By Elizabeth Virga
Estate tax. It is a phrase that is not understood by many young people, and many feel that it does not apply to them. Unfortunately, these young people will be affected by the estate tax more than they would have thought. Just like me.
After working to get an undergraduate degree, many of my peers will choose to join the workforce until they can afford graduate school. Many of us aspire to be part of the tax bracket that is directly taxed through creation of our own private businesses or taking over our own family business. Even if we are not pursuing creation of our own private business, it is likely we will be hired by a private business that would be at risk to the damage caused by the current estate tax collection method. If the company is at risk, then all of the workers who are employed by the company are at risk to lose their jobs and livelihoods.
The current estate tax policy has an exemption at $5 million, but that is set to drop to $1 million on January 1st, 2012. This means that when the owner of a private company or farm dies, the value is determined by the IRS, and a 55% tax is placed on every dollar over $1 million. To a young person, $1 million seems like an incredible amount of money, but when you are talking about a farm or business, that adds up quickly between land, equipment and inventory.
There are many private businesses, including farms that are land or inventory rich, but cash poor because the value is tied up in assets that make the farm or business work. In order to pay the 55% tax, businesses may have to fire their workers, sell land and inventory in order to liquidate their assets.
There are many flaws in the current collection method of which young people need to be aware. And then there is ASSET: Americans Standing for the Simplification of Estate Tax who are working to fix these flaws and make the collection system sustainable and fair, so that the government maintains the revenue that is coming in and the family farms and companies can continue to progress. ASSET has a permanent solution to a political problem.
Elizabeth Virga is a student at the University of Maryland, College Park pursuing a degree in Government & Politics