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There’s an old saying, often repeated by President Ronald Reagan, that “in the end, you don’t tax things, you tax people.” That is, a “property tax” doesn’t tax the house, it taxes the homeowner and his or her family. Likewise, a tariff doesn’t tax the imported television set, it taxes the American who purchases it. It is in this sense that the death tax doesn’t so much hit the American who has died or the estate they have left so much as it hits those who would receive the estate. Say, for instance, an American owns 20 hardware stores worth a total of about $500,000 each, making his business worth $10 million. And suppose we call this American “rich.” What if that hardware store owner decides that, when he dies, a certain manager who has worked hard and been loyal to the business for 20 years deserves to be given ownership of the store he’s managed. Sure, the owner of the hardware stores is rich. But the store manager is not rich at all. If, when the owner dies, his estate is taxed at a 37 percent rate, that would mean the loyal store manager wouldn’t get ownership of the store free and clear. Instead, the manager would have to either sell the store to a new owner who could afford the tax, or somehow come up with the taxes before he could really own the store. In this scenario, it’s plain to see that it is the loyal store manager of modest means, not the recently deceased rich owner who bears the brunt of the death tax. Viewed in this way, the very idea that we can tax “the dead” just doesn’t make sense, any more than it makes sense to say that we can tax “estates.” In the end, you don’t tax things, you tax people. And in the case of the death tax, the IRS is taxing people who would otherwise realize the means to seek their own part in the American dream, through the generous help and wishes of one who has died. |
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