Published on Alternet (http://www.alternet.org)
Home > Another Way the Rich Get Richer: Their Parents Give Them Obscene
Amounts of Money Nearly Tax-Free
________________________________________
Another Way the Rich Get Richer: Their Parents Give Them Obscene Amounts of
Money Nearly Tax-Free
By Peter Van Buren [1] / WeMeantWell.com [2]
May 16, 2016
It'd be great if we were all self-made men, like Citizen Trump.
Of course, his self-making, like that of many wealthy people, is based in
large part on a wealthy parent giving him a ton of money. Why work for a
living when you can just hang around drinking single malt until daddy dies
and leaves you his money?
Trump's papa left an estate valued at between $100 and $300 million [3] in
1999. A nice start for a career in real estate for Don and his siblings.
Getting All the Monies
Now the idea that parents should be able to leave their money to their kids
is all A-OK. That the hyper-wealthy can do it with little or no significant
tax is not OK. It is one of the prime drivers of future economic inequality
in the U.S. Absent a change in the law that will happen when pigs fly into a
snowy hell, rich kids will only get richer, and then pass on their buckaroos
to their heirs. They'll have all the monies.
In the words of one economist [4], even though the American dream is pulling
yourself up by your bootstraps, we've made ample room in it for people whose
boots are handed down.
How Estate Taxes Work
The first $5.43 million [5] per heir is fully exempt from any tax. Spread
the money around to siblings, spouses, kids and grandkids, and you can
shield a bundle from tax easily. In fact, that system means 99.8 percent of
all estates owe no estate tax at all. There is no reason the exemption has
to be $5.43 million except to favor the wealthy, and there should be an
overall cap on how much can be shielded from tax to prevent fake families
from splitting things all up.
For the small number of estates actually subject to some taxes, those taxes
of course are due only on the portion of an estate's value that exceeds the
exemption level. So, a $6 million estate would owe estate taxes on only
$570,000. Except that heirs can often shield a larger portion of the estate
from taxation through deductions, loopholes and discounts written into the
tax code. So, while the on-paper tax rate for estates is 40 percent, most
pay about 16 percent [6] in reality.
It's Complicated
As an example of the complexity of estate planning-tax avoiding available to
the rich, consider the grantor retained annuity trust [7]. The estate owner
puts money into a trust designed to repay the estate the initial amount plus
interest at a rate set by the Treasury, typically over two years. If the
investment - typically stock - rises in value any more than the Treasury
rate, the gain goes to an heir tax-free. If the investment doesn't rise in
value, the full amount still goes back to the estate. Such techniques have
been described as a "heads I win, tails we tie" bet.
A Reasonable Idea
If inheritances could be taxed reasonably, enough money would trickle down
the legs of the rich that some societal benefits would accrue.
Unfortunately, all three Republicans in the presidential race promise to
abolish the estate tax altogether. Hillary and Bernie offer [8] only weak
promises of reform, focused on rolling the tax back to its (higher) 2009
levels. But they'll need Congressional approval for that, so, no.
It will be no surprise that American estate taxes are well below average
among the countries in the Organization for Economic Co-Operation and
Development.
I know, I know, math and numbers are hard. So here it is in very simple
words: by not fairly taxing the estates of the wealthy, we are locking in
our staggering economic inequality for future generations.
FUN FACT: The wealthiest ten percent of Americans takes home about half of
all income. The richest 0.1 percent holds 22 percent of the country's
wealth.
Peter Van Buren, a TomDispatch regular [9], blew the whistle on State
Department waste and mismanagement during the Iraqi reconstruction in We
Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the
Iraqi People [10]. A TomDispatch [11] regular, he writes about current
events at We Meant Well [12]. His latest book is Ghosts of Tom Joad: A Story
of the #99Percent [13]. His next work will be a novel, Hooper's War [14].
