The tax deal passed this week in Washington contains an increase in the death tax (a.k.a. estate tax) from the current level of zero percent to 35% in some cases. Many Republicans in the House and Senate voted for this.
The death tax is arguably truly evil. Here's how it works. Let's say you work hard all your life and pay your taxes. You manage to save over the years from what the government doesn't take from you, and you build up a nest egg. Being a frugal and self-reliant person, you save it instead of spending it. Who knows, someday, you may need that money. As a result, when you die, your nest egg is still there. Remember, it's all money left over from the many taxes you paid during your life. But when you die, you will pay a 35% tax on your "estate" (actually, your "estate" will pay the tax, but let's not get into technicalities). So, for example, if you managed to save up $100,000, when you die, the government will take $35,000 of it, if the estate tax is 35%.
Yes, I know that the bill just passed in Congress exempts estates valued at under $10 million; but the push over time will no doubt be to lower that threshold as we continue to hear about making the rich pay their fair share.
There are even more pernicious aspects to an estate tax.
Keep in mind that a person's "estate" consists of everything they own, not just money in the bank. One's estate includes land, buildings, personal property, everything. So when a person dies, the total value of everything they own is added up and that is the amount that would be subject to estate tax laws.
Consider small, family farmers. Many of them are land rich and cash poor. A small farm of two or three hundred acres that has been in the family for generations may be worth a few million dollars due to the increased market price of the land over time, but the farmer's current annual income may very well be modest, since it takes a lot of acreage to make a little money in farming. $200 per acre is considered a standard rate of return for many small farms. So the value of the small farmer's land may be high, but his income will probably be very moderate. When such a farmer dies, his "estate" will include the value of the land, and if it goes over the exemption limit, his heirs would have to pay the estate tax. If the estate hits that $10 million mark that is in the recently passed law, the 35% tax would be levied, which comes to $3,500,000. Since the small farmer almost surely does not have that much money in the bank, in order to pay the estate tax, his heirs would have to sell off a big chunk of the farm (or cough up the money themselves).
So the government is essentially confiscating one's property via the estate tax when they die. Truly evil.
As I said, the current death tax (a.k.a. estate tax) is zero percent across the board, and the new tax "compromise" raises it to 35% on estates valued at $10 million or grater, a hugh increase. Many Republicans in both the House and Senate voted for this tax "compromise" bill. In addition, the stage is now set for the exemption limit to be under continual attack in attempts to lower it, thereby causing more and more people to pay the death tax. Anyone who resists these attempts to continually lower the estate tax exemption limit will be demonized as not wanting the "rich" to pay their fair share. Thanks, Republicans.