Skip to comments.Don't Die in 2013: Confiscatory 55% Death Tax Set to Take Effect
Posted on 07/19/2012 3:45:30 PM PDT by 92nina
The 2001 tax relief bill (EGTRRA), drastically reduced the impact of the death tax over the course of a decade, so that it was eliminated entirely for one year in 2010 a good year to die, joked a number of pundits. The bill lowered marginal rates and increased the applicable exclusion amount, but it also included a provision allowing individuals to carry over exclusion dollars that were unused by their spouse at the time of his or her death. This portability measure effectively increased the applicable exclusion for many households, in some instances putting millions of dollars beyond the reach of the federal government.
The death tax rose from the grave at the end of 2010, with a Bush-era top rate of 35% and an applicable exclusion amount of $5 million ($5.12 million in 2012).
In 2013, the death tax will revert to its antiquated, pre-2001 form. The applicable exclusion amount will plummet to $1,000,000, and the top marginal rate will leap twenty points to 55%. A 5% surtax will also return, to be levied on estates between $10 million and $17 million. This raises the top effective rate of the death tax to 60%.
According to research by the Tax Policy Center, if the current death tax expires, then the resulting, stricter exemption threshold will force 114,600 estates to file for the tax in 2013 this represents a 13-fold increase from the previous years 8,800 estates, and countless wasted hours filling out tax paperwork. Of that cohort, an unfortunate 52,500 will be liable for the tax, way up from 3,300.
While those 52,500 taxpayers only represent 2% of those who die each year, no one should be fooled into thinking that the effects of this tax fall only on the proverbial one percent. The economic incidence of the death tax is far broader, because it causes many wealthy individuals to save less, choosing instead to retire early or, as Milton Friedman put it, dissipate their wealth on high living. This reduction in savings means a concomitant reduction in investment, lessening the flow of capital to businesses and organizations where countless ordinary Americans are employed.
Additionally, use of estate planning lawyers, life insurance trusts, and inter vivos gifting (all common practice in upper-income circles) allows many wealthy individuals to minimize their estate liability, so that the death tax ends up harming only those who could not or chose not to navigate a maze of legal loopholes.
But the ills of a 55% death tax are not just speculative. Prior to 2001, when the death tax stood at 55%, a 1994 study by the Tax Foundation found that a 55% estate tax has roughly the same effect on entrepreneurial incentives as a doubling of income tax rates. The same death tax today, then, would have similar decision-distorting economic effects as an 80% income tax on affected parties. A 1992 study that was generally pro-redistribution piled on, finding that the paperwork and compliance costs of the estate tax largely cancelled out any revenue raised from the tax.
This consistent finding that the death tax is effectively revenue neutral, and is a net economic drain exposes the class warfare aims of death tax advocates. The other reasons listed merely reinforce the point: that the death tax increase should be vigorously opposed.
10 Year Cost to Taxpayers
Congressional Budget Office: $516 billion
This content is provided by the Americans for Tax Reform Foundation.
Read more: http://atr.org/dont-die-confiscatory-percent-death-tax-a7051#ixzz216SAJLn9
We need to change that! We were LUCKY or BLESSED that when we had a death in the family in 2005 the taxes weren’t as bad as before 2001. But then they went to Zero. That was a good number. I just want to leave enough money behind for my grandkids, or great grandkids’ college. That is all I hope for. But I fear it will just go to the Welfare Queens, Solyndra companies, crack ho’s, pimps, etc
I have always believed everyone should die broke or give any wealth they have at death to a good cause.
Kids, no matter how old, don’t deserve a dime of the parents’ wealth after said kids reach adulthood.
But it also pisses me off that investments in particular are triple taxed at death.
Should I wait until 2017? :-)
Wow! I plan to leave any money I still have, when I die, to my family. My kids, sister, grandkids, my mom. They are my good causes! My sister knows that if we all die, she is to take any money we have left, and take care of our mom with it. That is the plan. She is the Good Cause.
Forgot about Mom and Dad (in law, mine passed a long time ago).
The rest? Meh.
I mostly rail against kids waiting for Mom and Dad to pass on in hopes of a windfall (or even a lifestyle).
We (Mrs FD and I) keep urging my M/F-IL to spend all their money (we already had them liquidate and spend on themselves some property they had “earmarked” for us). When they pass, we don’t want a dime and will give any proceeds to charity.
That is my angle on this, kind of from the opposite side of where you are coming from.
But I appreciate what you are saying and what you want to do.
One down side to not having an estate tax is the heirs/beneficiaries lose the step-up in basis that was given when there was an estate tax. For example, if grandpa dies and passes his 100 acre farm with a fair market value of $2M and a basis of $1,000 to his kids, those kids will pay capital gains on $1,999,000. Ouch!
Bankrupt their families with 55% tax.
My family is a good cause.
“Kids, no matter how old, dont deserve a dime of the parents wealth after said kids reach adulthood.”
Each of us should be secure in our property - which means we have a right to what happens to it. Gifts are never “deserved”, or they wouldn’t be gifts.
>>Each of us should be secure in our property - which means we have a right to what happens to it. Gifts are never deserved, or they wouldnt be gifts.<<
I agree — I was just tossing in my favorite rant.
“I agree I was just tossing in my favorite rant.”
As was I :-)
its the right thing to do....
not to deprive yourself.....one needs food and health care and some fun...
my inlaws did NOTHING for their kids...basically chased them out of the house at age 18...no fancy weddings...no college...no nothing....not a car...nothing for grandchildren...
their kids help build their house...
do I expect them to leave something to their kids?....yea I do....
we plan too....I don't plan on touching my 401 unless I am absolutly desparate...I hope to hand my adult kids a "hand up"....