Thursday, June 10, 2010

A Proposed New Holiday

A Proposed New Holiday

On March 28, 2010, Dan L. Duncan died at age 77. Mr. Duncan did many admirable things in his life. He was a self-made billionaire, raised a family, gave $100 million to Baylor to fund a cancer center in Houston and seems to have been well regarded in Houston where he lived and died.

So it is rather unfortunate that Mr. Duncan will probably be best remembered for an entirely accidental event—he was the first (and so far only) American Billionaire to die without incurring one single cent in estate taxes. We aren’t talking about someone who just scraped into the billionaire category. Mr. Duncan’s wealth was estimated at $9 billion by Forbes Magazine, making him the 74th wealthiest person in the world and the wealthiest in Houston.

That $9 billion dollars will pass intact to his heirs—four children and four grand children. This is a first in American history. When America’s first billionaire, John D. Rockefeller, died in the 1930s, his estate was taxed at a 70% rate. Since then the estate tax has gone up and down, different thresholds to be subject to the tax have existed, but no billionaire has ever escaped it entirely, and unless another billionaire dies this year, no other billionaire may ever again escape the estate tax.

This rare occasion was caused by the Bush Administration’s gradual repeal of the estate tax. Philosophically opposed to what was characterized as the “death tax”, the estate tax was repealed in full in 2010 after a series of gradual deductions, but in one of those amazing Washington budget deals, the entire Bush tax cuts expire at the end of this year. If Mr. Duncan has survived into 2011, then his estate would have been taxed at 55%, or $4.95 billion.

For the heirs of billionaires, this is a very good year to inherit. While there is no indication whatsoever that Mr. Duncan’s death was due to anything but natural causes, if I were a very rich person, especially one who didn’t get along very well with my relatives, then I would be careful as the end of the year approaches. There is an incredible financial incentive to die this year.

Finally, I think would only be appropriate to celebrate this unique event by some sort of holiday. Maybe Congress could make March 28 “No Death Tax Day” giving anybody who dies on that one day an exemption from Estate Taxes.

John Greenan

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