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My Parents Give Me $28k a Year

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Re: My Parents Give Me $28k a Year

#31

Post by [deleted] »

coliveira wrote: post #20
intopieces wrote: post #11

My guess is this is of interest to us because it sounds an awful lot like UBI. But, I think the key difference is that the money is connected to parents, who presumably have a standard for how it's spent. If E.J. ended up spending it on drugs or other perceived vices, there's a chance the money might be cut off. The point of UBI is that it is 100% no-strings-attached, which has a different dynamic. That dynamic is on…

People treat drug users as if this was something that they chose to do. In fact, most drug addicts are in this situation because they suffer from a tendency to drug abuse. Many of them had good jobs and lost them because of this condition. Holding up on the UBI program for everyone else because of the behavior of a few that need treatment is absurd.

[deleted]

Re: My Parents Give Me $28k a Year

#32

Post by kcorbitt »

ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

It's a fair question. Personally though, I come down on the exact opposite side of the question – all gifts should be highly taxed, with maybe a nominal tax-free allowance of a few thousand dollars.

Making large gifts tax-free is just another big advantage that kids born to rich parents get over those born into less-fortunate circumstances. If we're in favor of equality of opportunity (and almost everyone claims to be), much stronger inheritance/gift taxes seem like a really obvious place to start.

I wrote some thoughts on this a few months ago: https://corbt.com/posts/2018/04/25/a-100-estate-tax.html

Re: My Parents Give Me $28k a Year

#33

Post by [deleted] »

ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

[deleted]

Re: My Parents Give Me $28k a Year

#34

Post by secabeen »

ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

The gift tax exists largely to prevent people from avoiding estate tax by gifting large sums of money just before death. That's why they're linked. If there was an estate tax and no gift tax, people would just give all their money away in the years leading up to death.

The gift tax exemption is co-mingled with the estate tax exemption, so you can just think of the gift tax as pre-death estate taxes.

As for why we have an estate tax, the general idea is that oligarcies and plutocracies are bad; that while you should be able to give your kids (and grandkids, and even great-grandkids) every leg up in the world, they should have to work and contribute to society; that the pernicious effects of wealth snowball as generations pass; etc. Add to that the fact that an estate tax has the least negative impact on the taxpayer (and their spouse), given that the taxpayer is dead, it's a pretty good tax. Especially now that the exemption is so high, I feel like the value proposition is pretty good.

Re: My Parents Give Me $28k a Year

#35

Post by dragonwriter »

ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

> Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family?

Could you explain the rationale for excluding such unearned income, other than privileging generational wealth against wealth earned by personal work and investment?

> Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business.

He's paid tax on his income. When it goes to you, you are the then receiving income—whether it's as a gift or a payment for goods or services, whether you are in the family or not.

Favoring one of those situations over another is just that, favoritism; it's not justifiable by “already paid” logic in one case but not the others.

Re: My Parents Give Me $28k a Year

#36

Post by wnevets »

ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

> Ignoring the possibility of using it to circumvent an income tax

you can't just ignore the reason why it exist.

Re: My Parents Give Me $28k a Year

#37

Post by dragonwriter »

tanderson92 wrote: post #25
ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

A common misconception is that gifts within a family are taxed. They are, but only after one exceeds the lifetime limit. That limit is around $11M (per parent). It is true that if you exceed a certain amount per year you have to fill out a form, but that is not to be confused with paying actual tax on the excess gift. It's good that you feel the same about the inheritance tax because it's the same tax code that gover…

Note that it's only if reportable gifts exclude the limit, nonreportable gifts (below the annual limit) don't count against the lifetime limit.

Also, both limits tend to go up over time, so it's a moving target.

Re: My Parents Give Me $28k a Year

#38

Post by dragonwriter »

whoTube- wrote: post #23
Breadmaker wrote: post #3

> That’s a $22.4 million of unearned income for the children of the rich, whereas the working class get taxed on their first dollar earned. A person could at least argue that my parents earned the capital they live off of. But me? I didn’t actually earn it.

how are working class taxed on first dollar earned? most dont pay any federal income tax.

> how are working class taxed on first dollar earned?

Payroll tax

Re: My Parents Give Me $28k a Year

#39

Post by Aunche »

ntumlin wrote: post #21

Maybe this isn't the right place to ask, but could someone explain the rationale for taxing gifts within a family? Ignoring the possibility of using it to circumvent an income tax, etc., my initial thought is that if my dad wants to give me $30,001 this year, or even $300,000 this year, that he's already paid taxes on it and it's not the government's business. I feel the same way about inheritance taxes, although tho…

You can make an argument that any tax isn't fair. Why should you have to pay a sales tax on money you already paid income taxes for? Why should a company pay a payroll tax to pay their employees?

What really matters is the economic consequences of these taxes. For example, you can't make sales tax too high because it discourages people from buying things and hurts poor people disproportionately. There isn't much of a economic downside to taxing large gifts. Sometimes taxing an inheritance runs the risk of closing a family owned farm or business.

Re: My Parents Give Me $28k a Year

#40

Post by Kluny »

vorpalhex wrote: post #29
coliveira wrote: post #20

Earlier quoted context omitted.

People treat drug users as if this was something that they chose to do. In fact, most drug addicts are in this situation because they suffer from a tendency to drug abuse. Many of them had good jobs and lost them because of this condition. Holding up on the UBI program for everyone else because of the behavior of a few that need treatment is absurd.

Nobody is compelled to take methamphetamines or heroin, especially not the first time. Yes, physical addiction is a beastly problem beyond simply quitting cold turkey - but you sort of put yourself in that boat to begin with. It's a bit like not knowing how to swim, and deciding to jump into the ocean. If you don't know how to swim, don't jump in the ocean.

If they started taking prescription painkillers for chronic pain or post-surgery, then they kind of were compelled to do it, weren't they?
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