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The ins and outs of the DEATH TAX · Stuff You Should Know

• 0:01
  Speaker 1: Welcome to Stuff you should Know from how Stuff Works
• 0:04
  Speaker 1: dot com. Hey, and welcome to the podcast. I'm Josh Clark.
• 0:14
  Speaker 1: There's Charles W. Chuck Ban, there's Jerry. If you put
• 0:18
  Speaker 1: us together in a room, get a little air conditioneder
• 0:21
  Speaker 1: noise going black out the windows. It's stuff you should know.
• 0:25
  Speaker 1: Hegg crates on the walls bringing a cup of water
• 0:29
  Speaker 1: for me, and like, I got nothing whatever? Why don't
• 0:31
  Speaker 1: you have four beverages? Like, I don't know, it's a
• 0:34
  Speaker 1: weird day. What is that is so weird? They're out
• 0:37
  Speaker 1: of Pellegrino. Yeah, I know. I'm sitting here like I've
• 0:42
  Speaker 1: never seen you without a beverage within three ft of
• 0:45
  Speaker 1: your body. And I also am really tired of the
• 0:48
  Speaker 1: coffee here. It's not okay. Oh man, are you drinking
• 0:51
  Speaker 1: it right now? No? Good for you, jack um Chuck.
• 0:58
  Speaker 1: Oh yeah, that's right. Although it's funny over the years
• 1:01
  Speaker 1: when I go into restaurants, usually like some sort of
• 1:05
  Speaker 1: like an ethnic restaurant, and asked for my name and
• 1:07
  Speaker 1: I say Chuck, they almost always say Jack, that was there, right,
• 1:10
  Speaker 1: And I just go with it. Yeah, I mean yeah, Jack,
• 1:13
  Speaker 1: because what kind of person is like, no, get my
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  Speaker 1: name right? On the little thing you write down to
• 1:19
  Speaker 1: my ticket. You just grabbed the thin man lapels. Yeah,
• 1:23
  Speaker 1: I didn't care. Uh well, it's the perfect segue into
• 1:27
  Speaker 1: what we're talking about today, Chuck, Yeah, Jack, the death tax.
• 1:31
  Speaker 1: That's right, one of our scintillating, uh internal revenue centered casts.
• 1:39
  Speaker 1: I mean, we have done a bunch of like tax
• 1:41
  Speaker 1: related episodes if you think about it. Yeah, this one.
• 1:45
  Speaker 1: I'm surprised we haven't done this one. And actually I
• 1:48
  Speaker 1: didn't check. We haven't, right, I checked, we have not, Um, yeah,
• 1:53
  Speaker 1: but it did seem familiar here there, but I definitely
• 1:55
  Speaker 1: double checked. Yeah, I thought it was pretty interesting, especially
• 1:58
  Speaker 1: a lot of this will be the history of it,
• 2:00
  Speaker 1: which basically is, we're going to war, let's get the
• 2:04
  Speaker 1: death tax going, right exactly, the rich are getting too rich,
• 2:07
  Speaker 1: Let's get the death tax going. So we should probably
• 2:10
  Speaker 1: say what the death taxes, and actually death tax we
• 2:14
  Speaker 1: should be saying death taxes because there's a couple of
• 2:17
  Speaker 1: different kinds of death taxes, and that's basically the term
• 2:21
  Speaker 1: that's used by people who aren't in favor of death taxes.
• 2:25
  Speaker 1: The kind of make it seem like it's just a
• 2:28
  Speaker 1: stupid idea, like you have to you have to pay
• 2:30
  Speaker 1: a tax to die. Come on, people, snap out of it,
• 2:34
  Speaker 1: you know. Um. So basically you have two types of
• 2:36
  Speaker 1: death taxes as it stands right now here in two
• 2:39
  Speaker 1: thousand seventeen, you've got, at least in the United States,
• 2:42
  Speaker 1: you have the estate tax and you have the inheritance tax,
• 2:46
  Speaker 1: and both of them are basically death taxes. The estate
• 2:49
  Speaker 1: taxes where um you die, you have an estate in
• 2:53
  Speaker 1: your state is the total of all of the stuff
• 2:56
  Speaker 1: you own and all the debts you have. So the
• 2:59
  Speaker 1: first thing that happens to your state, your debts get
• 3:02
  Speaker 1: paid off, uh, and then your executor gets paid off
• 3:07
  Speaker 1: for their troubles. Your funeral gets paid off. And then
• 3:10
  Speaker 1: Uncle Sam's standing there with his hand out shot out
• 3:13
  Speaker 1: of a cannon that costs take that off the top.
• 3:18
  Speaker 1: So Uncle Sam's standing there and he says, hey, lay
• 3:20
  Speaker 1: it on me, guys, I want that. That's your estate taxes.
• 3:26
  Speaker 1: Then after that, in some states, the money goes to
• 3:29
  Speaker 1: the heirs, and then the states come along and say
• 3:31
  Speaker 1: it's archer now. And because you know, states rights aren't
• 3:35
  Speaker 1: what they used to be, right, And then your city
• 3:37
  Speaker 1: comes along and they want theirs. And then if the
• 3:40
  Speaker 1: city then your next door neighbor comes along and say
• 3:44
  Speaker 1: you didn't pay the neighborhood tax on that, right, Can
• 3:46
  Speaker 1: I have my lawnmower back? Uh so? Yeah. Basically, if
• 3:50
  Speaker 1: you die in a state that has inheritance text, you're
• 3:53
  Speaker 1: going to pay in a state tax and an inheritance
• 3:55
  Speaker 1: inheritance tax on your estate. After your death, you won't care,
• 4:01
  Speaker 1: but your heirs well, and you make care every moment
• 4:05
  Speaker 1: leading up to that last one. After that, you'll be fine.
• 4:09
  Speaker 1: I think the Beatles had it right on the money
• 4:10
  Speaker 1: there that song Come Together. You're like Lucy and the
• 4:16
  Speaker 1: Sky with diamonds, no tax man. It's a great song.
• 4:20
  Speaker 1: If you you know, if you drive a car, I'll
• 4:21
  Speaker 1: Texas Street, if you take a walk, I'll text your feet.
• 4:24
  Speaker 1: It's very ah, very libertarian. Yeah, come to think of it.
• 4:31
  Speaker 1: In the background, if you play it backwards, it goes,
• 4:33
  Speaker 1: who is John Goal? Do we do what? I'm backmasking?
• 4:40
  Speaker 1: All right, We're gonna do that one day took all right,
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  Speaker 1: So you just describe the estate tax. I described both. Okay,
• 4:46
  Speaker 1: you said the inheritance taxe. Okay, that's the one where
• 4:49
  Speaker 1: the states like, can we have our cut to where
• 4:52
  Speaker 1: they text your airs, not your state. Yeah, like after
• 4:55
  Speaker 1: you get the dough in your text. Uh so, you're right,
• 4:58
  Speaker 1: both of those together make up a death tax. And um. Well,
• 5:04
  Speaker 1: over the years, it's been debated both economically and philosophically.
• 5:09
  Speaker 1: And I guess we should go back in time and
• 5:12
  Speaker 1: the way back machine to ancient Egypt if we fire
• 5:16
  Speaker 1: it up. Did you put gasing? I did? Uh so
• 5:26
  Speaker 1: if you if you go back to ancient Egypt, they
• 5:28
  Speaker 1: actually have existing uh papyrus with that tells the story
• 5:33
  Speaker 1: of men basically either trying to dodge paying a death
• 5:37
  Speaker 1: tax or paying a death tax, two different versions of
• 5:41
  Speaker 1: that story against depending on who the guy was, you
• 5:43
  Speaker 1: could tell which one you're supposed to do, because the
• 5:45
  Speaker 1: guy dodging it had he was in the middle of
• 5:47
  Speaker 1: a circle with a slash there. That's right, don't be
• 5:50
  Speaker 1: this guy. Uh. And of course in ancient Rome they
• 5:54
  Speaker 1: were big on uh big on trying to modernize everything,
• 5:58
  Speaker 1: and of course meant the tax code as well. And
• 6:01
  Speaker 1: Caesar Augustus instituted something called the uh vis sina herad titadium.
