If You’re Rich, You Should Have Died in 2010
That was the year the death tax was completely eliminated for one year. The families of philanthropist John Kluge, Texas oilman Dan Duncan, and Yankee’s mogul George Steinbrenner made out like bandits in 2010. Unfortunately, 2013 will see a crushing increase in the death tax.
In 2013, the death tax will revert to its antiquated, pre-2001 form. The applicable exclusion amount will plummet to $1,000,000, and the top marginal rate will leap twenty points to 55%. A 5% surtax will also return, to be levied on estates between $10 million and $17 million. This raises the top effective rate of the death tax to 60%.
Not only will the rate sharply increase, the amount of people estimated to be affected by the tax law changes will go up more than 13-fold. But truest and most invisible effects will be felt in the economy:
The economic incidence of the death tax is far broader, because it causes many wealthy individuals to save less, choosing instead to retire early or, as Milton Friedman put it, “dissipate their wealth on high living.” This reduction in savings means a concomitant reduction in investment, lessening the flow of capital to businesses and organizations where countless ordinary Americans are employed.
Additionally, a study done by the Tax Foundation when the death tax was 55% concluded that it “has roughly the same effect on entrepreneurial incentives as a doubling of income tax rates.”
The death tax rate change is only one of many, many tax increases scheduled for 2013, unless Congress makes changes to it at the last minute.