Anybody that has read the Declaration of Independence knows that taxes were a big issue for our Founding Fathers. Certainly, this has been lost on most media in our country as they regularly advocate a higher and higher financial burden on the citizenry to pay for government programs.
No finer example of the divide between the media and the intent of our Founding Fathers was demonstrated than in an op-ed published in today’s Washington Post entitled “Tax Inheritance, Not ‘Death.’” In it, authors Maya MacGuineas and Ian Davidoff – fittingly from the New America Foundation, as their ideas certainly go contrary to the America our colonists fought and died for – proposed that estate taxes in America should be replaced by inheritance taxes for everybody that tries to pass on more than $10,000 to their heirs.
Yes, they really said $10,000: “A far better approach would be to tax people equivalently on all the income they receive, whether it be from earned or inherited income, by replacing the estate tax with an income tax on inheritances. Under such a tax, inheritances would be treated the same as other forms of earned income and taxed in the same manner.”
The article foolishly continued:
“Whereas under an estate tax, the tax owed is based on the size of the estate regardless of how it is distributed, under an inheritance tax, how much an individual inherits along with their economic circumstances would be considered. The result would be much fairer. The housekeeper and the wealthy niece who each receive a $50,000 windfall would pay taxes based on their own different tax rates. Likewise, two middle-class workers, one of whom inherits $10,000 and another who inherits $1,000,000, would be taxed at the rates that apply to their total income.”
Sadly, what these folks clearly don’t understand about inheritances is that most of them are almost exclusively real estate, as most decedents’ primary asset is their home. As such, if Ma and Pa Kettle wanted to leave their house to their children (as most folks do!), these offspring would have to come up with the cash to pay the income taxes on said property. As the beneficiaries likely don’t have the cash, they would either have to sell it – conceivably in a bad market – or take out a loan.
Even worse, many lower-income families could be wiped out by such an intrusive tax. Using the above example, let's assume that the beneficiary already lived with Ma and Pa. To pay the taxes due, said heir would be required to sell the home he or she currently resides in. As folks can imagine, this kind of living situation is not at all uncommon in our nation.
As a result, virtually every death in our nation wouldn’t just cause trauma and grief on the part of the decedent’s family, but also an estate sale to pay taxes on the inheritance, and the potential for dislocation.This kind of thinking makes our Founding Fathers turn in their graves. Yet, the folks at the Post thought this was a fitting article to publish on Independence Day.