The government of the beautiful Mediterranean island of Cyprus came up with a great idea to bail itself out of impending bankruptcy: It would seize 40% of the money that wealthy people had “safely” deposited in their bank accounts. That type of thing could never happen here in the U.S., right?
I’m glad to be back here at Money Wise Pastor after a bout with a big cold, flu, or something that sapped quite a bit of my energy and creativity over the last few weeks.
As I’ve been catching up on what’s happening in the world, I noticed that one of the biggest financial stories in the news right now is the financial trouble in Cyprus.
Personally, I cannot understand how anyone could stand for the government seizing 40% or more of people’s wealth, but the government of Cyprus plans to do just that. Because it needs the money.
I’m glad I live in America, where we don’t seize people’s wealth just because the government needs the money. Or for any other reason.
Until you’re dead, anyway.
And we don’t really call it seizing. We call it taxing.
U.S. Estate Tax Rate for 2013
Thanks to this little thing called the Estate Tax, if you die in 2013 the government will take 40% of all of your wealth, after the first $5.25 million, thank you very much.
Though I don’t really know if anyone will really say thank you to your heirs when they take your…scratch that… “our”…money.
Now I know this may not affect the majority of Americans, today, due to the $5.25 million threshold before the 40% tax kicks in. But the numbers are arbitrary and really could change at any time. The threshold could be lowered down to $1 million or less. The tax could be raised to 50% or more.
It’s the principle of the thing that bothers me:
You’ve worked hard all your life (or if you inherited your wealth, at least your ancestors worked hard to create something worth passing on to you), became successful, paid taxes on the money already at least once, saved, and invested it to make it grow. Now you want to pass on an inheritance to your children and/or grandchildren when you die, and the government says that it wants 40% of the fruits of your labor.
Your heirs get to talk to the undertaker and the tax man on the same day. Isn’t that lovely?
I guess the only thing that makes the 40% U.S. Estate Tax better than the 40% Cyprus wealth seizure is the fact that in the U.S., you’ll be dead before your wealth is taken! So you won’t directly feel the effects of it like the depositors in the Cyprus banks will feel their asset seizure.
But in both cases, I’d think the 40% seizure would provide a disincentive for some who wonder whether its worth is to work as hard and create as much just so someone else can take it away.
How would you feel, and act, if you knew the government was seizing 40% of your wealth?
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