Death, taxes and the Ig Nobel Awards

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48 Responses to “Death, taxes and the Ig Nobel Awards”

  1. Ito Kagehisa says:

    How hard would you work if 90% of your income went to strangers?

    Same as now. I’m not motivated by selfishness or greed, and 100% of my income will eventually go to strangers in time.

    It’s interesting that so many people step from the very sound idea that markets and governments have to be capable of functioning even if people within the system are motivated by the basest, most sociopathic desires to a completely different idea that people should be motivated by greed and sociopathy in order for capitalism to work.

    It’s a wealthy country, I’m well fed and own land; why should I obsess over the movement of little pieces of paper? It’s not healthy. I’m OK with a 100% estate tax on everything over a million bucks – bring it on!

    • sapere_aude says:

      @Ito Kagehisa (#38): Amen! Classical Liberalism argued that markets (Smith) and governments (Madison) ought to be constituted so that they are able to work well IN SPITE OF human vice. Modern neoliberalism and libertarianism (which falsely claim to be the true heirs of Classical Liberalism) argue that free markets invariably work well BECAUSE OF human vice, and that governments don’t work at all. I’m not sure how we got from Madison’s notion that, if men were angels, no government would be necessary, to the modern laissez-faire notion that, because men are devils, no government is necessary.

      • self-propelled says:

        I’m not sure how we got from Madison’s notion that, if men were angels, no government would be necessary, to the modern laissez-faire notion that, because men are devils, no government is necessary.

        Nice. I’m stealing this line.

  2. demidan says:

    If these rich bastards want to “Throw momma off the Train”, I volunteer myself for Reaper Position. How greedy do you have to be (or rich for that matter) to plan your death around taxation?

    • cymk says:

      When you don’t work, and live off of your investments you pay little to no tax to begin with. Plus I’m sure all that free time allows for them to obsess over things like death and taxes.

    • sapere_aude says:

      @demidan (#1): I think you’re missing the point. They’re not planing their own death. Their heirs are doing it for them. ;-)

  3. joeentropy says:

    My Dad is 88 and has been saying for years that he planned to die in 2010 so he won’t owe any estate taxes. Unfortunately for him he’s still in pretty good shape, so I don’t see him fulfilling his goal…

  4. Steaming Pile says:

    Someone should compile a list of these elderly rich in descending order of net worth so that interested people (like law enforcement authorities) can monitor their health.

  5. Anonymous says:

    wait till FoxNews gets a hold of this. IRS death panels ha ha

  6. mlw99 says:

    The conventional wisdom is that the estate tax will be re-enacted with a 3.5 million cap (per person) on what can pass estate tax free (what was in effect for 2009). With proper trust planning, a husband and wife could pass up to 7 million estate tax free to the kids. Above those figures, the tax bite will be no less than 45%. Still, a lot of money gets to the kids under this scheme. Rationale for setting the figure at 3.5 million is that a lower figure could result in small businesses being forced to liquidate just to pay the estate tax.

  7. hhype says:

    Steaming Pile has the right idea. Every death in 2010 should now include a standard review of the person’s assets and potential tax liability as figured in 2010 and 2011. If its big then investigate.

    Demidan, how greedy (or rich or poor or just regular) do you have to be to plan your job, salary, investments or donations around taxation. Just like everybody does.

    I suppose that their could be less nefarious reasons than actively killing the person such as less application of extraordinary means to keep a terminal patient alive and more DNR’s. It is also not unreasonable that the person who is dying might want to die at a particular time because they themselves don’t want to give half their property to the government instead of their heirs.

    My wife used to work at trust company which managed rich people’s money. They did the boring, pay the bills part, rather than the investment part. She had many tales of the crazy tax code and exotic investment instruments that seemed designed specifically and exclusively to pass down wealth from generation to generation while avoiding paying any taxes, estate, capital gains, or income, on the wealth that was passed down. Few of these schemes involved euthanasia at a particular time. The current estate tax loophole is just a more straightforward example.

