Sometimes it seems like our politicians spend all day looking for excuses to impose new taxes, so it’s always nice to see some movement in the other direction. It doesn’t happen very often, but when it does it’s worth encouraging. Now it looks like New Jersey’s Republican governor Chris Christie plans to do something about his state’s crippling estate tax.
New Jersey is one of only two states that has both estate and inheritance taxes, so dying there is a pretty expensive business. It’s especially hard for small businesses and the middle class, who can easily slip into the bracket where estate tax becomes payable. It’s not much of a reward for a lifetime of building up assets – having the government step in and confiscate a big chunk of them. It makes it even worse when another chunk is seized from anyone who inherits what’s left. Now Christie is proposing raising the exemption, hopefully bringing thousands of NJ residents out of the bracket, and there’s pressure on him to go even further and scrap it altogether.
It would be an excellent idea for New Jersey to get rid of either the estate of inheritance taxes; levying both is grossly unfair, and the current system basically lets the state tax the same assets twice. It’s hard to justify a death tax anyway, because the assets being taxed are ones that have already been taxed before; whether it’s saved income, capital gains or property, the deceased has handed a share to the government when he acquired them. Why should more be taken just because he’s died, which after all isn’t usually a choice he made? It’s not as if the act of dying is another financial windfall that deserves taxed; it’s just the same money that contributions have been paid on already. In effect that means the system in New Jersey – and Maryland, which also has death and estate taxes – is giving the state three bites at the cherry. By the time the deceased’s estate finally reaches his chosen heirs a huge part of it has evaporated.
Death taxes have been controversial as long as they’ve existed. Many of the English upper classes were ruined by death duties in the 19th and early 20th centuries; homes that had been in families for centuries were seized by the revenuers to pay off impossible tax demands. The unfairness of placing a tax on bereavement is slowly dawning on governments around the world. Even tax-happy Canada got rid of its death levy in 1971.
So why has the USA hung on to it so long? It’s hard to say. Even Ronald Reagan, who did so much to curb the power of the government, didn’t touch the federal estate tax. George W. Bush tried to fix it in 2001, imposing a ten-year staged elimination through temporary repeal legislation, but that lapsed in 2010 and the current administration hasn’t acted; now the estate tax is back and it’s as bad as ever.
It’s time for politicians at both the state and federal level to get rid of this iniquitous surcharge. One of the founding principles of this republic was “No taxation without representation,” and someone needs to represent the property rights of the recently dead.
A friend of mine collected coins and gold bullion his entire life from all over the country. No doubt he paid his share of both sales tax and taxes on the income he purchased the items with. After his death his family paid not only the death tax on the current value of the items but also they were required to pay taxes on the difference between the original purchase price and the current market value since these were listed as unpaid capital gains. – Where do we draw the line….