If you consider Michael Jackson’s net worth and the reality of the IRS death tax it seems to be a case where these taxes on inheritance show just how crazy the tax code can be.
In a related report by The Inquisitr, Jackson’s estate is claimed to owe $702 million in taxes. The executors of the estate claimed Michael Jackson’s net worth was only $7 million when he died but the IRS claims it was more in the range of $1.5 billion since in 2009, the year of his death, the maximum estate tax stood at 45 percent.
Forbes says the estate is unlikely to end up paying that amount because he wasn’t on anyone’s billionaire list at the time and Michael Jackson’s debts were piling up. The IRS tax bill also arbitrarily claimed all of the singer’s memorabilia was worth around $434 million while the estate said it was only $2,105. There’s also a larger discrepancy in reports because celebrity sites claim he was actually worth around $600 million while the wrongful death lawsuit filed by the Jackson family claimed he would have been worth $40 billion if the singer hadn’t died at age 50.
Interestingly enough, if Michael Jackson’s death had occurred a year later in 2010 there wouldn’t have been a death tax at all since the law was repealed. But as part of the fiscal cliff deal President Obama brought back the death tax. The only good news is that it tends to only affect the rich since the estate tax exemption is $5.34 million (in the 1990’s it could easily have affected man middle class families) and the highest federal tax rate an estate pays in 2014 is 40 percent. States may also levy inheritance taxes on the family.
Some have claimed that the death tax can cripple family businesses and especially family-owned farms. For example, the value of the land itself is part of the estate tax and some families are forced to sell their farms just to pay off the IRS. Even the New York Times, which tends to side with Democrats on many issues, once wrote that estate taxes are wrong:
“I don’t like the estate tax on moral grounds. It’s wrong for the government to tax people twice, once when they earn the money and once when they give it away, if the giving away is done after death, an arbitrary and unpredictable deadline. It’s wrong for the government to create a tax that benefits tax lawyers and insurance companies for their creativity in structuring tax havens rather than helping to make the world a better place. And it’s wrong to tell the richest Americans that they will be punished for sharing the fruits of their labor or good fortune as they see fit, even if you or I might imagine in moments of hubris and envy that we could spend it so much more wisely.”
Do you think that it’s wrong for the IRS to be levying the death tax based upon a very high estimate of Michael Jackson’s net worth?