The $15 Million Death Tax Incentive
Politics / Taxes Jul 14, 2010 - 09:28 AM GMTBy: DailyWealth
Dr. Steve Sjuggerud writes: "You don't know whether to commit suicide or just go on living and working," Eugene Sukup told the Wall Street Journal over the weekend.
Sukup is an 81-year-old maker of grain bins in Sheffield, Iowa. If he dies this year, his death tax will be zero. If he dies after December 31 this year, his death tax could be more than $15 million.
It's not just Sukup... Tens of thousands will be affected. By December of this year (if Congress does nothing), Jack Kevorkian might find himself with a line of patients out the door – people in Sukup's situation avoiding the coming tax bomb. It's the "largest increase in a major tax that we've ever seen," says tax historian Joseph Thorndike.
Here's the situation...
The estate tax is set to rise from 0% this year to 55% next year. While many people think the "death tax" is only for the ultra-rich, they've got it wrong... The death tax will kick in at a 55% rate starting on estates with just $1 million.
Look, a million-dollar estate ain't what it used to be... You surely aren't ultra-rich. If you're earning 3% interest on a million-dollar estate, that's $30,000 a year to live on. That's hardly enough to cover health insurance and the simple cost of living.
On the floor of the Senate a month ago, Iowa Senator Chuck Grassley talked about the upcoming death tax situation and two families (including the Sukups) from his home state...
These two family-owned companies will be facing a very large combined estate tax bill. That bill could total tens of millions of dollars between the two companies. That is tens of millions of dollars that will leave the state of Iowa.
These companies might face a fire sale and so often in this circumstance a company is sold to someone with no interest or desire to maintain the current location or contributions to the community.
After describing the jobs that would be destroyed by a big tax on these estates, Grassley continued...
What amazes me is the zeal by some to use tax policy to inflict this kind of damage on family farms and small businesses. All of this to fund an ever-expanding set of federal benefits to many who don't pay any income tax. The signal sent is that those who work hard, save, and want to pass something onto their families exist solely to fund these bloated federal programs.
Why work hard? Why save? Why not work less? Why not go into debt or live beyond your means? In the end, the government levels everyone out, at death, by, as the President said, "spreading the wealth around."
Grassley summed it up, "Taxing people's assets upon their death is just plain wrong..."
I agree with Senator Grassley. These days, entrepreneurs like Eugene Sukup give nearly half of their income to the government in the form of income taxes, property taxes, and sales tax. To then be forced in death to give half of what's left – that is... extraordinary.
In very rough terms, the government is expropriating three-quarters of your money. Where are we, North Korea?
The death tax rate should not be 55%. It should not kick in as low as $1 million. And no tax should be so bizarrely punitive that there's a $15 million "death incentive" for Americans like Eugene Sukup.
You may have a different opinion than I do. If you think it's right for a 55% death tax to kick in on estates starting at $1 million, then do nothing – that's the current law for 2011.
But if you think it is ridiculous, you'd better do something.
Senator Grassley said fixing the death tax that starts in 2011 is "nowhere on the Senate's radar screen." So contact your congressman, contact your senator, and let them know something has to be done.
Regards,
Steve
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