• 6:08
  Speaker 1: Is that right? I think so? My Romans not what
• 6:10
  Speaker 1: it used to herititardium. Apparently that translation is twentieth penny
• 6:14
  Speaker 1: of inheritances. Uh. And taxes, sex secessions, legacies and donations
• 6:21
  Speaker 1: after death. They should have called it death tax. They
• 6:24
  Speaker 1: should have whoever came up with that, I couldn't find
• 6:26
  Speaker 1: who did, but it's pretty clever. Uh. And like I said,
• 6:29
  Speaker 1: there's long been debate. Um. Even in ancient Rome there
• 6:34
  Speaker 1: were exemptions for close family Back then you could give
• 6:37
  Speaker 1: away some charitable donations, which is, you know, kind of
• 6:41
  Speaker 1: similar to what you can do today. That's a that's
• 6:43
  Speaker 1: a very long standing tradition, and it should be I mean,
• 6:45
  Speaker 1: like if you want to give a bunch of money
• 6:47
  Speaker 1: to a charity, man, there should you. That should be unfettered, yes, um.
• 6:52
  Speaker 1: And in fact you should maybe even get a little
• 6:54
  Speaker 1: text break for that sure as people do at least
• 6:57
  Speaker 1: a pat on the back from everybody in your community. Uh.
• 7:00
  Speaker 1: And then plenty the younger not the elder beer man,
• 7:04
  Speaker 1: which one's the one that's so hard to get? I
• 7:07
  Speaker 1: think plenty of the elder is the beer that's hard
• 7:10
  Speaker 1: to get, right, I don't know. It might be the
• 7:12
  Speaker 1: other way around. So there's a plenty of younger beer
• 7:15
  Speaker 1: as well. Versions one you can get basically all the time.
• 7:19
  Speaker 1: The other one like, you have to stand in line
• 7:20
  Speaker 1: for a week and a half outside of the brewery
• 7:23
  Speaker 1: to get it, and they give you a you have
• 7:25
  Speaker 1: to bring your own like bucket and they fill it
• 7:28
  Speaker 1: up and they make you chug it right there and
• 7:30
  Speaker 1: then they kick you in the butt as you're walking away. Yeah,
• 7:33
  Speaker 1: they're doing it right. Uh well, regardless of I'm not
• 7:36
  Speaker 1: sure which one, plenty of the younger criticize this tax
• 7:39
  Speaker 1: and he's like, you know what you're doing. You're taking
• 7:41
  Speaker 1: advantage of people of these families that are distraught over
• 7:44
  Speaker 1: the death of a loved one. Yeah, how unfair is that.
• 7:48
  Speaker 1: I would guess that plenty the younger may have been
• 7:50
  Speaker 1: rich from that quote. I bet you're right. Yeah. Uh
• 7:54
  Speaker 1: where else? We can go to England and France. Yea
• 7:58
  Speaker 1: we I mean we jumped over several centuries. I don't
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  Speaker 1: know though, if the Holy Roman Empire was into death texas,
• 8:04
  Speaker 1: but by the time we arrive in uh well, feudal England,
• 8:08
  Speaker 1: that still would have been the Holy Roman Empire. I
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  Speaker 1: think in the thirteenth century. In England, by the time
• 8:13
  Speaker 1: they founded the Magna Carta, death texas were so unpopular
• 8:17
  Speaker 1: that It's like one of the first clauses of the
• 8:20
  Speaker 1: Magna Carta, like you gotta lay off on the death texas.
• 8:24
  Speaker 1: You could do them, but not so much. I think
• 8:26
  Speaker 1: that was the verbatim quote in the Magna Carta. Every
• 8:30
  Speaker 1: time I hear Magna Carta, I think of Johnny Dangerously.
• 8:33
  Speaker 1: Did you see that? I don't remember that. I think
• 8:35
  Speaker 1: it's the end when they're taking like walking maybe Johnny
• 8:40
  Speaker 1: too his execution and they have the fake priests and
• 8:42
  Speaker 1: he's doing this fake Latin because Magna Carta, Master Charga.
• 8:47
  Speaker 1: It's just so dumb. Whenever I hear Magna Carta, I
• 8:50
  Speaker 1: think of that one Simpsons where Marge is training to
• 8:54
  Speaker 1: be a realtor and Lisa's teaching her like that if
• 8:57
  Speaker 1: you if you make a song out of what you're
• 8:59
  Speaker 1: trying to memorize, remember She's like in twelve fifteen running
• 9:03
  Speaker 1: Me do. It's funny. There's historians out there right now
• 9:07
  Speaker 1: going when I hear of Magna Carta, I think of
• 9:09
  Speaker 1: the Magna cartas. Uh. But moving on to the United
• 9:15
  Speaker 1: States because that's mainly kind of what we're talking about
• 9:17
  Speaker 1: here with the death tax um. It was debated in Scotland,
• 9:21
  Speaker 1: which carried over eventually into our own founding fathers. But
• 9:25
  Speaker 1: some notable philosophers and economists, and they used to be
• 9:28
  Speaker 1: very heavily tied, which I think is interesting. Yeah, philosophy
• 9:31
  Speaker 1: and economics. Yeah, I guess it still is in some circles. Yeah.
• 9:35
  Speaker 1: I think economists like to pretend that's not the case,
• 9:38
  Speaker 1: but I think you're right. I mean, there's a certain
• 9:40
  Speaker 1: philosophy to it. But we talked about people like John
• 9:44
  Speaker 1: Locke and Bentham and Adam Smith before and they've kind
• 9:49
  Speaker 1: of remained lockstep with their principles on on the death tax. Right, So, uh,
• 9:54
  Speaker 1: Smith and Locke, we're saying, no, no, no, that's not
• 9:58
  Speaker 1: the government's role the tax of person airs after they die.
• 10:01
  Speaker 1: Black Stone, uh, the very famous magician, said no, we uh,
• 10:07
  Speaker 1: we absolutely should be taxing people's estates when they die,
• 10:11
  Speaker 1: because we want to prevent dynasties. And finally somebody in
• 10:14
  Speaker 1: history comes out and says it like that's basically the
• 10:17
  Speaker 1: point of the estate tax. Yeah, and um, and then uh,
• 10:21
  Speaker 1: I think Jeremy Bentham said basically the same thing, like, yeah,
• 10:25
  Speaker 1: we we like like wells should not be able to
• 10:29
  Speaker 1: grow exponentially in a single family that's not that's bad news. Yeah,
• 10:33
  Speaker 1: and that's sort of, like you said, been the root
• 10:35
  Speaker 1: of the philosophical debate from black Stone to Bernie Sanders saying, um,
• 10:41
  Speaker 1: and we'll get into the what people commonly were called
• 10:45
  Speaker 1: the pros and cons. But one of the cons is
• 10:48
  Speaker 1: uh and whether or not it's I don't know if
• 10:51
  Speaker 1: you can prove it's true. But one of the cons
• 10:53
  Speaker 1: people point to is you leave these kids all these
• 10:56
  Speaker 1: millions of dollars, and they're gonna end up on dope. Well,
• 10:59
  Speaker 1: or they're less likely to be super product not much
• 11:03
  Speaker 1: much ass likely necessarily, but they're not as incentivized to
• 11:06
  Speaker 1: be constructive contributors to society. No, they're not. It's well put. Yes.
• 11:15
  Speaker 1: Uh So, like I said, this kind of transferred over
• 11:19
  Speaker 1: to the founding fathers of the United States. Yeah, because again,
• 11:22
  Speaker 1: I mean, the US was founded very much on enlightenment, thinking. Yeah,
• 11:26
  Speaker 1: so the guys who founded the US were looking over
• 11:29
  Speaker 1: to Europe and saying, like, what are those guys saying
• 11:31
  Speaker 1: right now? What do we think about that? How does
• 11:33
  Speaker 1: that apply here? Let's like, what are they saying over there?
• 11:36
  Speaker 1: I don't know. I'll let you know in six months.
