Who Pays Income Taxes Anymore?

[Sacamuelas]

http://www.usatoday.com/money/perfi/taxes/2010-04-07-income-taxes_N.htm

The frustrating part of the situation is that the goberment leadership has been pandering to and hence enlarging this population of dependant citizens. They in turn, reproduce with no financial impediments and create more "voters" in the future that will expect more for less.

[Sten]

I do.

[Sacamuelas]

haha Nice Sten.

To answer my own question... I do too. :D
I was just venting my frustration by posting the article. Thought I might share the happiness with the rest of you. LOL

[Paslode]

They haven't yet called me with this years damage, but I know I do.

[The Reaper]

Not the POTUS's staff and friends.

TR

[Green Light]

My son works part time and made a whopping $7K last year. His tax refund is nearly $1,000. He only put in about $500. When you see him driving around, you'll know where your taxes are going.

[Defender968]

Not the POTUS's staff and friends.

TR

Or any member of Congress or the Senate.....best I can tell.

[GratefulCitizen]

Everyone still pays taxes, just indirectly.

When the "rich" are taxed, this changes the effective rate of return on their investment/labor/business/etc.

The costs are just passed along to everyone else.

Not paying federal taxes only gives the illusion of not paying taxes.
Such illusions are quite effective in furthering some political ends.

[Pete]

Who Pays?

Ask me next Thursday. My reply might not be too civil.

[echoes]

Not the POTUS's staff and friends.

TR

Spot on answer TR Sir, as usual!!!:lifter

(And after reading the Barrack thread in the Soapbox just now...frightening!):confused:

Holly

[dennisw]

Everyone still pays taxes, just indirectly.

When the "rich" are taxed, this changes the effective rate of return on their investment/labor/business/etc.

The costs are just passed along to everyone else.

Not paying federal taxes only gives the illusion of not paying taxes.
Such illusions are quite effective in furthering some political ends.

I'm not sure I can agree with this. Like anyone in business when you're faced with additional costs, you try and build the additional costs into your product price. However, there's nothing forcing anyone to purchase your product or service at this new price. When prices increase, folks may not choose to build a new building, purchase a new car, etc. I once reviewed an estate tax return where they paid $13,000,000 in federal estate tax. The person who passed away was wealthy, but how does one pass that tax onto the citizens at large?

I think your argument is more of a rationale justifying an unequal tax situation. It's ultimately an argument for redistribution of wealth, which I believe most on this board strongly oppose.

However, let's say I buy a home as an investment, fix it up and hold onto it for a few years, and I end up selling it at a gain of $200,000. Unless I do something like a section 1031 exchange(if it still applies) I will more than likely pay an extra capital gain tax of $40,000.00. How do I pass this on? Granted I'm not the rich category you're alluding to, but many middle class Americans pay a ton of taxes, yet have the same voting rights, etc. as those who do not.

How does paying additional taxes affect the rate of return on investments or the price of labor? I don't see a direct relationship.

I discussed this issue today with an employee of Home Depot. I believe the statistic mentioned on the radio was 47% of Americas do not pay any federal income taxes. He said, "you mean the really rich and the poor?" I ask him he believed really rich people pay no tax? He said, Oh, yeah."

I don't see it. Wealthy folks may do extensive tax planning and lower their tax liabilities, but not pay tax?

Now many rich folks may hide their money off shore or commit fraud on the tax returns, but that's a whole different situation. They may also go to jail for it.

One of the issues which created the angst with England during this country's foundation was taxation without representation. I think we would all agree that paying tax without a say in the government is unseemly. What about representation without taxation? How is that any less equitable?

[rubberneck]

Not the POTUS's staff, friends and the people that voted for him.

TR

I fixed it for you. We are getting to a really scary place in our history. If he continues to push his "change" I expect to see that percentage cross the 50% mark a climb yet higher. Once half the population realizes that all they have to do to avoid having to play federal income tax is to elect someone like Obama than were screwed. It won't be long there after that the people who do pay taxes are going to grow really tired of busting their rear ends to see it more and more of it taken from them and given to those who couldn't care less.

[bandycpa]

I have seen more people owing taxes on their returns this year. Most of this is attributable to either 1) retiree's having less withholding taken out because of the adjusted Federal Withholding tables created by the President's Making Work Pay Credit, and 2) from the Alternative Minimum Tax continuing to be applicable to more and more people.

