From the planks of the Communist Manifesto:
3. Abolition of all rights of inheritance.
In 1916, under the presidency of one Woodrow Wilson, a little something called the Revenue Act was passed. Â In it, in addition to completing the work of founding a Federal Income Tax, was the institution of the Federal Estate Tax. Â The Federal Estate Tax is just what it sounds like: a tax imposed on those who inherit property according to its accessed value. Â The tax rate itself has changed over the decades. Â However, having to forfeit large segments of that which is passed down from generation to generation still sticks in the American craw, hence the moniker “Death Tax.”
On Thursday, the U.S. House of Representatives voted 240-179 to repeal the century old law, probably in vain. Â (At least they tried.)
The details get lost quite often, but the reality is that heirs have been paying for the privilege of that status for almost 100 years in the United States.
“Can you imagine working your whole life to build up a family-owned business and then upon your death Uncle Sam swoops in and takes nearly half of what you spent a lifetime building up for your children and grandchildren?” asked Rep. Kevin Brady, R-Texas, who sponsored the bill. “It is at its heart an immoral tax.”
Tens of thousands of families over the years have been caught with the Death Tax. Â It makes passing family owned businesses down to the next generation very difficult. Â Currently, the 40% payment on estate taxes is levied against estates worth $5.43 million or more for a single person, and $10.9 million for married couples. Â This is definitely better than the 55% for estates valued at just over $500,000 during the Clinton years, but still effects mainly the mom and pop type businesses and farm owners who do not transfer ownership to their children or understand the tried and true ways of getting around the law.
“The super rich? They don’t pay this tax. They have a legion of lawyers and tax planners. They have charitable trusts and foundations,” Brady said. “These are family-owned, hard-working, risk-taking, determined Americans who are building their business, their farm, their ranch. These are not, as we will hear today, the Paris Hiltons and robber barons of the Teddy Roosevelt days.”
Having been in fundraising and the non-profit sector, this writer will attest that much of this is true. Â Irrevocable living trusts are prevalent among the people with money to donate. Â The person whose money is involved is then the trustee of the trust. Â But that isn’t the way traditional America operates. Â They would rather simply hand property and business down from generation to generation the way it has always happened – and step right into the death tax trap every time. Â Hence, the desire to repeal it.
True to form, though, Democrats tried to present repealing the death tax as a gift for the rich.
“This proposed repeal of the estate tax is nothing more than a massive unfunded tax break for a small sliver of America’s wealthiest families,” said Rep. Jim McDermott, D-Wash. “What are they doing? Shoveling a quarter of a trillion dollars out the door to the richest.”
Not by a long shot since the REALLY rich pay lawyers to find ways around the death tax.
It appears at this time that the Senate has enough votes to block a repeal of the Federal Estate Tax, or Death Tax, if you will. Â Barack Obama has threatened a veto. Â So, in the short term nothing will change, but this issue is still alive after 100 years – and inheritance is still an American tradition despite the attempts to eliminate it.