The USA is fucked, we all know this. Eliminating the death tax would be a catastrophic mistake and I thought people knew this but it keeps coming up so I’m going to talk about it anyway.
Donald Trump stated that he will abolish the death tax. I thought he was fighting for the average citizen?
First, ‘death tax’ is a misnomer. Death just adds fear to a political issue. What’s the best way to make people do things that aren’t in their best interest? Scare them. What we’re actually discussing is called “the estate tax”. In Canada it’s called your final return. It’s a tax return that lets the government know how much money you’re transferring to an heir and how much money is returning to the state. If you file taxes you already know the government tracks your income and wealth annually. This is a part of any functioning government.
Do you have an estate? I certainly don’t. I have a house that I’m still paying for, a car, and some savings. Yes! I’m a lucky one with some savings.
When you die you’re allowed to leave your children a certain amount of your estate; $5,000,000 per child. That is $62,500 for every year of an 80 year life not including interest. That’s more money than most will ever have or make in their lifetime.
The reality is that the death tax doesn’t matter to 99.9% of the population. $5,000,000 is a lot of money! The people who want to eliminate the death tax are the .01%. The Donald Trumps of the world, billionaire-types who laugh at The Giving Pledge, want to pass on their wealth and influence to their next of kin.
Example time. I die and leave my kids a paid off house, a car, some vintage guitars, family heirlooms and a modest savings under $2,000,000. I’ll leave it all to my children in my will and the government won’t touch any of it.
A billionaire dies today worth $50 billion. He leaves his heir 5 million and the rest is taxed at 50%. They leaves their heir $25,002,500,000.
The billionaire still leaves an astronomical amount of money to their heir. An estate tax is an intentional dilution of financial power and influence. It is very important and very necessary.
It’s also worth noting banks, credit card companies, lenders, and collection agencies in the U.S.A. are continually lobbying to allow debt to transfer to next of kin. That’s a whole different piece of the same puzzle. In any other country in the world the worst case scenario for the next of kin is $0 inheritance. Debt is (and should always be) the problem of the irresponsible/uninsured lender.
If you don’t get it watch Downton Abbey. The Earl of Grantham had his title and lands passed to him tax free because that’s how monarchies controlled such large swaths of territory. Lord Grantham also had a seat in the house of Lords which was a part of his inheritance so he in-part controlled the country. Whenever you hear the words “eliminate the death tax” think aristocracy for the rich and indentured servitude for everyone else.