I will say that the revised education credits have helped out several of my clients, and the $250,000 asset expensing election has helped too (as well as the improved residential energy credit...I've seen more roofs, doors, and windows sales invoices this year than ever :D). Still, with the talk of the favorable long-term capital gains rates set to expire at the end of 2010, we may see stock selloffs in 2010 like we haven't seen in years.

One week to go folks. One week to go.


Bandy

[echoes]

I have seen more people owing taxes on their returns this year. Most of this is attributable to either 1) retiree's having less withholding taken out because of the adjusted Federal Withholding tables created by the President's Making Work Pay Credit, and 2) from the Alternative Minimum Tax continuing to be applicable to more and more people.

I will say that the revised education credits have helped out several of my clients, and the $250,000 asset expensing election has helped too (as well as the improved residential energy credit...I've seen more roofs, doors, and windows sales invoices this year than ever :D). Still, with the talk of the favorable long-term capital gains rates set to expire at the end of 2010, we may see stock selloffs in 2010 like we haven't seen in years.

One week to go folks. One week to go.


Bandy

Bandy!!! As the resident CPA, hope you are not pulling all your hair out right now, mi amigo!:p (((Breathe))):o

Holly

[bandycpa]

Bandy!!! As the resident CPA, hope you are not pulling all your hair out right now, mi amigo!:p (((Breathe))):o

Holly

Thanks Holly. It's been a wild ride this tax season (well, as wild a ride as a CPA can have). As the old adage goes, we see light at the end of the tunnel, and it turns out it isn't a train!


Bandy

[echoes]

Thanks Holly. It's been a wild ride this tax season (well, as wild a ride as a CPA can have). As the old adage goes, we see light at the end of the tunnel, and it turns out it isn't a train! Bandy

Bandy, if you care to elaborate more...???

I am all ears as to the expected Tax vs. non-expected Tax of certain Americans payers this next year...as forecasted by those, such as you!:)

Holly---->pen and paper at the ready...

[bandycpa]

Bandy, if you care to elaborate more...???

I am all ears as to the expected Tax vs. non-expected Tax of certain Americans payers this next year...as forecasted by those, such as you!:)

Holly---->pen and paper at the ready...

Nothing really from a tax perspective. We've had two family deaths in the office this tax season. Today, after the funeral of my partner's wife, I came back and found out the utility pole across from the office had caught on fire. No power for hours! It's been an interesting season.

Tax wise, I can see a lot of paperwork coming down the pike. The new Form W-11 that came out this week as a result of the HIRE Act will get the hopes up of a lot of our small business clients who really need that social security tax exemption. Alas, the requirements (40 hours or less of employment in the past 60 days for the prospective employee, can only be hired to replace an employee who left voluntarily or was fired with cause...which is a whole other can of worms, and can't be related to the employer) will weed out most of them from getting the exemption. On the bright (but totally unrelated) side, the $250,000 Section 179 deduction was extended by the HIRE Act for 2010.

The residential energy credit will continue this year, as will the American Opportunity Credit. I really like this credit because it is basically the Hope Credit for four years instead of two. Great for college students (and the parents who have to foot the bill) to get some relief from their tuition (although, admittedly, not very much)

Roth IRA rollovers for higher income taxpayers are another big buzz we have. People can now roll over from a traditional to a Roth, no matter their income level. If they do this in 2010, they can have two years to pay off the tax resulting from this rollover.

My main concern is that we are now probably going to have to verify that people have health insurance as part of their tax return preparation. The IRS can say all they want that they are the ones verifying this; but, in reality, it will be us tax preparers that will be tasked with the responsibility of this...just like we have to verify EIC requirements, stock basis, and a plethora of other information that we have to report to the IRS. The IRS will then require us to provide proof that we verified this information at the time the return was prepared.

And we haven't even touched the estate tax issues that are still to be resolved this year.

And it's just April 8th. We have the whole year to go before the legislative dust finally settles.


Bandy

[GratefulCitizen]

I'm not sure I can agree with this. Like anyone in business when you're faced with additional costs, you try and build the additional costs into your product price. However, there's nothing forcing anyone to purchase your product or service at this new price. When prices increase, folks may not choose to build a new building, purchase a new car, etc. I once reviewed an estate tax return where they paid $13,000,000 in federal estate tax. The person who passed away was wealthy, but how does one pass that tax onto the citizens at large?

I think your argument is more of a rationale justifying an unequal tax situation. It's ultimately an argument for redistribution of wealth, which I believe most on this board strongly oppose.

