Marti Oakley (c) copyright 2010 All Rights Reserved

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At the request of several of our readers, and in light of the Republicans holding the unemployed hostage while they attempt to extort the  public on behalf of the uber wealthy…….we revisit this article.  Apparently there are still a large number of individuals that believe they will fall victim to the “death tax”.  In your dreams sweetie!  If the Republicans get their way…you’ll be lucky if you can even afford to breathe!

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Unless that farmer has a net worth…all his income plus real property value, minus all his debt that results in a net worth of 3.45 million or more, there is not a rat’s chance in hell they will be subject to any “death tax”. Simple estate planning can avoid all of this.  And what farmer, after having navigated the market manipulations of USDA, FDA, Farm Bureau and a host of other government agencies intent on depriving him of his life’s work, doesn’t make plans for the untimely event of his passing, making sure his heirs receive the results of that work?  Still, its nice to see someone finally concerned about our farmers.

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You don’t make enough to qualify for special treatment under what is called the “death tax”.  The marketing of the term “death tax” and selling it to middle America as something that would affect them and their annual salaries, and what ever real assets they had accumulated is strictly a Republican disinformation tactic. This bogus marketing campaign has been promoted by Republicans to protect rich donors and their buddies and in many cases, themselves. 

No one, with an estate upon their death with less than 3.45 million NET…is subject to the so-called “death tax”.  That does not mean that there are no taxes at all; just not the accelerated fictional rates used to scare you.

Above that level, the special loopholes, hedges, special provisions, allowances and deductions not available to the general tax payer kick in providing nearly 100% protection from paying taxes.  These special provisions reduce the marginal tax rate from 38.5, the tax rate constantly repeated to the public, to a marginal tax rate of 5.3% of real taxes paid only upon a reduced portion of their actual income (usually about 22% of real income) or net worth.  But no one ever mentions that. 

A recurring email on the net is one relating to the ending of special tax breaks, but never mentions deferment of real income earned, and the special loopholes, deductions, step-up basis, step-down basis, hedging and tax evasion methods and provisions provided to the upper 3% of the population who own approximately 78% of all the wealth in the nation and a few assorted others who haven’t quite reached that status yet. 

Originally referred to as the ‘billionaires tax”, these special loopholes and provisions were provided to the uber wealthy to enable them to avoid or legally evade taxes.  Here’s how it works: 

Mr. X made a billion dollars in real earned income for the year.  Of course he doesn’t want to pay taxes on 100% of that amount as that would, for some reason, be unfair.  (taxation on 100% of  income is only fair for the little people)

Mr. X is graciously allowed by the government to defer up to 78% of what he actually took in and to claim only the remaining 22% of his income for the year; this is the portion that he will actually pay taxes on.  Mr. X can do this year, after year, after year. 

Mr. X promises that upon his death, before the estate transfers to his heirs, his estate will pay all back taxes, plus interest on the yearly accumulated deferred income.  But! In the interim, he can set up trust accounts and set aside and protect huge portions of his non-taxed income.  He can access multiple estates planning methods that actually transfer the ownership of his wealth prior to his death and listed as “gifts”, that activate minutes before the time listed on the death certificate.  He has several other options to him also should the taxes be called in prior to his death. 

  1. If he has stocks that he’s owned for many years, originally purchased for say, 25 cents a share, but now worth $2500 per share, he gets to step back and claim the original purchase price of that stock, thereby significantly reducing the on-paper value of his stock portfolio.
  2. Inheritors of stock and other assets using what is referred to as the “step-up in basis”, can sell them without incurring any tax.  These inheritors at the point of sale can increase the value of the offered stock or assets to their current day value, in order to realize the most profit, even though the estate listed the same assets at their original price or value.
  3. The Bush loopholes for the uber wealthy included the retention of the step-up rule so the wealthy could escape the capital gains tax, but not for middle America who actually do pay this tax.

These are just a sampling of the special provisions provided to the wealthy to help them hide, divert, alter and protect income that was many times generated through the access to federal protection. 

Page 89 of  “Perfectly Legal”

Excerpted:

“Jonathan Blattmachr, who calls himself “a card-carrying Republican”, said that the effect of simply repealing the gift and estate tax ignores the fact that the various federal levies interact like the pile in a game of pick-up sticks where removing one stick can change everything.  With the repeal of both taxes, he concluded, the already rich could live lavishly without putting another cent into the public till.  “This will shift the tax burden from the wealthy to everyone else.” He said, because the wealthy will no longer have to pay taxes. (end excerpt)

The “gift tax” was retained in the Bush tax cuts when it was shown that the wealthiest American’s would avoid 250 billion in taxes as a result.  As Bush was already using the Social Security surplus to pay the day to day operating expenses of the federal government to hide the 265 billion annual shortfall created by the cuts, there was no surplus large enough in any other department or agency that could be stolen and used to cover-up an additional massive loss of revenue that would have occurred if the gift tax had been repealed.

