George W. Bush once spotted a 45 percent estate tax during his presidency. The wealthy will likely find a larger one in 2011. (Photo: Klearchos Guide to the Galaxy)
At the end of 2009, Congress allowed former President George W. Bush’s estate tax to expire. At the time, the Senate literally encouraged rich people near the end of their lives to postpone their terminal engagement with the choir invisible and stay alive until New Year’s Day, 2010. That way, their families would avoid having to pay a 45 percent estate tax (or death tax, if you prefer). But the estate tax appears to be on its way back in 2011, unless Congress goes against the consensus of experts and actually changes the law.
Estate tax at 55 percent, much smaller exemption
The Wall Street Journal reports that the top estate tax rate will rise to 55 percent, while the previous exemption of $3.5 million per individual taxpayer will fall dramatically to $1 million. That will rope as many as eight times more taxpayers into the estate tax arena, possibly putting some in a position where they may even have to borrow money. The example the Journal gives to illustrate the change is how the new estate tax would affect a $5 million estate. If the wealthy individual dies one minute after midnight on January 1, 2011 rather than just two minutes earlier, the added estate tax cost would be over $2 million. For a $15 million estate, the new cost would be approximately $8 million. This is prompting some heirs to wail, “I want my cash now!”
‘The largest increase in a major tax that we’ve ever seen’
Few average Americans will weep for the wealthy being separated from more of their money, of course. But this sudden turn of the taxation screw is dramatic. Joseph Thorndike of the nonprofit organization Tax Analysts told the Journal “a jump from zero to 55 percent would be the largest increase in a major tax that we’ve ever seen” and a huge pay day for the government and Internal Revenue Service. Elderly estate-holders and their heirs have come to ponder the rather perverse death incentive the looming estate tax provides. Congress has had numerous opportunities to soften the upcoming blow, but no action has been taken as yet, with fall elections on the line. Many unanswered questions – such as whether retroactive extension to the current zero-level estate tax will be approved – weigh heavily on the minds of estate holders and their kin.
Doctors do not recommend estate tax suicide
Money is never worth more than human life. This is something any doctor will tell you – it ties into their Hippocratic Oath – but not all patients are listening, including those sweating out the estate tax problem. They partake of such morbid ventures as suicide tourism, where the estate holder near the end of life travels to a nation with aid-in-dying laws. According to the Wall Street Journal, Switzerland and the Netherlands allow physicians to help people die, but only Switzerland allows its doctors to extend death “benefits” to foreign visitors.
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Oh yeah? Well, Bill Gates’ dad likes it!
