Should we kill the estate tax? Go ahead, answer the question—YES or NO! My knee-jerk reaction is to kill the beast, now and forever more. But remember, there's no free lunch.
Should we kill the estate tax?
Go ahead, answer the question—YES or NO!
My knee-jerk reaction is to kill the beast, now and forever more. But remember, there's no free lunch. If Congress lowers (or eliminates) the estate tax, they'll get you with an increase in the income tax or other taxes.
By now we all know that the U. S. House of Representatives passed a bill (The Death Tax Elimination Act, H.R. 8) that has been hyped by the media to repeal estate and gift taxes. The bill does not even attempt to kill the estate tax—maybe a slow, very slow, death by strangulation is the real truth. Following is what this wimpy (and I think politically motivated) bill provides.
This is not exactly a death sentence for the estate tax. You might be interested to know that the current estate tax law is number four in our history. It was killed three times before, only to be given a new life by a Congress in search of new revenues. If H.R.8 becomes law, will history repeat itself with a fifth estate tax law?
H.R.8 also adds a complex maze of new income taxes that really murders the very favorable stepped-up basis rules. For example, you buy real estate for $300,000, depreciate it down to $75,000 during your life, and when you die it's worth $1 million. The stepped-up basis rules give your heirs a free income tax ride for a future sale up to the first $1 million. And you can bet on it; the lost estate tax revenue will be made up by some yet-to-be determined income tax increase.
There are more facts you should know. The income tax tiger is tough to beat; we can wound him, but the plain truth is, if you make the money, you pay the tiger. The current estate tax teddy bear, on the other hand, is a pushover. We know how to avoid the teddy bear . . . legally. Every time. Whether you are young or old, married or single, rich or richest. Over the years, this column has shown you how to totally avoid the impact of the current estate tax law, whether you are worth $1 million or $100 million.
Suppose you are starting a new business at age 23 or 33 or 43. (Well, you fill in your age or one of your kids' ages.) Are you better off with a lower income tax, so you can build and enjoy your wealth while you're alive, or at least look forward to a zero estate tax bill (someday) while you struggle to pay those high and essentially unavoidable income taxes?
I'd like to bet on the American entrepreneur in a low income tax environment for his or her lifetime. Besides, the estate tax—as it is now—is easy to beat.
I invite you to learn more, much more, by looking at my new Web site, taxsecretsofthewealthy.com.blog comments powered by Disqus