Author Topic: Oaktree>Latest memo from Howard Marks: Political Reality Meets Economic Reality  (Read 2371 times)

JRM

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The problem is if the threshold is set too low for the estate tax then family farms and small family businesses cannot be passed on to the next generation.  The kids cannot afford to keep the farm/business, and it must be sold.  The threshold for the estate tax should be correspondingly high not to include most small business and wage earners (who were already taxed on those earnings), but rather capture the billionaires who accumulated wealth through businesses and other tax favorable ventures.


TwoCitiesCapital

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The problem is if the threshold is set too low for the estate tax then family farms and small family businesses cannot be passed on to the next generation.  The kids cannot afford to keep the farm/business, and it must be sold.  The threshold for the estate tax should be correspondingly high not to include most small business and wage earners (who were already taxed on those earnings), but rather capture the billionaires who accumulated wealth through businesses and other tax favorable ventures.

I don't disagree, but limiting it only to billionaires is too limited in scope. After all, the guy who has $250 million St his death didn't get by operating the local corner store that now can't be passed onto his kids....

Sure, make the estate cap in excess of 10, 15, or even 25 million - wherever you want to draw the arbitrary line of "disadvantaging the advantaged" or what qualifies as a "small" business - but targeting only billionaires is too limited in scope for an argument intended to support small business.

Further, for family members inheriting a successful operation - it wouldn't be too hard to finance to pay the taxes and then use cash flows from the business to pay off the financing. Will you be as rich as your old man when you're done? Probably not - but that's because your old man built it from the bottom up and you inherited a permanent job with a built in consumer. I don't think that's too unfair.

K2SO

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Further, for family members inheriting a successful operation - it wouldn't be too hard to finance to pay the taxes and then use cash flows from the business to pay off the financing.

Depends on the business. What if it is also highly levered? What if the estate tax comes due at a time when credit is hard to come by?

I agree with the principle that inheritances and generational wealth transfers should be taxed at some level, but in a perfect world we would tax only passive assets. Actively owned and managed businesses should be exempt, as taxation could impact the business, employees, suppliers, etc.

Cigarbutt

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In his memo. Mr. Marks lists the reasons behind a country's preeminence in the world (page 9). I think he could have included institutional governance.
https://www.transparency.org/cpi2018