Under the National Treasury Cabinet Secretary Henry Rotich’s Finance Bill 2019, Real Estate Investment Trusts will get income tax exemption extended to

Trump has announced he wants to eliminate estate tax. His policy will benefit his children. Is it right that he can do that?

The estate tax doesn’t apply to guys like Trump, who already have their assets held in a variety of trusts and LLC’s.

The estate tax doesn’t actually affect the people with the largest estates, because there are so many ways to get around it and the people who know they’re going to pass on valuable assets have protected them already. Who it actually affects is the middle class – it’s nothing but a money grab by government and the big banks.

How? Glad you asked. You see, the estate tax applies to ordinary folks who inherit things that have value on paper, even if that value isn’t monetary or realized. At the Federal level its something like $5.5 million – which seems high at a glance, but it’s really not when you think about how much real estate can appreciate over the long term. But the federal exemption is just one piece of the puzzle – the state levels can be crushing. Here in New Jersey it’s only $675,000, which is way too low with housing prices being what they are here.

So anyway, let’s say your parents own some family land, maybe a cattle ranch or a farm. Over the years, this land has gone up in value, but it’s not an “investment” to them. If they sold it, maybe it would be worth millions of dollars, but they don’t even know that or care because they aren’t interested in selling it. It’s their home and their business, it was paid for years ago, and they aren’t going anywhere.

So one day your parents kick the bucket and leave it all to you. Enter the estate tax. Now, even though you haven’t seen a dime in real dollars, you’re holding an asset and Uncle Sam wants his cut. If they appraise the land at $6 million, you now have to cough up about $200,000 to the Federal government (and $510,000 to the state, if you’re in New Jersey like me) just to keep the land your parents left to you. It doesn’t matter if that land is paid off or mortgaged at 100% and has no equity at all – the tax is based on the total gross value.

Even though the taxes were already paid on that land. Even though you would be taxed anyway if you sell it. Even though you haven’t put a dime of its alleged value in your pocket. None of that matters. The government wants a cut of its value, whether that value is liquid or not.

If you don’t have that kind of cash laying around and can’t come up with it, you lose it.

You know who benefits from the estate tax? Big banks.

Why do you think they supported this legislation in the first place? Well, think about it. If I just died and left you a property that’s worth millions, but you need to come up with $200k-$700k to keep it, what are you going to do?

You’re going to get a mortgage against it and use the money to pay the taxes. Which means you’re now going into debt and paying interest to a bank just to keep land that was already paid for and taxed, all because Uncle Sam demanded a cut of its value.

Screw them both.

Being forced to pay additional taxes on money that was already taxed, and on unrealized real estate values, is just plain robbery. Cash inheritances should only be taxed as ordinary income, and non-cash inheritances shouldn’t be taxed at all – they should be taxed as a capital gain when and if they are sold, and no sooner. The estate tax is theft, and it’s wrong. It needs to go.