Reimagining Our American Republic by Peter W. Frey

Author:Peter W. Frey
Language: eng
Format: epub
ISBN: 9781626346031
Publisher: Greenleaf Book Group Press
Published: 2019-07-27T16:00:00+00:00

SETTLING ESTATES

Theodore Roosevelt thought that passing fortunes from one generation to the next was “of great and genuine detriment to the community at large.”16 Andrew Carnegie argued that the “parent who leaves his son enormous wealth generally deadens the talents and energies of the son and tempts him to lead a less useful and less worthy life.”17

The current estate tax affects only a few citizens. Approximately 2.5 million Americans die each year. The estate tax currently applies only to families with a net worth greater than $10.9 million. Approximately five thousand estates pay an estate tax each year. A bit of math indicates that only one out of every five hundred estates pay an estate tax.18 This tax is a minor source of income for our government and with the 2018 changes passed by Congress that raise the threshold, this tax will become even less productive of tax revenue. Even so, many federal legislators repeatedly call for a repeal of this tax, apparently because they think it is too much of a burden on American multimillionaires. A policy that promotes a hereditary elite creates a society that is economically unhealthy and politically unfair.

My proposal for setting estates is innovative and economically beneficial. If the deceased designates the entire estate to his or her spouse, there would be no tax consequence. The deceased would also have had the option of leaving a portion of the estate to a living spouse, free of any tax, and distributing the remaining part to other people or to corporate organizations. Distributions to other living people, up to one million dollars for each person, would have no tax consequence for the recipients or the estate. The estate would pay a tax of 40 percent at the time of transfer on the amount beyond one million dollars designated for a single living person. There would be no tax consequence for the recipient. Funds designated in the deceased’s will for recipients under the age of eighteen could be managed by a financial guardian until the recipient became of age.

All money designated for nonhuman recipients would be taxed at 40 percent at the time of transfer. This would include donations to corporations, partnerships, charitable organizations, and religious organizations.

If the deceased had no spouse, and if the estate distributed $10 million to ten or more human recipients, each receiving $1 million or less, there would be no tax consequences for the estate or the recipients. If the $10 million estate were distributed equally to two children and three grandchildren, each person would receive $1.6 million and the government would receive $2 million in taxes. If the deceased designated half of this estate to a spouse and half to one child, the spouse would receive $5 million tax-free, the child would receive $3 million, and the government would receive $2 million in taxes.

If the estate were worth $100 million, a spouse could receive $50 million tax-free and fifty other living recipients could each receive $1 million tax-free. The government would receive nothing at the time of transfer, and the recipients would not be taxed on the money they received.

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