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Nice find on the data. I'm surprised there's even one family farm in the entire country that would be subject to the estate tax.
I have heard of farmers selling off land or assets to pay property taxes, but even that is less common now since a lot of Govts will wholly or partially exempt the farm land from property taxes too. This is very common in CT since the value of land has risen so much.
Some local Govts in CT will forgive all property taxes in exchange for all the land being turned over to the Govt once the owners die. Don't know if other states do anything similar.
It is a global trend to eliminate estate tax. Every year many countries joined the bandwagon. Australia, New Zealand, Sweden, Singapore, Hong Kong,...etc. already eliminated estate tax. When so many countries don't consider it a good idea to collect estate tax (including high tax countries like Sweden), there must be a rationale for them to justify the legislation.
Repeal of the estate tax has nothing to do with the cost basis for the new owner of the estate. Repeal of the estate tax will not make much difference in taxation. The very wealthy who are affected already have tax and estate planning in place to eliminate for greatly reduce any tax liability.
I would bet the OP does not like or trust Trump. That is a different issue. Let's not muddy the waters due to political bias.
Funny you should think that. You're actually quite wrong in your assumption about me- I voted for Trump and support most of his shenanigans, and I bear the ire of my coworkers nearly daily when Trump does something politically incorrect.
The other thing you're quite wrong about is how the estate tax impacts the cost basis of the estate for the new owner. Actually, 100% incorrect. The cost basis is stepped up to fair market value under the current estate tax, except in 2010 when the tax was repealed- in that year, heirs took their property at carryover basis with a token step-up that was 10 times lower than the previous year's estate tax exemption. Google it- it's a historical fact at this point.
The tax code is subject to the "butterfly effect" just like the fabric of space-time: make one small change somewhere in the code, and the results radiate out through the thousands of pages of regulations, impacting taxpayer's wallets and purses in the process. Just like all tax changes, there are winners and losers, but the amazing thing about this one is that 99.9% of the population actually experiences a direct increase in order to give the very wealthy a decrease.
I very, very much hope to be very wealthy and thus welcome the estate tax repeal, but I would prefer it be an unlimited exemption instead of an outright repeal so that it doesn't bite the heirs.
Quote:
Originally Posted by MrGompers
Can give me a link that says the exemptions are being repealed ? I can not find it any where. As it stands now the estate exemption is pegged to inflation and rises each year.
Wealthy estates also claim the exemption and the tax only applies to amounts above the exemption. It wouldn't make sense that Trump would want to eliminate that since himself and the wealthy will benefit from it. I don't think they are that stupid, but they do think we are that stupid to not notice.
The exemption is an exemption from the estate tax. If there is no estate tax from which to be exempt, then there can be, by definition, no exemption. It's also referred to in the article I posted earlier.
Quote:
Originally Posted by MrGompers
Can you give us examples of farmers that are sitting on "hundreds of millions of dollars worth of property" ? links to tax assessments would suffice.
Even if that was true how would they be able to afford the property taxes on "hundreds of millions of dollars worth of property"?
I posted earlier that 99.9% of all estates pay no estate taxes at the Federal level. So in turn that would mean that 99.9% of property is valued under 5.5 million dollars at the minimum assuming there's no cash in the estate.
Yikes- that was quite the typo! I'm not even sure which two sentences I was writing when I wrote "hundreds of millions of dollars worth of property"... I can only assume I meant hundreds of thousands.
Anyway, you keep repeating that 99.9% of all estates "pay no estate taxes", but you're ignoring the fact that 100% of all estates pass through the estate tax system and receive a basis step-up and thus, a huge tax benefit for the heirs.
Trying to salvage the farmer example- a farm purchased for $200k that is now worth $2m (land value alone makes this a reasonable example) will currently pass to an heir tax free but leave the system with $2m in basis. Now, that heir will get an asset of $2m and a tax basis of $200k, carrying with it a potential tax liability in the hundreds of thousands if they decide to sell. So this repeal is actually a tax increase to that heir of hundreds of thousands of dollars.
The drafters of the 2010 repeal were partially aware of this pain- in 2009, the exemption was $10m and thus $10m of property could pass tax-free to heirs with fully stepped up basis, but in 2010 when the tax was repealed, the legislators allowed for a ~$1m basis step-up, nearly 10x less than in the previous year before the tax was repealed.
I'm not going to disclose any of my clients personal information, but the article that was posted paints a picture that doesn't exist in most small family farming and ranching operations. The fact that even 50 small farms are going to be destroyed by the estate tax, is 50 too many.
To answer the first question about property taxes, in Montana, agricultural farm land that is personally owned, does indeed get a reduced property tax rate. This is the reason that the families want to keep the land personally owned. The second they incorporate, or transfer ownership to a partnership or LLC, they loose some of those savings, and are subject to the business property tax, which also taxes equipment, as well as real estate.
