Friday, September 17, 2004

The Great Estate Tax Con

The republicans ran their campaign partly on the estate tax 4 years ago. This was one of the greatest cons I have ever seen pulled on the middle class (and the democrats were as much to blame for not educating the public).

First of all, the estate tax was ONLY paid by the rich. Unless you had an estate of over 1.3 million dollars (combination of husband and wife), you never paid a dime in estate tax. The first 1.3 million dollars were totally exempt. Very few Americans die with an estate larger than that. If, on the off chance you did, you did not have to worry about your spouse because the entire estate (100 %) passed to your spouse tax free. Only after the spouse's death were any taxes levied (and only amounts over the 1.3 million).

The second argument used by the republicans to con us was that you are paying taxes on the same money twice (double taxation). This is patently untrue. The majority of any estate over 1.3 million is in stocks, bonds, etc. If you buy a stock for $10 today and sell it next week for $30, you pay tax on the $20 gain (capital gains tax). With the former estate tax in place, if you buy a stock today for $10, and when you die, it is worth $30, you heirs pay tax on the $20 gain. This seems fair since it ensures that the tax is paid just as if you had sold it. But now, if you buy a stock for $10 today and hold on to it, and when you die, it is worth $30, it passes to you your heirs tax free. Therefore, tax is altogether avoided. For example - if Bill Gates were to sell his shares of Microsoft today, he would pay a tax of around 2 Billion dollars. But if he dies and there is no estate tax, that stock passes to his heirs and no tax is ever paid (even if it is sold by his heirs the day after they put him in the ground). Since the estate tax was only for estates over 1.3 million dollars, it is ONLY the rich who benefit from the end of the estate tax. They never have to pay taxes and can just live off of the dividends.

The third con pulled by the republicans was that getting rid of the estate tax protected family farms and family business from having to pay "huge" taxes or lose the farm/business. This was also a lie. There was a provision in the tax code excluding family farms and closely held family businesses from the estate tax. There is not one documented family farm ever being lost due to the estate tax.

Thanks to DeLay and Lott, the rich can stay rich forever and the middle class continue to be stuck flipping the bill.I would also like to point out that schools, police, firefighters, roads, and every publicly financed project still will have to be paid for somehow. So, instead of taxing the dead (who really can't spend the money) we now shift the burden onto the living. Thanks guys! I would have preferred to defer paying my taxes as long as possible.My advice is to reinstate the estate tax and use the proceeds to pay for college scholarships (we can increase the exemption from 1.3 million for inflation). If you expect to die with a larger estate than that... spend it while you are alive! Take a vacation! Live a little! The grand kids will survive without a 5 million dollar trust fund. But with a republican legislature and republican president, I don't foresee any change. Aren't you glad the children of the rich will never have to work in their lives. It just warms my heart.

1 comment:

c&d said...

I like the post, and agree with it. I would make the suggestion that you use paragraph breaks. I think it would be easier to read.