Taxation & Estate Planning

Wall Street Journal Estate Tax Editorial

By Joel A. Schoenmeyer

I?ve said it before, I?ll say it again: I?m opposed to the estate tax, and think we should get rid of it. But ? as I?ve also said before and will say again ? I don?t understand why opponents of the estate tax have to engage in bald-faced lies in order to make their point.

Take today?s Wall Street Journal editorial, for instance. It reiterates two of the most popular lies perpetuated by anti-estate tax folks:

1. ?We?ve long argued that the fairest [estate] tax rate is zero, because the money was already taxed when it was earned.? That is, um, a lie. A LOT of assets have never been subject to tax prior to death (for instance, retirement benefits in a 401(k) account, or unrealized appreciation). The Journal acknowledges this fact in the very next sentence: ?Assets, such as stocks or property, in estates that have appreciated in value over time should be taxed at the capital gains rate of 15% in the year of the sale.? That?s some classic double-speak: all estate assets have already been taxed, but if they haven?t (wink wink), they should be taxed at a very low rate.

2. That the estate tax harms small businesses and farms, who are ?looted? by the tax. Those people, quite frankly, do not exist. Opponents of the tax mention small businesses and farms all the time, but they are never able to produce a family that was forced to liquidate its farm or business because of the tax. Funny enough, these are the same people who pushed to add Section 6166 to the Internal Revenue Code (which allows small businesses or farms to pay estate tax over a number of years at a very low interest rate), and then complained that Section 6166 wasn?t being used. No duh. To make its argument here, the Journal depends on Senator Blanche Lincoln of Arkansas, who evidently spoke with great eloquence about the nefarious effect of the estate tax on the good people of Arkansas. His words carried much weight with the Journal, whose editorial board has presumably never actually been to Arkansas or met anyone from that state.

This IRS page includes filing figures for the estate tax. One of the spreadsheets sorts by state and shows, for the most recent year (2007), that a total of 82(!) Arkansas estates paid estate tax. The average federal estate tax paid was $81,343. So the tax paid totals $6,670,126 (82 x 81343). So that?s what Senator Lincoln and the Journal are arguing about, in this case. Less than $7 million paid by fewer than 100 people (and note that this figure comes from 2007, when the estate tax exemption was $2 million -? it?s now $3.5 million).

Full post as published by Death and Taxes Blog on April 09, 2009 (boomark / email).