Beginning January 2013 the estate tax reverts to a tax of 55% on the value of your estate over $1,000,000. That’s what it was in 2001. If nothing else inflation alone has turned $1,000,000 into a current value of $693,000. But that’s not the point, the tax is immoral. You work your entire life to save, you buy life insurance and a home, perhaps you even build a business and instead of being able to leave your achievements to your children, the federal government wants 55% of much of it.
Remember, life insurance proceeds, the value of your house, your 401(k) plan, your IRA and more are all included in the value of your estate. You don’t have to be a Bill Gates to be hit by this outrageous tax that was never intended to be permanent when first enacted. In fact, it doesn’t even raise that much revenue, but it sure hurts a lot of individuals.
Where is there more value; giving your life savings to the government or to your children to spend, pay for their children’s college and prepare for their own retirement?
The estate tax is one of the chips in any negotiations regarding the fiscal cliff coming at year-end. This tax is not just on millionaires and billionaires as is claimed for higher tax rates on anyone earning over $200,000, this tax hurts people who have worked a lifetime to build a small business or were prudent in saving and planning… and who by the way already paid a great deal of taxes along the way.
Romney has pledged to do away with the tax. Obama would raise the exemption to $3,500,000, but many in Congress would like to see it at the $1,000,000 level. That means that if your estate is valued at $1,500,000 which is not hard to do when you consider what is included, you hand over another $275,000 to the government simply because you die (in addition to other estate and inheritance taxes in some states).
If you don’t think that is outrageous, then I can’t imagine what it takes to get you riled up. . What’s fair about the estate tax?
Perhaps the answer is for us not to save or invest, not buy a house, not carry life insurance and simply all become wards of the State. That should make some people in Washington quite happy.