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Killing the IRS

For the most part Biden's original plan nailed it. Eliminate step up in basis and tax the shit at death.

yeah, seems like if you're going to just defer your taxes til you die by borrowing against your gains then you should have to pay out the ass on your estate
 
It’s really split into administrative priorities versus legislative priorities.

My first move would be to increase enforcement on non-filers and ensure everybody is at a minimum participating in the process. That should generate a significant amount of revenue.

I’d then identify the largest dollar issues and focus on those. How much money do we really want to spend auditing somebody’s Earned Income Tax Credit.

Legislatively, I think we need to look at preferred tax rates for investment income and phasing those out over a certain threshold.

what percentage of wage earners are not filing?
 
I had an error trying to file on turbotax this year, and am gonna get stuck with a penalty for non-filing/compliance. They didn't like my wife's non W2 wage income from a foreign govt.
 
A May 2020 report from the Inspector General determined that there is about $37 Billion in unpaid taxes from nonfilers. The largest percentage of that group by far is composed of high net worth individuals.

Again that’s more than 3X the entire IRS budget for 2020.

W2 earners aren’t really a priority because I’d guess at best it’s a wash and at worst the government loses money since many of those not filing are leaving refunds on the table.

There’s no excuse for the HNW individuals not to file other than evading taxes.
 
For the most part Biden's original plan nailed it. Eliminate step up in basis and tax the shit at death.

Eliminating the basis step up at death will be an administrative nightmare. I am in favor from a pure policy perspective, but dealing with that on a very small scale in 2010 makes me think it just can't work. Same thing with the Warren (or others) wealth tax - my liberal bleeding heart says good idea (constitutional issues aside), but filing what essentially amounts to a current estate tax return on an annual basis just doesn't seem workable. Plus, the IRS would literally need an army of tax attorneys and valuation engineers to fight about the valuation issues alone.
 
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Eliminating the basis step up at death will be an administrative nightmare. I am in favor from a pure policy perspective, but dealing with that on a very small scale in 2010 makes me think it just can't work. Same thing with the Warren (or others) wealth tax - my liberal bleeding heart says good idea (constitutional issues aside), but filing what essentially amounts to a current estate tax return on an annual basis just doesn't seem workable. Plus, the IRS would literally need an army of tax attorneys and valuation engineers to fight about the valuation issues alone.

What assets are that an issue with? I get it with someone leaving ya a bar of gold, how can ya know what someone originally paid for it. Why not simplify it and just tax 35% of all assets at death?
 
What assets are that an issue with? I get it with someone leaving ya a bar of gold, how can ya know what someone originally paid for it. Why not simplify it and just tax 35% of all assets at death?

Things I personally ran across in 2010 - stock held in certificate form (not in a brokerage account); art, silver, and other collectables like coins (not usually an issue with really valuable art, since sales are tracked for provenance, but for less valuable, but still significant pieces); jewelry; homes (particularly improvements, as opposed to original cost). I get that all of these are issues for the person who owns them too and if they sell and don't have anything to document basis they are screwed, but wiping the slate clean at death, especially when there's a much greater likelihood of sale because the kids or whomever don't want mom's silver, just really simplifies things.
 
Things I personally ran across in 2010 - stock held in certificate form (not in a brokerage account); art, silver, and other collectables like coins (not usually an issue with really valuable art, since sales are tracked for provenance, but for less valuable, but still significant pieces); jewelry; homes (particularly improvements, as opposed to original cost). I get that all of these are issues for the person who owns them too and if they sell and don't have anything to document basis they are screwed, but wiping the slate clean at death, especially when there's a much greater likelihood of sale because the kids or whomever don't want mom's silver, just really simplifies things.

If it can't be substantiated, make it $0. Problem solved.
 
If it can't be substantiated, make it $0. Problem solved.

That was essentially what the rule was in 2010. If that's the rule, it'll certainly incentivize people to keep better records going forward, but it seems like a harsh result in the short term when we've had a basis step up at death for 100+ years.
 
We can put a man on the moon but figuring out how to get billionaires to contribute to the country they live in is just too difficult.
 
Of course.

Good luck getting enough Republicans on board to shore up the “least popular” federal agency in town.
 
That was essentially what the rule was in 2010. If that's the rule, it'll certainly incentivize people to keep better records going forward, but it seems like a harsh result in the short term when we've had a basis step up at death for 100+ years.

why is it harsh
 
Because you’re requiring people to pay taxes on the full value of the property rather than just the net gain on sale. That’s the wrong result for an income tax.

But...if inherit a set of silver for zero dollars and sell it the basis is zero, right?
 
But...if inherit a set of silver for zero dollars and sell it the basis is zero, right?

Okay. Let’s say you inherit $10MM of silver and there is no step up in basis and no unified credit or it’s been otherwise exhausted.

The estate owes 40% tax on the silver so you need to sell it. You owe 39.6% on the sale to the government plus 10% to the state. So after income taxes you you have $5,040,000 left. $4MM goes to the estate tax leaving you with $1.04 MM which is a combined 89.6% tax rate.
 
Okay. Let’s say you inherit $10MM of silver and there is no step up in basis and no unified credit or it’s been otherwise exhausted.

The estate owes 40% tax on the silver so you need to sell it. You owe 39.6% on the sale to the government plus 10% to the state. So after income taxes you you have $5,040,000 left. $4MM goes to the estate tax leaving you with $1.04 MM which is a combined 89.6% tax rate.

right...but the Estate is different entity from the inheritor. The inheritor is not paying 89% tax rate.
 
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