• 11:38
  Speaker 1: Send a message on a boat the stamp tax of
• 11:42
  Speaker 1: seven and this kind of begins a long tradition of hey,
• 11:47
  Speaker 1: we're going to war, we need to raise some dough
• 11:49
  Speaker 1: because at first they resisted the UM death tax. Yeah,
• 11:55
  Speaker 1: but they needed to protect the colonies and that's expensive.
• 11:58
  Speaker 1: So UH to under war against France and naval war. Um,
• 12:03
  Speaker 1: they said, how about a stamp tax, which when I
• 12:06
  Speaker 1: was a little kid, you know, I heard of the
• 12:07
  Speaker 1: stamp tax and I didn't get it um. But basically
• 12:10
  Speaker 1: it was a tax on every piece of paper printed,
• 12:14
  Speaker 1: like every kind of documenticial document and newspapers and stuff.
• 12:18
  Speaker 1: If you had a document that you needed to file, right, Yeah,
• 12:22
  Speaker 1: for like the judge to release somebody's personal effects to
• 12:25
  Speaker 1: you their air, you had to show them this document
• 12:28
  Speaker 1: and for the judge to release it had to be stamped,
• 12:30
  Speaker 1: and you had to pay for that stamp. So in effect,
• 12:33
  Speaker 1: it was a government tax because this whole transaction couldn't
• 12:36
  Speaker 1: happen until the government officially got its cut, and the
• 12:39
  Speaker 1: stamp was proof that the government had gotten its cut
• 12:41
  Speaker 1: and the transaction transaction could proceed. Yeah. So anything from
• 12:46
  Speaker 1: UH an administrative letter to UH receipts for legacies, UH
• 12:52
  Speaker 1: even the attorney's license. Like apparently attorneys had to pay
• 12:56
  Speaker 1: like ten pounds powder for the wig just to get license,
• 12:59
  Speaker 1: which is about a thous and bucks. Now, yeah, I'm
• 13:03
  Speaker 1: sure they passed that. I'll bet that's about I'll bet
• 13:06
  Speaker 1: you it costs about that much. These days, they probably
• 13:11
  Speaker 1: ten grand for an attorney's license. I could see it.
• 13:14
  Speaker 1: That sound about right. They make that up pretty quickly, though,
• 13:18
  Speaker 1: I think so, you know, just a couple of hours,
• 13:20
  Speaker 1: a couple of hours sitting at the desk watching the
• 13:24
  Speaker 1: little bird dip its peak in the water, thinking about
• 13:27
  Speaker 1: the summers. I'm just kidding, attorneys out there, we love you,
• 13:33
  Speaker 1: everyone does. Um. They did have rules back then, though,
• 13:38
  Speaker 1: even for the stamp tax, which we're kind of carried
• 13:42
  Speaker 1: out throughout the years in one way or another. Estates
• 13:45
  Speaker 1: under fifty bucks were exempt, and then anything above fifty
• 13:50
  Speaker 1: had a graduated scale of tax, which is still kind
• 13:52
  Speaker 1: of what we have today. I read this this post
• 13:56
  Speaker 1: by this guy um on I believe Forbes, and he
• 14:02
  Speaker 1: his name is Bob Rywick, and he wrote a book
• 14:04
  Speaker 1: on tax pretty much literally um and he was saying
• 14:10
  Speaker 1: that for most of history there, especially the history up
• 14:15
  Speaker 1: leading up to America. There was not a question of
• 14:19
  Speaker 1: whether there should be a death text or not. It
• 14:21
  Speaker 1: was um, how much is the upper limit and what
• 14:24
  Speaker 1: are the exemptions, you know, or what's the minimum and
• 14:28
  Speaker 1: what are the exemptions. That's basically yeah, which is kind
• 14:30
  Speaker 1: of where we ended up in the modern times, just
• 14:33
  Speaker 1: sort of debating and going back and forth. Right, but
• 14:36
  Speaker 1: even still, I mean, like right out of the gate,
• 14:38
  Speaker 1: you know, back in Rome, we talked about how there
• 14:40
  Speaker 1: were exceptions where if you donated to UM to like
• 14:45
  Speaker 1: a charity or here, it's like if you of Rome,
• 14:50
  Speaker 1: right or UM, if your state's fifty dollars worth fifty dollars,
• 14:56
  Speaker 1: there's like no one wants that, and it's fine. Even
• 14:58
  Speaker 1: back in the late eighteenth century that wasn't very much.
• 15:03
  Speaker 1: It's like a hundred dollars today. Uh. So the stamp
• 15:06
  Speaker 1: tax was repealed in eighteen o two because the war ended,
• 15:11
  Speaker 1: or at least that particular war that they were funding ended. Yeah,
• 15:17
  Speaker 1: and they thought about it again during the War of
• 15:18
  Speaker 1: eighteen twelve, but that were ended before they had a
• 15:20
  Speaker 1: chance to get it through. And maybe we should take
• 15:23
  Speaker 1: a break here and pick up with more history. So
• 15:48
  Speaker 1: chuck Naval War with France funded by the Staff Stamp Act.
• 15:53
  Speaker 1: Death taxes go away for a while, and they came back.
• 15:57
  Speaker 1: They actually stayed low in the United States until the
• 16:00
  Speaker 1: Civil War. Yeah, and we should point out this, these
• 16:03
  Speaker 1: death taxes didn't like fund entire wars. They you know,
• 16:07
  Speaker 1: there were many other taxes involved for this stuff, right, Okay,
• 16:11
  Speaker 1: So when and when I mean stay low, I mean
• 16:13
  Speaker 1: like non existent, not that the rates were low. So, um,
• 16:17
  Speaker 1: in the Civil War death text came about, and um
• 16:22
  Speaker 1: it was it was different than what had been proposed
• 16:24
  Speaker 1: with the Stamp Act. So the people who received the
• 16:27
  Speaker 1: inheritance were the ones who were taxed. So it was
• 16:30
  Speaker 1: an inheritance tax, not in the state tax, right. Yeah.
• 16:33
  Speaker 1: And it wasn't like, hey, we're going to tax these stamps,
• 16:36
  Speaker 1: which is really kind of a roundabout way of making
• 16:40
  Speaker 1: a death tax estate tax, right exactly. This was actually
• 16:43
  Speaker 1: your your uncle died, you got that money, give us
• 16:46
  Speaker 1: some or we're going to break your legs all the
• 16:50
  Speaker 1: civiphor Italians. Uh. After that, there was an amendment two
• 16:55
  Speaker 1: years later where um, it wasn't just like person all
• 17:00
  Speaker 1: effects or maybe stocks or cash or whatever, but real
• 17:04
  Speaker 1: property came to be taxed as part of the estate
• 17:07
  Speaker 1: as well. And then lastly, I think in eighteen seventy no,
• 17:13
  Speaker 1: as part of that eighteen sixty four a moment, there's
• 17:15
  Speaker 1: also a gift tax, and this is a big loophole
• 17:18
  Speaker 1: that people would take advantage of. Yeah, it's funny, like
• 17:21
  Speaker 1: early on even people were like figured out a way, like, oh, well,
• 17:25
  Speaker 1: here's what I'll do. I'll just sell my assets and
• 17:29
  Speaker 1: for even if it's for even less money, just to
• 17:31
  Speaker 1: get it off the books, well to my kids or
• 17:33
  Speaker 1: something like that. Yeah, Like here's like my dad sold
• 17:36
  Speaker 1: me a car once for a dollar. Nice, that's a
• 17:39
  Speaker 1: sweet deal. Yeah, yeah, it was all right. Did you
• 17:41
  Speaker 1: pay him in like pennies? He actually wanted the dollar
• 17:45
  Speaker 1: and it ended up costing me like a lot of
• 17:48
  Speaker 1: money in repairs and it was sort of not a
• 17:51
  Speaker 1: great deal in the end. Did he say buyer beware chump. No,
• 17:55
  Speaker 1: And I don't want to be uh look a gift
• 17:57
  Speaker 1: horse in the mouth. It was a nice gesture only, Yeah,
• 18:02
  Speaker 1: very nice. So let's move on show. So the big
• 18:06
  Speaker 1: loophole with that gift taxes. If you want your kids
• 18:09
  Speaker 1: to have all of your stuff and you wait until
• 18:12
  Speaker 1: you die to pass it on to him, Well, if
• 18:15
  Speaker 1: there's an estate tax, the government's going to take a
• 18:17
  Speaker 1: big chunk. But if you're alive and you say, hey, kids,
• 18:21
  Speaker 1: i'm feeling a little, uh, a little over the hill,
• 18:25
  Speaker 1: and uh, I think I'm gonna die soon, So I
• 18:27
  Speaker 1: want you to have all of this stuff from my estate.
