Brian Reardon has an excellent guest commentary* over at National Review Online regarding the return of the so-called death tax, set to return in 2010. For those new to tax law this tax simply is applied against a person's estate upon their death.
It was repealed in 2001 and replaced temporarily with a capital gains tax. The more basic difference is in terms of valuation:
"People don’t really know what their estates are worth, so they also don’t know what will be owed on their estates when they pass. Most of the litigation surrounding the estate tax — and there is lots of it — involves disputes over the underlying value of an estate’s assets. But with a capital-gains tax there is no dispute. The value is the sales price."
Of course, there are advocates on both sides of the aisle, but arguably, this repeal really was solid public policy. Reardon closes with this point:
"What will the thousands of successful, hard-working people who are busy making their estate plans right now do differently if the death tax is permanently replaced with a simple capital-gains tax? The answer is they will make decisions based on what’s good for them, their families, their businesses, and their communities — and no longer worry about how to avoid or minimize a poorly thought-out tax."
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Source: [*] National Review Online [Brian Reardon].
"People don’t really know what their estates are worth, so they also don’t know what will be owed on their estates when they pass. Most of the litigation surrounding the estate tax — and there is lots of it — involves disputes over the underlying value of an estate’s assets. But with a capital-gains tax there is no dispute. The value is the sales price."
Of course, there are advocates on both sides of the aisle, but arguably, this repeal really was solid public policy. Reardon closes with this point:
"What will the thousands of successful, hard-working people who are busy making their estate plans right now do differently if the death tax is permanently replaced with a simple capital-gains tax? The answer is they will make decisions based on what’s good for them, their families, their businesses, and their communities — and no longer worry about how to avoid or minimize a poorly thought-out tax."
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Source: [*] National Review Online [Brian Reardon].
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2 comments:
Or, maybe they'll give more of their money away to people that need it if they're so worried about the gub'ment getting it. Well, maybe they won't and the government will get it after all. I suppose no one wins then--so maybe it is a good idea. Although I'm really never opposed in principle or practice to rich people having their money taken from them--Robin Hood was my favorite movie growing up, after all--and this applies doubly if the dude is dead!
Matt, the only point I would disagree with you on concerns whether we trust people to devise money to charity or other foundations, or trust instead the government to take such tax money and pursue the same goal. In any case, I find the former much more likely than the latter. Besides, the organization likely should get the money tax-free, I believe. But point taken.
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