December 6 2010
Oh Death Where is Thy Sting?
"In this world nothing can be said to be certain, except death and taxes." - Benjamin Franklin
"The difference between death and taxes is death doesn't get worse every time Congress meets." - Will Rogers
Well, I hate to break it to you, but Congress might make death a whole lot worse too, if they fail to act on the death tax, set to return in 26 days at a 55-pecent rate. Furthermore, the exemption threshold will drop down to $1 million, not indexed for inflation, meaning more and more Americans will feel the direct effects of this tax in the future. From Sunday's Review and Outlook in the WSJ:
President Obama and Congressional Democrats don't think this is a high priority, but voters do. A November Gallup Poll found that Americans think that keeping the estate tax "from increasingly significantly" is "very important" by 56% to 17% "not too important." That's more than think it is a priority to extend current tax rates (50%), extend jobless benefits (48%), ratify the Start treaty (40%) or let openly gay men and women serve in the military (32%).
The Gallup results confirm that voters intuitively understand this tax isn't really about socking Bill Gates or Warren Buffett. Those two billionaires, like most others, have made sure they'll escape the grim tax reaper by parking most of their wealth into tax-exempt foundations. That may explain why the estate tax is so fiscally inconsequential, raising barely 1% of all federal revenue (0.6% in 2009).
The estate (death) tax is not about revenue collection. It's terribly inefficient at that. It's about class warfare, punishing hard work, and "spreading the wealth around." As I've written before, this tax is one of the biggest bullies of the American dream, and we'd be better off without it.