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Measure 84: Two New Tax Breaks for the Richest 2% Among Us

Measure 84: Two New Tax Breaks for the Richest 2% Among Us. What will this measure do if passed?. No estate tax upon death. No tax of any kind when ownership is transferred within the family during life. This means: no gift, capital gains, income or real estate transfer taxes.

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Measure 84: Two New Tax Breaks for the Richest 2% Among Us

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  1. Measure 84: Two New Tax Breaks for the Richest 2% Among Us

  2. What will this measure do if passed? • No estate tax upon death. • No tax of any kind when ownership is transferred within the family during life. This means: no gift, capital gains, income or real estate transfer taxes. First we’ll talk about the estate tax, then the prohibition against all taxes of any kind.

  3. History of the Estate Tax • First known estate tax in Egypt about 700 B.C. • Then Augustus Ceasar taxed estates in Rome about 2,000 years ago. • By the 18th century estate taxes existed in many nations, including the newly founded United States of America.

  4. History of the EstateTax in the United States • Our first estate tax was imposed in 1797. • Temporary estate tax laws were enacted to help pay for the Civil War and the Spanish American War. • Modern Estate Tax began with the Revenue Act of 1916 as a tax on the estate instead of a tax levied on the beneficiaries. • There have been many revisions in the law since.

  5. Teddy Roosevelt on the Estate Tax “I feel that in the near future our national legislators should enact a law providing for a graduated inheritance tax by which a steadily increasing rate of duty should be put upon all moneys or other valuables coming by gift, bequest, or devise to any individual or corporation.... “The prime object should be to put a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of no benefit to this country to perpetuate.” --Theodore Roosevelt, Message to Congress, Dec. 3, 1906

  6. Brief History of the Oregon Estate Tax • Has been in effect for 109 years. • We had an estate tax before we had an income tax. • Until George W. Bush, federal estate tax was shared with the states. • When under Bush the sharing with the states was eliminated, states had to act to continue having an estate tax. • Oregon immediately implemented its own estate tax.

  7. Oregon Estate Tax Facts • Families only pay if their assets are worth more than $2 million ($1 million for singles). • That is two million dollars after deducting mortgages, paying all bills including medical bills and the legal and accounting expenses of the estate and making charitable donations. • Only 2% of the population in Oregon actually pay an estate tax. With 32,000 decedents each year, 730 pay an estate tax. • Eliminating the estate tax will benefit only the richest 2% of Oregonians.

  8. What assets are found in estates that pay an estate tax? • Farms -- about one-half of one percent. • Family business assets -- less than 10%. • Stocks, bonds, homes, real estate, cash, insurance, retirement accounts, mortgages and art -- 90%. Source: Congressional Research Service Report: IRS, Statistics of Income, Estate Tax Returns Filed in 2003, October 2004. Note. this is the year with most filers eligible for a $1 million exemption, thus most similar to Oregon’s current estate tax payers.

  9. What does the Oregon Estate Tax do for Oregon • Adds $100 million in revenue per year. • Helps to fund schools, state troopers, roads, health care, prisons and all other things state government does for Oregonians. • For example, $100 million is enough to pay for 1,200 school teachers for a full year of school. • If repealed, what will the loss of revenue do to the necessary services provided by the State of Oregon? • Who makes up the difference?

  10. Arguments for repeal • Family farms and small businesses are forced to liquidate or sell assets to pay the estate tax. • It’s double taxation: “The owner has already paid both income and property taxes throughout his or her life. This constitutes double taxation and is unfair.” • The tax prevents families from building a better life for future generations. • Families purchase insurance to pay the tax when that money could be spent to invest in the business. • The estate tax eliminates jobs in Oregon.

  11. The family farm is not in danger from the Estate Tax • Under recent Oregon law changes, farm and forest families pay only if their assets are worth more than $30 million ($15 million for singles). • These families can pass on to their heirs up to $15 million in farm or forest assets tax-free ($7.5 million for singles), if the family continues the business. • The provision is so generous that families can include farm homes and up to $2 million in working capital as untaxed assets ($1 million for singles). • Extremely few Oregon farm or forest families pay any estate tax on their farm or forest assets.

