Death be not taxed
This is a good year to die. At least for the rich. Or is it?
I borrowed the sentence above from the Sioux warrior Crazy Horse with but one alteration. When he led his braves into battle with federal troops, he yelled, “This is a good day to die.”
Few in modern times would choose any particular day to die, or any year for that matter. But the wealthy might view 2010—in a theoretical way, at least—as the best year for tax reasons.
In 2010, the federal estate tax is gone for the year due to the Bush administration tax cuts. The Senate couldn’t get its act together in December to pass an extension and so will have to consider change this year. Without congressional action the tax returns in 2011 at 55 percent on estates of more than $1 million.
In 2009, the rate was 45 percent, and the exclusion was a much higher $3.5 million. The House tried last month to extend that into 2010 by passing H.R. 4154. But the Senate was grappling with health care. In addition, Democrats couldn’t muster the 60 votes needed to pass an estate-tax extension.
Even though something will get passed in 2010, if senators try to make an extension retroactive to cover 2010, there would be court challenges on grounds of unconstitutionality. So 2010 is the year for folks with large estates to die, except for one tiny provision.
It seems the 2001 Bush era tax legislation could trigger higher capital gains taxes on some properties when sold after inheritance, so in certain cases, the good year to die wouldn’t be. Rest in peace? Quoth the raven(ous) taxman, “Nevermore.”
Republicans, meanwhile, are battling on all fronts for principle and principal. They want to keep what they call the death tax dead. Democrats and populist outrage may overwhelm them, but they won’t go down without a fight.
For example, in the House Republican Rep. Dean Heller of Northern Nevada last month/year lambasted H.R. 4154, also euphemistically known as the Permanent Estate Tax Relief for Families, Farmers and Small Businesses Act of 2009.
It is “nothing more than a pre-emptive tax increase to prevent the expiration of the death tax next year (2010),’’ Heller said. He unsuccessfully pushed amendments to repeal the estate tax permanently or extend the lapse through 2011, instead of just 2010. He said reimposing the tax will hurt the economy and especially small business.
“Individuals pay income taxes, property taxes and sales taxes,” Heller said. “Now Congress has decided that nearly half of your assets belong to the federal government when you die.”
Heller has a point. Estate taxes, also called inheritance taxes, won’t balance the nation’s budget. They erode an underpinning of capitalism and amount to a poison pen letter from the envious many to antagonize the prosperous few.
This is a horridly graduated tax—zippo levied on most of us, 45 or 55 percent on a tiny minority. Sales taxes are regressive. Income taxes are progressive. Estate taxes are outright aggressive. It’s like beating a dead horse when he’s dead. It’s crazy.
Crazy Horse wasn’t crazy. He knew Washington, D.C., wanted way too much. He knew his people had it all until the feds came along and started taking it—with hardly any (Indian) reservations.
It’s mindful of an anti-tax poem a friend sent me recently. A pertinent part:
“Put these words/ Upon his tomb/ ‘Taxes drove me/ To my doom.’
“When he’s gone/ Do not relax/ It’s time to apply/ The inheritance tax.”