• 18:30
  Speaker 1: You can have a tax free because there is no
• 18:32
  Speaker 1: gift tax. The government finally said, and I think eighteen
• 18:35
  Speaker 1: sixty four, wait a minute, there's a gift tax now,
• 18:39
  Speaker 1: and uh, we see your loophole. But I think they
• 18:41
  Speaker 1: even made it. The gift tax was still less than
• 18:44
  Speaker 1: it was for an estate tax or an inheritance tax,
• 18:49
  Speaker 1: so it was still advantageous if you're a very wealthy
• 18:52
  Speaker 1: family to pass on your estate while you were living.
• 18:56
  Speaker 1: Then it was to leave it after you died, but
• 18:58
  Speaker 1: it would still be taxed. Actually equalized those right later on. Yeah,
• 19:02
  Speaker 1: but not for a few decades. All right, So let's
• 19:07
  Speaker 1: let's get into the twentieth century here. Industrialization. H One
• 19:12
  Speaker 1: of the byproducts of that was it led to a
• 19:14
  Speaker 1: concentration of wealth for a lot of families. So the
• 19:18
  Speaker 1: government was like, alrighty see, all you wealthy families out there,
• 19:22
  Speaker 1: thinking you can learn learn all that money and keep
• 19:24
  Speaker 1: it and pass it to your kids, and they can
• 19:26
  Speaker 1: pass it to their kids. We want our cut. And
• 19:29
  Speaker 1: it wasn't just the government. As a matter of fact,
• 19:31
  Speaker 1: I'm not sure how much the government had to do
• 19:33
  Speaker 1: with it, but the there was a populist movement that
• 19:36
  Speaker 1: arose that was basically like, we want our cut. And
• 19:40
  Speaker 1: you know, Wizard of Oz was was written during that time.
• 19:44
  Speaker 1: Frank really, Frank L. Bomb, the author of the Wizard
• 19:49
  Speaker 1: of Oz was a populist. And there's apparently it's a
• 19:52
  Speaker 1: very populist allegory. Yeah, lots of it, Like the Yellow
• 19:55
  Speaker 1: Brick Road is some commentary on the gold standard, the
• 19:59
  Speaker 1: fact that it's in can in this is um has
• 20:01
  Speaker 1: to do with the agrarian roots of the popular The
• 20:04
  Speaker 1: scarecrow is um, I don't know, Elvis, something weird like that, right,
• 20:10
  Speaker 1: put on some pink Floyd, right. So um. There was
• 20:14
  Speaker 1: this big movement, and part of this big populous movement was, Hey,
• 20:17
  Speaker 1: there's a lot of really wealthy people here. Um, you
• 20:21
  Speaker 1: guys should should stop this procession of wealth, you guys
• 20:24
  Speaker 1: being in the government. And they started to get there.
• 20:27
  Speaker 1: There was an income tax instituted in eighteen ninety four. Yeah,
• 20:32
  Speaker 1: I didn't realize this. I thought the first income tax
• 20:34
  Speaker 1: came later in nineteen sixteen. But they made they took
• 20:36
  Speaker 1: a crack at it in four but it was ruled
• 20:39
  Speaker 1: unconstitutional for reasons other than, um, the fact that it
• 20:43
  Speaker 1: was an income tax. Right, But it was ruled unconstitutional,
• 20:49
  Speaker 1: but not because of the death tax, for different reasons.
• 20:52
  Speaker 1: So they said, we'll get that income tax, don't you worry, Right,
• 20:55
  Speaker 1: that's plenty constitutions. Wait, just wait twenty years, twenty two years.
• 20:59
  Speaker 1: Then comes along another war, the Spanish American War, and
• 21:02
  Speaker 1: they instituted the War Revenue Act of eight And this
• 21:06
  Speaker 1: one looked a lot like the one that we have today. Right,
• 21:10
  Speaker 1: while it was in a state tax rather than an
• 21:12
  Speaker 1: inheritance tax. Yeah, and it had familiar exemptions. Uh. This
• 21:16
  Speaker 1: time under ten thousand left to a spouse was fell
• 21:20
  Speaker 1: under the exemption, and the rate of tax depended on,
• 21:25
  Speaker 1: of course, how big your estate was and then who
• 21:28
  Speaker 1: you were giving it to. Yeah, and those are still
• 21:31
  Speaker 1: around today in a lot of places. Um, if you
• 21:35
  Speaker 1: are somebody's nephew, you're probably gonna pay the full bracket
• 21:39
  Speaker 1: of taxation very according to uh, according to who you
• 21:44
  Speaker 1: are or if you like you're a drinking buddy, you're
• 21:46
  Speaker 1: gonna pay the full the full amount. If you're a
• 21:51
  Speaker 1: like a grandchild, you'd pay less than the drinking buddy,
• 21:55
  Speaker 1: but more than the spouse. And then the spouse is
• 21:59
  Speaker 1: usually and has been for a very long time, whenever
• 22:01
  Speaker 1: there's an exemption within the state tax, the spouse is
• 22:05
  Speaker 1: usually completely left alone. There's no tax if the entire
• 22:08
  Speaker 1: state goes over to the spouse. So that's the current
• 22:11
  Speaker 1: rules too. Yeah, boy, I get I need to look
• 22:13
  Speaker 1: up drinking buddy, So I gotta take care of Clem right, Well,
• 22:17
  Speaker 1: Clem is gonna pay through the notes, I'm afraid. Oh boy,
• 22:20
  Speaker 1: he's not gonna like that. He's really counting on me
• 22:23
  Speaker 1: dying leaving in my podcast fortune. Uh so with that one,
• 22:30
  Speaker 1: the War Revenue Act of again War ends. In nineteen
• 22:34
  Speaker 1: and one, Congress uh repealed the tax. Yeah, which is weird.
• 22:40
  Speaker 1: I kept reading that, like, what do you mean repealed
• 22:42
  Speaker 1: the text? When did they stop doing that? But apparently
• 22:45
  Speaker 1: they used to institute new taxes get the money they needed,
• 22:50
  Speaker 1: and then they would say we got enough, now they
• 22:53
  Speaker 1: have and then just more new taxes. Yeah. Um, so
• 23:00
  Speaker 1: this kind of marked a turn where people started to
• 23:02
  Speaker 1: get who wrote this was this Jane Jane McGrath, remember Jane, uh.
• 23:08
  Speaker 1: She calls it a growing distaste for inherited wealth. And
• 23:11
  Speaker 1: it started to kind of pick up steam, most notably,
• 23:15
  Speaker 1: UM in the form of President Teddy Roosevelt, who was
• 23:18
  Speaker 1: not a fan. No, he actually around this time there
• 23:22
  Speaker 1: was another there was another big push for the income text.
• 23:25
  Speaker 1: Remember it had been repealed, and Um Roosevelt was like,
• 23:30
  Speaker 1: I'm not sure about the income tax, but I'll tell
• 23:32
  Speaker 1: you what is great idea, that estate tax. Let's get
• 23:35
  Speaker 1: one of those in there. Um he said. Basically, our
• 23:40
  Speaker 1: national legislators should enact a law providing for a graduated
• 23:43
  Speaker 1: inheritance text. The prime objects should be to put a
• 23:46
  Speaker 1: constantly increasing burden on the inheritance of those swollen fortunes,
• 23:51
  Speaker 1: which it is certainly of no benefits to this country
• 23:53
  Speaker 1: to perpetuate. I mean that kind of lays it down there,
• 23:58
  Speaker 1: go out and make your own money essentially. Well, yeah,
• 24:02
  Speaker 1: and I think part of the other point, um, is
• 24:05
  Speaker 1: that really seems to apply today. If you've listened to
• 24:07
  Speaker 1: our Dark Money episode two. Um money very easily translates
• 24:12
  Speaker 1: into political power. Now it translates into political speech, but
• 24:17
  Speaker 1: it's always translated into political power. And if you have
• 24:21
  Speaker 1: more and more money just being passed along from one
• 24:23
  Speaker 1: generation to the next, that that that family is not
• 24:28
  Speaker 1: just amassing more and more money, they're amassing more and
• 24:30
  Speaker 1: more power. And that's not good for democracies. It's good
• 24:35
  Speaker 1: for monarchies, but not democracies. And that's what Roosevelt was saying.
