Personal finance is one of my interests – i am subscribed to numerous financial blogs, i listen to Clark Howard whenever i can. This doesn’t make me qualified in anyway, i’m just sayin, i read a lot about personal finance.
One of the big “reforms” that President George W. Bush pushed through during his 8 wasted years in office was to abolish the death tax. Abolish the death tax!! Sounds pretty good, doesn’t it?
The phrase “Death Tax” contains two words Americans loathe. We hate death and taxes, those two unavoidable entities. So to abolish it *must* be good for the American people! Right?
Unfortunately, the American people are being mislead. The so-called Death Tax only affects a very small percentage of Americans. The current law is this: if your net assets at the time of your death, minus life insurance, is MORE THAN TWO MILLION DOLLARS (four million as a couple!), then you have to pay an extra tax on the amount exceeding the $1M.
Middle class Americans have two major assets: their homes and their retirement accounts. In fact, many do not even have retirement accounts, but that is a whole other post. In general, your average American family will not even come close to worrying about the dreaded Death Tax. It really is only taxing the upper class.
What does it mean to be “upper class”? It seems everyone wants to define themselves as “middle class.” I found a decent definition at Wikipedia of the super-rich (top .9%) as “Multi-millionaires whose incomes commonly exceed $350,000; includes celebrities and powerful executives/politicians. Ivy League education common.” The “rich” (top 5%) is defined as “Households with net worth of $1 million or more; largely in the form of home equity. Generally have college degrees.”
People in that category, the top 5%, will be affected by this Death Tax. Should it make the general public happy to abolish a tax for this small group of people?
Even if you just barely get over the $2M threshold, it’s a tax on the amount over that. That first two mil is yours, free and clear.
So the Death Tax really is a tax on the rich. But our buddy Bush talks about it in his speeches as if he’s done something good for “the people.” It’s only good for a few people, and those funds could do a lot of work if we collected them and added them to the budget.
The tax used to be on amounts over $1M. Bush’s repeal has the threshold amount rising gradually over a period of years, and then it disappears entirely in 2010. It will return again in 2011, i think back at the $1M threshold. There is a push to make it permanent.
I am 100% against its permanent repeal. As inflation rises, perhaps it’s reasonable to make adjustments to the threshold amount, but to get rid of it entirely benefits only a very small percentage of Americans, and those who least need it. If i’m lucky, maybe the death tax will apply to my estate when i die. However, i’m not planning on any of my kids being total bums. I consider any money i pass on to them to be gravy. I’m just not concerned that they won’t get “enough.”
Tags: money, politics
