The Estate Tax is Truly a Patriot’s Tax, but Where Are the Patriots

By Andrew H. Dral

In times of war congress has consistently made the decision to dig into the deep pockets of the well-heeled.  Politicians with greater foresight than our current leadership knew the wealthy would be more than willing to contribute to the war effort, because they reaped the overwhelming benefit of being on the winning side of a conflict. 

During the American Civil and Spanish American Wars’ of 1862 and 1898, respectively, congress instituted patriot taxes to fund the war efforts.  President Woodrow Wilson enacted the patriot tax, again in 1916, through the House Ways and Means committee to fund the dough-boys fighting in World War I.  Consumption taxes of the day were too much of a burden on the families of the men fighting the war, so the wealthiest of Americans were asked to step-up by contributing funds equal to the benefit they received from the government’s protection of their assets.  Those assets came in the form of an estate.  The patriot tax permanently funded the military defenses of a growing nation.

Now that we have a defense budget greater than the defense budgets of the next largest defense budgets of the next 15 countries combined, it seems logical that the folks with the most to lose and most to gain should contribute the most to the defense of their own assets and our nation.  But the wealthiest of Americans of today have decided that the tax burden should fall on the lower and middle classes, the families sacrificing men and women in the Iraq War, not themselves.  You truly have to question the patriotism of U.S.’ current breed of coupon cutters.  The following chart shows the manipulations playing out in congress with our patriot tax.

Patriot Tax Exemption and Rates

                                                Individual                                              Married Couple                                   Patriot

Year                                       Exemption                                             Exemption                                             Tax Rate

2003                                        $1 Million (MM)                                   $2MM                                                    49%

2004-2005                               $1.5MM                                                 $3MM                                                    47%-48%

2006-2008                               $2.0MM                                                 $4MM                                                    45%-46%

2009                                        $3.5MM                                                 $7MM                                                    45%

2010                                        Unlimited                                               Unlimited                                               0%

2011-thereafter                      $1MM                                                    $2MM                                                    55%

Only 1% to 2% of all estates will pay any patriot taxes.  Most estates qualify for the married couple exemption, double the individual exemption.  Only 0.16% of all estates pay half the government’s patriot tax receipts.  The majority of patriot taxes are paid by estates worth over $10MM and most estates circumvent the patriot tax through charitable deductions.  Less than 1% of all heirs are affected by a patriot tax.  Of the estates, paying the patriot tax in 2003, the average patriot tax rate was only 18.8%, due to deductions and exemptions.  Your annual income will affect your patriot tax rate.  It takes an annual income of $297,000, to reach the top patriot tax bracket.  In a study of those favoring repeal of the patriot tax, only 1% of respondents knew someone having to sell a farm or a business to pay a patriot tax.    

Andrew H. Dral “The Rabble”