• 24:40
  Speaker 1: Uh so Roosevelt support it big time. It also was
• 24:44
  Speaker 1: supported by Taft and Wilson, but it still took a
• 24:48
  Speaker 1: little bit of time and another war before Congress would
• 24:52
  Speaker 1: get back on board again with another death tax. World
• 24:55
  Speaker 1: War One. Yes, world War One, the US lowered terror
• 25:00
  Speaker 1: us on our allies and wanted to build up a
• 25:02
  Speaker 1: stronger defense, and all of a sudden they said, wait
• 25:05
  Speaker 1: a minute, we we need dough. Yeah, those new fangled
• 25:08
  Speaker 1: tanks aren't cheap, they're not building themselves. So they went
• 25:14
  Speaker 1: back and said, all right, maybe that income tax ideas
• 25:17
  Speaker 1: pretty good one. So they came up with the Revenue
• 25:19
  Speaker 1: Act of nineteen sixteen, and that's where the modern the
• 25:23
  Speaker 1: modern income tax and the modern um the state tax
• 25:27
  Speaker 1: were born. And there's been no going back. No, there
• 25:30
  Speaker 1: really hasn't because they were initially Apparently initially they planned
• 25:34
  Speaker 1: on repealing it after the war, and they're like, this
• 25:38
  Speaker 1: feels pretty good. I like rolling in piles of money,
• 25:41
  Speaker 1: so let's just keep it going. And at this point,
• 25:44
  Speaker 1: the exemption was fifty thou dollars and had a graduated
• 25:49
  Speaker 1: rate of one per cent on amounts under fifty grand,
• 25:52
  Speaker 1: up to ten on amounts over five million dollars. Right,
• 25:58
  Speaker 1: it's a lot of dough back in. Yeah, it also
• 26:02
  Speaker 1: text um real land, personal property. Uh, if you transferred
• 26:06
  Speaker 1: something at death or even in the two years before death,
• 26:09
  Speaker 1: that loophole. Yep, it was taxed um and then the
• 26:14
  Speaker 1: the gift tax, but there's still a loophole. See like
• 26:16
  Speaker 1: if you did it three years, if you transferred all
• 26:18
  Speaker 1: of it three years before your death, you're fine. Um,
• 26:21
  Speaker 1: you just had to live in poverty for the last
• 26:23
  Speaker 1: three years of your life and hope that you called
• 26:25
  Speaker 1: it correctly and that it wasn't like seventeen years. Right.
• 26:30
  Speaker 1: So in Congress said, we see what you're doing. We're
• 26:34
  Speaker 1: coming back with that gift tax again. That was a
• 26:36
  Speaker 1: good idea. I don't know why we ever forgot it.
• 26:39
  Speaker 1: We lost our institutional memory but we're putting it back in.
• 26:41
  Speaker 1: So they put in this gift tax, and now all
• 26:44
  Speaker 1: of a sudden it was um not smart too, it
• 26:48
  Speaker 1: was not a loophole any longer. Yeah, and then the
• 26:52
  Speaker 1: Great Depression had a lot to do with that, because
• 26:54
  Speaker 1: obviously income tax went down during the Great Depression, and
• 26:57
  Speaker 1: they said, our coffers are getting low, so we need
• 27:00
  Speaker 1: to equalize this again. That's right. And I think the
• 27:03
  Speaker 1: gift tax his state since then too, right, It never
• 27:06
  Speaker 1: went away, Yeah, because I guess it was challenged in
• 27:10
  Speaker 1: court and it was upheld by the Supreme Court to
• 27:12
  Speaker 1: be constitutional. But Congress is like, ah, we'll repeal it,
• 27:15
  Speaker 1: and then yeah, they brought it back and it's been
• 27:17
  Speaker 1: there ever since. Yeah. And here's a staggering stat you know.
• 27:20
  Speaker 1: We we've talked before about past income tax and uh,
• 27:24
  Speaker 1: how even though it might not seem like it, we've
• 27:26
  Speaker 1: got it pretty good today compared to certain years. But
• 27:29
  Speaker 1: the estate tax from World War Two, when they raised rates,
• 27:33
  Speaker 1: uh ninety one until nineteen seventy seven, the very top
• 27:38
  Speaker 1: estate tax was seventy seven percent. Isn't that crazy? Wow,
• 27:44
  Speaker 1: that's pretty high. Oh yeah, that's like Gerard Depardu fleeing
• 27:48
  Speaker 1: for the borders high you know what I mean. Yeah,
• 27:51
  Speaker 1: like you made all this stow in your life and
• 27:54
  Speaker 1: you get to keep your family gets to keep it
• 27:57
  Speaker 1: after you die. Yeah, and give us a smile. So
• 28:02
  Speaker 1: the m they stayed that way actually for a really
• 28:05
  Speaker 1: long time. It wasn't until yeah, it wasn't until nineteen
• 28:10
  Speaker 1: seventy seven that Congress brought that highest rate down from
• 28:14
  Speaker 1: seventy and they just brought it down to seventy then
• 28:18
  Speaker 1: and then um, Reagan came in and started whittling it away, uh,
• 28:22
  Speaker 1: little by little, um and it got as far down
• 28:25
  Speaker 1: as I think. Yeah. That was the Tax Reformact of
• 28:29
  Speaker 1: nineteen seventy six. And another thing came along with that.
• 28:32
  Speaker 1: It was something called the g s T tax, the
• 28:34
  Speaker 1: Generation skipping transfer tax, another loophole, yeah, which is like, oh, well,
• 28:39
  Speaker 1: I'm not gonna give my fortune to my kids, I'll
• 28:41
  Speaker 1: give it to my grandkids, wink wink. And then if
• 28:44
  Speaker 1: you had a really good estate planner, they could teach
• 28:46
  Speaker 1: you how to leave your assets to your grandkids, but
• 28:49
  Speaker 1: make your kids the beneficiary of any interest in income
• 28:53
  Speaker 1: arising from those assets. So both generations were taken care
• 28:57
  Speaker 1: of text free so they in nineteen seventy six they
• 29:01
  Speaker 1: closed that loophole with the generation skipping transfer tax, and
• 29:05
  Speaker 1: grandchildren around the world cried and cried, cried, yeah, and
• 29:12
  Speaker 1: that's when the um well, the exemption at that point
• 29:17
  Speaker 1: in nineteen seventy six went from sixty grand to a
• 29:20
  Speaker 1: hundred and twenty thousand dollars. And you know what, let's
• 29:24
  Speaker 1: take a little break here. I'm gonna leave people in suspense,
• 29:26
  Speaker 1: I think wed because I'm starting to get excited. All right, Chuck,
• 29:50
  Speaker 1: you've left this in suspense long enough. What so that
• 29:53
  Speaker 1: exemption rate, I said, in Uh, the Tax Reformact of
• 29:56
  Speaker 1: nineteen seventy six went from sixty grand to one at seven.
• 30:01
  Speaker 1: And we've explained what the exemption was, right like or
• 30:05
  Speaker 1: did we not? Even? I feel like we did, But
• 30:08
  Speaker 1: if not, just make it more clear. The exemption is where,
• 30:11
  Speaker 1: if you're the value of your estate comes and that's
• 30:14
  Speaker 1: part of the process is everybody goes in and says
• 30:17
  Speaker 1: this is worth this much, No, it's not, YESI and
• 30:19
  Speaker 1: then they come up with the value of your state.
