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Another Reason Not to Die Soon

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In a bit of comedy that could only exist in the tax code, the estate tax was supposed to expire at the end of 2009, be nonexistent for 2010, and then reset to pre-Bush-era rates of 55% of your assets, exempting the first $1 million.

But the House voted yesterday to maintain the current 2009 estate tax exemptions and 45% rate for 2010 and beyond. According to Bloomberg, the U.S. House of Representatives voted to prevent the federal estate tax from expiring on Dec. 31 and to permanently exempt couples' fortunes of up to $7 million, eliminating the 2011 sunset provision on the original estate tax law.

It may still expire, of course. For the changes to take effect, the Senate would have to pass its own version, then the two bills would need to be reconciled and signed by the president -- all by the end of the year.

If things move quickly, though, wealthy Americans who die in 2010 will once again have to worry about the estate tax ding. Yet some of the super-rich have long supported the tax. Berkshire Hathaway's (NYSE: BRK-A  ) Warren Buffett told Reuters in 2007 that "a progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy."

Back in 2001, when the 2010 repeal first became law, Bill Gates Sr., father of the uber-rich Microsoft (Nasdaq: MSFT  ) founder, organized a petition with over 100 supporters arguing that the estate tax should remain in place. Members of the Rockefeller family -- themselves dynastically wealthy through Standard Oil, the former conglomerate whose pieces live on in ExxonMobil (NYSE: XOM  ) , Chevron (NYSE: CVX  ) , and other big oil names -- signed the petition, as did George Soros and one of the founders of Unilever's (NYSE: UL  ) Ben & Jerry's brand.

But yesterday, Republican Rep. Dave Camp told The Washington Post, "Death should not be a taxable event."

It seems that, like many things tax-related, this is an issue split along party lines. What's your take? Let me hear it in the comments section below.

Brian Richards owns shares of Microsoft, which is an Inside Value pick. The Fool owns shares of Berkshire Hathaway, which is a Stock Advisor and an Inside Value pick. Unilever is an Income Investor pick. The Fool has a disclosure policy.


Read/Post Comments (19) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 04, 2009, at 11:48 AM, Turfscape wrote:

    Step 1: Convince the multitudes that the government wants to tax their death (conveniently ignoring the fact that the multitudes are untouched by such a tax).

    Step 2: Have the multitudes demand their congressional representatives repeal all estate taxes.

    Step 3: Swim with your children and grandchildren in a giant vault of money, ala Scrooge McDuck, while the multitudes bear the financial burden of $12 trillion in national debt.

    Follow-Up: Continue to espouse the idea that if the richest of the rich are allowed to keep their money, they'll have more money to graciously share with the rest of us.

  • Report this Comment On December 04, 2009, at 11:51 AM, TRILLIBRO wrote:

    A study posted in the WSJ in 2003, showed that the estate tax devistates family farms and small businesses. Obama advisor Summers, authored a similar study quoting that it will cost 1.3 million jobs if it is reimplemented. When is the greed of our Gov't ever going to be addressed.

  • Report this Comment On December 04, 2009, at 1:25 PM, Turfscape wrote:

    TRILLIBRO wrote:

    "A study posted in the WSJ in 2003, showed that the estate tax devistates family farms and small businesses."

    One might argue that the estate tax does not devastate them, poor or no business planning does.

  • Report this Comment On December 04, 2009, at 1:27 PM, tkell31 wrote:

    Lol Turf, good stuff. I live near NYC and you wouldnt believe the retarded things people say...like bankers need bonuses so they can tip waiters and cab drivers. It never dawns on them that the other solution, paying those people more, makes infinitely more sense. However, on this one I do see the other side of the coin. If you paid tax on something while alive your relatives shouldnt have to do it again, that is getting a bit ridiculous. Oh well, I'm no tax attorney, I'm sure the politicians will do what is right. Hmmm, on second thought...

  • Report this Comment On December 04, 2009, at 2:23 PM, fallguy2008 wrote:

    The estate tax DOES DEVASTATE small businesses and family farms; they are not guilty of poor planning just like you are not guilty for your 401K tanking from this bad economy. I believe this gov't does not care at all about small business, and they only care about big business to bring in tax revenue and votes! IMHO.