However, let's say I buy a home as an investment, fix it up and hold onto it for a few years, and I end up selling it at a gain of $200,000. Unless I do something like a section 1031 exchange(if it still applies) I will more than likely pay an extra capital gain tax of $40,000.00. How do I pass this on? Granted I'm not the rich category you're alluding to, but many middle class Americans pay a ton of taxes, yet have the same voting rights, etc. as those who do not.

How does paying additional taxes affect the rate of return on investments or the price of labor? I don't see a direct relationship.

I discussed this issue today with an employee of Home Depot. I believe the statistic mentioned on the radio was 47% of Americas do not pay any federal income taxes. He said, "you mean the really rich and the poor?" I ask him he believed really rich people pay no tax? He said, Oh, yeah."

I don't see it. Wealthy folks may do extensive tax planning and lower their tax liabilities, but not pay tax?

Now many rich folks may hide their money off shore or commit fraud on the tax returns, but that's a whole different situation. They may also go to jail for it.

One of the issues which created the angst with England during this country's foundation was taxation without representation. I think we would all agree that paying tax without a say in the government is unseemly. What about representation without taxation? How is that any less equitable?

I'm not implying that everyone ends up paying "equal" or "fair" taxes,
nor am I advocating progressive taxation.

When the "rich" are taxed, in generally results in a barrier to upward mobility.
People far enough ahead of the game can continue to rise.
Those on the edge get beaten down by taxes.

The tax system ends up favoring large and established businesses while depressing small and upstart businesses.

The idea that "everyone still pays taxes" is an argument against progressive taxation because the people can't see the costs.
Make it flat; let people know what the tax system is actually costing them.

[T-Rock]

…not the real members of Congress…

http://www.youtube.com/watch?v=UksfV5V7R20

[Surf n Turf]

Roth IRA rollovers for higher income taxpayers are another big buzz we have. People can now roll over from a traditional to a Roth, no matter their income level. If they do this in 2010, they can have two years to pay off the tax resulting from this rollover.
And we haven't even touched the estate tax issues that are still to be resolved this year.

Bandy

Bandy,
Isn’t it counter-intuitive to defer paying taxes on a ROTH conversion, knowing that the Bush Tax cuts expire on 31 Dec 2010.

As I understand Estate Taxes (I prefer “Death Tax", 'cause I already paid taxes) this year the rate is zero (0%), and next year it raises to 35% to 55% based on value of the estate.

SnT

[Richard]

A worthwhile set of charts/data for those interested.

Richard

Summary of Latest Federal Individual Income Tax Data

http://www.taxfoundation.org/taxdata/show/250.html

This is interesting, too.

1913 Internal Revenue Service 1040 Form

http://www.taxfoundation.org/taxdata/show/641.html

[bandycpa]

Bandy,
Isn’t it counter-intuitive to defer paying taxes on a ROTH conversion, knowing that the Bush Tax cuts expire on 31 Dec 2010.

As I understand Estate Taxes (I prefer “Death Tax", 'cause I already paid taxes) this year the rate is zero (0%), and next year it raises to 35% to 55% based on value of the estate.

SnT

SnT,

The income tax resulting from the Roth conversion is separate from the estate tax. The Roth rollover is meant to allow people in higher individual income tax brackets to have their IRA accounts become tax free at the time they start drawing distributions from them (usually at age 59 1/2). The tax deferral on Roth IRA conversions for this year is similar to the deferral allowed in 1997 when Roths first came around. It is said that the government wants people in Roth IRAs because it will collect tax dollars *now* on taxpayer IRAs that were tax deductible before. A tax dollar today is worth more than a tax dollar years from now. The taxpayer is betting that the account will grow by leaps and bounds in the future, and that they will be in at least the same tax rate they are in now when they start drawing from the account (and that tax rates will be higher in the future than they are now).

Whether the account is a Roth or traditional IRA, it will be included in a person's estate when they die. But remember, since the Roth is growing tax-free over the course of its life, there would be potentially more money for the beneficiaries to have when it's inherited. And that money would be tax free to the beneficiary as well (unlike a traditional IRA). (the Charles Schwab site - where I took some of this info from - has a great writeup of the pros and cons of conversion...http://www.schwab.com/public/schwab/research_strategies/market_insight/retirement_strategies/planning/2010_roth_conversion_look_before_you_leap.html).