• 30:21
  Speaker 1: If that value was less than sixty grand at that point,
• 30:25
  Speaker 1: then you're you could transfer it to any you could
• 30:28
  Speaker 1: transfer it to claim text free. It's exempt below the
• 30:32
  Speaker 1: level of sixty grands, okay, so super clear. So that
• 30:35
  Speaker 1: rose to a hundred and twenty grand and change. Uh.
• 30:38
  Speaker 1: And then in the nineteen nineties things kind of started
• 30:41
  Speaker 1: rolling a little bit. We had this uh big budget surplus.
• 30:45
  Speaker 1: I remember that, Yeah, the good old days. And then
• 30:48
  Speaker 1: George W. Came along and said, you know we're gonna
• 30:50
  Speaker 1: do we got this big surplus, we're gonna start giving
• 30:52
  Speaker 1: it back to the American people, um, and especially the
• 30:57
  Speaker 1: wealthy American people. And um, the the threshold really started climbing. Yeah,
• 31:06
  Speaker 1: Like it went from in two thousand nine, it had
• 31:09
  Speaker 1: climbed to six hundred and seventy five thousand dollars not bad.
• 31:12
  Speaker 1: And it jumped from six d seventy five thousand to
• 31:15
  Speaker 1: three point five million dollars, yeah, in two thousand nine.
• 31:19
  Speaker 1: So it went from from the eighties and of or
• 31:24
  Speaker 1: no I'm sorry, the seventies a hundred and twenty thousand
• 31:27
  Speaker 1: to thirty years later three and a half million dollars.
• 31:32
  Speaker 1: The exemption was. Yes, that that is quite a climb,
• 31:36
  Speaker 1: but it had an even more astronomical climb from two
• 31:39
  Speaker 1: thousand nine to uh two thousand thirteen because it went
• 31:45
  Speaker 1: chuck in the Taxpayer Relief Acts. So remember George W.
• 31:49
  Speaker 1: Came in and said, hey, it's not government's role to
• 31:52
  Speaker 1: have a bunch of taxpayers money and you don't know
• 31:55
  Speaker 1: what you're gonna do with it. Give it back. I'm
• 31:58
  Speaker 1: the man who's gonna get it back. And like you said,
• 32:00
  Speaker 1: and certain people got it back, some other people got
• 32:03
  Speaker 1: it back. But it was a transfer of wealth, right. Um.
• 32:07
  Speaker 1: Barack Obama came in and said, you know what, that
• 32:10
  Speaker 1: was screwed up. I'm gonna get some of that money
• 32:12
  Speaker 1: back for everybody. I'm gonna tax the wealthy. I'm gonna
• 32:15
  Speaker 1: get rid of these so called Bush tax cuts, which
• 32:18
  Speaker 1: is what they were called. And um, he didn't at all.
• 32:23
  Speaker 1: As a matter of fact, he signed into law in
• 32:26
  Speaker 1: two thousand twelve, the Taxpayer Relief Act of two thousand
• 32:31
  Speaker 1: and twelve, which took the Bush tax cuts which were
• 32:34
  Speaker 1: which had expired already, um, but then had been extended
• 32:38
  Speaker 1: temporarily for two years. He took those Bush tax cuts
• 32:41
  Speaker 1: he campaigned on getting rid of, and actually enshrined them
• 32:45
  Speaker 1: in law. And now for the indefinite future. They the
• 32:50
  Speaker 1: um the exemption is up to five million dollars for
• 32:53
  Speaker 1: in a state more than that now actually, so it
• 32:55
  Speaker 1: must have been at least five Well it's index for inflation. Yes,
• 32:58
  Speaker 1: And now for two thou and sixteen it was four
• 33:01
  Speaker 1: five point four five million um for a single individual,
• 33:05
  Speaker 1: ten point nine for a couple for a couple yeah. Uh.
• 33:08
  Speaker 1: And then um, the tax rates were set at fort maximum, right,
• 33:14
  Speaker 1: and that's after it had gone down to thirty five
• 33:18
  Speaker 1: under Busch. So I think that was part of the compromise,
• 33:21
  Speaker 1: and let's bring it up, but let's let's basically make
• 33:25
  Speaker 1: it permanent at five mill Yeah. And there was even
• 33:29
  Speaker 1: a year in there. This is crazy. Do you remember this,
• 33:32
  Speaker 1: this whole back and forth, like getting rid of the
• 33:34
  Speaker 1: bush tax? What's gonna happen? Yeah? And um, in two
• 33:38
  Speaker 1: thousand and ten there was I guess they didn't sign
• 33:41
  Speaker 1: a paper fast enough for something. But there was no
• 33:43
  Speaker 1: death tax in that year. So if you're wealthy and
• 33:47
  Speaker 1: Gladys died in two thousand and ten, you were you
• 33:52
  Speaker 1: you lucked out because the very next year, those uh,
• 33:55
  Speaker 1: those cuts got restored, or those those gifts taxes or
• 33:59
  Speaker 1: estate taxes out of store. And don't think that there
• 34:01
  Speaker 1: weren't some people in two thousand ten that were peeking
• 34:04
  Speaker 1: in on Aunt Gladys holding a pillow in their hands. Us. Yeah,
• 34:11
  Speaker 1: that's not funny at all. Killing a relative for their
• 34:13
  Speaker 1: inheritance is not funny. No, it's not certainly not in practice.
• 34:17
  Speaker 1: So here's the deal, and we're going to get to
• 34:18
  Speaker 1: the pros and cons in a second. But like I said,
• 34:21
  Speaker 1: for because of inflation, five five point four or five
• 34:27
  Speaker 1: million dollars is the lifetime exclusion amount. They have this
• 34:32
  Speaker 1: chart you can basically throw out the window that says like,
• 34:36
  Speaker 1: if you have a taxable state of four grand, you'll
• 34:39
  Speaker 1: low seventy thousand dollars plus thirty of a hundred and
• 34:43
  Speaker 1: fifty thousand because you have to pay a percentage on
• 34:45
  Speaker 1: the amount and excess of the lower limit. It's all
• 34:47
  Speaker 1: mine numbing if you're just a lay person. But throw
• 34:51
  Speaker 1: that all out the door, because anything under five point
• 34:54
  Speaker 1: four or five million, let's just call it five and
• 34:56
  Speaker 1: a half million bucks is under that ex lousion amount.
• 35:00
  Speaker 1: But here's the weird part. Because it's the United States
• 35:03
  Speaker 1: and we can't just make things simple. It's a unified credit.
• 35:08
  Speaker 1: It's how it's structured. So what what you have to
• 35:10
  Speaker 1: do is you have to structure it to pay on
• 35:13
  Speaker 1: the full amount, and then they give you a tax
• 35:16
  Speaker 1: credit back. Oh, that's just to make convoluted. That's not okay, though,
• 35:21
  Speaker 1: you pay the full amount and then they're like, and
• 35:22
  Speaker 1: then we'll pay you back what you I don't think
• 35:25
  Speaker 1: you pay it. Actually, I think it's just in the
• 35:26
  Speaker 1: computation different. But it still seems just unnecessarily convoluted, Like
• 35:32
  Speaker 1: you should just knock it off the top and see
• 35:35
  Speaker 1: what you got left. Here's the other trick. If you
• 35:39
  Speaker 1: have a lot of money, and we should say that
• 35:42
  Speaker 1: this is we do not qualify as text experts, or
• 35:45
  Speaker 1: if we're giving tax advice. If if you're subject to
• 35:48
  Speaker 1: the estate tax and you're using our tax advice, No, no, no,
• 35:51
  Speaker 1: how did you come up with that money? Yeah? Uh?
• 35:55
  Speaker 1: The gift thing, there's an annual gift tax exemption of
• 35:58
  Speaker 1: fourteen thou dollars per person. Oh yeah, so if you
• 36:03
  Speaker 1: have three kids, that's per year. Yeah, if you have
• 36:06
  Speaker 1: three per person per years. If you've got three kids
• 36:09
  Speaker 1: and they're all three married, and they have ten kids
• 36:11
  Speaker 1: between them, and they they all are successful, they don't
• 36:14
  Speaker 1: have drug habits or anything like that, right, you can
• 36:17
  Speaker 1: give fourteen thousand dollars a year to each one of
• 36:20
  Speaker 1: them per spouse. So that's four hundred and forty eight
• 36:25
  Speaker 1: thousand dollars a year to those three kids, their three spouses,
• 36:28
  Speaker 1: and those ten grandkids. And if you plan ahead way
• 36:33
  Speaker 1: before your death, you could potentially give away all your
• 36:36
  Speaker 1: money tax free by the time you die through gifts.
