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Here's something I only recently became aware of that may change your opinion on the estate tax. I have three children, ages 3, 2 and six months. If I were to
by portman 16y ago
Here's something I only recently became aware of that may change your opinion on the estate tax.
I have three children, ages 3, 2 and six months. If I were to die tomorrow, the cost of raising those kids and sending them to college would be something like $3.5M. So, I have a life insurance policy, as any responsible parent does.
But under the current law, the proceeds of my life insurance policy are subject to the estate tax.
Sure, if you're paining a hypothetical about a 24-year-old Ivy League graduate who just received news that his parents have passed and that he has inherited a $3M estate, it doesn't sound too bad if part of that inheritance is taxed.
But now imagine a toddler who just lost two parents and needs to be fed, clothed, sheltered and educated for the next 20 years... it's different.
- jbooth 16y agoOk, so there's a case that's pretty important and probably deserves an exemption under the law. Or, maybe not, if you think 3.5 million is enough, you already have all the exemption you need. I could see something pushing it a little higher in cases of early death and a life insurance payout. That makes sense. You know what doesn't make sense, though? Complaining about a "death tax" on the one hand while complaining about the budget deficit at the same time, yet maintaining that you're the political party of hard work, bootstrapping, blah blah. If you care about the latter two, don't spend your time going to the mat for Paris Hilton. If you consult some charts about income distribution in this country, you can conclude that the vaaaaaaaaast majority of the revenue collected under this tax comes from very large estates where the children would be set for life with 10% of it, and they're doing very very well with 3.5Mil + 45% of the rest. Exceptional cases may be worthy of exceptions under the law, but that doesn't change whether the law makes sense in the general case.
- WalterBright 16y agoSimultaneously complaining about taxes and the deficit does does make sense if you consider cutting spending.
- jbooth 16y agoNot given the size of the budget deficit, and especially not if you're only concerned about taxes that exclusively affect the very very wealthy.
- sethg 16y agoIf I recall correctly, the status-quo-ante estate tax is 55% of everything over $1M. So a $3.5M estate would be $2.125M after taxes. (Note that the Obama Administration is willing to support a $3.5M exemption, but that’s not enough for the Republicans.) I did a quick check at vanguard.com, and mutual funds that deal in intermediate-term bonds are yielding in the 6.5% to 7.5% range. So whoever gets guardianship of your kids would be able to feed, house, and educate them from an income stream of over $130K per year (presumably that income would be subject to capital gains tax). I am sure that your untimely death would cause great suffering for your children, but I really don’t see them suffering in a financial sense.
- orangecat 16y agoIf I were to die tomorrow, the cost of raising those kids and sending them to college would be something like $3.5M. I'm opposed to an aggressive estate tax too, but I can't believe those numbers; that comes out to more than $50k per year per child.
- philwelch 16y agoYour life insurance policy has a $3.5M death benefit? I've never heard of that.
- whyenot 16y agoThis is why your spouse or your children should own the policy, not you.