The Death Tax is set to increase as part of the “fiscal cliff,” over which the U.S. economy will be thrown come January when tax cuts will expire, taxes will increase and irrelevant budget cuts will be made. Currently, on estates worth $5 million or more, a 35% tax is levied. Next year, that percentage is set to increase to 55% on estates worth $1 million or more. Obama’s “compromise” is a 45% tax with a $3.5 million exemption.
Farmers and ranchers will be hit the hardest even though the death tax is supposedly aimed at the “super rich.” Governments want to prevent these very wealthy individuals from amassing large fortunes which can be passed on to future generations through inheritance. The government can’t just let large estates go untaxed. That would mean that potentially, large plots of land could remain in someone’s family for generations, and the government would never get to profit from it as long as the property stayed in that person’s family. How unfair that would be. So, to make the classes more “equal,” governments tax the estates heavily upon the owner’s death and every time the estate gets passed on to the next generation.
One such rancher is Kevin Kester. Twenty years ago, he paid the IRS $2 million in estate taxes when he acquired the 22,000-acre cattle ranch from his grandfather. But he’s hardly “super rich.” He’s not even rich. He drives a 12-year-old pickup truck, lives in a modest house with his family and makes less than the average government bureaucrat. But because his job as a rancher requires a large plot of land, the government treats him like he’s a “one percenter.” If he were to die next year after the new death tax increases, his kids would be liable for $13 million in taxes. Fox News reports:
“[A]ccording to the American Farm Bureau, up to 97 percent of American farms and ranches will be subject to an estate tax where the exemption is set at $1 million. At that rate, the federal government will pocket $40 billion in 2013 and up to $86 billion in 2021. That contrasts with just $12 billion this year.”
So, by increasing these taxes, not just on the super wealthy but on average Americans, and by letting tax cuts expire, we’re supposed to be able to avert this “fiscal cliff?” Aren’t these kinds of measures just going to hasten our fall? Raising taxes won’t increase the revenue. No matter what the tax rates have been in the last 60 or so years, the government has only managed to collect 17.7% of GDP in tax revenue. Raising taxes like the death tax won’t help to increase revenue to close the deficit. It will only further cripple the U.S. economy.