• 36:42
  Speaker 1: So that seems legit to me because that is clearly
• 36:50
  Speaker 1: middle class. It's upper middle class, but that's middle class.
• 36:53
  Speaker 1: That that cap, the five million, No, that gift tax. Yeah,
• 36:58
  Speaker 1: that cap of fourteen grand a year. It's not gonna
• 37:02
  Speaker 1: help funnel a massive estate tax free onto the airs,
• 37:07
  Speaker 1: but it does give a break to middle class, upper
• 37:11
  Speaker 1: middle class, but middle class families. Well, but you would
• 37:14
  Speaker 1: only be given that away though, if you were going
• 37:15
  Speaker 1: to be above the five million dollars, right, because anything
• 37:20
  Speaker 1: under that is exempted. So that ain't middle class. No,
• 37:22
  Speaker 1: that's true, you're right, you know. Okay, Well that was
• 37:25
  Speaker 1: that was a stupid thing for me to say. So
• 37:29
  Speaker 1: if you're out there thinking, even with the deduction at rate,
• 37:34
  Speaker 1: is a lot of money on an estate tax. They
• 37:37
  Speaker 1: give an example here in this article. Let's say you
• 37:38
  Speaker 1: have a seven million dollar estate knock off the five
• 37:42
  Speaker 1: point four or five million, that's one point five five
• 37:45
  Speaker 1: million at that's about six and twenty thousand. So if
• 37:50
  Speaker 1: you didn't look at that for the whole seven million
• 37:51
  Speaker 1: dollars state, that's only about nine. Yeah. And actually I
• 37:55
  Speaker 1: saw a two thousand thirteen Brooking study Text Policy Institute.
• 38:01
  Speaker 1: I think study found that of in that year, of
• 38:07
  Speaker 1: all of the estates that had to pay taxes, they
• 38:10
  Speaker 1: paid an average effective rate what they actually paid of
• 38:14
  Speaker 1: sixteen point six percent, nothing like and um in that
• 38:21
  Speaker 1: same year. There's another one too. There's there's a lot
• 38:23
  Speaker 1: of objection. We should talk about some of these objections.
• 38:26
  Speaker 1: Some of the objections to this is they're basically they
• 38:31
  Speaker 1: go into two tranches. One is that this kind of
• 38:35
  Speaker 1: tax stifles investment. That is the very wealthy and the
• 38:39
  Speaker 1: very rich, who are really that the economic engines of
• 38:42
  Speaker 1: America and capitalism't because they introduce capital to the markets
• 38:47
  Speaker 1: and that's what drives the markets and makes the economic
• 38:49
  Speaker 1: engine hum. And we're all better off as long as
• 38:51
  Speaker 1: the wealthier pumping money into this. Well, if we don't pump,
• 38:55
  Speaker 1: if we don't let the rich pump more money into it,
• 38:58
  Speaker 1: meaning the government comes along and says, your father just died,
• 39:02
  Speaker 1: give us of his of that vast estate that you
• 39:05
  Speaker 1: just inherited, Well, that's going to Uncle Sam rather than
• 39:09
  Speaker 1: potentially into the markets. Yeah. And also some people would say, hey,
• 39:13
  Speaker 1: that's attacks for being successful. Well, that's the other trunch
• 39:17
  Speaker 1: is that it's basically morally incorrect for the government to
• 39:21
  Speaker 1: come in and say give us some money wealthy person.
• 39:25
  Speaker 1: That yeah, that it's attacks on on success, that the
• 39:29
  Speaker 1: government has no business taxing inter family fortunes, um. And
• 39:35
  Speaker 1: then again that it stifles economic growth and development. Yeah.
• 39:39
  Speaker 1: And another thing if you're against this, someone might say is, hey,
• 39:43
  Speaker 1: we were already taxed on that stuff to begin with
• 39:46
  Speaker 1: during life. So now and not only that, but my
• 39:49
  Speaker 1: dad inherited that and paid in a state tax. So
• 39:51
  Speaker 1: it's just double and triple and who knows depends on
• 39:55
  Speaker 1: how long your family wealth goes back? Is how many
• 39:59
  Speaker 1: times it's tax Yeah, because not only was it taxes income,
• 40:03
  Speaker 1: it could be taxed multiple times. Is in a state
• 40:05
  Speaker 1: that same estate is what you're saying. Yeah, Then of
• 40:08
  Speaker 1: course a lot of people drop the mic with it's
• 40:11
  Speaker 1: a wealth redistribution scheme that you're trying to take money
• 40:15
  Speaker 1: from the wealthy and give it to the less wealthy
• 40:19
  Speaker 1: e g. The poor and um, home, we don't play that.
• 40:25
  Speaker 1: I remember Holming the Clown. That was great. Uh that
• 40:29
  Speaker 1: was a great show. Yeah, oh yeah in living color. Yeah.
• 40:32
  Speaker 1: It's crazy how many things kind of like carried over
• 40:36
  Speaker 1: and are still part of the lexicon. Home, we don't play.
• 40:39
  Speaker 1: We don't play that. Two snaps up. Let's bring all
• 40:41
  Speaker 1: that stuff back, two snaps um. Another knock is that
• 40:47
  Speaker 1: people say, you know what this is, state taxes is
• 40:50
  Speaker 1: less than like one per cent of what the government
• 40:53
  Speaker 1: collects annually, and they probably spend that much going after
• 40:57
  Speaker 1: it and litigating this stuff because nine times out of ten,
• 41:01
  Speaker 1: wealthy people are fighting this tooth and nail and you know,
• 41:05
  Speaker 1: just cause too much to go get it. And that's
• 41:08
  Speaker 1: a a lot of these, it turns out, are pretty disingenuous,
• 41:11
  Speaker 1: Like they sound right if you don't look into them,
• 41:14
  Speaker 1: but apparently a lot of them are not correct, like
• 41:17
  Speaker 1: the idea that the effective tax rate is sixteen percent
• 41:21
  Speaker 1: or seventeen percent, not fort Another one is that it
• 41:25
  Speaker 1: hurts small businesses. This is a big boogeyman with the
• 41:29
  Speaker 1: estate tax as well, like that you if you go
• 41:34
  Speaker 1: in and a family owned business or a family owned farm.
• 41:39
  Speaker 1: If the government goes in there and says you own
• 41:43
  Speaker 1: on that just because your father died, So go sell
• 41:46
  Speaker 1: some of the cows, go sell a tractor, you hay seed,
• 41:49
  Speaker 1: and give us the money. That's gonna have a really
• 41:52
  Speaker 1: negative effect on the family farm or the family small business.
• 41:56
  Speaker 1: It may even cause it to go bankrupt. It may
• 41:58
  Speaker 1: cause the farm to go under. That's not good. The
• 42:01
  Speaker 1: government can't do that. Yeah, you hear that, and you think,
• 42:03
  Speaker 1: of course that's awful, right, but the facts don't bear
• 42:06
  Speaker 1: that out, correct, right. That same two thirteen Brooking study
• 42:10
  Speaker 1: found that in two thousand thirteen, twenty twenty small businesses
• 42:15
  Speaker 1: and farms owed any estate tax at all, and on average,
• 42:19
  Speaker 1: those twenty small businesses and small farms that did have
• 42:23
  Speaker 1: to pay a state tax paid an average about four
• 42:25
  Speaker 1: point nine percent of the value of the estate. Um,
• 42:30
  Speaker 1: there's special there's special rules, especially for calculating the value
• 42:33
  Speaker 1: of farmland for estate taxes, in particular, that reduces their
• 42:38
  Speaker 1: value so that the tax is inherently lesser. Another reason
• 42:43
  Speaker 1: someone says might say that they're unfair. I'm sorry, you
• 42:47
  Speaker 1: might say that they're fair, is what we alluded to
• 42:50
  Speaker 1: a little bit earlier about the concentration of wealth is
• 42:53
  Speaker 1: not a good thing, not just economically, but um when
• 42:57
  Speaker 1: it comes to power, and it's dangerous to a democratic
• 43:00
  Speaker 1: society to have UM. The influencers of this country be
• 43:05
  Speaker 1: so few and only influencers because they have so much right,
• 43:10
  Speaker 1: and the average Joe's voice is lost in the process. Yeah, so.
