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Estate-Tax Reform Made Easy

Estate-Tax Reform Made Easy
(Dollar Photo Club)

By    |   Sunday, 27 August 2017 09:53 PM

The United States enacted an estate tax four times in its history.

Each time the avowed purpose was to raise additional amounts of money from taxpayers to pay off war bonds.

With the bonds paid, the estate tax was repealed.

The current estate tax levy was to pay off World War I bonds.

Those bonds were paid off long ago, but this estate tax took on a new life.

As a revenue raiser, the Joint Committee on Tax has written numerous reports informing us that the estate tax is a net revenue loser for the government.

The estate tax lives on as a political tool enabling politicians to raise obscene amounts of campaign contributions from special interest constituencies.

Estate tax professionals of all kinds and insurance companies think their livelihood depends on its continuance.

Others believe that either it serves a socio-economic purpose of breaking up accumulated wealth or that the rich should just be made to pay more money to redistribute wealth to more deserving people.

While the vast majority of voters are in favor of repealing the estate tax, an equal majority of special interest groups are determined to keep it in place.  

Politicians would like to appease both groups, but seemingly are stuck on the idea that the only choice they have is to either repeal or continue the imposition of the death tax.

There is, however, another alternative which may balance the competing interests.

At present, the lifetime exemption and annual exclusion from the estate and gift tax results in few estates ultimately subject to tax.

For those the estate and gift tax is effectively repealed.

The people with estates still subject to tax have a legitimate beef with the impact of the estate and gift tax is to tax accumulated wealth twice.

Once for income tax purposes and second for the estate tax.

Except for the truly extraordinary wealthy—think Buffet, Gates, and other billionaires—who can avoid both income tax and, using charitable foundations, avoid estate and gift tax while keeping complete control of their fortunes.

One impactful change without much disagreement is that each person’s estate receives credit for the total amount of income tax paid during life.

The argument that the death tax imposes tax twice on the same money becomes moot.

A second impactful change would be to eliminate the tax-free nature of private charitable foundations.

We recognize as a matter of public policy that having anti-trust legislation in place keeps the economy competitive.

This same concept applies to the massive charitable foundations which serve primarily to maintain private control in perpetuity over vast amounts of wealth without any public oversight or accountability.

Bill Gates has the right idea that even the largest of private foundations should have a limited life.

By being tax exempt, the taxpayers are also, in effect, involuntarily subsidizing the private foundation’s operations.

While many private foundations are doing extraordinarily good work for the betterment of society, it is also true that many are nothing more than a cover for social engineering, as a political weapon, or corruption.

For those with so much wealth that they believe that it could be best used for societal good, giving what they think is an excess of wealth should be encouraged.

Continuing to provide a current charitable deduction from income tax achieves this purpose.

However, the income of the foundation itself should be taxed.

Giving the mega-rich one bite of the apple, so to speak, is enough.

Taxpayers should not be expected to bankroll charitable functions for private interests by foregoing the government’s fair share of tax on the income earned.

Much like corporations which monopolize markets, massive foundations should not be monopolizing vast amounts of accumulating capital which is off the books of tax exposure and public accountability.

Using charitable foundations as a front for political action or cover-up for corruption is wrong per se.

Unfortunately, the operations of George Soros and the Clintons are not aberrations.

Private foundations should be subject to close regulation, including certified audits, like those required of public corporations.

Having massive amounts of unaccountable capital being deployed in secret is unaceptable in a capitalist free-market economy which depends on transparency.

In trying to repeal the death tax, politicians are caught between the voters and well-funded special interests.

But reforming the estate tax by balancing their separate interests to attain mutually acceptable tax and socio-economic goals is achievable.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher.

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The United States enacted an estate tax four times in its history. Each time the avowed purpose was to raise additional amounts of money from taxpayers to pay off war bonds.
estate, tax, reform, easy
Sunday, 27 August 2017 09:53 PM
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