25 September 2010 - It’s an Unfair Tax, Time to Act

It’s called 'The Inheritance Tax', 'The Estate Tax', 'The Death Tax', and I would add one more title, the 'Totally Unfair Tax'. Come December 31st, if Congress doesn’t take action before then, people who die in 2011 leaving a business, a farm or a ranch will be taxed at more than 50%. That just doesn’t seem fair to me; as a matter of fact, it isn’t!

A few days ago in the Wealth Adviser section of the Wall Street Journal, the editors devoted the front page to an article entitled ‘What Should We Do With the Estate Tax?’ They presented two viewpoints. The first was headlined ‘Get Rid of it. It’s Unfair, and There’s a Better Way.’ Ed McCaffery wrote and I quote “ Suppose you overheard a mother schooling her child not to work for regular wages, not to save and, by all means–whatever you do, my dear child! – to spend every cent the little one could accumulate on this Earth and die broke.’ That is exactly what the U.S. tax system tells the American people. If you work hard, save thriftily and accumulate a fortune, you will be taxed constantly while doing it, and then you will see up to one-half of your savings go to your distant Uncle Sam, instead of the heirs that you choose.”

The other viewpoint, expressed under the headline ‘Keep it. It’s Fair and We Need the Revenue’, Michael Graetz wrote “Is it fair for Paris Hilton to inherit her great-grandfather Conrad’s fortune without paying any tax on it? Or Yankee owner George Steinbrenner’s 13 grandchildren? This is exactly what happens when there is no estate or inheritance tax on the bequests of the very rich. Indeed, that is what the case for the Estate Tax boils down to: basic fairness. The tax affects a small number of people who inherit large amounts of wealth and who can afford to give up a portion of their wealth to help finance their government.”

I totally disagree with that concept. You work all your life to build a farm, a ranch or a small business; giving your blood, sweat, tears and money and paying taxes on it every year; then when you die and leave it to your heirs, Uncle Sam takes over half of the value. What is fair about that?

We are not talking about the Steinbrenner family or the Hilton family, we are talking about people who don’t have that kind of wealth but are still impacted by the inheritance tax. Heirs who would like to continue the business find themselves having to sell part of the property to meet the tax obligation. I have heard from several farmers/ranchers who had to sell so much of the property that it left the business so small it could no longer operate as a profitable farm or ranch. As one farmer told me “It put me out of business”. It’s time again to make it clear to your representatives in Washington that it’s time to get rid of the Inheritance Tax, to kill the “Death Tax” and do it before the December 31st deadline.

My thoughts on Samuelson Sez.