  8. Micah says:

    People have been calling 2010 the Throw Momma from the Train year since 2001 when the stupid temporary repeal was enacted. The Republicans created the problem (which is really inexcusable), but you can blame the Democratic leaders in the Senate for not fixing it before the end of 2009, which is equally inexcusable and will likely end up costing the government many, many millions of dollars to defend the inevitable lawsuits that will be spawned by any retroactive fix to the law. And by “fixing it,” I don’t mean the Republican wet dream of eliminating the tax entirely. I mean the reasonable compromise of extending the 2009 rules indefinitely, so as to eliminate the Throw Momma from the Train year while setting the exemption level high enough to avoid messing up the vast majority of family-owned businesses and farms.

  9. heinjd says:

    From what I understand, it is expected that when the tax is reinstated in 2011 it will be made retroactive back through this year.

  10. JeffF says:

    The house voted to extend the current estate tax with its $3.5 million per person exemption and top 45% rate indefinitely this year (all republicans and 20 or so democrats voted no), but it seems like the senate didn’t manage to vote on the same thing last year so the legislation is back to square one.

    And yea, all these tax increases are republican tax increases passed during the bush administration. The democrats are actually passing tax cuts so that the increases aren’t as big as they would be under the laws the republicans wrote. Republicans aren’t too likely to make the argument that these tax increases were just a cynical accounting gimmick to make the massive deficits resulting from their tax cuts look smaller, instead they will try to pretend they didn’t write and pass these laws and hope the media is lazy enough to let it slide with he-said-she-said reporting.

    Personally I would love it if liberal democrats in the senate would filibuster these bills so that the tax goes back to its $1 million per person exemption and… can’t remember 45 o5 55% rate in 2011. Sadly there aren’t 40 liberal democrats in the senate.

    In the zero estate tax year estate assets will be subject to capital gains taxes. Hilariously I think this means that regular people who aren’t pretty rich will actually have to pay some taxes on their inheritances where as under the estate tax they would be exempted from that.

    So what this law does is decrease taxes on people inheriting multiple millions, and increase them on people inheriting less. It also means a paperwork headache as heirs will need to figure out the cost basis for the assets in order to pay capital gains taxes on them. I’m sure the very wealthy have good records that make this easy, but for regular people figuring out how much grandma’s 40 year old AT&T shares were purchased for might turn out to be quite a headache.

    Could set up a very interesting natural experiment though. The rich ought to die in greater numbers, and the common people in lower numbers since the taxes are higher on regular people and lower on the rich next year (unless I’m wrong about the capitol gains and the vast majority are still exempted from them).

  11. ldrydenb says:

    I did part of my undergraduate thesis on this phenomenon.

    In large populations, it’s possible to discern rises and falls in the death rate around certain dates. For instance, people are more likely to die just after their birthdays and less likely to die just before them. One study showed that the death rate for members of one religion in a city dropped before a particular holy day and spiked afterward, but not for the rest of the population.

    Momma doesn’t have to be thrown from the train, Momma seems to be able to choose (to some degree) when she falls off.

  12. tim says:

    And I must admit I’m surprised at the amount of vitriol against the rich here. Someone spends their entire life working his/her ass off, and then they’re supposed to greet a FIFTY-FIVE PERCENT TAX with a smile and a “c’est la vie”? (OK, OK: “c’est la mort.”) I don’t blame them one bit for wanting to ensure that their money goes to their children, spouses, or other beneficiaries instead of to our bumbling federal government.

    Met many very rich people? Any thoughts on how many of them actually got rich by working hard? Let alone by anything akin to ‘honest’ work?

    One of the original reasons for an estate tax is precisely to stop the passing of enormous wealth on to undeserving relatives in order to reduce the growth of super-rich dynasties. Which are, to all intents and purposes, an undesirable aristocracy that gets to pull in yet more wealth and political power, which of course goes to making sure they stay on top. Wasn’t there some political argy-bargy a few hundred years ago on precisely that point? Umm, some place that tried a form of democracy for a while before it got taken over by oligarchs and became a fairground mirror image of what it claimed to be?

    • MadMolecule says:

      Yes, tim (and grimc), I have met a lot of rich people. There are some in my family, though I’m not one of them, and my employer’s clients are all very wealthy. Almost every rich person I’ve known got that way by working hard for years. Sure, there are some who inherited a lot of money, but in my experience, that stereotype is not even close to the norm. The existence of people who inherit wealth doesn’t mean that those who worked for it should be punished.