Share on Facebook Share
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Report typos and corrections to 'corrections@xxxxxxxxxxxx'. [15]
[16]
________________________________________
Source URL:
http://www.alternet.org/economy/another-way-rich-get-richer-their-parents-gi
ve-them-obscene-amounts-money-nearly-tax-free-0
Links:
[1] http://www.alternet.org/authors/peter-van-buren
[2] http://wemeantwell.com/blog/
[3]
http://www.nytimes.com/1999/06/26/nyregion/fred-c-trump-postwar-master-build
er-of-housing-for-middle-class-dies-at-93.html
[4]
http://www.nytimes.com/2016/03/28/opinion/campaign-stops/whats-more-american
-than-inheriting-a-fortune.html?action=click&pgtype=Homepage&version
=Moth-Visible&moduleDetail=inside-nyt-region-4&module=inside-nyt-reg
ion&region=inside-nyt-region&WT.nav=inside-nyt-region&_r=0
[5]
http://www.cbpp.org/research/ten-facts-you-should-know-about-the-federal-est
ate-tax#_ftn2
[6]
http://www.cbpp.org/research/ten-facts-you-should-know-about-the-federal-est
ate-tax#_ftn6
[7]
http://www.cbpp.org/research/ten-facts-you-should-know-about-the-federal-est
ate-tax#_ftn7
[8]
http://taxpolicycenter.org/UploadedPDF/2000638-an-analysis-of-hillary-clinto
ns-tax-proposals.pdf
[9]
http://www.tomdispatch.com/blog/176079/tomgram%3A_peter_van_buren,_who_will_
fight_the_islamic_state/
[10] http://www.amazon.com/dp/0805096817/ref=nosim/?tag=tomdispatch-20
[11]
http://www.tomdispatch.com/post/176059/tomgram%3A_peter_van_buren,_the_great
_war_in_the_middle_east/
[12] http://www.wemeantwell.com/
[13] http://www.amazon.com/dp/1935462911/ref=nosim/?tag=tomdispatch-20
[14] http://www.hooperswar.com/
[15] mailto:corrections@xxxxxxxxxxxx?Subject=Typo on Another Way the Rich
Get Richer: Their Parents Give Them Obscene Amounts of Money Nearly Tax-Free
[16] http://www.alternet.org/
[17] http://www.alternet.org/%2Bnew_src%2B
Published on Alternet (http://www.alternet.org)
Home > Another Way the Rich Get Richer: Their Parents Give Them Obscene
Amounts of Money Nearly Tax-Free
Another Way the Rich Get Richer: Their Parents Give Them Obscene Amounts of
Money Nearly Tax-Free
By Peter Van Buren [1] / WeMeantWell.com [2]
May 16, 2016
AddThis Sharing ButtonsShare to FacebookShare to TwitterShare to Google+More
AddThis Share optionsShare to Email
It'd be great if we were all self-made men, like Citizen Trump.
Of course, his self-making, like that of many wealthy people, is based in
large part on a wealthy parent giving him a ton of money. Why work for a
living when you can just hang around drinking single malt until daddy dies
and leaves you his money?
Trump's papa left an estate valued at between $100 and $300 million [3] in
1999. A nice start for a career in real estate for Don and his siblings.
Getting All the Monies
Now the idea that parents should be able to leave their money to their kids
is all A-OK. That the hyper-wealthy can do it with little or no significant
tax is not OK. It is one of the prime drivers of future economic inequality
in the U.S. Absent a change in the law that will happen when pigs fly into a
snowy hell, rich kids will only get richer, and then pass on their buckaroos
to their heirs. They'll have all the monies.
In the words of one economist [4], even though the American dream is pulling
yourself up by your bootstraps, we've made ample room in it for people whose
boots are handed down.
How Estate Taxes Work
The first $5.43 million [5] per heir is fully exempt from any tax. Spread
the money around to siblings, spouses, kids and grandkids, and you can
shield a bundle from tax easily. In fact, that system means 99.8 percent of
all estates owe no estate tax at all. There is no reason the exemption has
to be $5.43 million except to favor the wealthy, and there should be an
overall cap on how much can be shielded from tax to prevent fake families
from splitting things all up.
For the small number of estates actually subject to some taxes, those taxes
of course are due only on the portion of an estate's value that exceeds the
exemption level. So, a $6 million estate would owe estate taxes on only
$570,000. Except that heirs can often shield a larger portion of the estate
from taxation through deductions, loopholes and discounts written into the
tax code. So, while the on-paper tax rate for estates is 40 percent, most
pay about 16 percent [6] in reality.
