Chatting recently with a politically active friend on the left, I was surprised when she mentioned her objection to the estate tax for "obvious reasons." This discussion was instigated by a column in the right-leaning Washington Examiner, which wrote that "the death tax was the grim reaper of family-owned businesses," an argument often invoked by those opposed to the levy.
Describing herself as "wealth adjacent" — she stands to inherit family money — my interlocutor joked that efforts to eliminate the "death tax" was the only thing Trump had gotten right. It's funny how a proximity to a fortune can change one's political perspectives.
Regardless, it is surprising that anyone would be concerned about the estate tax. Of all the tax issues to worry about, this one should be at the bottom of your list. The exemptions are high, and the ways to legally avoid the tax are well-known and relatively cheap, if a bit complicated.
For most families, the only excuse for paying estate tax is getting hit by a bus on the way to the attorney's office to sign the paperwork. Other than that, it is a nonissue for almost all Americans.
The more troubling issue about the estate tax is the rhetoric and inaccurate claims made in the debate: It's an unfair death tax, and a killer of small businesses and family farms. Here is the Washington Examiner, although it could just as easily come from the op-ed page of any number of other conservative or business-oriented publications:
The estate tax creates needless complexity and hardship for family-owned businesses. It often eliminates a family's ability to reinvest or grow, sometimes making it impossible to pass these businesses down to future generations.
This tax, often called the "death tax," is terrible policy. Assets taxed in an estate have previously been subject to income taxes, capital gains taxes, dividend taxes, corporate income taxes, or business taxes at the local, state, and federal level.
Most of this is wrong or intentionally misleading.
Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of "Bailout Nation."
