Tuesday, July 13, 2010

Death and Taxes

George Steinbrenner passed away today. As a lifelong Yankee fan, I always had mixed feelings about the Boss. Way too mercurial, but it's hard to argue with his results.

The Boss, a businessman first and foremost, would surely appreciate the business sense in the timing of his death. Because of the Bush tax cuts, death taxes for 2010 are zero. They were meant to stay that way, but in order to get the tax bill passed at all, Bush had to compromise by including sunset provisions. So, get this, next year when they expire the rate goes back to 55%. Steinbrenner is worth $1.3 billion. Thus the timing of his death is worth $700 million to his heirs. Had he passed away next year, the tax bill would have been enough to force his kids to sell the Yankees.

Here's a prediction: towards the end of the year, I believe there will be a lot of "soft" suicides by people with substantial assets. If they are sick anyway they may simply allow the process to accelerate. There may even be a spike in more deliberate suicides. Suicide cancels the obligations for a life insurer, but it will certainly beat the tax man.

This may seem like a very cold-hearted prediction, but what's really cold-hearted, and perverse, is the existence of a tax system so penal and complex that people may literally make life and death decisions based on its rules. It is a system beyond simple repair. The entire edifice must be razed and something simple and fair must take its place.

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