You have a great point about deferring the taxes over 2 years. If the tax rates go back up in 2011, then you'd be paying on half of the conversion at a higher tax rate than you would if you bit the bullet and paid it all in 2010. That's the thing about any tax planning right now. It's more of a crapshoot than it's been in years. We've gone from analyzing the law to pulling out a crystal ball on some of our client questions ("Will capital gains rates go back up? Will the estate tax come back, and at what rate? Are the individual tax rates going up next year?").

Days like this, a flat tax almost looks appealing. :D


Bandy

[6.8SPC_DUMP]

Thanks for your input Bandy.

Don't you think 47% of households not paying any income tax largely a result of job losses, low paying jobs, the real estate crash and stock market loss write-off's?

Homeowner's can write off their homeowner's insurance, mortgage interest, property taxes, private mortgage insurance and try for a depreciation loss write-off of 2/55 the purchase price of their home (for the first 27 years since purchased).

Landlords can also write off their landlord forms, any property management company costs, hazard insurance premiums, home improvements, habitability and safety repairs, advertising for vacancies, credit reports/background checks of prospective tenants and the cost of most legal contracts.

Becoming an expert in the tax field looks to be a safe bet for employment safety - but not an easy task. State and federal growing debt and massive spending makes carbon emission taxes a shoe-in for 2011- just for starters...

Legislation favoring the industries who are the top two political contributors: Medical and Banking, what a shock...

This site (http://www.opensecrets.org/industries/index.php) keeps track of industries' :


Totals: A summary of political giving dating back to 1990, including breakdowns by type of contribution and political party

Top contributors: A list of organizations (usually U.S. companies) that have given the most from that industry

Top recipients: A list of candidates that have received the most from that industry


But that doesn't answer the question of our debt solution, for which, no-one I've heard can realistically answer.

IMHO the first step is not paying interest on the debt to private banks who we let print our Countries' money. Changes to our political legislation process should be made. I think bills should be voted on individually and lobbyists outlawed. Politicians should be paid very well (with a good pension) and not allowed to be paid by the private sector after their term limit ends (which they should all have) or favor former employers in the bills. Not an easy task as politicians would be the ones who would have to vote in that change, but in my mind politicians aren't leaders; they are representatives.

Just my .02

[bandycpa]

Thanks for your input Bandy.

Don't you think 47% of households not paying any income tax largely a result of job losses, low paying jobs, the real estate crash and stock market loss write-off's?

Homeowner's can write off their homeowner's insurance, mortgage interest, property taxes, private mortgage insurance and try for a depreciation loss write-off of 2/55 the purchase price of their home (for the first 27 years since purchased).

Landlords can also write off their landlord forms, any property management company costs, hazard insurance premiums, home improvements, habitability and safety repairs, advertising for vacancies, credit reports/background checks of prospective tenants and the cost of most legal contracts.

Becoming an expert in the tax field looks to be a safe bet for employment safety - but not an easy task. State and federal growing debt and massive spending makes carbon emission taxes a shoe-in for 2011- just for starters...

Legislation favoring the industries who are the top two political contributors: Medical and Banking, what a shock...

This site (http://www.opensecrets.org/industries/index.php) keeps track of industries' :


Totals: A summary of political giving dating back to 1990, including breakdowns by type of contribution and political party

Top contributors: A list of organizations (usually U.S. companies) that have given the most from that industry

Top recipients: A list of candidates that have received the most from that industry


But that doesn't answer the question of our debt solution, for which, no-one I've heard can realistically answer.

IMHO the first step is not paying interest on the debt to private banks who we let print our Countries' money. Changes to our political legislation process should be made. I think bills should be voted on individually and lobbyists outlawed. Politicians should be paid very well (with a good pension) and not allowed to be paid by the private sector after their term limit ends (which they should all have) or favor former employers in the bills. Not an easy task as politicians would be the ones who would have to vote in that change, but in my mind politicians aren't leaders; they are representatives.

Just my .02

I think that some factors you mentioned are in the 47% figure. Stock losses aren't a big factor though because, no matter how big your loss is, you can only net that against capital gains (and Lord knows we haven't seen a lot of that this year). Only $3,000 of the remaining capital loss per year can offset ordinary income. Not a large deduction at all in the grand scheme. A lot of people have gotten stuck with capital loss carryovers that they will likely never completely use up in their lifetimes.

