But you do say it with conviction. That's what the democrats do too. They lie with a straight face, and some people believe it.
You say the death tax is just an income tax to the heirs????
Wrong!!!!!!!
I'll give you an example. Try to understand this.
After the exemption there is an estate of 6 million subject to this death tax. The gov. wants to steal about half of that.
What if there were 10 heirs? Do you think they would each pay income tax on 600 thousand each....@ 55% rate??
What if one were in a low bracket, and one was a multi-milionaire?
Income from inheritance is not taxed by the government. The estate is taxed.
Money Matters / Joseph AnthonyAxing the estate tax: not so great?
So the House and Senate both have voted to eliminate the estate tax. That's great news for you small-business owners who want to pass your enterprise on to your children, right?
Well, not so fast, heir-head. Eliminating the estate tax may have less impact on your business than you think.
It's a 9-year phase-out The estate tax is not going to be wiped out in one fell swoop. As it stands now, the tax will be phased out in increments through 2010.
The fact that the tax won't be repealed for a decade has led many to joke about how the best estate plan is to live for another 10 years. Much of the benefit would go to a remarkably small number of people. Once the repeal is complete, about half of the total tax benefits would go to the heirs of the wealthiest one-tenth of 1% of Americans.
Capital gains may have to be paid
The bill passed by Congress holds out another big change in how assets are treated when sold by heirs.
Right now, regardless of the value of an estate, heirs get something called a "step-up in basis" when they inherit assets. That means that if you pass on to your heir a stock that you bought for $10 a share but that's worth $100 a share at your death, the heir's basis becomes the $100 it is worth when inherited. If the stock is later sold for $105 a share, taxes are paid on only the $5-per-share appreciation from the time it was inherited. Everything else is free of an income tax. This is one reason the complaints you may have heard about "double taxation" are not valid — many of the assets in estates never have been taxed, and aren't taxed when inherited, either.
That'll change under the bill passed by Congress. Once the estate tax is phased out, the step-up in basis will be limited to $1.3 million. Property inherited by a spouse could be stepped up by $3 million on top of that, meaning a spouse could inherit assets that have increased in value by as much as $4.3 million, without having to worry about additional income taxes on those gains.
How bad off are you now, anyway?
Most small-business owners don't really have to worry about estate taxes. About 98% of all estates don't have to pay any estate tax. In fact, about half of all estate taxes get paid by those leaving taxable estates of more than $5 million. That's about 3,000 people annually. Based on these numbers, I think I can safely say that only a minute percentage of the fine, intelligent, upstanding and well-rounded people who read this column have to worry about estate taxes.
If you're single, there currently is a tax on your estate only if the net value exceeds $675,000. If you're married, using some simple and inexpensive estate planning, you can increase that exemption to $1.35 million.
But there's an even-better break if you own your own business — a family-owned business-tax exclusion on top of the regular exclusion. This year, the additional exclusion is worth $625,000. Mark Luscombe, a spokesman for the tax information publisher CCH, says that with some planning, a married couple owning a business could pass on to heirs as much as $2.6 million in assets free of estate tax.
There are restrictions on qualifying for this additional break. Among other things, your family has to own at least half of the business, you have to have materially participated in the business for at least five of the eight years prior to death and the business has to be worth more than half the value of your total gross estate.
Finally, just to be sure that this break really does serve the purpose of helping keep family-owned businesses in the family, your heir must be involved in the business for at least five years out of the eight-year period following the receipt of the inheritance. There are other restrictions as well. A full explanation of how this business-tax exclusion works is complicated (and likely will be the subject of a future column).
By the way, cutting the estate tax is not necessary to preserve family farms. As David Cay Johnston of The New York Times recently reported, even the leading advocates of repealing the estate tax are hard-pressed to come up with a single example of a farm that fell out of family control because of estate taxes.