  • Report this Comment On December 04, 2009, at 3:01 PM, TMFCop wrote:

    Here's a crazy notion...the money you make is yours! Not the government's!

    It's very convenient for the uber-rich to say "the rich" need to be taxed more. They can afford it most. But wasn't Buffett the one saying he actually paid less taxes than his housekeeper or secretary or something? Might that be because he generally gets paid in dividends and capital gains, which are taxed at a lower rate rather than the income taxes he advocates for "the rich?"

    Perhaps instead of soaking "the rich" to enrich the Treasury -- since the politicians won't be able to restrain themselves if they have more money coming in -- we cut spending so we don't have to raise taxes!

    At worst, enact a flat tax with zero exemptions, no loopholes, and rid ourselves of the bureaucracy the current tax structure supports.

    I know, crazy stuff.

    Rich

  • Report this Comment On December 04, 2009, at 3:06 PM, Turfscape wrote:

    fallguy2008 wrote:

    "just like you are not guilty for your 401K tanking from this bad economy"

    If I don't take responsibility for my 401K and the assets held within it...meaning I don't properly choose, allocate and occasionally rebalance...then, yes I am guilty for it tanking.

  • Report this Comment On December 04, 2009, at 3:08 PM, Turfscape wrote:

    TMFCop wrote:

    "It's very convenient for the uber-rich to say "the rich" need to be taxed more. They can afford it most."

    Uh...yeah. That's the point.

  • Report this Comment On December 04, 2009, at 7:16 PM, TMFCop wrote:

    Problem is Turf, "the rich" apparently starts at around $200,000 or so, which isn't very rich at all.

    So when Buffett or Soros or other mutli-billionaires advocate that "the rich" need to pay more than their fair share, they're really saying the independent business owner -- the Joe the Plumbers of the world, if you will -- are going to have to shoulder the burden.

    So it won't be Buffett and Soros really paying the tab, it will be the vast layer of small businessmen and women who will be. And they can't so readily afford it.

    When you're making billionslike Buffett, it's easy to say increase taxes because he won't feel it.And if the burden was going to land on just the likes of him, maybe it wouldn't be so harsh an imposition after all.

    But when you're much further down on the rungs of the economic ladder, it becomes a very different story.

    Rich

  • Report this Comment On December 04, 2009, at 7:28 PM, xserver wrote:

    $1 million is rich...really??? A 500K house, 500K nest egg...you're just getting by.

    I read a story about a someone who sold his business for $10 million and retired. He went to a money management firm and expected the red carpet treatment, you know, free tickets to the game, concerts, etc. He thought he would be a big shot. Turns out they ignored him just like any other schmuck...you really needed at least $100 million to be anybody.

    I don't like the notion that your life belongs to the government and that when you die, they should be compensated for losing a taxpayer.

  • Report this Comment On December 04, 2009, at 7:35 PM, bolshojdurak wrote:

    I'm sure you've all heard the argument before, but just in case, here it is one more time.

    If two people make the same earnings during their lives, and one lives below her means and saves her money to pass on to her children, while the other spends every penny and dies owing money, why should the person that saved and, in my opinion, lived responsibly, be penalized??

    If uber-rich people want to give more $ to the government, then fine, do it. I'd like to leave something to my children so they and their children might get a leg up.

  • Report this Comment On December 04, 2009, at 7:36 PM, bolshojdurak wrote:

    I'm sure you've all heard the argument before, but just in case, here it is one more time.

    If two people make the same earnings during their lives, and one lives below her means and saves her money to pass on to her children, while the other spends every penny and dies owing money, why should the person that saved and, in my opinion, lived responsibly, be penalized??

    If uber-rich people want to give more $ to the government, then fine, do it. I'd like to leave something to my children so they and their children might get a leg up.

  • Report this Comment On December 04, 2009, at 11:12 PM, Turfscape wrote:

    TMFCop wrote:

    "the Joe the Plumbers of the world, if you will"

    Wow...I honestly never thought I'd see that reference again. Particularly not in this instance because the "real" Joe the Plumber is exactly who I'm talking about: a guy who thinks that he's going to be taxed and taxed, but is actually the one benefitting.