Also, regular homeowners don't get as many breaks as they used to. While it is true that mortgage interest and, to a lesser extent, points and PMI are deductible, homeowner's insurance and depreciation are not. The only depreciation a regular homeowner is allowed is if they attempt to create a deductible home office...and even then only a portion of the house is depreciable. And even mortgage interest, the expense with the most common tax incentive for homeowners, is not as great a deduction as it used to be because the standard deduction continues to creep up year after year. Remember, you can only itemize your deductions if your itemized deductions are greater than your standard deduction. Lower interest rates have created smaller mortgage interest amounts, and have resulted in more people doing the standard deduction this year (as far as what I've seen anyway). With this pattern continuing, Congress has allowed taxpayers to deduct their real estate taxes (up to $1,000 for married filing jointly) as an addition to their standard deduction (as well as certain sales taxes on purchases of new vehicles and motorcycles).

Further, a lot of landlords are limited in the losses they can take on their rentals. The government puts a $25,000 limit on rental losses deductible by "mom and pop" lessors, and that is cut off after income reaches $150,000. Consider as well that depreciation is over 27.5 years (or even 39 years, if commercial property), and it becomes clear that the losses aren't that big unless the lessor is actually losing money.

As far as debt solution is concerned, I haven't studied it as much as others have. I put my trust in nmap on that one as far as someone who has a pretty keen eye on matters like that. I'm just a tax guy trying to learn some more things outside of my circle. :D


Bandy

[echoes]

I'm just a tax guy trying to learn some more things outside of my circle. :D Bandy

Bandy, WOW! I go away for a couple of days, and come back to find such a great wealth of info!!! :)

Knowing that it is "tax season," there are always those who want to dump on preparers adivce, but thanks for taking the time to share it, as I have passed some of your thoughts on to my family's tax preparer.:lifter

Rock On!!!

Holly

[bandycpa]

Bandy, WOW! I go away for a couple of days, and come back to find such a great wealth of info!!! :)

Knowing that it is "tax season," there are always those who want to dump on preparers adivce, but thanks for taking the time to share it, as I have passed some of your thoughts on to my family's tax preparer.:lifter

Rock On!!!

Holly

Thanks Holly. I sure do appreciate it.


Bandy

[echoes]

Thanks Holly. I sure do appreciate it.

"Remember, you can only itemize your deductions if your itemized deductions are greater than your standard deduction. Lower interest rates have created smaller mortgage interest amounts, and have resulted in more people doing the standard deduction this year (as far as what I've seen anyway). With this pattern continuing, Congress has allowed taxpayers to deduct their real estate taxes (up to $1,000 for married filing jointly) as an addition to their standard deduction (as well as certain sales taxes on purchases of new vehicles and motorcycles)."
Bandy

Bandy,

Am very interested in you thoughts on the above points reguarding itemized deductions. (Am all for CPA's who support SF!!!:lifter)

Holly

[bandycpa]

Bandy,

Am very interested in you thoughts on the above points reguarding itemized deductions. (Am all for CPA's who support SF!!!:lifter)

Holly

Holly,

I'm glad to be a guest here! Very grateful for all SF does for us. I've gotten to talk with a few people on the board (QPs and non QPs alike), and every one of them have been so helpful in answering my questions.

Broad brush here. The most common itemized deductions to look out for are:

1) Medical deductions (only the amount above 7.5% of adjusted gross income count though)

2) Real estate taxes, personal property taxes, and either state income or sales taxes

3) Home mortgage interest and investment interest

4) Charitable contributions (cash and noncash)

5) Miscellaneous itemized deductions (including unreimbursed employee expenses, safe deposit box fees, union dues, etc). These are deductible when they get above 2% of adjusted gross income.

There are several others, but these are the major ones. Once added all together, if these deductions are greater than the standard deduction ($5,700 for single filers, $11,400 for married filing joint) then you can take the itemized deductions on your return.

But, even if you can't itemize, the real estate taxes mentioned above (up to $500 for singles, $1,000 for married fililng joint) can be added on to your standard deduction, and so can the sales taxes on new vehicles purchased in 2009 (on purchase prices up to $49,000).

And, believe it or not, it pays to compare taking the standard deduction against taking itemized deductions even if your itemized deductions are higher. Because of the alternative minimum tax, there are some occasions where taking the standard deduction will actually save you taxes.

If you have questions, feel free to pm or email me, Ms. Holly. Be glad to help any way I can.


Bandy

[bandycpa]

Well, after a solid year of confusion, wondering, and gazing into the crystal ball, we are back where we started (well, sort of). And, we get to do this again in two years.

