5 Jun 2023 5:17 pm
The flaw in your logic...that you apparently refuse to recognize...it that investments (even mutual funds) are eventually sold. Use your example, at some point between year 30 or 50, the owner of that mutual fund will probably want to retire...maybe travel...maybe purchase vacation property...maybe do something crazy like eat and pay their bills. Money withdrawn from that fund is available because investments were SOLD. The mutual fund hasn't had cash sitting in a bank account. That sale generates capital gains...which are taxed. When the sucker dies, maybe the kids (who already own a home) don't need another home...so they sale either the one they just inherited or they one they currently live in. Damn...capital gains, more taxes.Skans » 05 Jun 2023, 5:03 pm » wrote: ↑ You entirely missed the point. If you eliminate the step-up basis in favor of eliminating all estate taxes, people (and companies) will quickly figure out how to game that system. "Oh, ok, no more step-up basis, well then, I'll just invest in companies that pay dividends, have dividend growth and higher pay-out ratios." CEO "Yes, we will structure the company so that the Wealthy can create dynasties and pay minimal taxes".
Yes, yes, I am very well aware of that. They already paid taxes on the money they used to purchase a package of bubble gum paying more tax on that earned money too. And, they already paid taxes on that money they need to use to pay property taxes.
I said that, didn't I? Example: Let's put $1,000,000 into a mutual fund called QYLD. QYLD has an annual (paid monthly) dividend yield of 11.48% and after-tax yield of .0723% (.1143 x .37) (highest tax rate). If I put this investment into an entity that will last forever - generations upon generations, let's see what happens:I think you get the point. If stupid 'ol me could figure this out and game it in the time it took for me to write this, this would hyper accelerate the wealth gap between the extremely wealthy and those who can't even afford to buy an ear of corn.
- After Year 1 - My investment = $1,114,800
- After Year 10 - $2,025,881.93 - actually a little more than that because of more precise compounding
- After Year 30 - $14,489,505.96 -
- After Year 50 - 43,000,000 - Most people would be dead by now and any amount over $22,000,000 would be taxed at something like 40% BUT....
- After Year 60 (year 10 after kid inherits) - $128,000,000
- After Year 70 (year 20 after kid inherits) - Somewhere north of $500,000,000
Why should a child be forced to sell the 445 acre farm (that is the average size...ranches are slightly larger on average) because dear old dad died? I notice you keep dodging that question.