      And thanks for the totally unnecessary history lesson; I’m familiar with why the estate tax was enacted, and I’m familiar with the historical roots of the Rule Against Perpetuities, and I’m aware of our nation’s historic issues with aristocracy. And if I work my butt off for the next three or four decades and end up with an estate larger than the $3.5 million estate tax exemption (which seems pretty unlikely at this point), I’m not going to be happy about being forced to give 55% of it to the government instead of to the Humane Society or whomever I want to benefit from the fruits of my labor once I’m unable to myself. I suspect you wouldn’t either, but maybe I’m wrong.

      Sorry folks, but I don’t buy the notion that once someone gets rich their life becomes perfect and carefree, and therefore their pockets are open for public plundering.

      • Brainspore says:

        Someone spends their entire life working his/her ass off, and then they’re supposed to greet a FIFTY-FIVE PERCENT TAX with a smile and a “c’est la vie”?

        The person who works their ass off isn’t the one who pays an inheritance tax. You can’t pay taxes after you’re dead any more than you can claim wrongful imprisonment claims against the people who packed you in a coffin. Maybe estate taxes are fair and maybe they’re not, but the law only applies to the living.

        Changing the dialogue from “people get taxed on what they inherit” to “people get taxed even after death” a decade ago was one of the most diabolically clever marketing maneuvers ever executed by a political party.

      • tim says:

        The existence of people who inherit wealth doesn’t mean that those who worked for it should be punished.

        I might be able to agree with that in exchange for agreement that the inheriting of wealth doesn’t count as working for it and therefore merits different taxing. I could for instance agree with the idea of taxing the recipient of the largesse instead of the estate per se.
        You seem to be ignoring the point that the idea is to prevent the evil – and I consider it a real evil that corrupts the world in a very nasty way – of self-maintaining dynasties of people barely connected with anything approaching normal life that life at the cost of freedom and dignity for everyone else. Would you truly consider it proper for the Rockerfeller/Cabot/Vanderbilt/Chan/Singh/Orlov/Whatever cliques to own America?

        There’s nothing much wrong with people being wealthy; I enjoy it immensely. There is something wrong with a system that allows a few people to be so wealthy they can treat the rest of us as objects.

  13. SKR says:

    @cmyk
    When you don’t work, and live off of social security you pay little to no tax to begin with. Plus I’m sure all that free time allows for them to obsess over things like death and taxes.

    FTFY

    What, do you want the rich to work until they are dead now? They aren’t allowed to retire? Or are you upset that they are providing capital so that businesses can function?

  14. DOuglas3 says:

    So when Grandma unexpectedly kicks the bucket in 2011, you’d better hope that the estate has 55% of the value of her small-business in cash-on-hand or easily liquidable assets that aren’t critical to running the business. Otherwise it’s time to sell up to the highest bidder and too bad about the inevitable job losses.

  15. SKR says:

    Looting corpses, how progressive.

  16. Chuck says:

    Feh! There are no suspicious deaths here.

    The super rich merely revert to their reptilian form temporarily while they evaluate which of their descendants they should implant their soul into.

  17. bklynchris says:

    heinjd-please tell me that this is indeed the case. PLEASE!!! bc-if not it will be Obama’s biggest debacle. To date, I do not blame him for the bank bail outs and assume that the recent bank taxation was the plan all along.

    But this estate tax fail was just too blaringly overlooked, esp. in the face of the nationalized health insurance reform (if you will-I’m bitter) push I thought, people are whining about how we are going to pay for it and you forget this? It would be like ignoring the penny jar with 100$ worth of pennies in it to get your hands on a crisp $20!

    So lie to me if you have to heinid but do it with a straight face so I don’t start screaming profanities to strangers on the street.

    • sapere_aude says:

      @bklynchris (#9): Don’t blame Obama. The wacky provisions of the estate tax law were enacted way back in 2001. Besides, POTUS doesn’t make the tax code; he just signs or vetoes whatever legislation Congress sends him.

  18. Kaleberg says:

    We should just get rid of the estate tax and just tax the recipient as if it were ordinary income. It’s money coming in, and it’s all these exceptions and loopholes that are driving people crazy about taxes.

    Given how high the basic exemption is, and how few people are affected, I’m always amazed at all the whining. Since most of the assets are likely to be land on US soil, US government issued money, and shares in US chartered corporations the government seems to have done most of the heavy lifting. It’s not as if someone created their fortune out of thin air. Besides, if the taxes are too much, just say no. You can always pass on an inheritance. No one is forcing anyone to pay anything.