I'm concerned about the 2% social security tax "holiday". Can a system that is barely afloat as it is handle a reduction of income? Also, from what I've seen so far, the 2% reduction is the same for both employees and self-employed. An employee's FICA goes from 6.2% down to 4.2%. However, the self-employment component goes from 12.4% down to 10.4% (NOT 8.4% like one would think...double of 4.2 is 8.4).

Anyway, at least we now know what to expect, and we can approach 2011 tax planning with a little bit of foundation.


Bandy


http://www.foxnews.com/politics/2010/12/17/congress-passes-extend-tax-cuts-jobless-aid/

Obama to Sign Tax Cut Bill Friday, Offering Americans a Dose of Holiday Cheer

Published December 17, 2010 | FoxNews.com

WASHINGTON -- President Obama gets to play Santa Claus on Friday when he signs into law a massive bipartisan tax package preventing a big New Year's Day tax hike for millions of Americans.

Obama is scheduled to sign the bill at 3:50 p.m. from the White House, sealing a deal with congressional Republicans that was nearly derailed by liberal Democrats who risked being seen as the Grinch.

The measure would extend existing tax cuts for families at every income level, renew jobless benefits for the long-term unemployed and enact a new one-year cut in Social Security taxes that would benefit nearly every worker who earns a wage.

The bill was passed just before midnight Thursday in a remarkable show of bipartisanship in the House, despite objections from some Democrats, who wanted to impose a higher estate tax than the one Obama agreed to. The vote was 277-148, with each party contributing an almost identical number of votes in favor -- the Democrats 139 and the Republicans 138.

In a rare reach across party lines, Obama negotiated the $858 billion package with Senate Republicans. The White House then spent the past 10 days persuading congressional Democrats to go along, providing a possible blueprint for the next two years, when Republicans will control the House and hold more seats in the Senate.

"There probably is nobody on this floor who likes this bill," said House Majority Leader Steny Hoyer, D-Md. "The judgment is, is it better than doing nothing? Some of the business groups believe it will help. I hope they're right."

Rep. Dave Camp, R-Mich., said that with unemployment hovering just under 10 percent and the deadline for avoiding a big tax hike fast approaching, lawmakers had little choice but to support the bill.

"This is just no time to be playing games with our economy," said Camp, who will become chairman of the tax-writing House Ways and Means Committee in January. "The failure to block these tax increases would be a direct hit to families and small businesses."

Sweeping tax cuts enacted when George W. Bush was president are scheduled to expire Jan. 1 -- a little more than two weeks away. The bill extends them for two years, placing the issue squarely in the middle of the next presidential election, in 2012.

The extended tax cuts include lower rates for the rich, the middle class and the working poor, a $1,000-per-child tax credit, tax breaks for college students and lower taxes on capital gains and dividends. The bill also extends through 2011, a series of business tax breaks designed to encourage investment that expired at the end of 2009.

Workers' Social Security taxes would be cut by nearly a third, going from 6.2 percent to 4.2 percent, for 2011. A worker making $50,000 in wages would save $1,000; one making $100,000 would save $2,000.

"This legislation is good for growth, good for jobs, good for working and middle class families, and good for businesses looking to invest and expand their work force," said Treasury Secretary Timothy Geithner.

Some Democrats complained that the package is too generous to the wealthy; Republicans complained that it doesn't make all the tax cuts permanent.

Rep. Ginny Brown-Waite, R-Fla., called it "a bipartisan moment of clarity."

The bill's cost, $858 billion, would be added to the deficit, a sore spot among budget hawks in both parties.

"I know that we are going to borrow every nickel in this bill," Hoyer lamented.

At the insistence of Republicans, the plan includes an estate tax that would allow the first $10 million of a couple's estate to pass to heirs without taxation. The balance would be subject to a 35 percent tax rate.

Many House Democrats wanted a higher estate tax, one that would allow couples to pass only $7 million tax-free, taxing anything above that amount at a 45 percent rate. They argued that the higher estate tax would affect only 6,600 of the wealthiest estates in 2011 and would save $23 billion over two years.

House Speaker Nancy Pelosi, D-Calif., called the estate tax the "most egregious provision" in the bill and held a vote that would have imposed the higher estate tax. It failed, 194-233.

Rep. Elijah Cummings, D-Md., said he thought the White House could have gotten a better deal.

"When I talk to the Republicans they are giddy about this bill," he said.

The Associated Press contributed to this report.

[Pete]

This is what chaps me

The bill's cost, $858 billion, would be added to the deficit, a sore spot among budget hawks in both parties.


