General Question

ETpro's avatar

Do you think it is unfair that only 1/100th of 1% of Americans paid estate taxes in 2011?

Asked by ETpro (34247 points ) April 24th, 2012

Just 3,300 filers paid estate taxes in 2011. Estate taxes only apply to estates with adjusted values over $5 million. Does that mean that 99.99% of all Americans are freeloaders? Republicans are fond of claiming the poor are fortunate freeloaders because the bottom 46% of American households pay no income tax. Funny, if the poor are such lucky duckies, the rich could enjoy the pleasures of poverty by just giving all the money they’ve been cursed with to the poor, thus transferring that terrible burden of wealth to them, and then refusing to work. I suppose it’s only their steel-like strength of character, their rugged self reliance, that keeps the rich from availing themselves of life on easy street, AKA food stamps.

In reality, isn’t the 46% number is rather like the 99.99% number? It is absolutely true, and, in my opinion, totally meaningless where a discussion of economic fairness is concerned. Here’s why I say that. The 46% not subject to income taxes arises because, for those earning a low wage, the standard deduction is greater than their adjusted gross income. What GOPers conveniently leave out is that the poor pay lots of their total income in taxes; far more as a percentage of earnings than the very rich pay. The poor pay payroll taxes, FICA taxes, sales taxes, property taxes (whether on a home they own, or to their landlord on a unit they rent), gasoline taxes, state and local taxes, excise taxes, and more. The average American family of four living on $50,000 per year pays a far greater percentage of their total income in sales taxes than do families in the top 1/10th of 1%. This is because the family earning $50,000 spends almost all of their disposable income on taxable goods (in states having a sales tax). The top 0.1%, earning $1.6 million per year or more, spends only a small portion of their annual income on items subject to a sales tax.

So is it really “Class Warfare” for the average American to ask a multimillionaire to pay the same federal tax rate that an upper middle class worker pays? If the poor have it so good, what’s keeping the rich from divesting themselves of the curse of wealth, and getting in on the joys of poverty?

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35 Answers

marinelife's avatar

Yes, it is grossly unfair. Wealth should not pass from generation to generation untaxed.

Charles's avatar

Yes it is grossly unfair – to those 3300 people who had to pay those taxes. Wealth should pass from generation to generation untaxed.

This is one of those things that is unfair depending on what side of the line you are on. Thousands of MBAs and PhDs could argue this until the cows come home.

So, with that, my definition of fair is everyone else but Charles pays taxes.

elbanditoroso's avatar

Get serious.

What percentage of Americans died last year. Your denominator should not be the US population. It should be the population of Americans that died in 2011. Which is maybe, 3 million people.

So your equation should be 3300/1,000,000 – which is a much different percentage.

Lies, damn lies, and statistics

JLeslie's avatar

I liked when the estate tax exemption was $1million. $5million is high to me. The exemption gives the poor and middle class a break they need. The wealthy get that same exemption, and they give away money every year to their heirs before they die, because they have plenty of money to live on. A married couple can give away $26k a year to a child, or whoever they want to gift, tax free and outside of their lifetime estate tax exemption. Someone with $10million to their name can give that to their children without fear of going broke themselves, or changing their lifestyle while they are still alive. Someone with $200k in the bank in their retirement years needs to hold onto it, to make sure they are ok themselves, they can’t gift big chunks of it to their heirs. So, the wealthy get more than the $1million or $5million, or whatever it is for the given year, because they are already giving their money to their family over many years tax free, and that law does not seem under attack from what I can tell.

I think @elbanditoroso is right about the denominator, it should be based on how many died this year.

When stats are given on the poor and taxes, I always wonder if the EIC is calculated in there? I feel like the EIC funds business in the end, the same greedy horrible owners of business who complain about tax money going back to the poor.As long as they pay piss poor wages, we will have to give money through the government and through social services to the poor. If companies paid a decent wage there would be less need for it. If companies did not push employees to the brink, amd hired more employees we would not have so much in “welfare” needs. No matter what there will be a percentage of the population who doesn’t work, can’t work, or won’t work, but most people want to work, work hard when they do, and their wage should be able to provide shelter and food.

I do think sales tax is regressive. I would not completely get rid of it, but look for a better balance. In my state it is very high 9.25%.

Rarebear's avatar

I think estate taxes are grossly unfair no matter who pays them.

