How do you feel about inheritance?

[ajax18]

Another Bidenism! Boy this is a good break for the middle class.
Another Bidenism for us to swallow.
Did you know Biden wants to get rid of something called "stepped up basis"??? How does this affect you!? When your parents pass and leave you the family house normally you would inherit that property at what it is worth today. If you were to sell that house you would only pay taxes on the gain from what it is worth today and what it sells for. If Biden does away with "stepped up basis" you will inherit the property for what your parents paid for the property. If you decide to sell you will pay taxes on the difference between the original purchase price and what it sells for today. Our kids need to be aware.
Here is what this looks like!
Current Policy
Inherited House at Current Value - $200,000
Sells for $205,000
Taxable income = $5000
Taxes Due - 20% of $5000 = $1000
Profit to you = $204,000
Biden Policy
Inherited House at original purchase price - $40,000
Sells for $205,000
Taxable income = $165,000
Taxes Due - 20% of $165,000 = $33,000
Profit to you = $172,000
If your parent were to have sold this property prior to passing they would have paid no taxes because it was their primary residence.
So much for helping the middle class get ahead.
***My educated guess would be that at least 95% of Americans don’t even know Biden has proposed this. We are talking tens of thousands of more tax dollars for the average sold after inheritance! Wow, google “Biden stepped up basis” and educate yourself because this is a biggie!
My guess is they will remove it from Farm and Ranch land as well.. So here it comes...We were warned...I guess you can lead a horse to water but you can't make it drink..

I'm just curious where the left on this board stands on this new policy? Should inheritance taxes be raised?

[Chap]

FYI, this statement on Bidenforum puts the 'step-up basis' into the wider context of tax reform:

A tax system for all Americans
By Ray D. Madoff
Biden Forum Editors
Dec 12, 2018 · 5 min read

This proposal is presented as part of an attempt to deal with the fact that in the US as things tend at present, it is the holding of capital, not the earning of wages. that makes a family richer.

As I understand it, that notion of how to become prosperous was not part of the 'American Dream'. Indeed, the US middle class is sinking economically because its main motor of social advancement in the past - earnings from work - no longer work the miracle they used to. Instead, it is the people who just sit on their investments without needing to work who end up owning an ever-increasing proportion of the national wealth.

I wouldn't have expected ajax to see that as being in the interest of people like himself, but you can never tell, can you?

Who bears the brunt of taxes in America?

A cursory glance at the tax code might suggest that it is predominantly the wealthy. After all, taxes due on wages rise with income. However, closer inspection of the tax code reveals that it is actually workers — and not the wealthiest Americans — who bear that burden.

The root of this misconception is the failure to take into account that the wealthiest Americans generally acquire their income not from wages, but from investments. Rather than working themselves, wealthy taxpayers put their money to work for them by investing in stocks, art, real estate, or other property, and then earn “capital gains” when these investments rise in value. While some argue that such investments are good for our economy, these endeavors are no better than the good that comes from labor. Yet, taxes imposed on investments are significantly less burdensome than taxes imposed on wages.

There are three ways that our tax system gives preferential treatment to capital gains over wages. First, the tax rates on wages are significantly higher than those on capital gains. Wages are subject to income tax rates up to 37 percent while capital gains are taxed at a maximum rate of 20 percent. This preferential rate on capital gains cost the federal government $130 billion in 2017 — approaching double the $72 billion spent on all veteran’s benefits and services in the same year. In addition to losing substantial revenue, this special treatment adds significant complexity to the tax code as Congress has needed to adopt additional rules to thwart taxpayers from finding crafty ways to make their income look like capital gains. Of course, Congress often has a hard time keeping up with clever tax planners, and we ultimately end up with schemes like the infamous carried interest loophole — which allows hedge fund managers to pay tax at a 20-percent rate instead of 37 percent.

The second way that investments are taxed more favorably than wages is due to timing. Workers pay taxes on their wages as their income is earned, and there is very little opportunity to shift income across years to lower their tax bill. However, investors have significant latitude when it comes to timing their capital gains. The reason for this flexibility is “the realization requirement,” which provides that no taxes are levied on capital gains until the investment is sold or exchanged — allowing investors to pick the year in which their taxes are due. The realization requirement has been described as “the primary source of distributional inequity and complexity in the tax system.”

The third, and most significant, advantage of all for investors is that taxes on capital gains can be avoided altogether if the investment is held until death. Under American tax law, investors are not subject to tax on their capital gains if they don’t sell the property during life. This is unlike Canadian law, which taxes previously untaxed capital gains on the owner’s final income tax return. The most troubling aspect of the American system is that investors’ heirs will also avoid capital gains on the assets they inherit because, under the tax code, the heirs are treated as if they had purchased the inherited property for its fair market value at the time of the investor’s death. This means that the heirs can sell the property and avoid taxes on all gains accrued during the investor’s life. This is known as step-up in basis.

