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The death tax: A big issue that only matters to a small group of very rich people

Mark J. Hardy
Flickr, http://j.mp/1SPGCl0

Donald Trump doesn’t often make me laugh, but he did a week ago, when he announced his grand plan to change the tax system. We should all support it, he said, because it would finally end “the crushing, the horrible, the unfair estate tax, or, as it is often referred to, the death tax.”

Trump went on to explain how farmers and people with small businesses have to hold a “fire sale” after the owners die to pay “the death tax, a disaster for this country.”

I’m not sure if he’s ever told a more outrageous lie. Twenty years ago, I went to my mother-in-law’s house, to find her dead, the victim of a sudden heart attack while she was knitting. Her assets, including her home, were maybe a few hundred thousand dollars, and her daughters were worried they wouldn’t have enough to pay the estate tax.

We asked an accountant about it, and he not only told us that she didn’t have to pay it, she wouldn’t pay it if she had ten times as much. In fact, about the best wish you could have for your children would be that when they die, their heirs would have to pay the “death tax” -- because the only people who ever pay it are multi-millionaires.

Here are some “death tax” statistics, compiled by my economics guru Michigan State University Professor Charles Ballard. In 2015, the last full year for which we have statistics, 93,719 Michigan residents died. How many of those do you suppose left estates that had to pay the “death tax?”

Take a guess. Most people I’ve asked say about half.

The actual number was … 91. Not 91,000, but 91 people. Less than one out of a thousand. Actually, Professor Ballard told me, 211 Michiganders had to file an estate tax return, but there are many deductions, and more than half ended up paying no estate tax at all.

How much did the heirs of the 91 have to pay? I couldn’t find that out, but I can tell you that they were left an average estate of more than $22 million dollars. In fact, unless you leave your heirs at least $5.5 million, you don’t have to pay anything at all.

So all eliminating the tax would mean, Ballard said, was that “the very very richest folks would be able to leave more to their heirs,” the federal deficit would increase, and “the distribution of wealth would become a bit more unequal, though it is already extremely unequal.”

Leon LeBrecque, the managing partner of LJPR financial advisors in Troy, told me that nationwide, the number of farms or small businesses that had to pay any “death tax” that year was 50. Fifty in the whole country. By the way, he noted, you can still get out of paying a penny of estate taxes even if you are a billionaire.

You can leave up to $11 million tax-free to your kids, give the rest to charity, and you are home free. Of course, the person who dies, no matter how rich, never has to pay anything because, of course, they are dead. I can safely reassure my heirs that they will never have to pay a penny of estate tax.

I hope that they will somehow forgive me.

Jack Lessenberry is Michigan Radio’s Senior Political Analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.

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