Linda_Owl's avatar

Personally, I think that anyone who leaves at least million dollars to their heirs, should have to pay estate taxes. The wealthiest individuals have any number of ways of enriching their heirs prior to their deaths, so any wealth that is not passed on to their heirs prior to their deaths – it should be taxed.

JLeslie's avatar

@Linda_Owl So, people who leave less than $1million should be exempt from taxes? Is that what you mean?

Jaxk's avatar

As with most Democratic proposals, you tend to destroy the very things you purport to want to save. Estates are not just cash, they are the family farm, the family business or the family home. Not something you can divvy up into small pieces. When they are taxed quite often they must be sold to pay those taxes. And of course if you are selling you small business or your family farm to pay taxes, you sell to someone with money (that doesn’t seem hard to figure out). We are losing the family farms all sold to large corporations. Small businesses are sold to large corporations. You building up the corporations (remember they never die) and gutting the middle class.

It seems everytime you want to take from the rich, you end up taking from everybody else and giving it to the rich. It would be nice to see you think it through for once.

JLeslie's avatar

@Jaxk Well, then how about making the primary residence tax exempt? I would assume most family farms are also the primary residence. I don’t like the idea of families losing their property, whether it be a farm or not. I did a question a few months ago about property taxes, because it bothers me someone could own a house outright, but still have their home taken from them for failure to pay property taxes. I’m not sure of the solution.

ETpro's avatar

@marinelife Seems to me that at least a limited amount of wealth should be able to pass from generation to generation. I like Warren Buffet’s idea. He said, “The goal is to leave your children enough that they can do anything, but not enough that they can do nothing.”

@Charles The idea behind estate taxes is to prevent massive accumulation of wealth in the hands of an increasingly small number of families—which is oligarchy, the classical banana republic. If you truly want a land where you have no taxes of any kind, Somalia is sitting there waiting for you.

@elbanditoroso I am as serious as a heart attack. I demand the right to the same sort of polemics the right constantly employs. I explained in the question details how the two “true” claims are both horse manure.

@JLeslie The denominator is what it is because the GOP uses a false denominator in computing their 46% of Americans don’t pay “Income Taxes.” True, but only because they aren’t subject to that tax due to their low income, just as the living and the dead who aren’t worth more than $5 million aren’t subject to Estate Taxes. Fair for the goose of fair for the gander.

Granted an estate of $5 million is a lot, and the wealthy do whittle down the estate through gifts before dying. But if it resets back to $1 million, then the incredibly marginal argument that @Jaxk raises becomes far less marginal. You do start to cut into small businesses and family farms that, in my opinion, should be able to pass on unscathed by taxes.

@Rarebear With an increasingly regressive income tax, and with many extremely wealthy individuals not even subject to income taxes, the estate tax is one of the last remaining bastions against massive generational accumulation of wealth to the point that a small handful of families own the entire nation. It happens routinely in banana republics, to the detriment of nearly everyone living there. We may debate how the estate tax should be structured, but I see no legitimate argument that it shouldn’t exist except that mounted by multimillionaires and billionaires who yearn to become the ruling class in perpetuity.

@Linda_Owl I am entirely open to discussion of what the limits and conditions should be, but that’s not the topic here so I’d prefer to save that for a future question.

@Jaxk As usual, you find the 1/1000th of 1% of cases that a right-wing rule legitimately protects, and make them the central case of the entire rule. No thought to @JLeslie‘s suggestion of writing an exception to protect the few family farms that are valued at over $5 million after all the gifting the parents can do tax free. Perish the though. Rather, accuse me of not thinking things through. Give me a break!

Would you answer this? The wealthiest 1% of Americans now own 42.7% of all the financial wealth of the nation. How much will finally be enough? Will you be happy when they have 60%. 80%, 90%? Must they get all 100% for themselves before things are “fair”? What do you see as a healthy figure for the nation’s financial health?

JLeslie's avatar

@ETpro Ok, I’m reasonbly persuaded $5million is a better number with your argument.

Rarebear's avatar

@ETpro /rant begin: I couldn’t disagree more. The estate tax is a tax that most people can avoid by getting a living trust (hence the small number of people actually paying it per your question), but to get a living trust you need to pay a trust attorney a boatload of cash to do it for you correctly. So if most people avoid it, it’s an unnecessary hoop in an increasingly complicated tax code. Additionally, the estate is mostly money you have already paid taxes on, so you’re paying taxes on the money twice.

