Estate Tax Bomb coming: Rise of the â€˜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 â€˜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 â€˜graciously' compromise, saying that a $3.5 million property would only be taxed at a 45% rate. Awesome.
Essentially, the Estate Tax, or â€˜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 â€˜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 â€˜intolerable.'