It's Complicated
As an example of the complexity of estate planning-tax avoiding available to
the rich, consider the grantor retained annuity trust [7]. The estate owner
puts money into a trust designed to repay the estate the initial amount plus
interest at a rate set by the Treasury, typically over two years. If the
investment - typically stock - rises in value any more than the Treasury
rate, the gain goes to an heir tax-free. If the investment doesn't rise in
value, the full amount still goes back to the estate. Such techniques have
been described as a "heads I win, tails we tie" bet.
A Reasonable Idea
If inheritances could be taxed reasonably, enough money would trickle down
the legs of the rich that some societal benefits would accrue.
Unfortunately, all three Republicans in the presidential race promise to
abolish the estate tax altogether. Hillary and Bernie offer [8] only weak
promises of reform, focused on rolling the tax back to its (higher) 2009
levels. But they'll need Congressional approval for that, so, no.
It will be no surprise that American estate taxes are well below average
among the countries in the Organization for Economic Co-Operation and
Development.
I know, I know, math and numbers are hard. So here it is in very simple
words: by not fairly taxing the estates of the wealthy, we are locking in
our staggering economic inequality for future generations.
FUN FACT: The wealthiest ten percent of Americans takes home about half of
all income. The richest 0.1 percent holds 22 percent of the country's
wealth.
Peter Van Buren, a TomDispatch regular [9], blew the whistle on State
Department waste and mismanagement during the Iraqi reconstruction in We
Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the
Iraqi People [10]. A TomDispatch [11] regular, he writes about current
events at We Meant Well [12]. His latest book is Ghosts of Tom Joad: A Story
of the #99Percent [13]. His next work will be a novel, Hooper's War [14].
Error! Hyperlink reference not valid.
Error! Hyperlink reference not valid.
Report typos and corrections to 'corrections@xxxxxxxxxxxx'. [15]
Error! Hyperlink reference not valid.[16]
Source URL:
http://www.alternet.org/economy/another-way-rich-get-richer-their-parents-gi
ve-them-obscene-amounts-money-nearly-tax-free-0
Links:
[1] http://www.alternet.org/authors/peter-van-buren
[2] http://wemeantwell.com/blog/
[3]
http://www.nytimes.com/1999/06/26/nyregion/fred-c-trump-postwar-master-build
er-of-housing-for-middle-class-dies-at-93.html
[4]
http://www.nytimes.com/2016/03/28/opinion/campaign-stops/whats-more-american
-than-inheriting-a-fortune.html?action=click&pgtype=Homepage&version
=Moth-Visible&moduleDetail=inside-nyt-region-4&module=inside-nyt-reg
ion&region=inside-nyt-region&WT.nav=inside-nyt-region&_r=0
[5]
http://www.cbpp.org/research/ten-facts-you-should-know-about-the-federal-est
ate-tax#_ftn2
[6]
http://www.cbpp.org/research/ten-facts-you-should-know-about-the-federal-est
ate-tax#_ftn6
[7]
http://www.cbpp.org/research/ten-facts-you-should-know-about-the-federal-est
ate-tax#_ftn7
[8]
http://taxpolicycenter.org/UploadedPDF/2000638-an-analysis-of-hillary-clinto
ns-tax-proposals.pdf
[9]
http://www.tomdispatch.com/blog/176079/tomgram%3A_peter_van_buren,_who_will_
fight_the_islamic_state/
[10] http://www.amazon.com/dp/0805096817/ref=nosim/?tag=tomdispatch-20
[11]
http://www.tomdispatch.com/post/176059/tomgram%3A_peter_van_buren,_the_great
_war_in_the_middle_east/
[12] http://www.wemeantwell.com/
[13] http://www.amazon.com/dp/1935462911/ref=nosim/?tag=tomdispatch-20
[14] http://www.hooperswar.com/
[15] mailto:corrections@xxxxxxxxxxxx?Subject=Typo on Another Way the Rich
Get Richer: Their Parents Give Them Obscene Amounts of Money Nearly Tax-Free
[16] http://www.alternet.org/
[17] http://www.alternet.org/%2Bnew_src%2B