Taxes are regressive. Period. If someone were to take money away from you without your consent, it’s called a robbery. Taxes are legalized robbery, and the estate tax is the worst kind—it’s grave robbery. I worked extremely hard for my money, the government is already taking almost half (if you include state and property taxes), I’m trying to provide for my daughter, and if I weren’t protected, and I die, they want to take ANOTHER 50%?

Now. I’m okay with paying a fair share of taxes. I use free roads and I appreciate my local police and fire departments, and I use my local library. I get paid with tax money. What I do not appreciate is the need for the federal governent to take more and more of my money when they can not be accountable for themselves: they pay for unfunded wars, they throw huge swaths of money at financial institutions with no accountability, and they want to take money away from my daughter to do it? Screw that.

Okay. rant end/

ETpro's avatar

@Rarebear I am open to a debate (not in this thread, but on one where that’s the topic) about how best to prevent the wealth inequality in America from getting even worse than it is now. Just before the Great Depression, it hit a high where the top 1% owned 40% of the nation’s financial wealth. It is not 42.7% and rapidly climbing. This is not good for democracy, and starving the consumer base is not good for the economy. While we’re fixing it, I am 100% in favor of tax simplification. I know it would put a lot of estate planners and such out of work Good riddance. With the economic surge that would give us, we could put them back to work doing something that’s beneficial to more than just a handful of people.

The point of this thread is not really the fairness of the Estate Tax or how it should be structured. It is the disingenuous GOP argument that the poor are under-taxed and have a sweet deal.

Rarebear's avatar

Ah. On iPhone now so cant rant. The tax system is grossly unfair no matter how you slice it. Poor and rich.

Sorry for lighting up earlier. I’m a bit down on the Feds as they allowed me to be ID thefted and they owe us several thousand dollars of refunds over two years they paid to someone else and trying to get someone to help takes an act of a diety I do not believe in.

elbanditoroso's avatar

Minor correction.

According to the US Statistical Abstract, the number of deaths in the US in 2009 (the last year for which statistics are available) was 2,486,000.

So the denominator is even smaller than I had guessed above, and the statistical claims on the part of the original poster even more bogus.

I realize that he is making a political point and is ignoring numerical realities, but I did want to correct the record.

Jaxk's avatar

@ETpro

I see you continue to play fast and loose with your statistics. I wonder how you come up with “1/1000th of 1% of cases that a right-wing rule legitimately protects”. Just so I understand, you’re willing to except family owned farms just not family businesses. Probably because the word ‘Business’ is in there.

Just to add some ‘Flame to your flame war, do you realize that not only do 50% of Americans pay zero income tax but 30% actually pay less than zero. That is they pay no federal income tax but actually get a check as well. Incredible.

bkcunningham's avatar

I would like to know, from the Feministe blog @ETpro linked as a source, why are people who receive federal tax payer dollars through the Supplemental Nutrition Assistance Program more than likely to be overweight? Does asking that question make me a hater of the poor or deserving of the rant @ETpro used in his question? I think it is a fair question and holds the program to some accountability.

ETpro's avatar

@Rarebear I had head about those ID theives ripping off taxpayers. Very sorry to hear you got caught up in it.

@elbanditoroso Duly noted.

@Jaxk In guestimating a number, I got as far as determining that 74% of family farms earn $50,000 per year or less. Only 12% of US farms are non-family operations, but they account for 84% of US agricultural production. Thus, I feel safe in saying that if 1/100th of 1% of Americans paid estate taxes in 2011, less than 1/1000th of Americans paid estate taxes on a family farm in 2011.

I wasn’t willing to spend the research time necessare to look up the exact number, but feel free to prove me wrong in principle. Look up how many family farms are valued at greater than $5 million as estates, how many of those farm owners died in 2011, and what percentage of the entire electorate do they represent. If it is even 1/1000 of 1%, I will be stunned. But it’s a big enough number to justify your imposing your right wing dogma on the massive percentage it does NOT represent.

@bkcunningham Because they eat the cheapest things they can to stay alive, such as rice, beans, pasta, bread and the fattiest cuts of meat.

Ron_C's avatar

I paid estate tax on my Dad’s estate, I don’t see how the figure could be so low. Frankly, I wouldn’t mind paying higer estate taxes. They are a good thing because they help stir the economic pot. I really dislike the idea of wealth staying in a family for generations without having the dependents work for their keep.

bkcunningham's avatar

@Ron_C, you and anyone else who wants to pay more money to the federal government may make contributions online or by check payable to the Bureau of the Public Debt.

