exactly why are we in favor of taxing monies that have already been taxed?
doesn't "double taxation" ring a bell for anyone? i agree it is easy to build a sympathetic case for an estate tax. i dislike paris as much as anyone, but why is it ok to tax someone twice, just because they have $XX?
i look at this from a more realistic standpoint. I have quite a few clients who would get hit with the estate tax as it stands now.
they don't just tax someone who has $XX sitting in cash next to the fireplace for kindling.
- cash assets, investments, etc.
- real estate
- real property
- businesses
- life insurance
it isn't hard to go over the limits as they are set.
scenario: corner dry cleaner has worked thirty years building his business in his community. he makes a good living, takes care of his employees, is involved in community organizations. he pays his taxes on his business and personal earnings every year. he has a modest home in a nice neighborhood. because he is concerned about not having a pension or 401K he funded his IRA every year and has saved some additionally. he has a family so bought a life insurance policy to care for them. altogether, a stand up guy , don't you think? maybe he reminds you of yourself or someone on your block.
one day this hard working business owner has a heart attack and dies. his wife and children are heartbroken, but what can you do?
the house? $300K
the business? $600K
Investments? $275K
Land they had bought to build dream retirement home? $320
Life Insurance? $700K
The life insurance and investments can provide the family with a stream of income of @$50-60K/ annually.
The business is a tough issue - she wants to keep it in the family but the boys are a little too young to take over the reigns. she will have to hire a good manager to keep the high standards her husband always enforced. Her income from the business is basically a wash after finding, hiring, training, and paying the manager.
The CPA and attorney call her in for a meeting to inform her that her husband was a successful business owner. too successful. the estate tax is due. She has choices though.
1)She can sell the land, but that is tough because of sentimental reasons and she still wants to retire there.
2)She can sell the business, but then all of her husbands hard work to build a business that her son's can take over in just a couple of years, is wasted.
3) She can pay it with the Life insurance money, but then she would have to pay the manager of the store considerably less or do the job herself for extra income.
do you see where i am going here? this is a real story. this isn't someone who is obscenely wealthy. they probably live on your block. they have worked hard and saved and planned for the future.
everything they have they bought with money that they already paid taxes on. why should the estate tax go after the same dollars a second time?
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what do i know though? i support a flat tax on every dollar earned over $30,000. no loopholes. i read recently that an 8% tax on every dollar earned over $30,000, plus a 1% additional sales tax would more than make up for anything lost by throwing out the "progressive tax" system. you know who won't support something like that though? CPA's attorneys, employees tax related businesses. they are afraid people won't need them anymore.
