Page 32 - ARUBA TODAY

A32 FEATURE
Thursday 30 November 2017
Death and taxes _ all about the estate tax debate

By SARAH SKIDMORE SELL senate version doubles the
AP Business Writer exemptions but does not
The estate tax affects a very repeal the tax.
small — and very wealthy Congress is under pressure
— number of Americans. to act: Trump wants a tax
Only the estates of about overhaul passed by the
2 out of every 1,000 end of the year.
Americans who die face WHY IT MATTERS
this tax right now. The argument is largely one
Easing or repealing of tax fairness.
the tax — currently Opponents call the estate
under consideration in tax the “death tax” and
Washington — would say it taxes someone twice
lower federal revenue — first when they earn the
and potentially generate money and again after
a windfall for some ultra- they die. House Speaker
wealthy families. Paul Ryan, one who has
The estate tax accounts for long argued for eliminating
a small but significant share the tax, called this “unfair”
of the federal government’s and said in a recent
revenue. And it symbolizes interview with Fox News that
a major issue at the heart the government shouldn’t
of the tax overhaul debate: stop people from passing
whether the Republican In this Nov. 14, 2017, file photo, Speaker of the House Paul Ryan, R-Wis., speaks during a news their life’s work to their kids.
proposals unfairly provide conference on Capitol Hill in Washington. He and other opponents
more benefits to the Associated Press of the tax say it also inhibits
wealthy over low- and It used to be more estates wealthy members of his A long-running argument, job growth because it can
middle-income Americans. faced the tax, but the cabinet could potentially still used today, is that the penalize small businesses.
Here’s what you should exemption has climbed — benefit as well. estate tax unduly burdens But proponents and tax
know: jumping from $600,000 20 The tax rule is criticized as small businesses and family experts disagree. They
WHAT IS IT? years ago to nearly $5.5 ineffective though, as many farms. But the Tax Policy say the tax doesn’t affect
When someone dies, the million today — so that now wealthy families take steps Center estimates that only many businesses and much
estate they leave their heirs it only applies to the super to lower or avoid their tax 80 small business and small of the money the wealthy
is subject to federal taxes wealthy. burden — including gifting farm estates nationwide will leave behind has never
when its value exceeds President Donald Trump money over time, making face any estate tax in 2017. gone through an earlier
a certain threshold. That — whose has at least $1.4 charitable donations to THE PROPOSALS round of taxation. That’s
threshold, or exemption because the bulk of these
as it is known, has risen massive estates, according
dramatically in recent to the IRS, are made up
years and at last measure of real estate and stocks,
was nearly $5.5 million for which when held for the
individuals or $11 million for long-term often increase
couples. in value without being
The IRS measures the estate taxed. Left undisturbed,
by the fair value of all assets those assets continues to
— cash, stock, real estate, gain in value as they are
business interests and more handed down over the
— at the time it is handed generations. They typically
down. But the estate is only aren’t taxed until someone
taxed at the value above “realizes” its value through
the exemption level. a sale, at which time they
So that first $5.5 million, or face capital gains tax. So
$11 million? It’s tax free. the tax is in place to level
Anything beyond that is the playing field and avoid
taxed at the top level of 40 dynastic wealth. The estate
percent. tax will generate about $20
But the Tax Policy Center billion in federal revenue
says the effective rate this year, according to
is much lower, because the Treasury Department
of that sizeable upfront Protesters shout their disapproval of the Republican tax bill outside the Senate Budget estimates. That’s not a ton
exemption and other Committee hearing room on Capitol Hill in Washington, Tuesday, Nov. 28, 2017. in terms of federal revenue
provisions that allow the Associated Press that exceeds $3 trillion.
wealthy to protect their But it’s still a lot of money
money from taxes. billion in assets, according shrink the size of their estate The competing proposals when looking at a deficit or
WHO PAYS IT to a disclosure with the or using certain trusts to would both tweak the funding other services. “It’s
Only the wealthiest 0.2 Office of Government pass on money with a estate tax rules. The house a stupid tax,” said Edward
percent of estates owed Ethics — is among the smaller tax burden. Plus, bill initially doubles the McCaffery, a professor
any estate tax at last count, estates that would benefit under existing rules, an exemption to $11 million for of law, economics and
according to IRS data and from an elimination of the estate can be passed to a individuals and $22 million political science at the
the Center on Budget and rule. Outside analysts have surviving spouse with no tax for couples and repeals the University of Southern
Policy Priorities. pointed out that other ultra- penalty. entire tax after 2023. The California. q