JLeslie's avatar

For those againts estate taxes, let’s say the government needs to collect a certain amount of money every year, and let’s just say we all agree on the amount. Would you rather have some of it taken from estate taxes after death, and less taken from us people out here living and working? Waiting for an inheritance to make us better off, is wishing/waiting for a parent’s death. I don’t think most people live that way, counting on inheritance.

ETpro's avatar

@Ron_C Thanks. I am delighted at least one respondent has actually experienced this issue.

@bkcunningham That is the most disingenuous right-wing live-tax-free talking point on earth. No good right-winger would open a business and tell customers there are no prices. Just pay whatever you feel called to pay. They’d go broke in the first month. And you know very well the government would do the same @JLeslie is quite right. We have to find the functions of government or continue to run up the debt the Republicans launched under the banner of the Reagan Revolution. How do we do that?

We’ve already cut top tax rates from 94% to 35%. It’s only added to the debt. The fantasy that we can cut our was to prosperity cannot be maintained without completely ignoring all the evidence to the contrary. I sure don’t love taxation, but I recognize it’s required to maintain the infrastructure, education, public safety, defense and investment in research that makes for a prosperous economy. To starve that is penny wise and pound foolish.

bkcunningham's avatar

What are you talking about, @ETpro? You don’t believe you can pay extra taxes to the government?

@Ron_C said, and I quote, “Frankly, I wouldn’t mind paying higer estate taxes. They are a good thing because they help stir the economic pot. I really dislike the idea of wealth staying in a family for generations without having the dependents work for their keep.”

If he wants to pay extra taxes to the government, he may do it online or by check payable to the Bureau of the Public Debt. I see nothing disingenuous about that.

Rarebear's avatar

I don’t either. I agree with @bkcunningham. Nothing is preventing people from paying higher taxes if they want to. Frankly I think that they’re foolish, but that’s just me. If the Federal Government were accountable for their money I’d be okay with it.

And @ETpro Again, I disagree. You said that the dropping of the tax rates from 94 to 35% made our deficit worse. That’s simply not true. Under Clinton, when tax rates were only marginally raised, and there was a 1:1 spending cut to tax hike, the budget was balanced. Only after the neoconservatives steamrolled the government into two unfunded wars did our deficit go out of control. This was made worse by the Bush and Obama administration throwing a half a trillion dollars at banks who repaid their CEOs and shareholders, at the same time not spending nearly enough on stimulus.

And all THAT was when Congress was actually reasonable—look at it now. It’s filled with freshmen right wing Christians who would like nothing better than strip women’s rights, make abortion a crime, and outlaw homosexuality.

You guys can give more money to the Feds if you want. I’m going to keep every penny I can.

bkcunningham's avatar

How do you make a contribution to reduce the debt?
There are two ways for you to make a contribution to reduce the debt:

You can make a contribution online either by credit card, checking or savings account at Pay.gov
You can write a check payable to the Bureau of the Public Debt, and in the memo section, notate that it’s a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept G
Bureau of the Public Debt
P. O. Box 2188
Parkersburg, WV 26106–2188

or online:

https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=23779454

bkcunningham's avatar

The funniest part of making a contribution to reduce the public debt, to me, is that you can count it as a charitable contribution on your federal taxes. That is hilarious.

ETpro's avatar

@bkcunningham I said nothing of the sort. I said that’s not a realistic tax plan any more than making a contribution to AT&T is a reasonable cell-phone plan.

@Rarebear Facts are facts. We had been paying down the debt of WWII under every administration, Republican or Democratic, till Reagan came along. He dropped the top marginal tax rate from 70% to 28%. In just 8 years, he tripled the national debt from $.9 trillion to $2.8 trillion. Here’s a chart of the debt to GDP by presidency.

If people really believed that cutting revenue increases net worth, they would be going in and asking their bosses for a huge pay cut so their bank accounts would suddenly overflow.

Jaxk's avatar

@ETpro

Yes facts are facts. It is the spending that gets us into trouble. When spending goes up debt goes up. When spending goes down, so does the debt. We have collected 17%-18%. in Revenue for the past half century, regardless of the income tax rate. Our problem is that when a recession hits, the top earners take a bigger hit than the rest of us. Our tax base has been getting smaller and smaller with the top tax rate paying the bulk of the taxes. When they take a hit revenues plunge. We would be much better off with a broader tax base. Sates like Texas fair much better than states like Ca or NY during a recession simply because they have a broader tax base. Continue to demonize the rich, continue to place more and more on the very top and you will only increase the volatility of the tax revenues.

