means lawyers and other fees eating at the amount, and your desired beneficiaries may not be the saem as what the probate court determines. So, regardless of your assets, have a will, possibly have a trust if it fits your situation, but don;t leave it to the whims of the court to decide where your assets should go once you kick the bucket. bingo Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 26, 2012 Share Posted January 26, 2012 It may be tax free, but without proper estate planning, it will go through probate, which means lawyers and other fees eating at the amount, and your desired beneficiaries may not be the saem as what the probate court determines. So, regardless of your assets, have a will, possibly have a trust if it fits your situation, but don;t leave it to the whims of the court to decide where your assets should go once you kick the bucket. Yes, I didn't mean die intestate, I meant don't go through a raft of gyrations to avoid estate tax. Link to comment Share on other sites More sharing options...
westvirginia Posted January 26, 2012 Share Posted January 26, 2012 So under your logic, I go to work and EARN my money and I MUST pay tax. But the beneficiary of a gift or inheritance does NO work for their money, and they pay ZERO tax? Your thinking punishes the guy who works and rewards the guy who doesn't. Where is the logic in that? And ALL money has been previously taxed. My clients paid tax on the money they earned. By your logic, I shouldn't pay income tax when they use that same money to pay for my services? *That* would be crazy. And yet that's what you (and others) suggest should happen when money changes hands in a context that is more akin to winning the lottery than anything else. This really comes down to a policy question about which reasonable minds can disagree - should we favor capital over labor? If they are of equal value, then accessions to wealth from either source should be taxed the same. Right now our economic policies favor capital because capital gains/dividends/carried interests, etc. are taxed at 15% versus ordinary income rates for wages. Estate and gift tax is all over the place year to year, but a married couple can currently pass $10,000,000 in assets free of estate and gift tax. That's pretty generous compared to the income tax hit someone take if they actually WORK for $10,000,000 in wages, or simply won the lottery. You're completely missing the point on the estate/death tax. In the JN example, the money he's leaving to his kids is money he's ALREADY paid tax on. The fact that the funds are now controlled by his kids is irrelevant. It's already down to some 60 cents on the dollar or so - why should that same pool of dollars be taxed again? You even go on to make his point - the person who worked for that $10MM has to pay income taxes on it. Why should his kids have to pay any taxes at all on the SAME MONEY if inherited or given as a gift? It's an argument over principle. Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 26, 2012 Share Posted January 26, 2012 The fact that the funds are now controlled by his kids is irrelevant. Actually, that's the entire nub of the argument. It certainly isn't irrelevant in any way. Link to comment Share on other sites More sharing options...
yo mama Posted January 26, 2012 Share Posted January 26, 2012 (edited) You're completely missing the point on the estate/death tax. In the JN example, the money he's leaving to his kids is money he's ALREADY paid tax on. The fact that the funds are now controlled by his kids is irrelevant. It's already down to some 60 cents on the dollar or so - why should that same pool of dollars be taxed again? You even go on to make his point - the person who worked for that $10MM has to pay income taxes on it. Why should his kids have to pay any taxes at all on the SAME MONEY if inherited or given as a gift? It's an argument over principle. No, I'm not missing his point, its just not very persuasive. You, however, are incorrect - funds are not "controlled" by the kids - the funds are transferred to the kids. And it is the right to transfer property at death that is being taxed without regard to whether or not that money was previously taxed. Carping mindlessly that the money was previously taxed doesn't help either because, even under your logic, money that has not been previously taxed (perhaps because dad inherited it from grandfather) should then be taxable when it passes from father to son. And I'm not sure why you think I made Jimmy's point. Kid 1 win's lottery, he pays tax. Kid 2 inherits money, he doesn't. There is no reason to treat them differently because the lottery paid tax on the money it earned before paying that prize. Why doesn't your logic apply equally there? I'll tell you why - because the principle at issue is simply that folks want favorable tax treatment for their intended beneficiaries. That's human nature, which I understand, but it benefits only the very wealthy at the expense of wager earners who ultimately fund that benefit through higher rates of income tax and/or reduced government services. There is a very real wealth gap and growing inequality between this haves and have nots. And that's *with* an estate tax. That gap isn't good for the country, and it would only get worse - faster - without an estate tax. Edited January 26, 2012 by yo mama Link to comment Share on other sites More sharing options...
