Tuesday, October 30, 2012
So why should normal people care about a tax that only affects the wealthiest people in this county? The tax could affect normal people indirectly by affecting someone who could be affected by the reduction in the estate tax exemption amount. If the exemption were to return to the pre-Bush era exemption amount of $1 Million, it could force those who fall outside the exemption but nonetheless have incurred a tax due to the vast wealth they own in illiquid assets to sell those assets to pay the tax. If the wealth is locked within a business or a farm, this could cause downsizing of a company to where the employer would have to terminate his or her employees shut down a farm.
So what is the proper solution to this debacle? The author below argued that these were the changes that Congress should make to fix the estate tax problem.
- Congress should create a new tax cut or exemption to prevent the scenario I listed above to happen to those who are most at risk to suffer the affects of selling their assets to pay for the tax.
- The new estate tax exemption should be set at $3.5 Million and with the maximum tax rate set at 35%.
- The author also suggested that Congress should:
- "Eliminate the Family Valuation Discount Loophole"
- "Eliminate the 'Crummy Withdrawal Right' Loophole"
- "Wipe-Out the 'Zero-Out GRAT' Loophole"
- "End the IDCT Installment Sale Loophole"
See Dwight Drake, The Estate Tax: Why to Keep and How to Fix, PlainTalk Planning, June 22, 2012.
Special thanks to Kyle Wolf (2012 J.D., Texas Tech University School of Law) for bringing this article to my attention.