How does the new estate tax affect family businesses? Posted on April 15, 2013 by Laura Hollis … and what can they do to minimize its impact? Another good article from Forbes.
With the Marital deduction the estate tax may never apply. For instance, if I have 100 Billion in assets and I die I can leave it all to my wife, thus avoiding the tax. If my wife re-marries & subsequently dies she can leave said assets to her new spouse, also avoiding the tax. This can go on into perpetuity. In states where same sex marriage is legal gay couples could also avoid the estate tax with this method.
I know this is a far fetched scenario, but it could happen. The estate tax is flawed and should be replaced with a general wealth tax collected on an annual basis. The estate tax makes it impossible to plan for revenue (the government needs to wait for wealthy people to die) and it unfairly hits families with a huge burden when the patriarch/matriarch passes.
At the same time the wealth disparity in this country is at a record level and taxing income alone will not generate the revenue necessary to pay down our debt.
In the 1950’s, when our national debt was high due to WWII expenses, the highest income tax bracket was at 94%. That was under Republican President Eisenhower. That truly progressive tax system worked to pay down that debt. Today I think it is necessary to tax wealth if we are ever to escape the $ 1 7 , 2 9 1 , 6 7 2 , 6 5 0 , 2 9 3 . 4 5 (as of today) debt we have been burdened with.