Let’s talk about death…
Or, more to the point, let’s talk about what happens to your money when you die. In a perfect world when you die, your assets go to your heirs in whole because either you have 1) already paid taxes on the money when you earned it or 2) there is no sale, therefore nothing to tax. So if you spend your entire life working to amass wealth (thus driving the economy, creating jobs, etc), you are able to leave the fruits of your labors to your chosen heirs. Like I said, this is how it would function in a perfect world.
Instead, we live in a vastly imperfect world where it is believe that anyone dying with a lot of money or assets doesn’t have any sort of right to pass it en masse to their heirs. Instead, the dead person’s estate is smacked with a huge tax burden that, under current totals, wipes out close to half of their estate, leaving a greatly diminished number of assets to their heirs. Under the current tax codes, the estate tax for $2 Millon+ estates in 2006 is set at 46%, it then drops to 45% for 2007-2009 (with the exempt limit jumping to $3.5 Million in 2009). In 2010, there is no estate tax. So if you’re planning on earning a lot of money in the next few years, you might want to consider an unfortunate accident in 2010 so your heirs will get all the money you earned. Then, in 2011, it goes back to pre-2001 levels ($1 Million exemption and a 55% upper end tax rate).
Now I am sure there are many of you out there who are going ‘well, those are just the really rich folks and they can handle their estates getting hit.’ It is that attitude that is detrimental to the growth of our economy and the expansion of wealth in this country. What reason does anyone have to strive to enhance their position in life through hard work and accumulate wealth if they can’t choose what to do with all of it after they die? In many cases, the money has already been taxed once before and is now geting smacked with a second, usually much higher, tax burden because the holder of the wealth died. There is also the fact that this doesn’t just hit the “evil rich.” There are also many family farms that end up needing to be sold after the death of the honor due to the tax burden being more than the heirs can pay without divesting themselves of the property to cover it. Instead of being able to stay and work the family farm (or family business in general), they are forced to abandon it due to the tax burden.
Of course, there are some ways to get around it. I had a great-uncle who did well playing the stock market and invested his earnings from RJR well over the course of his life. When he died, he left most of his estate to his sister. Shortly before his death, he bought a one payment life insurance policy of $1 million that had a one time premium of close to the benefit amount. Under the current tax codes, however, life insurance isn’t taxed. The simple fact is, however, that people shouldn’t have to look for loopholes like this in order to pass their wealth on to others when they die.
Unfortunately, the truth about our current tax codes isn’t spoken openly. The current tax code isn’t a burden on those who already have wealth. Instead, it’s a burden on those who want to be productive and create their own wealth. It doesn’t hurt the rich–it hurts those who are trying to get rich. More and more, the government is asserting that it is better able to decide how to spend your money than you are, and they’re going to take your money away for your own good, to benefit everyone else around you (and you, if you’re lucky).
Why did all of this come to mind? Because the Senate today fell three votes short of cloture to bring a vote on a compromise amendment to the tax bill that would limit some of the burden of the death/estate tax. The Democratic Party, on the whole, doesn’t want people to be able to do what they want with all of their money. Instead, they believe that they have the magic formula of how to best spend the money and they need to have these laws in place to ensure they’re able to carry these things out. Unfortunately for the rest of us, they are unable and unwilling to get it through their heads that the money doesn’t belong to them, it belongs to the people who earned it. They are also unable and unwilling to limit the function of the government to the Constitutionally defined limits of authority. For many of them, it’s all about personal power wrapped up in the idea that they’re not doing it for themselves, but rather doing it for the “People.”
Personally, I call bullshit on that. I’m one of the “People” and want them to keep their hands off of my money.