Now let’s see you explain this to the average voter so they can understand it make decisions based upon it. Good luck!

You are confusing the flat tax and a value added tax. The flat tax is an income tax in which all deductions such as charitable contributions and home mortgage interest and property taxes are eliminated and everyone, regardless of income, pays the same rate. A value added tax is a sales tax that is hidden in the price one pays for goods and services. Both benefit the wealthy.

As a tax accountant who has done a lot of estate tax planning, I know many ways for family owned businesses to get around the inheritence tax. The problem is that the father generally refuses to face his own mortality and plan for his demise. In many cases, he doesn’t want to turn control over to his children so the company is owned by an eighty or ninety year old and run by a sixty year old still waiting for dad (and mother) to die. I had one case where I kept bugging the dad to do some estate planning until he finally told me he would rather the government get the money than his sons. When dad finally died, the kids blamed the IRS rather than dad.

It is true that brokerage houses now keep track of stock costs, but that is a recent practice. Few people know how much they paid for stock purchased before about 1995. A more difficult problem is the cost of real estate and the basis of property inherited form their parents or grandparents. The same holds true for paintings, antiques and collectibles.

Under a VAT, the IRS would not be eliminated, only the name would change. Kind of like when Russia changed the name of the secret police from whatever it was called under the Czar to NKVD to KGB after Stalin died to whatever it is today. Ever person who sells at a garage sale, by the side of the road or on Ebay would have to pay the tax. Without agressive enforcement, none of these people (and there are millions of them and billions in sales) would pay any tax.

My final objection to removing the estate tax is that too many beneficiaries turn into people like Ted and Patrick Kennedy, Steve Forbes, Paris Hilton or Jay Rockefeller, rather useless people who keep telling the rest of us how to run our lives.

For social, not economic or tax reasons, I would rather see the inheritance tax increased and the income tax decreased. I like people who earn money but am annoyed by those who inherit it.

Is it a tax on the deceased or a tax on the heirs? Is the difference just a matter of opinion? The deceased doesn’t pay. The deceased is dead, in most cases (there might be loopholes here too … I’m no lawyer). The natural enemy of this tax are those that pay it, the heirs.

Alj goes on to say that the estate tax ruins family business, the idea being that in transfering the business, tax is due, and this distroys the business. Family business are exempt from the tax. First, you get to place your own value on a family business. It’s maybe five times the salary you draw from it. That’s all it’s worth. Next you get to reduce that by some 70% as long as you hold it for 10 years. And then you do a deduction and then you take 40% or so percent. (we are down to 12%, which is less than the tax on the next dollar earned, and you are now entitled to the entire profit of the business, no longer a partner.) You then get to pay it over 14 years, at 2% per annum interest, which is less than inflation, so this is what you do.
(See http://www.taxpolicycenter.org/newsevents/events_estate_tax.cfm. )

Second, Glen, I understand what you are saying when you talk about cost basis numbers being hard to keep track of, but any investors today that do any amount of trading has software that will keep track of these numbers. Also those investors that do less trading still go through brokers or banks when they wish to purchase securities, these banks would then update and log cost basis for these clients.

Also the argument that Burt proposed is invalid in that the “piano lesson” tax is imposed on two different people. The person who earns the dollar is taxed on income as is the income earned by the “piano teacher.” In the case of estate tax the tax burden falls on the same person twice. The same way it falls on any investor today. The capital gains tax is the second tax on a single person’s money. The first tax is on income earned, while the second tax applied is on monetary gains earned by this person in the form of stocks, bonds or the like being converted to cash or sold off. The same applies for estate tax, when the person dies/is forced to sell the securities they own. The real reason I despise estate tax, is because it ruins small family owned businesses where a lack of cash available to pay the estate taxes could possibly and in most cases causes the heirs to sell the business to cover the tax burden of the deceased’s estate.

Lastly, I agree with Steve in that the taxation in the United States is virtually impossible to navigate for any average person. If income tax is repealed and a flat tax is implemented, this tax should be on goods purchased. If a higher sales tax is put in place, this would increase revenues in the short and long run and also be “fair,” to those who believe taxing is acceptable in the first place, since this tax would be harder to avoid. Therefore on all goods purchased and sales rendered we oppose a 15% or 20% sales tax and eliminate the income tax, more Americans would participate in taxation spreading out the burden and forcing those using goods and services to “pay the freight.” Eliminating the complicated IRS tax laws would allow the federal government to eliminate some IRS personnel, cutting back on federal employees is always a good thing, and could divert this money to paying back our foreign and domestic debts or give future tax refunds.

Perhaps they should only tax the difference between the value at death and the basis, as if the poor deceased “cashed out” on death, and reestablished the position immediately, in the name of the heir. New basis, taxes paid just up to that point. In this case, the fortunate daughter would pay 1.5 million to receive 10 million (10 million on a 5 million basis, less 2 exclusion, 50% on what’s left). Or at 15% is this still too much?

If you consider this a second tax, then you have to remove all taxes on capital. I guess you can do that, but then only people who work would pay taxes, and the receipts won’t amount to much.

It’s hard enough figuring out what your own capital gains were – figuring out somebody else’s in absentia is a bit much to ask.

DESPERATION 85% of people are working poor in an informal economy to earn $2 a day so that they can feed a meal for their family. Their lives oscillate between desperation and frustration. As of today, sex, movies and democracy aka ‘voting in elections’ is the only respite for them.

COLLUSION The remaining 15% well to do people are even ‘more’ desperate. They ‘prefer’ not to pay taxes. The only ‘professional’ relation between any two individuals is collusion.

Enforcing inheritance taxes will stimulate compassion instead of collusion among people.