Your Money Is Ours

Hillary Clinton announced an updated estate tax proposal today. After previously supporting an increase in the estate tax rate from 40% to 45% and decreasing the amount of tax free assets to $3.5 million, she now wants to tax estates exceeding $10 million at 50%, estates exceeding $50 million at 55%, and estates exceeding $500 million at 65%. She also wants to remove the stepped up basis provision for estates so appreciated assets would also be subject to capital gains tax at death.

Two quick points without being too political because the proposal speaks for itself:

1. Apparently Hillary believes the Senator Warren adage that "you did not build this" so we are going to tax it mantra.

2. No word from her billionaire buddies Soros, Zuckerberg, Gates, and Buffet on how they feel about the government possibly taking 65% of their wealth and, frankly, I don't give a damn about them.

Hey, New Jersey, Your Tax Base Is Too Narrow

David Tepper is a hedge fund manager whose company is located in New Jersey.  He is also a resident of the Garden State (misnomer alert). He recently announced that he was moving his corporate headquarters and his personal residence to Florida.  The NJ state budget director then stated that this move could affect the amount of tax revenues generated by NJ.  

For the record, NJ has the highest real estate taxes in the country, a state estate tax rate of 16%, only a $675,000 exemption for estate taxes (lowest/worst in the country), and a top income rate of 9%. Florida has no income tax and no estate tax, no Newark or Camden, but plenty of sunshine.  Some NJ legislators wish to revise the state tax code to retain residents like Tepper while others believe his move and others are a "blip" and do not warrant revision of the tax rates.

Three quick points:

1.  If the state is so dependent on the income of one individual, its tax base is too narrow and should be expanded to include more residents.

2.  Those NJ politicians who tell NJ residents to "fuhgeddaboudit" the NJ income and estate tax rates because they do not matter to people are delusional.

3.  Note to Bernie Sanders supporters, you can only tax people so much before they change their behavior to reduce their tax burden.  

Feel the Burn?

Last week Bernie Sanders released his tax increase plan for paying for his $1.4 trillion annual single payer health care plan. Among other hefty increases, his plan would increase the estate tax on the “wealthiest .3% of Americans who inherit more than $3.5 million” to raise an additional $21 billion annually. The specifics are lacking, but the plan resembles President Obama’s annual budget proposals which call for the same reduction in the estate tax exemption to $3.5 million from the current $5.45 million, an increase in the estate tax rate from 40% to 45%, and no indexing of the exemption amount to inflation.

Two quick points:

1. As an estate planner who lived through 12 years of uncertainty with the estate tax exemption, it is disappointing to see politicians inject uncertainty back into the estate planning arena which makes planning difficult for clients and their families.

2. A plan that equals 40% of the current federal budget does not have enough rich people to gouge to pay for it so of course Sanders has to resort to taxing the dead more to try to pay for it.

She Doesn't Get It - Redux

A young writer recently wrote a web piece titled "If You Have Savings in Your 20's, You're Doing Something Wrong." The article contained the following gems:

• People who are saving in their 20s are people who don’t set their sights high. They’ve already dropped out of the game and settled for the minor leagues.
• Your 20s are not the time to save; they’re the time to gamble. $200 a month isn’t going to make the dent that a $60,000 pay raise will after spending all those nights out networking.
• We don’t have kids. We’ll be renting for the foreseeable future, and we have no problem eating McDonald’s when we’re skint.

Several quick points:

1.  If this advice was from a 40 year old looking back on life, it would be less laughable that it is coming from a 20 something trying to justify her lifestyle.

2.  I am not sure I know anyone who received a $60K annual raise but she seems to think they are plentiful.

3.  The value of the monthly $200 expenditure she mocks is $1 million after 45 years.

4.  If she continues to spend what she makes, she will rent forever, not just the foreseeable future.

5.  The writer and the 2 million plus people who liked her article on Facebook are likely constituents of Bernie Sanders because they are counting on others to provide for their retirement.