The old expression was, “What would you do if you had six months to live?”
This year, it’s, “What would you do if you had six months to die?”
The clock is ticking on free death in America. Last week we saw an amazing example of a good news/sad news scenario.
George Steinbrenner, owner of the Yankees, died of a heart attack at age 80. But by dying in 2010, his family avoided $500 million in estate taxes that it would have paid if he’d hung on another year.
Why? Because the inheritance tax is in exile this year. The rate is zero. Next year it jumps to 55%. That’s right. From zero to 55 at a stroke of midnight. A Maserati doesn’t go that fast.
This is simmering into some uncomfortable scenarios. Sure, in Steinbrenner’s case you could say, “It was his time.” There’s still six months to go.
But what if he took ill in December? What if he were on life support at Christmas? Five hundred million dollars might be a compelling motivator Â
You get the drift. Government gains
Of course, we should never be in this ridiculous scenario. Under President George W. Bush, a law was passed gradually shrinking the estate tax year after year until it reached nothing, a move hailed by everyone except tax-lovers and certain charities.
But in classic government form, the only way the law got through was if it had an expiration date. And guess when? 2010. Die now, or the family gets less.
Crazy. Look, I have said this before. The estate tax is blatantly unfair and, in my mind, indefensible. I have heard all the arguments for it. They go like this:
1. If you allow wealth to stay with the wealthy, you’re perpetuating a class system.
Nonsense. This isn’t England in the 1500s. You can get rich many ways in this country. Besides, you’re not giving your wealth to the poor with estate taxes; you’re giving it to the government. What class are we perpetuating there? Aren’t your loved ones more entitled to your life’s savings than Congress?
2. If you don’t force people to bequeath money to charities, charities will go out of business.
First of all, charity should come from the heart. And if charitable giving is directed by government, why did President Barack Obama propose a limit on deductions the wealthy can get for giving? Wasn’t he motivating them in the wrong direction?
Besides – and this is most important – the money you want to leave your kids has most likely been taxed before. When you earned it, you paid tax on it. If you put it in an investment and cashed that investment, you paid tax on the growth.
Most of your wealth, by the time you’re ready to leave it, has been spooned into by federal, state, city and local taxes. Your house, you’ve paid taxes on year after year. Your car, you paid taxes on when you purchased it.
Yes, there is currently a good-size deductible before you pay. But why should your dying ever be a windfall for politicians? Wouldn’t you rather your children have that?
Even Sweden, a country that has as many taxes as it does blondes, did away with its inheritance tax. Australia doesn’t have one. Neither does Switzerland.
I don’t see them going out of business. An uncomfortable truth
All this is bad enough. But with 2010 halfway gone, we’ve created an unimaginable dilemma. Wealthy people are better off dying this December than next January. And their heirs are WAY better off.
Were this a “Saturday Night Live” skit, you’d have Grandma upstairs, crying for her pills, and the kids on a couch watching TV and yelling “Yeah, in a minute!”
It’s insane that death should be free one day and cost you half your estate the next. But that’s where we’re at.
If we had any sense, we’d keep the law the way it is. You notice it hasn’t stopped the current administration from planned tax increases. There will be no shortage of new ways to give to the government.
The sad part is, Obama doesn’t even have to take the heat on this. He just sits there, lets the law expire and – boom! We’re back to 55%.
The Steinbrenner family, in the midst of their grief, have to actually feel lucky. That’s weird. And the closer we get to Dec. 31, the weirder this is going to get.
Contact MITCH ALBOM: 313-223-4581 or email@example.com. Catch “The Mitch Albom Show” 5-7 p.m. weekdays on WJR-AM (760).