Ice1 Posted January 26, 2012 Share Posted January 26, 2012 (edited) It is really pretty simple> Many liberals seem to think that the government deserves your hard earned money and you should not be able to give it away as you see fit. It makes no different to the government that they have have already been paid their share on this money. Liberals really believe this is the governments money and want every control measure possible over the citizenry. The majority of the sane people think the government is wrong and double taxation on dollars already taxed is wrong on principle. I would much rather be able to take my life's savings that I worked very hard for and paid taxes on and have the freedom to do as I wish without the greedy government getting to take a second bite of the apple. Obviously once these dollars are spent to purchase goods it stimulates the economy and taxes are paid on those purchases. If a house then jobs were created and maintained to purchase said house. If reinvested to start a company then jobs results and more revenues are gained not to mention the gains tax that will be collected. Inheritance taxes are nothing more than a double tax money grab sponsored by our control freak government to grow it out of control and spend it as they see fit. In my view it should be completely illegal. The government simply does not deserve to double tax funds in my view. That is morally wrong, unjust, and not fair. Edited January 26, 2012 by Ice1 Link to comment Share on other sites More sharing options...
Ice1 Posted January 26, 2012 Share Posted January 26, 2012 (edited) There is a very real wealth gap and growing inequality between this haves and have nots. And that's *with* an estate tax. That gap isn't good for the country, and it would only get worse - faster - without an estate tax. Yes many common criminals out there think the same way. Your comment that somehow no estate taxation would contribute to some perceived gap is not remotely provable. It is nothing more than stealing by the government through double taxation. Poor people don't create jobs. People that are smart and willing to take risks will create jobs. Redistribution philosophies don't work and never have. Obviously, some think socialist/communist models make sense but it is a pipe dream. John Q public spends his life working and paying his legal taxes. What is left is his and that individual should have the FREEDOM to with what is his as he/she wishes. Anything less is stealing in my view. A simpler tax code makes sense on many levels as it could shrink the government in many ways but double taxation is wrong under any program. It is just another way to rob us of our freedom. Edited January 26, 2012 by Ice1 Link to comment Share on other sites More sharing options...
yo mama Posted January 26, 2012 Share Posted January 26, 2012 Yes many common criminals out there think the same way. Your comment that somehow no estate taxation would contribute to some perceived gap is not remotely provable. It is nothing more than stealing by the government through double taxation. Poor people don't create jobs. People that are smart and willing to take risks will create jobs. Redistribution philosophies don't work and never have. Obviously, some think socialist/communist models make sense but it is a pipe dream. John Q public spends his life working and paying his legal taxes. What is left is his and that individual should have the FREEDOM to with what is his as he/she wishes. Anything less is stealing in my view. A simpler tax code makes sense on many levels as it could shrink the government in many ways but double taxation is wrong under any program. It is just another way to rob us of our freedom. I'm sticking up for people who work for a living, you idiot. Link to comment Share on other sites More sharing options...
Ursa Majoris Posted January 26, 2012 Share Posted January 26, 2012 It is really pretty simple> Many liberals seem to think that the government deserves your hard earned money and you should not be able to give it away as you see fit. It makes no different to the government that they have have already been paid their share on this money. Liberals really believe this is the governments money and want every control measure possible over the citizenry. The majority of the sane people think the government is wrong and double taxation on dollars already taxed is wrong on principle. I would much rather be able to take my life's savings that I worked very hard for and paid taxes on and have the freedom to do as I wish without the greedy government getting to take a second bite of the apple. Obviously once these dollars are spent to purchase goods it stimulates the economy and taxes are paid on those purchases. If a house then jobs were created and maintained to purchase said house. If reinvested to start a company then jobs results and more revenues are gained not to mention the gains tax that will be collected. Inheritance taxes are nothing more than a double tax money grab sponsored by our control freak government to grow it out of control and spend it as they see fit. In my view it should be completely illegal. The government simply does not deserve to double tax funds in my view. That is morally wrong, unjust, and not fair. You haven't read a single word already posted. This isn't a rebuttal, it's a diatribe. Tell us how the inherited dollars are taxed twice since two separate people are taxed. Give us your considered opinion on why this massive influx of money should not be taxed when all other income is, even social security. Tell us why this unearned income is good while other unearned income is not. Link to comment Share on other sites More sharing options...
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