Key Takeaways:
– Kamala Harris supports increasing the death tax, which could affect family businesses.
– The exemption for this tax could lower to $3.5 million, potentially impacting more businesses
– The death tax rate could potentially rise to as high as 65%, seizing almost two-thirds of an estate.
– These changes may drive wealthy individuals to spend their money, resulting in fewer funds for inheritance.
Potential Impact of America’s Future Tax Plans
You might have heard about the ‘death tax’. It’s the tax families have to pay when a family member passes away. Right now, if you have a property worth up to $13.6 million, you don’t have to pay this tax. But things might change under the tax plan proposed by Vice President Kamala Harris.
Why Change the Tax Plan?
This tax exemption, set in place during Trump’s presidency, is set to expire in 2026. If it does, the tax-free amount goes down to $5 million, and Harris is okay with that. According to her, the richer people can afford to pay more taxes. But here’s the flip side: small businesses could get caught up in this tax change.
Affect on Small Family Businesses
Imagine your parents spent their lives building up a business. Over the years, they’ve paid different taxes. Now, when they pass away, you might have to pay a tax on their hard-earned assets too. The rate could go up to 40%. Depending on where you live, you might have to pay extra – up to 15%. So, basically, if your parent leaves you a million dollars, you might have to give half of it back in taxes. Doesn’t seem very fair, does it?
In fact, small businesses like farms and ranches might have to be sold just to come up with the tax money. Imagine having to sell your family business straight after a funeral. That would be tough!
Plans to Further Raise the Death Tax
To top it off, Sen. Elizabeth Warren wants to make these taxes even higher. She introduced a bill that would raise the death tax to between 55% and 65%. Plus, she wants the tax-free amount to drop to $3.5 million. In simple terms, the government might get two-thirds of the family fortune.
This plan could mean that family businesses have to be sold in a rush to pay off the taxes. This also means, there’s a chance grandma’s precious jewelry or grandpa’s collection of trucks may have to be sold off too.
More Dangerously, a Global Comparison
These changes would make America’s estate tax the highest in the entire world. We’re talking higher than what people pay in Russia, China, or even European socialist nations.
Why Does it Matter?
People might find a way around these taxes. They might spend all their money so there’s nothing left to tax. It makes sense, right? If you’re going to lose most of your money to taxes, why not enjoy it while you’re alive?
But here’s the downside: this approach means there’ll be no family estate left to pass on to the next generation. No inheritance means no money to invest in new businesses or create jobs.
For comparison, if Trump were to continue his presidency, he wanted to make his death tax relief permanent. This meant that families could pass their businesses on to their kids, pretty much untouched.
Why is all of this important? It’ll affect how people vote. Taxes might not be the most exciting thing, but knowing about different tax plans helps us make better decisions. After all, our votes could shape the future of family-owned businesses across America. And that’s something worth caring about.