There are two sides to the estate tax debate, and those who feel as though this federal levy is unfair can make a very solid case. For one thing, the estate tax is an instance of double taxation. The assets that comprise your estate have been accumulated after you’ve paid taxes throughout your life. After paying payroll or self-employment tax and income tax you may be left with as little as 60% to 70% of your earnings. You also pay sales tax on everything you buy, property tax, capital gains tax, gasoline tax, and the list goes on and on. Why should anything you have been able to hang onto after paying all of these taxes be taxed yet again after you pass away?
In addition to the fact that the estate tax is levied on assets that have already been taxed, the rate of the levy is extreme. At the present time the estate tax rate is 35%, and if the laws remain the same as they are at the present time it will rise to 55% in 2013. How do you justify a tax that will take anywhere from over a third to more than half of your legacy?
Those in favor of the tax seemed to have just one argument that is somewhat lacking in substance. Their mantra is “Tax the rich,” and that is the long and short of it regardless of how much of the tax burden the so-called “rich” have shouldered throughout their lives.
The dividing line that defines “rich” in this estate tax context is the estate tax exclusion. Right now it is set at $5 million, but when the existing tax relief act sunsets at the end of 2012 it will go down to $1 million. There are those who would suggest that this is not an extraordinary amount of wealth, and indeed there are over 8 million families in America with assets that exceed $1 million. So when you hear people telling you that you don’t have to worry about the estate tax unless you are rich you may want to dig a little deeper and find out exactly what the exclusion is and whether or not your family is exposed to this heavy federal levy.
Latest posts by Saul Kobrick (see all)
- Durable Power of Attorney and Elder Care Considerations - February 28, 2019
- When Is Probate Not Necessary in New York? - February 26, 2019
- Proposed Regulations Address “Clawback” Issue - February 21, 2019