(Bloomberg) — By now, you must have heard about Tom Perkins’s letter to the Wall Street Journal (Progressive Kristallnacht Coming?), where he made a foolish comparison to the “parallels of fascist Nazi Germany to its war on its ‘one percent,’ namely its Jews, to the progressive war on the American one percent, namely the ‘rich.’ “
The PR disaster Perkins ignited — yeah, he is that Perkins from venture capital firm Kleiner Perkins — ignited a firestorm. The reaction was so intense he had to go on Bloomberg TV to sort of, but not quite, apologize. In the course of his comments, he said several other really dumb things (you may be detecting a pattern here) on unrelated subjects.
But the thing which really stood out to me was his plea for lower taxes. Perkins said: “Upon my death the government will take 45 percent” of my estate.
To which I am compelled to respond: Only if you are an idiot. Or, perhaps, if you were on the way to your lawyer’s office when you got hit by a bus, and died intestate (without a will), then that makes sense as well. Short of those things occurring, no one in America actually pays 45 percent in estate taxes. It is simply too easy to avoid paying estate taxes.
First, some numbers: About 314 million people live in the U.S. Each year, a bit fewer than 2.5 million people shuffle off this mortal coil, according to the Centers for Disease Control and Prevention. The first $5.25 million is exempt from estate taxes (double that for married spouses). In other words, only the wealthiest 0.14 percent of Americans pay any estate tax. That’s fewer than two out of every 1,000 people who die.
But here’s where things get interesting: With a little planning, those folks don’t pay a 45 percent rate. As the Center on Budget and Policy Priorities has observed, a more typical tax rate on large estates is about 17 percent.
Take a guy like Perkins, who said “I am not a billionaire.” Let’s assume he has a net worth of $100 million dollars (or some multiple of that). It is a rather simple thing to reduce his estate taxes to almost zero.