Step-up in basis is deeply troubling for a number of reasons. First, it has a distortionary effect on markets, called the “lock-in effect,” because investors are encouraged to hold on to property until death, even if they think it is not the best investment from a financial point of view. This is harmful not only to the investor, but to the market as a whole that is deprived of valuable information about how this investor assesses the value of the investment. Step-up in basis is also troubling because it disproportionately benefits the wealthy who are most likely to hold investment assets outside of retirement accounts, which do not benefit from step-up in basis. Finally, this tax benefit is expensive for the government. Step-up in basis at death is expected to cost the federal government $30 billion in 2018 — roughly the same sized tax break as the deduction for mortgage interest.

Market economies will always feature some inequality, as those who are more talented, work harder, or are just plain luckier are going to generate more income. This type of inequality on its own is not a problem. However, it is a problem when the tax system exacerbates this inequality by giving extra tax benefits to those who are already better off.

To make our tax system fairer for all Americans, Congress should eliminate the preference for capital gains over wages. To achieve this, Congress should first eliminate step-up in basis and either provide that capital gains are taxed at death, as they are in Canada, or provide that heirs eventually pay tax on capital gains whenever the underlying investment is sold. Second, Congress should eliminate the preferential tax rate afforded to capital gains. Finally, Congress should consider adopting a system that taxes capital gains as they materialize, not only when the investment is sold.
Combined, these reforms would raise billions in tax revenue annually, which could then be directed toward lowering rates on wage earners. A tax system with these reforms would finally recognize that workers, not just investors, are key to a healthy economy.

[Xenophon]

I won't lie I had to do a fair bit of reading on this, so thanks for that I guess. That said it seems like a lot of outrage over a thing that affects very few people and is mostly avoidable avoidable.

I thought this Forbes article did a fairly good job of dumbing it down for me.

Some notable excerpts:

More people would sell investments rather than hold on to them for their descendants, which would boost tax revenue to the tune of $116 billion over 10 years, per the Tax Foundation. Almost all of the tax burden would fall on the top 1% of income earners, and Biden would use that revenue to help fund his ambitious agenda.

This argument is unlikely to find many sympathetic ears among Congressional Democrats, though: Just 0.1% of all deaths will be subject to the estate tax in 2020, according to the Tax Policy Center.

And professionals will still find creative ways to avoid taxes no matter what the tax code.

“If Biden’s tax plan is enacted, there will be longer term considerations for our clients,” says senior financial planner Jessica Beam DeBold. “I believe you will see less charitable contributions made in cash and more people taking advantage of gifting appreciated stock or doing qualified charitable distributions directly from their IRAs.”

But that’s the norm, not the exception, and it’s why you might employ a CPA or financial planner in the first place.

All emphasis mine. Seems to me that very few of us on this board are likely to be impacted and even if you were you could probably afford the help to dodge the taxes anyways. Not to mention that changes in tax law are almost comically difficult to actually get through.

For someone that swears to be a seeker of justice and truth for the working man you sure do carry a lot of water for the 1%.

[Some Schmo]

I think inheritance money should be taxed at 95% (at least). Everyone should earn their own way in the world. Personal responsibility, and all that.

Trump inherited all his money, and he's a total piece of crap (clearly, the money didn't make him a better person). We should learn from that.

[ajax18]

I think inheritance money should be taxed at 95% (at least).

Yeah, my hitting partner in tennis was an athlete in the former East Germany. He thinks any and all inheritance should be forfeited to the federal government.

[ajax18]

Seems to me that very few of us on this board are likely to be impacted.

How so? This seems to effect everyone who legally leaves any inheritance. It certainly doesn't just effect the 1% who as you mentioned are more likely to find a good estate planner to help dodge the tax.

[Some Schmo]

He thinks any and all inheritance should be forfeited to the federal government.

I agree with him broadly, although I think most of it should go to the state, or maybe county government. The more local, the better.

[ajax18]

Everyone should earn their own way in the world. Personal responsibility,

Are you going to leave anything to your daughter?

I guess we just come from different cultures. My family, (incidentally my confederate family) lived very meagerly as farmers. The most wealth my grandad ever had was the day he retired when he sold his equipment. He could have underwent very costly surgery and treatment for his cancer. He refused and part of that was because he knew he could leave his money to his sons. He had no daughters. And I have profited from his sacrifices and managed to lift the standard of living of both me and his great grandchildren far above that which he enjoyed. No I didn't do it on my own. He helped me do it, not the federal government.

[ajax18]

though I think most of it should go to the state, or maybe county government. The more local, the better.

I hear a streak of states rights in your views.

[Doctor CamNC4Me]