  19. blueelm says:

    Great. So some one’s prolly gonna kill my grandma. Well that sucks. I want the house though!

    Wait… gotta make a phone call :D

  20. Ian70 says:

    Follow the money.

  21. JeffF says:

    “if I work my butt off for the next three or four decades and end up with an estate larger than the $3.5 million estate tax exemption (which seems pretty unlikely at this point), I’m not going to be happy about being forced to give 55% of it to the government instead of to the Humane Society or whomever ”

    You need not worry about being unhappy about that. Firstly you’ll be dead. Secondly you aren’t understanding how the tax works.

    Your heirs would fail to get 55% of the amount in excess of $3.5 million per person they are inheriting from (it is an exemption meaning that money is untaxed). So if they inherit say $14 million and you happen to be married you could easily set it up so that as you and your wife died they would get $10.15 million (7 million + 45% of 7 million). If you aren’t married, or fail to do any estate planning, they might get $8.25 million (3.5 million + 45% of 10.5 million.

    Note that if there was no inheritance tax and they instead paid capital gains on that $14 million, assuming it is entirely gain and the preferential 15% capital gains tax applies to it all they would inherit $11.9 million, so 17% more than under the $3.5 million exemption 55% rate law.

    Only if your heirs get an infinite amount of money does the government take 55%.

    If you are in a charitable mood you can avoid estate taxes completely by donating the money before you die.

    The break even point of 15% capital gains on an entire estate vs 55% estate tax on the amount over $3.5 million is $4.8 million. Unless you inherit more than roughly $4.8 million the estate tax probably reduces your taxes. It also avoids a lot of hassle trying to figure out the capital gains tax on assets who’s buyer is seriously unable to answer questions about when or for how much they were purchased.

    • kc0bbq says:

      “If you are in a charitable mood you can avoid estate taxes completely by donating the money before you die.”

      You can also burn all of it in a big bonfire out of spite.

  22. Xenu says:

    Oh boo hoo, I feel *so* sorry for those poor obscenely wealthy folks being taxed a little. *cries*

  23. Anonymous says:

    I doubt the majority of extra deaths in 2010 will be due to overt killing. There’s a known holiday effect, whereby people nearing death will somehow hang on just a few more days or weeks so that their families don’t have to mourn during a holiday. In the same manner, a wealthy grandparent with medical issues might decide to give in rather than fight this year, believing the more timely death will help his/her descendants.

  24. MadMolecule says:

    @heinjd: I sincerely hope the estate tax will NOT be retroactive. Retroactive taxes are a monstrously slippery slope. Of course, any change to the estate tax is retroactive, because a tax imposed in 2011 is levied on everything the decedent earned during his life and wants to pass on.

    And I must admit I’m surprised at the amount of vitriol against the rich here. Someone spends their entire life working his/her ass off, and then they’re supposed to greet a FIFTY-FIVE PERCENT TAX with a smile and a “c’est la vie”? (OK, OK: “c’est la mort.”) I don’t blame them one bit for wanting to ensure that their money goes to their children, spouses, or other beneficiaries instead of to our bumbling federal government.

    @bklynchris: This hasn’t been overlooked at all; this has been the topic of much discussion and speculation for years among people (like me) who deal with taxation issues regularly.

    • teapot says:

      I don’t blame them one bit for wanting to ensure that their money goes to their children, spouses, or other beneficiaries

      Isn’t part of the idea of estate tax that money should be put back into the system to avoid stagnation of the economy?

      Doesn’t estate tax also encourage people to share their wealth with loved ones while they are still alive? This is the first I’ve heard of estate taxes being applied to a spouse.

      Aren’t donations to charity exempt from estate tax?

      Yes. Yes. Yes. I say pry their money from their cold, dead hands.

    • grimc says:

      “Someone spends their entire life working his/her ass off…”

      Yes, because everybody knows that all rich people worked for their fortunes. They didn’t, you know, inherit it or anything.

  25. MadMolecule says:

    Oh, for Pete’s sake.

    Brainspore and JeffF, I’m a life insurance attorney. I know how the estate tax works, and I know how a $3.5 million exemption works. I should have said “I’m not going to be happy about being forced to give 55% of any excess over $3,500,000.” I apologize for not being razor-specific in my previous posts.