These clients are land rich, cash poor. They own tens of thousands of acres, with out buildings, and equipment, but little in cash. Most of their money is in the cattle on the land. Their home is on the ranch. They may own a couple of pickups. They draw a salary of about 100K each, and put everything else back in. They don't have investment portfolio's to use to pay the estate tax. So tell me, how is this family supposed to pay the estate taxes when grandpa dies? Sell all of the cattle to pay the bill? Most wind up selling off chunks of land to pay the bill.
Why does the government have the right to tax income, after it has already been taxed, just because someone dies. Where is all of this hatred of wealthy people coming from?
If you are a republican as you stated, no that is not something to be proud of.
The estate tax, that is ALL death taxes, both federal, state, and local, should have been abolished years ago. It only hurts small businesspeople and farmers. They should also get rid of the stepped up basis, but keep a favorable tax treatment for capital gains so that people will have an incentive to invest long term, rather than trade and speculate. And while they are streamlining the tax code, get rid of the AMT, don't allow deductions for property taxes and mortgage interest (except for rental property), and abolish all these tax deferred retirement and tuition plans such as all of the IRAs, 401k, 529 plans, etc. I love it how the middle classes in this country are always complaining about how the rich and the big corporations have all kinds of tax loopholes, yet not a word is said about all of the middle class tax deductions which allow many to pay little or no federal income tax.
Plus from everything I've read you are very wrong in stating how many farms and small business this has and does actually hurt. Its the standard talking points used over and over without any facts to convince the low information voter that the estate tax hurts the working man.
.... Where is all of this hatred of wealthy people coming from?
I don't think there's much hatred of the wealthy so much as those who gained their wealth in less than honest ways. Banks too big to fail. CEO's who run a company into the ground yet get multi million golden parachutes. That sort of thing.
Quote:
Originally Posted by hikernut
Um.... those folks might want to find another occupation. They're not very good at farming
The other thing you're quite wrong about is how the estate tax impacts the cost basis of the estate for the new owner. Actually, 100% incorrect. The cost basis is stepped up to fair market value under the current estate tax, except in 2010 when the tax was repealed- in that year, heirs took their property at carryover basis with a token step-up that was 10 times lower than the previous year's estate tax exemption. Google it- it's a historical fact at this point.
That's how it is because that's how the tax code was written, not because of some physical law of nature binding estate taxes to stepup basis. Why couldn't we define step up basis independently of estate tax?
Although, and I'm sure I'll be hated for it, I don't see why there is a step up basis and it isn't always straigt carryover. If grandpa would have had to pay tax if he sold it yesterday, why shouldn't the heir pay tax if they sell it tomorrow?
If you are a republican as you stated, no that is not something to be proud of.
The estate tax, that is ALL death taxes, both federal, state, and local, should have been abolished years ago. It only hurts small businesspeople and farmers. They should also get rid of the stepped up basis, but keep a favorable tax treatment for capital gains so that people will have an incentive to invest long term, rather than trade and speculate. And while they are streamlining the tax code, get rid of the AMT, don't allow deductions for property taxes and mortgage interest (except for rental property), and abolish all these tax deferred retirement and tuition plans such as all of the IRAs, 401k, 529 plans, etc. I love it how the middle classes in this country are always complaining about how the rich and the big corporations have all kinds of tax loopholes, yet not a word is said about all of the middle class tax deductions which allow many to pay little or no federal income tax.
You, my friend, have no idea what you are talking about. Do you realize that the AMT starts kicking in at $40,000 if you are single, have no children, and take certain deductions. So because you are jealous of President Trump, you want to punish lower middle class people by forcing them to pay a secret, double tax to make YOU feel better. My last return, I had to pay $700.00 in AMT. Our family income is under $80k. Just because I give allot to charity, and have a large family, I take a hit in the wallet.
People like you disgust me. You would rather everyone get screwed over with higher taxes, as long as one rich person or business doesn't get a break. Any changes made to lower taxes on the middle class, will also lower taxes on the wealthy.
Our tax system is broken. All the estate tax does in my state if force family farmers to have to sell their land, or convert it into a corporate farm, which is then at risk of being bought out. I have worked with too many clients that have been forced to break up the family farm, to pay the estate tax. Farmers who earn less than $200k a year, but are sitting on hundreds of millions of dollars of property. Property their family has had for generations. So sure, lets keep the estate tax, the property developers sure love buying up theses farms and ranches, sub-dividing them, and making a killing. Then people wonder why the big corporate farms are expanding at a record pace, and the small family farm is dying.
wish i could rep you a hundred times. the AMT is pretty much highway robbery (actually IS highway robbery). we are by no means millionaires but get hard hit by AMT every year and get no benefit from amount i donate to charity. and dont even get me started in what the AMT did to many of us in the tech industry that were bankrupted by AMT due to exercised stock options that took place in years when the market crashed. i know poor whiny stock option owners in startups, but these were people with families making very low salaries in exchange for stock then lost their jobs and visas - and to add to that pain no owe the feds hundreds of thousands of dollars of supposed stock gains after just exercising the stock, never actually making a dime. what a perfect government scheme lets make people pay on income they havent even MADE yet. oh and lets screw them just a little more by only letting them write off a teeny amount every year. it's,really criminal
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