Estate Tax Bomb coming: Rise of the ‘death tax'KEVIN DANIELSEN NOVEMBER 18, 2012 6:36 AM
One of the hardest things to do in life is burying a loved one. However, if you are the heir of an individual who owns property that is valued higher than $1 million, you may soon end up paying 55%, meaning that the US government would own more of that property than you would. That is, if Congress decides to trip over the ‘fiscal cliff', allowing for the Bush tax cuts to expire. Business Week reports:
If Congress does nothing, as would be the case if the Democratic bill and no others became law, the exemption would drop to $1 million and the rate would rise to 55 percent. Under that regime, the tax would affect about 2 percent of estates, or 55,200, according to the JCT.
However, Democrats are willing to ‘graciously' compromise, saying that a $3.5 million property would only be taxed at a 45% rate. Awesome.
Essentially, the Estate Tax, or ‘death tax', was originally put in place for two reasons:
#1. It would raise revenue in times of financial difficulty for the US government (e.g., the Civil War).
#2. It would prevent a massive expanse of wealth from staying within dictatorially powerful families. Even the Founding Fathers favored such a tax, seeing how England's aristocracy was the root of much tyranny.
Up until around 1916, Estate Taxation only climbed to 10%. It could now become as high as 45% under the uneasy compromise being forged with the Obama administration to avoid the ‘fiscal cliff'.
Just imagine, the U.S. government is asking citizens to pay the IRS about half their inheritances once their loved ones pass on. The Founding Fathers would call such a state of affairs ‘intolerable.'