Congress passed legislation that extends the $10 million per couple estate tax exemption but raises the rate to 40%.
Here’s the good news:
- We still have an estate tax.
- A 40% rate is better than a 35% rate.
- This is the first time the estate tax has been strengthened in 28 years.
Here’s the not-so-good news:
- The estate tax was once again used as a bargaining chip in the negotiations (as in 2010).
- The $10 million per couple exemption is still unnecessarily high, and the 40% rate is too low.
- The federal estate tax remains “de-linked” from state-level estate tax laws, meaning states cannot automatically get a credit on federal estate tax payments. (adapted from Responsible Wealth newsletter)
The United States already has an unacceptable gap between rich and poor. People like the Koch Brothers, secure in their inherited and very profitable company, are like survivors in a lifeboat who are fine, thank you, and use the oars to fend off others in the water seeking to save their lives. A new aristocracy is being formed out of pathetically under-taxed and inherited wealth. You cannot, in the long term, have a happy and contented society where winner takes all and one political party is solely preoccupied with protecting the monied aristocracy. That strategy will lead to a modern version of the tumbrils and the guillotine. It is also mind-blowingly short-sighted and stupid.
Responsible Wealth might be relieved that the estate tax has been slightly strengthened. But Epicureans, happy to pay reasonable taxes for the benefit of the whole community, should be concerned that Americans are not serious about inherited wealth.