Let’s dream; you are amazingly lucky and hit the lottery. You win ten million dollars. Your life is going to change, but more importantly you will be able to help your financially struggling children. When you pick up your check however it is not for $10 million but $5,600,000 a hefty sum for sure but you did pay 44% of your winnings in federal and state income tax (varies by state).
Bad luck strikes and you die, but the good news is that your five children will divide your estate, the $5.6 million, your house worth $250,000 and your life insurance policy for $300,000, plus the $300,000 you saved for retirement. That’s not bad, each child will receive $1,290,00 an amount that can help with their retirement, perhaps the grandkids college or pay off some debts.
But wait, we forgot something. Your total estate of $6,450,000 must pay the estate tax. That means you will give back to the federal government one of these amounts:
Under the old law you would lose $2,997,500. Under the new deal with the President you would lose $507,000 and under what the Democrats want and are likely to get you would lose $1,032,500.
Is this scenario likely to happen, probably not. But does it really matter where the money comes from? In fact, if this estate had been the accumulation of a life’s work, , the fruits of running a small business for forty years, it would seem even more shameful for it to be confiscated. The government needs the money we hear, pay your fair share we are told. I am not sure what is fair any longer, but I do know the essence of the problem is why the government needs the money. Nevertheless the estate tax has been abused by every Congress since the last time it was enacted during WWI.
If you are looking for proof that Congress always spends every penny and more of new taxes, the estate tax is it. This tax was supposed to help pay for WWI, it’s hard to believe we are still paying that debt. Did you ever hear the old saying that money burns a hole in his pocket? In this case Congress burns a hole in your pocket.