There's no more appropriate name
The government calls it the federal estate tax; it's the inheritance tax. Shorthand, it's the death tax.
As soon as you die, the feds demand nearly half or more of everything you have. Like it or not - it's a tax for dying. On the other hand, you could call it a living tax that is paid when you die. As the year wound down and Congress is in a whirl of new laws, regulations and taxes, the estate tax is on the agenda, too. In fact, Congress wanted to do something before the end of the year, so it wouldn't find itself imposing a retroactive tax increase next year.
The current law, part of the Bush-era tax cuts, says the first $3.5 million of an estate is exempt, but the balance is taxed at 45 percent. In 2010, there would be no estate tax at all but the following year, and thereafter, everything over $1 million would be taxed at 55 percent.
Just think, if your house is valued at more than $1 million, you'll owe the feds 55 percent of everything else!
Democrats, not wanting to have a year without the tax, rushed a vote through the House last Thursday, 225-200. It extends the current 45-percent tax indefinitely, effectively canceling that one year of zero tax. All the Republicans voted no. In fact, many want a permanent repeal of the estate tax because of its destructive effect on small businesses of all kinds.
The Senate still has to vote
There's been a constant battle between those who want a permanent repeal and those who see estates as piles of gold and want as much of it as possible - upwards of 65 percent and more. There's no question the tax is destructive to small businesses. The family wants the children to carry on with the business. But after dad or mother dies, the children must come up with that 45 percent in cash, within nine months.
But businesses don't have that kind of cash around. To come up with it, the family is usually forced to sell the business - effectively destroying it. It's been particularly devastating to small-town newspapers, which have been picked up by corporate bottom feeders looking for control of small operations at fire-sale prices.