While there's been some discussion of the massive cut, albeit temporary, in the estate tax (arguably the tax cut least likely to produce jobs), the new gift tax rules are even more obscene:
Families would be able to make tax- free gifts to their children or others of as much as $10 million, an increase from the current limit of $2 million, under the tax-cut bill Congress is debating this week.
Beginning in 2011, an individual U.S. taxpayer's lifetime gift-tax exclusion will jump to $5 million, up from $1 million currently, according to the legislation. Gifts from living parents allow taxpayers to transfer assets such as cash, stocks or shares of a business to their kids and let the value grow outside of the couple's estate, said Jim Cundiff, an estate planning attorney with McDermott Will & Emery, who's based in Chicago. Unifying the estate and gift tax exemptions is one of the biggest benefits in the measure, he said.
But you better move quickly:
"You could transfer $10 million next year without paying any tax," Cundiff said. "That's a big tax-free gift. This benefit evaporates in two years, so take it while you can." Parents may use trusts to give the money to descendants if they're concerned about giving a lot of money directly to their children, he said.
It's one thing to be born with a silver spoon in your mouth, it's another to have one stuck up your ass. This is nothing more than an end-run around the estate tax. The kids didn't earn it, they inherited it--and keep in mind, the previous rules allowed $2 million tax free, after which the remaining gift is treated as income and currently taxed at thirty five percent. You can make do on that.
This is one more step towards the establishment of a de facto aristocracy and towards the triumph of Toryism (Republicans should really be called Tories--it would clear things up greatly). Apparently, working for a living only has redemptive value for poor single minority mothers: the scions of the wealthy, by virtue of their birth, clearly don't need this form of moral instruction.
A republic, if we can keep it...
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Mike, you're kind of late to the show. It has already been done, and in a big way, while you were in school. These new estate taxes are small potatoes, for the very very stupid.
The so-called "dynasty trusts", now allowed in about half the states since the mid-90s, deliberately set up a permanent tax-free aristocracy--note the blatant choice of name. There are no time limits, there are no taxes, the future generations don't actually inherit the property but simply get full exclusive privileges. Junior lives in the mansion, uses the limousines, hires the servants and all, but doesn't actually own anything or pay for anything.
Even more rich-people-are-special is the fact that these trusts are typically off-limits from legal encroachment. Suppose the junior aristocrat runs up ridiculous debts, say by causing a terrible accident or running a Ponzi scheme. Junior can be sued out the wazoo, but since he is legally a pauper, nothing will be collected, and the trust is exempt. His access to the trust remains unimpeded.
It is reasonable to view the system as set up to help the rich get richer. It assumes, correctly, that the rich consult lawyers and accountants on how to game the system. A middle class person who does a little bit of consultation finds the same gaming is available to middle class people. There are gift deeds, trusts, etc. which you can use to keep the over-valued farm in the family.
I gotta admit: the gift tax sounds really stupid. It's a gift. And taxing inheritance sounds stupid, too. Private, non-commercial money transfers should be left alone.
Other stuff is perfectly taxable, though.
Thanks for keeping Phil Agre in the conversation.
Personally, what really steams me about large caps on the gift taxes, and any level of cap on the estate tax, is that capitol gains get zeroed out by gift or inheritance. If the IRS just collected capitol gains on gifts an inheritance, then I'd be satisfied.
"Republicans should really be called Tories"
I beg your pardon! Real Tories (in the UK) are not creationist.