  12. In the past, provisions for farms have been far less generous. Still, there are “1,144 farms in Oregon that have been operating continuously for over 100 years.” --Oregon Live.Com updated July 30, 2012 The American Farm Bureau acknowledged to the New York Times several years ago that it could not cite a single example of a farm having to be sold to pay the estate tax. --CBPP The Estate Tax: Myths and Realities The Congressional Budget Office found that of the few farm and family business estates that would owe any Federal estate tax, the overwhelming majority would have sufficient liquid assets (such as bank accounts, stocks, bonds, and insurance) in the estate to pay the tax without having to touch the farm or business. And if it is a problem, they have 14 years to pay. Of the 38,000 farms in Oregon, 2/3 are “hobby farms” and do not meet the definition of a family or commercial farm. --Oregon Department of Agriculture

  13. Farms in Oregon State of Oregon Agriculture, Oregon Department of Agriculture, 2010

  14. The Estate Tax is not double taxation or unfair • The appreciation over time of an asset, say real estate, is known as “unrealized capital gain” until taxed when sold. • Estates subject to the estate tax include significant “unrealized capital gains.” • 56% of larger estates and 36% of all estates are gains that have never been taxed. • All inherited assets get a date-of-death valuation. • The estate tax is the means – the only means -- of taxing these unrealized capital gains.

  15. The Estate Tax does not prevent a better life • The tax impacts only those with significant resources who have the ability to pay. • A taxable estate includes all assets minus transfers to one’s spouse, debt, last medical, attorney and accounting expenses. The $1 million exemption of the first to die can be saved and used when the second person dies. • Those subject to the estate tax have the opportunity during their lifetime to provide their children and grandchildren with the best schools, equipment, resources and opportunities to succeed.

  16. Examples: A couple’s taxable estate worth $3 million, taxed only at the second death, pays $101,250 in tax. This leaves nearly $2.9 million for the heirs. A single person’s estate valued at $3 million pays Oregon estate tax of $205,000. Inheritors receive nearly $2.8 million.

  17. Planning, including investing in insurance, is a normal part of business • Estate and succession planning is a normal part of business and places little additional burden on the family or the business. • Few would complain that investing in the stock market is a waste of money. Investing in insurance is just another investment. • Insurance is an investment with a guaranteed payment amount and an unknown rate of return. Most people hope for long lives and a low rate of return.

  18. The estate tax does not eliminate jobs in Oregon • If trickle down worked, we’d be swimming in jobs today.

  19. Part II A new tax loophole

  20. No tax on transfers within the family • Hidden in Measure 84 is a prohibition against any tax on the transfer of property among family members at any time. • Nothing prohibits the family member receiving the asset from immediately selling it at the newly acquired value. • No family member would pay tax on gains or profits. • This could be used to transfer stock, homes, commercial buildings, crops, art or any other assets and never pay taxes on the gains. • This creates a huge tax loophole that must not be opened.

  21. CPAs and tax lawyers could be sued for failing to recommend this tax dodge to high asset clients. • The state has not estimated the impact this would have on state revenues. • We think it will cost even more in lost revenue than the elimination of the estate tax. • The richest 2% receive 75% of all capital gains.

  22. An example: • A wealthy NY resident owns $100 million of Oregon timberland originally purchased for $1 million. • He sells the land to his son for $100 million and gets an IOU. • The son immediately sells the property for $100 million and pays off the IOU. • Neither father nor son owes Oregon tax on the $99 million gain. This tactic will also work for the Oregon resident.

  23. So who benefits from Measure 84 if it passes? • The benefits of this measure will flow to the richest 2% of Oregonians when they sell or inherit stocks, bonds, homes, or other real estate. • Proponents talk of double taxation. With Measure 84 they seek no taxation, ever. • Measure 84 is two new tax breaks for the richest among us – it does nothing for the other 98%.

  24. Why we need to Vote NO on Measure 84 • Estate and capital gains taxes provide substantial benefit to all Oregonians. • If we do away with the estate tax, the rest of us will have to make up the $100 million of lost revenue. • If we create a capital gains tax loophole, the rest of us will have to make up for the unknown millions that will be lost. • We do not need to give additional tax breaks to the richest among us.

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