    The “you’ll be dead so you won’t care” argument doesn’t hold water. Believe it or not, people do know before they die that the tax will affect their estates. Many, if not most, of my clients’ chief priority in estate planning is making sure that their loved ones will be taken care of after they die, so that the client can retire with an easy mind.

    • Brainspore says:

      The “you’ll be dead so you won’t care” argument doesn’t hold water. Believe it or not, people do know before they die that the tax will affect their estates.

      Yes, but it’s still their loved ones paying the taxes. I’m not even going to get into whether current law is fair or not, I’m just sick of hearing estate tax opponents complaining about how “the government is taxing me even after I die!”

      • Anonymous says:

        I guess saying “Imagine you stand to benefit from the death of your rich uncle, but it turns out up to half the money will be taken by someone else. How hard would you work?” just doesn’t pack the same punch.

  26. Lobster says:

    I listened to about half of the recording of last year’s. Finally shut it off after the obnoxious little girl shrieking, “please stop, I’m bored” cut off someone interesting for the fifth time.

  27. Lobster says:

    Let’s keep the wealth thing in perspective. If someone is making $20,000 a year and is taxed 0%, they still might have trouble making ends meet. If someone is making $5,000,000 per year and is taxed 90%, they’re still making half a million dollars per year. They’re probably doing OK.

    There’s an argument to be made on how to balance justice (keeping your money) versus empathy (giving it to the poor) but don’t expect me to feel sad that millionaires have to give away more of their money than I do. Frankly, they’re still millionaires, and I’m still not.

    • joeposts says:

      Plus the wealthy have a lot more to lose should society collapse from a lack of government revenue. Since the 70s or so it’s been expected that the poorer classes should be the ones to pay for social programs because the wealthy are sooooooooo independent (lol). They need law enforcement, military and expensive government protection from ‘market failure.’ Or private gated communities, security forces, private islands, etc.

  28. Anonymous says:

    Of course an american making $20k per year and paying 0% tax is still richer then the vast majority of the people on the earth so it should stand to reason that its fair he be taxed 95% and the wealth be shared?

    This isn’t just the ultra wealthy, what about the hard working middle class who saves a few hundred K in the bank just to have half of it swiped when they die. Considering that money was saved from after tax earnings, and the earnings it made over the years where taxed as well, seems like a “have and eat it too” situation.

  29. Avram / Moderator says:

    MadMolecule, I’m not a lawyer myself, but I have friends who are lawyers. One trait they have in common is that they do speak precisely and with care about the technical matters pertaining to their specialties.

    You spoke sloppily, implying that a marginal tax rate was a tax rate applied to the whole amount, not once but twice, only relenting when called out on the fact. That leads me to believe that you are deliberately using sloppy terminology to exaggerate the effects estate taxes have upon the wealthy — in other words, you are propagandizing. Knock it off.

    • MadMolecule says:

      Avram, I assure you my misstatement was not intended to mislead. I posted in haste, believing–wrongly, I now see–that readers would understand that the tax applied only to amounts over the exemption.

      Anyway, I apologize. I’m always slightly irked by the assumption that rich=evil, and I let my fingers talk before my brain caught up.

  30. MadMolecule says:

    Yes, Lobster, let’s keep it in perspective. How hard would you work if 90% of your income went to strangers?

    To state that someone paying 90% taxes and taking home $500,000 a year is “probably doing OK” shows a profound lack of empathy and/or understanding.

    @Xenu: Since when is being wealthy “obscene”?

    • joeposts says:

      with student debt the way it is, and with the gap between rich and poor widening, a lot of us do give up 90% of our income to pay off an education that a lot of our parents got for cheap or free. I guess that’s why the young people are so dang lazy.

      Make everyone rich, we’d all work REALLY hard, just like those Wall Street experts that drove the economy into a ravine.

  31. mlw99 says:

    One of the things which hasn’t been discussed is the issue of what is the basis (tax-term)for appreciated assets which are inherited. It used to be simple, the heirs gets a step-up in basis for an asset that is inherited. If mom bought 1 share of xyz stock for $1 in 1952, and it is worth $600 on her death, the heir gets a basis of $600 should he/she want to sell it. Now there are complicated rules that muck all of that up (rules that involve basis exemptions and revised step-ups). This will only get burdensome in certain high worth estates, but the record-keeping tasks may prove quite onerous.

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