Ron_C's avatar

For the record, I didn’t think that my comment about paying estate taxes would generate much comment. I see that it was suggested that I could pay more by contributing to the government but I don’t think that it was necessary. I could have contested some of the estate tax but I chose not to do so.

I never expected to benefit from my father’s death. I saw the money as a windfall but I am not impressed by such things. I made sure that my brothers got their share and paid his final income tax and estate tax. I used the short forms just to get it out of the way. I know that I paid more than I should but my dad was a veteran and a patriot and that’s the way he would have done it.

ETpro's avatar

@Ron_C Thanks. I appreciate your dad’s patriotism and the fact you followed suit. Funny that those who wrap themselves in the flag and constantly label their opposition as unpatriotic, and American haters apologizing for the USA would never consider to do the same.

@Jaxk Our tax base has been getting smaller because of trickle down economics. In 1980, the top 1% of Americans owned roughly 20% of the nation’s financial wealth. Now, they hold 42.7%. The income share is even crazier. The top 1% have gained almost 300% in income in the last 32 years since Piss Down economics was put in place by Reagan. In that same time, the bottom 60% lost 6% in real income. Since taxes are based on earnings, even a far-right ideologue like you should be able to see why the tax base has been getting smaller. Your preferred solution, to give even more tax breaks to the poor, underprivileged billionaires and sock it too the lucky-ducky poor will only accelerate turning America into a banana republic with an economy much like that of Haiti.

As to the revenue collected as a percentage of GDP, we have had two near-equal high points in the last 62 years. It peaked near 20% just after Reagan was inaugurated and before he slashed taxes. With each of his successive tax cuts it dropped then it climbed back up from the 15 to 17% range to a full 20% during the Clinton Administration after a tax increase. It then crashed again to 15% under George W. Bush with his tax cuts.

So once again, you select a few facts and trot them out as “proof” of the perfection of your right-wing ideology when a complete review of the facts shows quite clearly that just the opposite it true.

Ron_C's avatar

@ETpro The right wing has drifted from patriotism to libertarianism. They’re a perfect example of what happens when the “me generation” grows up. They are self centered, self righteous, and greedy. They have no country, no state, no idealism, and operate only on fear and loathing of people not in their social or ethnic group.

bkcunningham's avatar

“What’s really going on, I think, is that the nature of class war has changed. The old virus has mutated. The old social and political divisions have given way to two new classes — rather as on the trains. Those in economy are most of us, paying for the comforts of those in first class. And those in first class are the new political class — all those who owe their advancement and their security and their pensions and their privileges not to their backgrounds or their talents, or even necessarily their political parties, but to the state and our taxes.”

- Minette Marrin

ETpro's avatar

@Ron_C Seems sadly to be the case.

@bkcunningham Definitely the State and taxes have been stacked in their favor recently. It’s not good for the long-term health of our nation.

Jaxk's avatar

@ETpro

As always, your liberal views almost sound reasonable as long as you don’t look too closely and ignore other data or events that take place during those times. As long as we focus on the right hand we’ll never see what’s happening in the left (pun intended).

The drop in government revenues coincides with recessions. Even the drop in 1990–1992 was the recession (which was exacerbated by the Bush I tax hikes). By the time Clinton raised taxes, the economy (and revenues) had already begun to turnaround. The Dotcom boom fueled the economy for the remainder of the decade but by the time Bush was elected the overheated economy was falling into recession again. And not surprisingly, government revenues began to fall.They fell until 2003 when the tax cuts were implemented, at which time they began to rise again until the housing bust of 2008. The same timing and effects occurred for the Reagan administration. Recession started under Cater and continued until the tax cuts in ‘83. At which time the economy and government revenue recovered.

With a little attention to detail, your arguments just don’t stand up.

ETpro's avatar

@Jaxk Aha. Raising taxes either does or doesn’t hurt the economy dependent on whether the specific instance supports your ideology or conflicts with it. There is no need to carry this further. Enough of your arrogant, dismissive; “your liberal views almost sound reasonable as long as you don’t look too closely…”

I’m going to stick with the fact-based Universe, and if you’d care to join me there some day, we can resume discussion of policy initiatives.

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