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Inflation has two opposite effects.

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  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Apparently somebody introduced a new type of double edged sword. One that replaces with one edge what the other edge cut away. The first swipe of the inflation sword cut away any cost of living increase for SS recipients for 2016 while the second edge deposited that cut away amount in the exclusionary exemption for estate and gift taxes. 2016 will see another raise in the gift tax exclusion amount by $20,000. The Exclusion limit has increased by $4,430,000 in the last five years.
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    Chet --- I don't understand what argument you are making or who you are targeting so I went into the IRS website to see what they are saying about gift and excise taxes. So here is what I took away.

    1. If you want to give (gift) away your money or property in a year to anyone, but usually your kids, you can do so tax free as long as the amount does not exceed $14,000 ($28,000 for husband and wife). You can make gifts in a calendar year to any number of people but no gift can exceed $14,000 in a year without incurring taxes. If you give away more than $14,000, you the donor have to pay taxes on the amount that exceeds the $14,000 exclusion. The $14,000 exclusion has remained the same for the past few years (2013-2016). In 2009-2012 it was $13,000.

    2. If you die, your estate is subject to an estate tax (Republicans call it the death tax). However, that estate also has an exclusion that is not subject to those taxes. The amount for 2016 is $5,450,000, a 1.0 percent increase increase from $5,430,000 from 2015. The 2010 amount was $5,000,000. So yes it has increased from year to year based on some kind of schedule agreed with Congress.

    3. Estates over $5,430,000 in 2016 will be taxed at the prevailing estate tax rates. These are really complicated, and it's fair to say that the super rich, the billionaire class, has long ago taken measures to shield much of their estates from estate taxes should they die. But some millionaires are probably not so lucky.

    4. Social Security benefits are tied to a formula developed a long, long time ago in 1973. Each year it increases based on a inflation index (CPI-W) tied to a basket of goods and services used in the 3rd quarter (Jul, Aug, Sep) of every year. So it's really a snapshot of the cost increases (or decreases) in that select basket of goods and services for that specific 3rd quarter to that 3rd quarter in the next year. Any changes in the other nine months of the year do not affect the calculation. If the number is negative, it is held to zero.

    5. In my opinion, this methodology lacks any scientific basis. I think it was developed before computers were born in a big way. I am more in favor of a methodology that includes all 12 months of the year and a different basket of goods and services. Attempts to change the formula have largely been resisted by both parties in Congress. Compromise is not an option. So if you have an issue with the way the calculation was originally set up, go back to those in power in 1973. If you want to change it, complain to your Congress person. Barack Obama had fuck all to do with it and neither did the IRS. The IRS just implements the laws passed by Congress.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Posted in Uncategorized

    The IRS has announced the 2016 inflation adjustments to many tax items. Among these on the estate and gift tax side:

    • The unified estate and gift tax exemption amount is $5,450,000 (up from $5,430,000 in 2015)
    • The exemption from GST tax is $5,450,000 (up from $5,430,000 in 2015)
    • __________As opposed to opposite effect for SS recipients_________

    • Cost-of-Living Adjustment (COLA) Information for 2016

    • With consumer prices down over the past year, monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will not automatically increase in 2016.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Listed as containing inflation adjusted items for 2016

    irs.gov/pub/irs-drop/rp-15-53.pdf

  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    Chet -- So what is the point that you are making? I am missing that.
  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Schmidt, The widening income gap is brought up in almost every political discussion. Both Democratic and Republican discussions. My point is to call attention to the reality. The politicians note the income gap but that appears to be the end of it . Inflation in my post was used to justify a raise in the deduction for the gift tax and at the same time inflation was used to justify no COLA for SS recipients. On this forum you (singularly and collectively) have discussed the various indexes and how they reflect representative equitable spending. I have gone one step further to show that it doesn't matter how data is calculated if it is disregarded. I feel that my point illustrates an obvious contradiction that contributes to the widening of the income gap. Not only is the income gap a result of actions it is actually a cause of actions. When lower classes have less money to spend the economy suffers. The income gap is not only self supporting it is expanding negative effects of the economy making the situation worse. Your first response to this thread was to discredit it. That appears to dismiss the concern for the lower classes crediting status quo for acceptable. ?
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    Yes you are right that income gap is a worsening problem. However, much of it has to do with tax loopholes and deductions and new laws negotiated as a part of the annual budget exercise. Those deals are full of compromises. The Estate tax exemption schedule is a part of that negotiation. As you know, Republicans want ZERO taxes on estates. Democrats have held them to an exemption in the 5 million plus range. That is subject to negotiation every year, but is usually for three or four years in the future until it expires...and then is subject to renegotiation.

    The inflationary increases in tax brackets, personal exemptions, social security benefits, Medicare, and a whole bunch of other stuff are all indexed to inflation. There is not one single inflation number. The Bureau of Labor Statistics calculates CPI-U for all urban consumer applications, CPI-W for Urban Wage Earners and Clerical Workers, a CPI-E for the elderly (but not used for Social Security), and my favorite, the C-CPI-U for chained CPI for all urban consumers. All of these will result in different inflation indices depending on what is in the basket of goods and services being measured. Some will provide a nominal increase, or in some cases, as you pointed out, zero for 2016 (based on the change from 2014 to 2015).

    There is nothing sinister in the indices. The rules are what they are...no year to year manipulation by politicians if that's a concern.

    Some Democrats are asking for a one time Social Security bonus for 2016 because of the zero increase. That makes good sense to me. But none are asking to manipulate the formulas.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Schmidt Wrote:

    Yes you are right that income gap is a worsening problem. However, much of it has to do with tax loopholes and deductions and new laws negotiated as a part of the annual budget exercise. Those deals are full of compromises. The Estate tax exemption schedule is a part of that negotiation. As you know, Republicans want ZERO taxes on estates. Democrats have held them to an exemption in the 5 million plus range. That is subject to negotiation every year, but is usually for three or four years in the future until it expires...and then is subject to renegotiation.

    The inflationary increases in tax brackets, personal exemptions, social security benefits, Medicare, and a whole bunch of other stuff are all indexed to inflation. There is not one single inflation number. The Bureau of Labor Statistics calculates CPI-U for all urban consumer applications, CPI-W for Urban Wage Earners and Clerical Workers, a CPI-E for the elderly (but not used for Social Security), and my favorite, the C-CPI-U for chained CPI for all urban consumers. All of these will result in different inflation indices depending on what is in the basket of goods and services being measured. Some will provide a nominal increase, or in some cases, as you pointed out, zero for 2016 (based on the change from 2014 to 2015).

    There is nothing sinister in the indices. The rules are what they are...no year to year manipulation by politicians if that's a concern.

    Some Democrats are asking for a one time Social Security bonus for 2016 because of the zero increase. That makes good sense to me. But none are asking to manipulate the formulas.

    Schmidt, I am not in support of social programs or entitlements as a tax. I am in support of a productive country needing only safety nets for unusual circumstances. The income gap and accumulation of wealth at the top doesn't bother me as an injustice. They bother me because our resources are being diverted from benefitting the country. There is no reason that everybody can't have a sustaining job. The reason there is unemployment, underemployment and poverty is because resources are being manipulated. When a majority are effected then it becomes the national interest. The national interest is being harmed by specialized interests. When the interests of a few supersede the National Interest, then action is needed. The solution is reverting back to a level playing field, something promised and guaranteed by the Constitution.