(In case you didn’t catch on:  Your FICA tax, your investment for retirement, was stolen from Social Security to cover up the loss of revenues when the Bush Administration and those “God is speaking to my heart” Republicans gave all their super wealthy donors and business buddies a pass on taxes.) 

The claims of this current email that  “after January 1, 2011, there is a 55 percent top death tax rate on estates over $1 million” are spurious.  Few attaining that level of income have left them selves exposed unnecessarily to taxation of any form and actively work with not only tax attorneys but, estate planners to make sure their fortune is safe from taxation for their heirs.  And the threshold is 3.45 million, NET.  

How many of you out there actually believe this “death tax” will apply to you or your heirs?  How many of you actually believe that it is fair for you at your median income level, to pay taxes on 100% of your income, while those with vast fortunes pay marginal taxes on only a portion of their actual income?

A friend who truly believes this tax will affect them sent me this in an email:

“Think of the farmers who don’t make much money, but their land, which they purchased years ago with after-tax dollars, is now worth a lot of money.  Their children will have to sell the farm, which may be their livelihood, just to pay the estate tax if they don’t have the cash sitting around to pay the tax.  Think about your own family’s assets.”

Unless that farmer has a net worth…all his income plus real property value, minus all his debt that results in a net worth of 3.45 million or more, there is not a rat’s chance in hell they will be subject to any “death tax”. Simple estate planning can avoid all of this.  And what farmer, after having navigated the market manipulations of USDA, FDA, Farm Bureau and a host of other government agencies intent on depriving him of his life’s work, doesn’t make plans for the untimely event of his passing, making sure his heirs receive the results of that work?  Still, its nice to see someone finally concerned about our farmers.

And quite frankly, I don’t want to hear another protector of the Bush tax cuts to those who didn’t need them, promoted as “the only way to create jobs”, or, “the people who create jobs in America”.  These were the excuses for the tax cuts and you see how that turned out.  If these wealthy people were given these massive and unwarranted tax breaks, why! They would create jobs and re-invest in America!  BS! All of it!  They created jobs alright: in every poor nation they could pry their way into; nations with no labor standards and non-livable wages and then were allowed to ply their wares back here in the US …duty free of course.  In the first three years after these huge tax breaks the US bled jobs and businesses to foreign countries at a rate never seen before or since.  We haven’t seen it since…because there are few jobs left.  So much for reinvesting in America. 

It never ceases to amaze me that many people either believe this unequal taxation is fair, or that by removing these massive and special tax breaks for the uber wealthy will somehow prevent them personally, from “getting rich”. 

Hugely successful has been the campaign to convince the public that repealing the Bush tax cuts would increase taxes on small businesses.  Your focus is kept on the small businesses so you won’t focus on the parasites at the top.  Think about this:  If the tax cuts for the wealthy were applied across the board as they are to the middle and lower classes, and all the special provisions, loopholes, deferments, offsets, accounting gimmicks, and preferential treatment they receive were wiped out and they were forced to pay tax on 100% of their income, there would be no need to increase taxes on small businesses.  

As for the calls yet again for the privatization of Social Security: If you are one of those misguided individuals who screams for privatization think about this:  Had any portion of your SS investment been directed into any one of the proposed ten indexed accounts (the only accounts you would have had to choose from) this portion of your savings would have been effectively wiped out, never to be seen again during the Wall Street fiasco. 

While this may come as a shock to some of you, the attempts to privatize SS during the Bush era, was merely the attempt to stave off the coming market and banking collapse.  The forced diversion of funds into Wall Street would have covered up the corruption just long enough to get through the next election.  The Republicans fully aware they would not retain the White House, and knowing the rampant corruption was about to come full circle, pushed for the privatization of at least a portion of your FICA investment to fund the very people and organizations and corporations committing the corruption.  While on an individual basis this amount would have amounted to only a few dollars a week per person forced to invest; when you multiply it by several million workers contributing every single week…you get the picture.  Had this been successful, the first Wall Street bailout would have occurred long after Bush, Cheney and the rest of the crazies from the basement were long gone and Obama would have taken the fall for the whole scam instead of just part of it.

Some days I am just amazed at how corrupt all of this is.