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Ask
Auntie Pinko
June
28, 2001
Dear Auntie Pinko,
My uncle promised to leave me (in his will) $5000 worth
of microsoft stock that he bought for $2000. I know before
Bush ended the Death tax I would not have owed anything. Under
Bush's new law will I have to pay capital gains tax when I
sell the stock? My lawyer says yes and my Republican congressman
says only if my uncle dies in 2010. Who is right?
Confused in Chicago
Dear Confused,
Oh, dear! Now you have Auntie Pinko confused, too! The best
thing I can recommend you to do is to talk to an accountant
who is familiar with the ins and outs of these complex matters.
Auntie Pinko is not an accountant and frequently tries the
patience of the nice people at the bank in reconciling her
monthly statement.
However, perhaps some experience and observations will help
provide a little context for your dilemma. Auntie Pinko recently
had the sad duty of executing the estate of a loved one who
passed away last year, and during the process I did learn
a couple of things about Estate and Inheritance taxation.
First, you are correct in assuming that under the old rules
you would have owed no tax on the already-appreciated value
of your uncle's stock. In fact, if your uncle left anywhere
up to $600,000 in wealth, there would be no tax of any kind
for any of his heirs to pay on the bequests! This means that
the vast majority of estates probated or cleared in the U.S.
have never been subjected to any kind of "death tax," a clever
semantic tag designed to play on the prejudices of Americans.
In fact, while the duties of settling or probating an estate
are rarely simple, and can be costly (please make your wills,
my friends-your survivors will thank you,) taxation is not
an aspect of this process, and the repeal of estate/inheritance
taxes will not simplify it in any way, nor lessen the expense
for the average family.
You might be tempted to ask, in light of this, "Why do we
bother with inheritance taxes at all, then?"
You will hear many reasons, but most of them boil down to
a simple principle that embodies the beliefs America was founded
upon: The growth of a class of hereditary plutocrats, concentrating
large amounts of the nation's wealth among a small elite of
families, is bad policy for a democracy. America's founders
were familiar with systems where a small hereditary nobility
owned most of the country's land and resources. Americans,
while believing every family has a right to accumulate a reasonable
"stake" in the nation's wealth, also believe that to continue
building economic strength, money must circulate broadly,
not be hoarded by a plutocratic few.
Thus, various inheritance taxes have been implemented at
various times, to apply only above certain wealth levels,
in order to put a measure of that accumulated wealth back
to work for the public good, before passing the remainder
on to the next generation of the wealthy family.
Now, for the record, Auntie Pinko (as a good leftie) supports
this concept. And had Mr. Bush proposed raising the "floor"
on that estate tax limit-say, to a million dollars or even
a million and a half, I would have approved. Given the long
surge of prosperity in the last eight years, it is not inconceivable
that even a modestly-prosperous person could have accumulated
more than $600,000 when house values, personal property, retirement
funds, etc., are all taken into account.
But Auntie Pinko wonders now… will we end up with those hereditay
plutocrats, after all?
Thank you for writing to Auntie Pinko!
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