Tax cuts - or an extension of an existing one - do not "cost" anything. Unless the government figures it owns every single dimes worth of money the US produces.

How much does it cost the government each year allowing anybody to keep any money? Just take it all and let everyone work for the government or be on welfare. See how easy it is to fix all our problems - just have everyone work for the government or be on welfare.

[1stindoor]

Well, after a solid year of confusion, wondering, and gazing into the crystal ball, we are back where we started..

Many House Democrats wanted a higher estate tax, one that would allow couples to pass only $7 million tax-free, taxing anything above that amount at a 45 percent rate. They argued that the higher estate tax would affect only 6,600 of the wealthiest estates in 2011 and would save $23 billion over two years.



Thanks for the updated info Bandy. I can't for the life of me understand the estate tax though. 35-45% is grave robbing if you ask me.

[longrange1947]

This is what chaps me

The bill's cost, $858 billion, would be added to the deficit, a sore spot among budget hawks in both parties.


Tax cuts - or an extension of an existing one - do not "cost" anything. Unless the government figures it owns every single dimes worth of money the US produces.

How much does it cost the government each year allowing anybody to keep any money? Just take it all and let everyone work for the government or be on welfare. See how easy it is to fix all our problems - just have everyone work for the government or be on welfare.

If it were up to the progrdessive Dims, that is exactly how this place would be ran!! NOTE NOT IN PINK!! :munchin :p

[bandycpa]

Thanks for the updated info Bandy. I can't for the life of me understand the estate tax though. 35-45% is grave robbing if you ask me.


You're welcome, sir. It is grave robbing in the most literal sense of the word. The only consolation here is that the Dems wanted 55% as the top rate...with the estate tax exemption going back down to $675,000 (from the $3.5M amount in 2009, and unlimited exemption in 2010). They didn't get it...yet.

Further, the Dems were willing to do away with the child tax credit, education credits, the 10% income tax bracket, the marriage penalty relief provision, and a myriad of other tax savings and incentives that would affect individuals and families in the 15% and lower brackets just so they could get to the rich. Talk about cutting off one's nose to spite your face.

Taxes used to drive economic policy and provide for common public goods and services. Now I fear they simply promote political agendas.

Bandy

[Gypsy]

Thanks for the updated info Bandy. I can't for the life of me understand the estate tax though. 35-45% is grave robbing if you ask me.

Agree. They are not entitled to a dime if you ask me.

Juan Williams, of Fox News Channel, was interviewed on a local radio station the other day. The host asked him if he thought the "death tax" (as he refers to it) was fair. "Sure it is", basically he feels the dims are only trying to stop "generations" from inheriting money, that he knows plenty of "rich people" that tell their kids they'll get x amount and that's it, go work for it if you want it.

I understand that premise, working for what you want, but who the hell is the government to dictate? And why do they deserve it, instead of some family members? They don't.

Isn't this some form of double taxation? (excluding pre-tax savings dollars)

[Richard]

Who Pays Income Taxes Anymore? I do.

Richard :munchin

[Oldrotorhead]

Who Pays Income Taxes Anymore? I do.

Richard :munchin

We are both still in the majority 53% vs. 47% at least for now. You haven't see the Congress take on Trusts and Family Trusts yet have you? Why you may ask? Kennedy, Kerry, Pelosi, even Buffitt and Gates among others I answer. How many really well paid "entertainers claim California or New York as a residence? Answer not many, though they may spend 10 months a year in their Malibu house they "live " in Montana. Why you may ask ? I answer State Income Tax is for peasants that can only afford to have one residence. I just love Liberals. :mad: :mad::mad:

[The Reaper]

We have a small family farm that I may one day inherit. It has been in my family for four generations.

If the estate taxes are as high as the Dims would want, I could not even pay them off without selling the property or taking out a huge loan against it.

Is that what they call fair?

TR

[Richard]

We have a small family farm that I may one day inherit. It has been in my family for four generations.

If the estate taxes are as high as the Dims would want, I could not even pay them off without selling the property or taking out a huge loan against it.

That's why there are 'trusts'...;)

Richard :munchin

[Paslode]

We have a small family farm that I may one day inherit. It has been in my family for four generations.

If the estate taxes are as high as the Dims would want, I could not even pay them off without selling the property or taking out a huge loan against it.

Is that what they call fair?

