Rep. Kevin Brady (from the 8th District of Texas, an area North of Houston) has co-sponsored a bill that again tries to repeal the estate tax. His claim is that repeal of the tax would pour "billions of extra dollars into the economy," siting the reputable source of "conservative economic research," whatever that means.
I don't think this bill will have any traction, but is Brady correct? I don't think so. Of the less than 1% of Americans that get hit with any estate tax liability, I just can't see a scenario where the money that didn't go to the government would go directly back into the economy. I understand the thought that tax breaks=more spending=economic growth=job growth, but the trickle down theory of Reaganomics has never really panned out. Granted, I don't trust the government to spend the tax dollars from keeping the estate tax to spur job growth either.
We have had an estate tax for a long time. Its controversial. Some states have an EXTRA estate tax on top of the federal one, be thankful Texas does not. However, even in those states, its tough to argue that killing the estate tax is always a good thing.
Do I want an estate tax? No, not really. I don't want to pay it if I am lucky enough to have more than $5 million when I die. I don't want to keep it just because I am an estate planning attorney, and its existence makes me money. However, I just cannot make the policy arguments in favor of completely eliminating it. At least not yet.
Without the estate tax, would we have the Gates Foundation, the Rockefeller Foundation, and the like? Maybe. Would we have new billionaires, like the founder of facebook, signing off to give away most of their wealth? I doubt it. Sure, they would give some, but with no penalty on keeping most of it, its hard to imagine there would be as much charitable giving.
But those are billionaires. What does this mean for us normal folk:
If you have a family business or significant assets, you need to revisit your estate plan. Have an experienced estate planning attorney go over your will and other documents, or create one if you don't have it already. There are ways that you can limit the tax you might have to pay, or not pay any at all: but it takes some work. With changing times, its never to early to make sure you are prepared.
Note: I met the guy in the picture on a sunny day in Washington, D.C. Pretty nice fellow, and makes a decent infomercial.