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Please begin with an informative title:

How many different ways can Fox News instill false outrage into their viewership over the estate tax?  As usual, it's all bullshit, but it's got new life today, having been folded into the "fiscal cliff" discussion.

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In 2009, Congress put in place temporary estate tax rules that allowed estates to be exempt from the federal estate tax up to $5 million.  Anything above that $5 million threshold is currently taxed on a sliding scale up to 35%.  So if grandma dies and has an estate worth $4 million, no federal estate taxes are owed.  If her estate is worth $6 million, however, then the heirs will owe federal estate tax of 35% of the amount that exceeds the exemption, $1,000,000: $350,000, on a total estate of $6 million, which is about a 5% effective rate ($350,000 is about 5% of $6 million). Feel sorry for those heirs? Yeah, me neither.  

That's the current law.  As of January 1, 2013, the estate tax exemption will go back to where it was from 2001-2008, which is $1 million per person.  The rates will go back down too: they'll start at 18% and go to 55%.

So what does Fox News do with this information?

ZOMG! SMALL BUSINESSES WILL DIE! FAMILY FARMERS HOMELESS! CATASTROPHE!  

Ummm, not really.

First of all, anyone - small business owner, family farmer, or otherwise - who has a potential estate worth $1 million or more and who hasn't put some basic estate planning in place deserves to be bent over by the IRS, as they probably shouldn't be trusted with anything more valuable than their own lunch money.  Anyone who has that much money has already done the shifting and shuffling necessary to avoid most of the impact of the estate tax exemption drop (such as putting assets in trusts, utilizing yearly gift tax exemptions over time, or even things as basic as just putting family businesses and farms into LLCs that don't die, and therefore don't have estates).  

This means that for any small business owner or family farmer who has done any kind of even basic planning, the estate tax exemption changes will have approximately ZERO impact on what taxes their heirs have to pay.  Why does Fox News think its exalted family farmers and small business owners are so collectively stupid that they can't pick up the phone and call an estate planning lawyer?

Also, nothing in the federal estate tax has anything at all to do with state and local estate taxes.  At least twenty states have their own estate tax laws, and some local jurisdictions (cities, counties) have their own estate tax laws as well.  So Fox News and its captive audience can gnash their teeth all they want about the federal estate tax exemption going down, but that doesn't do a darn bit of good in reducing or eliminating state and local estate taxes.  Some states' exemptions are lower than the federal government's will be in 2013 (New Jersey, Ohio).  So if grandpa owns a family farm in Ohio worth $999,999, and dies in 2013, he'd still have to pay Ohio estate tax, even though his estate wouldn't owe anything to the federal government.  And again, that's assuming grandpa was too short-sighted to put some basic estate planning in place.  To the extent rich people's estates are taxed, it's not all the federal government's fault.

Then there's the inconvenient little problem that only forty small businesses and/or farms will owe any federal estate tax at all in 2012.  You read that right: FORTY.  Not forty percent, not forty thousand.  Forty. For the whole country, for the whole year.  In 2013, if the exemption goes down to $1 million as scheduled, that number skyrockets to....  sixty.  Sixty small business and/or family farms across the nation will have to pay some estate tax.

In fact, when challenged to come up with even ONE family farm or small business that had folded because of the federal estate tax, the American Farm Bureau Federation (a group that opposes the estate tax) couldn't come up with one.  Not one.  

I don't know about you, but I'm unsympathetic.

3:49 PM PT: As commenter MMColo pointed out, the federal estate tax exemption amounts weren't $1 million from 2001-2008.  They started at $1 million in 2001, gradually crept up to $1.5 through 2005, then rapidly increased from 2006-2012, where they're now $5.12 million.  My mistake, mea culpa.


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