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.”