Tax Reform

Last week, the House of Representatives passed a bill that plans to extend the estate tax permanently with relief for families and small businesses. The bill, HR 4154, would effectively eliminate the 2001 tax act that planned to repeal the tax in 2010 and reinstate in the next year at the level it was at before 2001. Introduced by North Dakota representative, democrat Earl Pomeroy, the bill keeps the exclusion amount the same, as well as freezing the maximum rate at 45 percent. While it keeps the tax from increasing at all, the bill does eliminate the reprieve that was planned and expected by many in 2010.

The estate tax is simply a tax on whatever is included in a deceased person's will that is passed on to heirs or to other people. My question is, why do we even have to tax these transfers? You can't even escape the "death tax" by giving away your stuff before you die! There's a gift tax for those transfers. My parents don't get taxed for giving me twenty bucks to go to the movies; why when they die, will a lot of their estate be given to the government? Shouldn't that be my money? I'm pretty sure my parents don't work their whole lives, buy a home, and save money for retirement for the government. I think they're content with sales tax and income tax and property tax, but to have to give the government the money that they saved? I don't think so.

The rates for the estate and gift tax are high! If a $3.5 million estate was given to me, the rate on it would be around 45%. For the federal estate tax. In Iowa, we also have an "inheritance tax". So basically, half of the amount will be given to the government. I hope they enjoy it and spend it wisely! If that same amount were taxed as income, the federal rate would be about 35%, and less than 10% for my Iowa tax.

Truthfully, most estates don't pay estate tax; it's mostly the richest estates. As I read more and more about taxes, especially the estate tax, I am realizing that taxes are really a lot worse for the wealthy. They might have more money, but they likely worked harder for it. I know I have a lot, but I'm not excessively money-rich. I doubt the estate will even apply to my parents', but I can't know for sure. However, I respect the fact that they had to earn that money somehow. They probably went through college, and worked hard in their careers, so shouldn't they be rewarded for that? There's a mentality in the country that the rich should pay for the poor, surely fueled by politicians appealing to the multitudes of middle to poor voters. If there were flat taxes, the rich would still pay for the poor, because 10% of their income or estate is much more than 10% of a poor family's income or estate.

Before I go into why I dislike the taxing system, I would like to say that I am not against taxing, just against the way it is done. Taxes pay for many good things in this country. Back when politicians did many things that mattered, they built things: railroads, highways, libraries, etc. Not only do these projects create a need for jobs, they are the best stimulus package the government could give. Buildings and highways need lots of materials, and building more of them spurs industry, creating even more jobs. Things just get done with the money.

Taxes also help to keep bank CEOs in their mansions, give money to ridiculous projects (rainforest in Iowa City??), and provide money for the government to do whatever it wants, whenever it wants. Well, you could write a letter to your congressman.

So, my question is, why is there such waste of money, helping to grow a massive federal deficit, even though there are incredible amounts of money going in to the government from taxes? The Iowa government has simply cut employees if it's budget doesn't come out in the black. Yeah, it's not nice to dissolve jobs, but it's not nice to have a deficit either.

I have often thought of taxes in this way. It all starts with a job; I work to earn money to live. To get to work, I have to buy a car and gas. Taxed. I get paid from my job. Income tax, social security, medicare, ... I spend money at businesses. Taxed. Oh, but then that money is income for them, they are taxed on it again. When I die, my estate is taxed before it is passed on to my heirs. How crappy. So much of our money is handed to the government, only for them to use more than what we give them to "stimulate" jobs, to stimulate the economy. If they just taxed less, wouldn't those things naturally be stimulated that much more?

I'll pay my taxes quietly, even the estate tax, but I just want to make sure that the entity that collects them is using the money wisely. Make sure that my hard-earned money isn't wasted paying for an huge bureaucracy that spends huge sums on things that don't matter. Make sure that our money is being used in ways that we, the people of this country, truly approve of.