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Jim Meade / Iowa City
Senior Advisor

2012 Death Taxes

The federal government raised 0.42% (yes, 0.0042) of it's tax revenue with estate taxes in 2012,  $8,492,115,000

 

the average estate tax was $3,400.00 on 2.5 million deaths.  That means most paid nothing but a few paid a lot.  The greatest tax was not on ag land but on stocks.

 

"Relatedly, various studies show that the compliance costs associated with estate planning exceed the revenue generated by the tax.  "

 

" The IRS statistics also reveal that the primary asset likely to be included in a generation-skipping (“dynasty”) trust, is stock rather than agricultural land. "

 

The whole article is short and interesting.

 

https://www.calt.iastate.edu/2012-estate-tax-numbers

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4 Replies
JCCWIS
Senior Contributor

Re: 2012 Death Taxes

Jim...I thought all these big farms were having to be sold off to pay estate taxes??????     John

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hardnox
Advisor

Re: 2012 Death Taxes

Of course the basis on those stocks got valued up at death, meaning that in many cases the heirs saved money by it going through the estate. It would vary by case- how big the estate was, what the original cost was on the stocks. Probably have to get over $10 million or so for that not to be the case, in general.

 

If they want to pay the capital gains on them rather than the estate tax that's fine with me.

 

As to farms, the same kind of applies. It is a windfall for heirs who want to sell.

 

I'm not very familiar with current estate tax law but there was once something called Special Use Valuation that gave tax breaks specifically for farms where there were ongoing operations by related parties.

 

That seems to me to be a quite valid approach as opposed to using Farm Bureau and the guy in overalls to testify about the heinous impact of the Death Tax on Family Farms. Which really is just a matter of our growing intergenerational oligarchy defending its privelege and using whatever they can to sell it.

 

I'll cover up with pillows before the brickbats come flying but will suggest that the estate tax isn't mostly about revenue it is about social policy- discouraging a hereditary aristocracy.

 

The essential problem is that even marginal 1%ers don't recognize the threat that the .1, .01 and .001%ers represent to them.

 

A $10 millionaire ain't the same as a $10 billionaire, even if he thinks he's on the team.

 

 

 

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minnisota
Veteran Contributor

Re: 2012 Death Taxes

There would be a lot of farms sold to pay estate taxes if they had gone back to $1M rather than $5.2M as it stands now very few farms will be sold for estate taxes. Welcome to the world of the 1% ers. We get to be welfare queens and 1%ers all at once now don't we feel better.

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hardnox
Advisor

Re: 2012 Death Taxes

Although for non-farming heirs who have just had all the tax liability wiped away and what is , shall we say, a strong market by historical standards, it would take a lot of sentimentality to overcome the voice that would have to be shouting SELL in their ears.

 

Of course it depends entirely on how the estate is constructed but a Special Use approach rather than large blanket exemption, or repeal, might do more for the contuation of family farms. If that was ever the intent.

 

Actually I think you could make a case for the repeal of the estate tax if you also eliminated the step up in basis. Would probably be better for "family farms" as it reduces incentive to sell. Also would need to eliminate the very substantial amount of deferred income tax that can be avoided upon death- mark the non-capital assets to maket and pay the same 'ol income tax that everybody else pays.

 

Point there being that you shouldn't be able to have it both ways. Either no estate tax and you settle up on a cash basis and pay CGs down the road if you sell or put it through fed estate and get the tax benefits.

 

Doubt that the poor family farmers who were testifying brought that part up.

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