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Journal pudge's Journal: Estate Tax 10

Journal by pudge

So a lot of people are whining about the estate tax, both ways. I think it is an unreasonably confiscatory tax. I think that it is a serious problem for small business owners and entrepreneurs who are trying to pass on wealth to their children.

But that is not why I am writing. I am writing because I've heard people say, hey, Bill Gates Sr. is in favor of the Estate Tax! And so is Warren Buffett! And they are rich! So what's wrong?

Well, first, Buffett is so incredibly rich that an inheritance tax will still leave his children with billions, if he wants to give it. The inheritance tax kicks in at $1 million, and if you've got only $2 million to pass down, it could take a huge chunk of that, maybe 20 percent or more. When you've got a house, kids going to college, kids buying houses, and so on, $2 million doesn't last long, and taking $400,000 or more out of that is a huge hit.

As for Gates, his son has many billions more than he does -- more than anyone else in the country -- so he has no need to pass it down.

But the funniest part is that much of Buffett's wealth was created because of the estate tax: his business is buying and selling businesses, and he has bought many profitable properties at a low price because they were sold to pay for the estate tax. Further, he sells estate tax insusrance products. He'd lose a lot of business if the estate tax went away.

So don't think for half a second that Buffett is thinking of society when he favors the estate tax. He, like most people, is thinking of himself, and the profits he has and will continue to make.

This discussion was created by pudge (3605) for no Foes, but now has been archived. No new comments can be posted.

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Estate Tax

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  • I didn't realize Gate's son was rich too. I thought Gate's kids where young, like 14.

    Not that I wouldn't expect his kids to eventually be rich...
  • The lopsided disparity of estate tax becomes even more evident when comparing between two extreme economic regions like Silicon Valley, California and some obscured country side town of Missisippi.

    A million doller is becoming a smaller and smaller portion of the middle-class house in SV whereas the same amount is the more than the entire estate in Miss.

    For the tax to kick in SV, such family estate and small business are commonly disbanded when insufficient side wealth are available to cover this. Not so in
    • Yep. Especially when you're talking property in the Bay Area, where a normal family home can run up close to $1m.
      • Not just the Bay Area either.. I'm in San Diego and my home, which I bought for $289,900 back in '01 is probably worth over $600k now. Looking at the houses near me where they're asking for more then that, and don't have a pool (I do) just confirms it.

        Scary how much homes are now.
    • Is the estate tax threshold linked to inflation? If not, that would be a start. Also, since land and buildings seem to be a big point of contention, the inflation could be linked to changes in the median price for land/property in the county the property is in.
      • It is indexed, or has some other cause for going up each year. I forget exactly what it is based on. The problem is not that the threshold does not increase annually (for now), but simply that for certain areas in the country, it's very unfair compared to others.

        Of course, we have the same problem in the federal income tax, too.

        And, of course, even making it relatively fair for areas of the country would not change the notion that it is inherently unfair and unreasonable to begin with.
  • Did you write about this before, pudge? I thought I remembered reading your thoughts on this, but maybe it was just another discussion of it when it first came up.
  • If we're gonna play the "they're rich and support the estate tax" game to look at exactly how their money is structured. How much of THIER money will be subject to the estate tax, and how much of it is in trusts, pass-throughs, and other accounting entities which change ownership upon death without taxes being generated...

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