This has been posted this afternoon, 12/31 on The Huffington Post . Click on the link to read it on the Huff Post web site.
Someone once said, “Nothing’s Certain But Death and Taxes”
In a political environment where lying has become the norm rather than the exception there is one axiom that is self-evident—death. Though taxes seem to be inevitable the depth and effect remain uncertain.
This was never more graphically displayed than in the recent fight over the sunsetting Bush Tax Cuts. Republicans and Democrats fought over taxing the rich or taxing the poor.
But, returning to the inevitability of death and taxes—behold the lie when the two are coalesced by a disingenuous political party and Frank Luntz.
The term ‘Death Tax’ is one of the most egregious prevarication’s perpetrated on an uninformed American public over the last few decades.
Despite being UnAmerican, it is fraudulent to rename the ‘Estate Tax,’ yet the Republicans continue to use the deceitful misnomer to the detriment of a struggling nation.
Republicans were able to negotiate a compromise of the estate tax in the new tax bill; a move that will lower Federal tax revenues by billions of dollars, thereby, adding to the burgeoning deficit.
The ‘real’ truth about taxation of estates is that it affects very few Americans. Less than two percent of Americans leave a large enough estate for their heirs to be taxed.
If the Bush Tax cuts had expired the estate tax would have returned to pre-tax cut levels—a one million dollar deduction (two million for couples) and the rest would be taxed at 55%. This level would have a larger impact on estates and would add approximately 2% more to the number of families affected. The compromise changes in the tax bill took the deduction to five million dollars (ten million for couples) and a tax rate of 35% on additional assets or money that exceed the exemption.
A more responsible compromise for the country and the wealthy would have been to return to the 2009 deduction of $3.5 million ($7 million for couples) and raise the tax to only 35% instead of returning to 55%.
The rate of 0% in 2010 will, by year’s end, cost the Federal Government over $20 billion in revenue and prompted tasteless jokes about dying this year.
Ninety-eight and a half percent of American’s heirs will never pay an estate tax. A mere one and a half percent will actually accumulate enough wealth to pass along to their children subject to taxation.
What is surprising in the debate is the number of people who don’t understand that the estate tax does not affect them, yet still argue for its elimination.
Republicans, even those with average incomes, decry the fabled ‘death tax.’
Additionally, wealthy Americans have many ways to minimize this tax. An open debate should be held regarding who actually pays estate tax and how much they pay. In 2009 only 47,000 of the 3,685,000 that passed away bequeathed estates that exceeded $7 million.
The children of the other 98.672% received the entire assets of the estate. They did not pay a single penny in taxes.
Every American can gift up to $13,000 per year to each child—tax free—every year. They can also start a 529 Plan (Qualified Tuition Program) for their children and grandchildren’s college education. And the wealthier can set up trusts to further reduce the tax burden on their heirs. There are additional benefits, too complicated to explain in this article
The wealthiest Americans are also able to set up charitable foundations to help others and shelter part of their wealth. This is almost always a good thing for the general welfare.
The discussion should center on the Paris Hiltons, Kardashians, and others who do nothing or achieve little yet will benefit greatly from the recent compromise.
Though the return to pre-2001 levels of one million and 55% were unreasonable, so to is the five million and 35% compromise.
While Republicans scream about reducing the deficit the pernicious destruction caused by their compromise goes unquestioned and unreported by a deficient media.
Republicans must be confronted with their lies and their hypocrisy exposed.
The general public needs to understand what elimination of the ‘death tax’ will cost their children and grandchildren. The lost revenue will cost future generations billions of dollars adding to an already intolerable debt.
We can debate the merits of wealthy American’s contributions to society, but the Republican win on the estate tax is a blow to the deficit and another nail in our economic coffin.
What is not debatable is the destructive and unsustainable tax reduction path we’re on.
Something must change if this nation is to survive.