TR


Fair.....no. At one point in time I believe that saving, passing on heritage and legacies was an essential part of keeping the American Dream alive. But for sometime now it seems that you are actually penalized for saving unless you go find a attorney to find the right loop holes.

In the case of my Aunts property a Law Firms manages a Trust and receives income which is a bone of contention within the surviving members of the family.

TR, I am curious as to whom would end up with the property in your described worst case scenario? Would it be federally confiscated or put up for sale?

[The Reaper]

Fair.....no. At one point in time I believe that saving, passing on heritage and legacies was an essential part of keeping the American Dream alive. But for sometime now it seems that you are actually penalized for saving unless you go find a attorney to find the right loop holes.

In the case of my Aunts property a Law Firms manages a Trust and receives income which is a bone of contention within the surviving members of the family.

TR, I am curious as to whom would end up with the property in your described worst case scenario? Would it be federally confiscated or put up for sale?

One of my high school classmates was in a similar situation about fifteen years ago. He was farming and was wealthy enough that the bathroom floor of his trailer allowed him to see the weather outside. He nailed a piece of tin over it in the winter to keep the weather and vermin out.

His father and mother died and he was left with a larger farm, which he immediately had to use as collateral for a $500,000 loan to pay the taxes. He busted his ass to make it work, but a few hard years with bad crops, and the bank came calling.

A few days before he was due to be foreclosed on and evicted, he used a 12 gauge shotgun to end his life and his worries. A developer bought the land from the bank and put up a subdivision on 1/4 acre lots. He made a fortune.

Meanwhile, almost half of the people in this country are getting a free ride on taxes while we try to soak the "rich".

Yeah, that seems fair. Obviously, he should have gotten a lawyer and set up a tax dodge. If he had the money for that.

I guess I should get a lawyer and start a payment plan already. If I inherited it and it came with a huge tax liability, I would take out a loan to pay the taxes and start looking for a developer to make the best deal we could. Maybe we could save a small part of it for my kids to remember, like the family cemetery. For sure, I could not pay the $300,000 to $500,000 that the Dims would like to see paid on it, and we certainly do not need any more small farms in this country. :rolleyes:

TR

[Richard]

You have to discuss such affairs with a local attorney schooled in those specific laws because the laws vary somewhat...

...but...

after my Dad died and my Mom found out she was ill, she had our family attorney place our family ranch into a 'memorial trust' with me as an executor and having co-access/signatory powers to all the family accounts (banking, utilities, etc). When she, too, passed away, there was no 'inheriting' to be done - I just took over the property and have carried on with it (I'm now renting it out) as if nothing had changed (which it really hasn't as everything is conducted under the terms of the 'trust'). The property taxes are also 'grandfathered' under the terms of the last owner (my Mom) until such time as it ever changes and I pay the normal 7% state income tax on earnings from the property. As the executor of the 'trust' and not an 'estate', when I eventually sell it (once the property values out there come back up at some point) the taxes will be figured IAW the normal sales taxes and not the excessively high 'inheritance' taxes. I manage the 'trust' - not some attorney.

My ffolkes were pretty smart with their money - didn't mind paying their 'fair' share of taxes and such, but certainly didn't like giving their earnings to any person or governmental body just to be giving it away. I feel the same way about my money.

Richard :munchin

[T-Rock]

I can't for the life of me understand the estate tax though. 35-45% is grave robbing if you ask me.

Me neither :mad:

New York Rep. Anthony Wiener and his Dem friends doesn’t think any inheritance is yours, it’s unearned income, therefore, it should be taxed again…
:mad:> http://www.youtube.com/watch?v=JO9PqfGUFZE

[bandycpa]

Me neither :mad:

New York Rep. Anthony Wiener and his Dem friends doesn’t think any inheritance is yours, it’s unearned income, therefore, it should be taxed again…
:mad:> http://www.youtube.com/watch?v=JO9PqfGUFZE

Clearly they don't understand that the inheritance has had taxes paid on it at least once during the decedent's lifetime...maybe two or three times. Yet, these people are elected to vote on (and sometimes to write) such legislation.

Of course, they don't read it anyway.

[GratefulCitizen]

We have a small family farm that I may one day inherit. It has been in my family for four generations.

If the estate taxes are as high as the Dims would want, I could not even pay them off without selling the property or taking out a huge loan against it.

Is that what they call fair?

TR

IIRC, there is a way to mitigate the effects of inheritance tax through life insurance trusts and other mechanisms.
It's a delicate issue to discuss with family, but may be worth investigating.