Friday, March 27, 2015

The Death Tax

The Senate voted to repeal this today.  This means if this passes the House and gets signed, the inheriting more than $5mm from your family won't result in taxes. On one hand, I'm glad, since I don't like the idea of the estate tax for family. Spouses are exempt, but not children. On the other hand, large estates don't necessarily do much to encourage anyone to live their own life, away from what others have accomplished.

However in the piece, there's a note from Bernie Sanders that says "This amendment exclusively the wealthiest 0.3 percent of the families in this country."

To me, that's the sad part. I would hope that $5mm would be more like 10% of the country. However it's a sign that we are stratifying our wealth more and more, which I think fundamentally distorts how things appear in our government, and hence, our laws.

In the 2011 census, we see the top 20% mark at $630k. If you were lucky and could count on a 10% return, then this would give you $63k a year, or just over the average income of the US. Not bad at all. However, if you earn $60k a year, it's difficult to save enough, unless you diligently start from your early 20s and can put away the 8-10% a year.  Retirement calculators say this works, but the reality of life seems to be that you won't earn $50k at 21 if that's your average salary expectation when you're 30 or 40. Which means you'd be behind.

I'd like to see more effort to teach retirement savings and preparation for people, but I'm not sure how well it works. Kids at 16 can't envision life at 60. They assume things will get better. It's what banks and auto loan officers want us to believe. We'll do better over time.

However that doesn't seem to be reality.

This really is a wealth person's repeal. If family farms are the issue, raise the limit for those, but not for anyone else. $5mm is a crazy amount of money to give away.

No comments: