The federal government managed to get something right on January 1 (entirely unrelated to the fact that they were closed!). For one year, the “death tax” has been repealed. That means that assets transferred after a person’s death, such as homes, cars, furniture, and retirement accounts, will not be subject to a government levy. Paid by heirs of the deceased, the tax adds insult to injury (you mean I have to pay the government for this horrible collection of Hummel figurines I inherited?) at a time when loved ones should be grieving, not filling out paperwork.
Although its proponents couch their arguments in terms of class warfare, in reality the death tax hurts average families, not the very wealthy. The mega-rich have armies of accountants and lawyers to help shelter funds from such taxes – but more average families, who are likely to bear the brunt of this policy, do not enjoy the services of such personnel.
The death tax runs counter to one fundamental underpinnings of American society. Part of the American dream is for parents to be able to give their children lives that are better than what they had. People work hard to provide for their families, and often strive to better their children’s economic situation by leaving an inheritance after their passing. Unsurprisingly, Uncle Sam wants in on the action, despite not being in the will.
The death tax is fundamentally unfair: it punishes those who saved money with a new round of taxation while money that was fully consumed escapes this new government levy. The estate tax is one of the best examples of government double-dipping by taxing money that has already been taxed before. The worker who earned the money has already paid income and/or business taxes. And let’s not forget those lovely things you bought for your home and office with your after-tax dollars – the government also collected sales tax on them, too. But hey, who’s keeping score?
Family businesses are particularly hard hit by this tax: a 2006 report by the Joint Economic Commission notes that between 1995 and 2004, estate taxes were paid by the owners of more than 37,000 “closely-held businesses,’’ as well as 24,000 farms, 50,000 limited partnerships, and nearly 28,000 other non-corporate businesses. Businesses that know that they face such penalties are discouraged from capital investments – why bother to buy a building, or equipment, when the government will take half its value eventually?