    But, what a testament to GOP marketing efforts. Really.

  • Report this Comment On December 04, 2009, at 11:32 PM, starbucks4ever wrote:

    Last time I checked, Buffett was richer than his diehard Republican opponents. I side with the billionnaire.

  • Report this Comment On December 05, 2009, at 1:00 AM, ganzemacher wrote:

    TMF Cop said: "At worst, enact a flat tax with zero exemptions, no loopholes, and rid ourselves of the bureaucracy the current tax structure supports."

    Steve Forbes proposed that when he was running for President years ago. Of course, if we had a flat tax, maybe we would be able to afford health insurance, college tuition for our children, or retraining for ourselves, if needed. There are too many people and too many businesses that have too many loopholes. It won't be passed. It should be. Done right, many of us would pay less than we do now and the government would have sufficient money to pay for the services it is supposed to provide, like defense.

  • Report this Comment On December 05, 2009, at 11:51 PM, BenGFranklin wrote:

    If Warren Buffett is so fond of inheritance taxes, why doesn't he let his entire estate go to the Federal Government rather than the Gates Foundation and his children?

    Isn't he arguing that the Federal government knows best how to spend the hard-earned assets of the rich after they die?

    It is an outrage that he encourages federal confiscation of the hard-earned assets of those who have a tiny fraction of his wealth.

  • Report this Comment On December 06, 2009, at 6:02 PM, georcole wrote:

    I agree that "death should not be a taxable event". Taxes have already been paid on a large amount of those dollars. Whether it was taxed when the deceased earned it or paid along the way in the form of capital gains, etc. I realize that taxes were not paid on all of that money. The beneficiary should only have to pay taxes on money that has not been taxed yet, such as the profit from shares of stock that have been held and increased in value. In that case, capital gains need to be paid.

    Overall, I feel that the government takes way too much money in taxes. There are too many people that feel the government needs to support them in various ways. I say that we should all support ourselves. It is our job, not the governments. The government should only get about 10-20% of our income at most. If they can't survive on that, then they obviously do not know how to manage our money (Yes. It is our money. It is for our military, police, firefighters, etc.). And yes, right now, the government is doing a very poor job of handling our money and has been for decades.

  • Report this Comment On December 06, 2009, at 10:23 PM, kimmiesueh wrote:

    The estate tax did devastate our small family business and 13 people lost their jobs as a result. Also the timing of the death meant the heirs paid tax on assets that were valued on the date of death at a much higher rate than they can be sold for in the real world, so we are paying huge taxes on value that doesn't even exist. On top of that, the only liquid assets available to heirs to use to pay the estate tax, were in fact taxable to us as income. So in order to use the assets we inherited to pay the government, we also increased our own personal income tax burden. After expenses involved in administering teh estate, and the federal estate taxes paid, there is very little left. What a complete and utter waste of hard earned "wealth", that was already taxed as it was earned over a lifetime. But hey, at least some people who were already able to afford new cars and houses can get an additional tax break.

  • Report this Comment On December 07, 2009, at 1:12 PM, mountain8 wrote:

    "But yesterday, Republican Rep. Dave Camp told The Washington Post, "Death should not be a taxable event.""

    I have to agree with Mr Camp. Death should not be taxed. What we need is change the name to something like "Our-share-of-what-you-cheated-us-out-of-tax"

    Capitalism and free open markets are wonderful things but we have neither. The rich are rich because they can rent a politician, affort a batch of crooked lawyers, and pay off regulators and accountants. The poor think an Estate was some kind of vehicle Detroit used to make.

    Of course if the $7 million exemption holds, that would eliminate estate taxes for 98% of Americans.

    I'd like to take a moment to remind the rich and powerful of the peoples uprisings in England, the French Revolution, The overthrow of the Czars in Russia and the other poor peoples revolutions who killed off all the rich many times in history. Been awhile since a big one fell, it's due. Of course the govt would only be replaced by something at least as bad, but hey, it would at least be different.

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Brian Richards
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Now: I work on global strategy for The Motley Fool with a focus on Canada, Europe, and South America. Former: Managing Editor of Fool.com. The longer version: http://www.linkedin.com/pub/brian-richards/31/164/461/.

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