• 43:14
  Speaker 1: Somewhere somebody pointed out that the estate taxes the most
• 43:18
  Speaker 1: progressive part of the entire U S tax code because
• 43:21
  Speaker 1: it truly only affects the people who actually can afford it,
• 43:25
  Speaker 1: or who are actually wealthy. It doesn't it has no
• 43:28
  Speaker 1: undoe or disproportionate burden, or any burden on people of
• 43:34
  Speaker 1: lower socioeconomic status or even middle socioeconomic status. Something like um,
• 43:42
  Speaker 1: two tenths of one percent of households are subject to
• 43:48
  Speaker 1: the estate tax in the United States this year. I
• 43:51
  Speaker 1: think two tenths of one percent. That's not much, that's true.
• 43:58
  Speaker 1: And then another one to address that, the idea that
• 44:02
  Speaker 1: it doesn't bring in very much, and the government spends
• 44:04
  Speaker 1: more money than it then it takes in it. Yeah,
• 44:08
  Speaker 1: we're fighting for it. Supposedly. I saw estimates of two
• 44:11
  Speaker 1: billion I saw one estimate of two billion UM between
• 44:16
  Speaker 1: two thousand seventeen and two thousand twenty six is how
• 44:19
  Speaker 1: much they expect the estate tax to take in, which
• 44:22
  Speaker 1: isn't much. It's like less than one percent of the
• 44:24
  Speaker 1: government's tax revenue. But the author of this one article
• 44:30
  Speaker 1: I saw pointed out that's like the combined budgets of
• 44:34
  Speaker 1: the f d A, the CDC, and the e p
• 44:36
  Speaker 1: A combined, So it's it's actually paying for stuff, you know.
• 44:42
  Speaker 1: And apparently it cost about seven percent for enforcement and administration,
• 44:49
  Speaker 1: whereas income taxes cost about four to UM chase down
• 44:54
  Speaker 1: dead beats, So there's that. It's about half the state
• 44:59
  Speaker 1: tax problems debunked you anything else? No, I thought I
• 45:04
  Speaker 1: thought that was fairly interesting for someone who doesn't like
• 45:07
  Speaker 1: I go a little uh foggy when I start talking
• 45:10
  Speaker 1: about finance and taxes, But for some reason this one
• 45:13
  Speaker 1: kind of interested me. Do you do your own taxes? No?
• 45:17
  Speaker 1: I love it? No, no, no, no, I love it. Man,
• 45:20
  Speaker 1: I love doing taxes. I not only do I not
• 45:23
  Speaker 1: like it, but I would say that I can't put
• 45:27
  Speaker 1: a percentage on it. But having a professional involved, really
• 45:32
  Speaker 1: really financially is beyond worthwhile. Like a thousand percent worthwhile
• 45:38
  Speaker 1: Yeah for what they can save you. Oh no, I'm
• 45:41
  Speaker 1: sure like like we're having somebody go back over my
• 45:45
  Speaker 1: figures this year, but um it's and I don't like
• 45:49
  Speaker 1: paying tech because it's not fun. But it's like this
• 45:54
  Speaker 1: big horrible ball like hair and teeth after like like
• 46:00
  Speaker 1: work into uh a usable yeah figure, I gotta turn
• 46:06
  Speaker 1: it into the venus. Gummy venus to Mila. So you
• 46:08
  Speaker 1: take a taratoma and you form that into a beautiful
• 46:11
  Speaker 1: statue right with no arms, and then I cry Matt's Texas. Uh.
• 46:17
  Speaker 1: If you want to know more about death Texas, type
• 46:19
  Speaker 1: those words into the search part how stuff works dot Com.
• 46:22
  Speaker 1: Since I said search parts, it's time for listener mail.
• 46:28
  Speaker 1: I'm gonna call this uh fan that found us through Delta,
• 46:31
  Speaker 1: all right. I know this would pay off one day.
• 46:34
  Speaker 1: You know, we don't know for still on. But for
• 46:36
  Speaker 1: a while we were on Delta flights. We're supposed to
• 46:37
  Speaker 1: be back on this year, are we? And I always
• 46:40
  Speaker 1: kind of wondered, like we got booted off? Does anyone
• 46:42
  Speaker 1: actually discover us board on a flight? That's what I'm saying.
• 46:45
  Speaker 1: We now come we have one person, so uh, Ethan
• 46:50
  Speaker 1: lives in Los Angeles and says he found us on
• 46:52
  Speaker 1: a Delta fight and a loyal listener ever since. Um,
• 46:55
  Speaker 1: I'm sure many fans have their favorite episodes, favorite sweets,
• 46:58
  Speaker 1: band names, ideas. Here if you my favorite jokes, and
• 47:01
  Speaker 1: I didn't remember a couple of these, so I'm gonna
• 47:03
  Speaker 1: test your memory. Josh, you had one look at those
• 47:07
  Speaker 1: look at these shoes. I'm the king of Rotterdam. All right, Nope,
• 47:14
  Speaker 1: he said. He laughed for five minutes on that one.
• 47:16
  Speaker 1: Chuck the Language of the Beard. He says, he's still
• 47:20
  Speaker 1: laughing at that. In fact, anytime I need to pick
• 47:21
  Speaker 1: me up. I scrolled to the forty three minute mark
• 47:24
  Speaker 1: of how the Stigil the Stigil Organs work. The whole
• 47:27
  Speaker 1: exchange is hilarious, including Josh's reaction. The joke verges on
• 47:30
  Speaker 1: toilet humor, but doesn't quite belong in that category. So
• 47:34
  Speaker 1: I don't remember that one. I have to look it up.
• 47:37
  Speaker 1: I do remember this one, Chuck the runner up his
• 47:39
  Speaker 1: Chuck's line when you realize that diesel fuel is named
• 47:41
  Speaker 1: after a person, Jimmy Gasoline. I remember that. I remember that.
• 47:46
  Speaker 1: I don't remember what episode it was in, though, but
• 47:48
  Speaker 1: I do remember that, but he has a little factoid
• 47:51
  Speaker 1: for us. He finished the Alexander Hamilton's show, uh and
• 47:54
  Speaker 1: he says, this saw the visit of the Grange a
• 47:57
  Speaker 1: couple of years ago and loved it. While there, I
• 47:59
  Speaker 1: learned something I'm surprised you mentioned as a testament to
• 48:01
  Speaker 1: his character. Not only did Hamilton's shunned slavery, as you mentioned,
• 48:04
  Speaker 1: he also defended Tories and British subjects as a lawyer
• 48:08
  Speaker 1: in court. And this was only six years after the
• 48:11
  Speaker 1: Declaration of Independence. What a guy. Wow, he really was
• 48:15
  Speaker 1: top knock. Yeah, that's from Ethan barber Er. Thanks a lot.
• 48:19
  Speaker 1: Ethan Ethan Barber or Barber one of the two. Oh
• 48:23
  Speaker 1: it wasn't Barbara. It was spelled different Barber, I know,
• 48:26
  Speaker 1: like the hunting gear right, I don't know barb barber whatever.
• 48:31
  Speaker 1: If you want to get in touch of this, like
• 48:34
  Speaker 1: Ethan did Ethan right, Ethan, it's his last name. That's
• 48:37
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• 48:40
  Speaker 1: Y s K podcast. You can join us on Facebook
• 48:43
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• 48:48
  Speaker 1: com and has always joined us at our home on
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  Speaker 1: the Web Stuff you Should know dot com for more
• 48:57
  Speaker 1: on this and thousands of other topics. Is it how
• 49:00
  Speaker 1: stuff works? Dot com? Mhm