An estate planner write over at DailyKOS (excerpted below) about how the repeal of the estate tax (the tax that only 2% of Americans ever had to pay), has morphed into a middle class inheritance tax increase because inherited stocks and investments will now be taxable.

Welcome to the REALITY of where the Republican loyalty lies.

Daily Kos :: Confessions of a Former Dittohead: The Death of an Otherwise Good Tax:

[snip]

“What’s worse is that under the new tax law everyone will face a new form of the estate tax. Please enjoy another hypothetical. Let’s say mom and dad owned $100,000 worth of Ford stock that they originally paid $1,000 for 30 years ago. If they were to sell the stock while they were alive, they’d pay capital gains on the $99,000 of growth, so let’s say mom and dad never sell it. Mom and dad bite the bullet and leave everything to their kids. Their total estate is less than the federal exemption amount, so they don’t owe any estate taxes.

So the kids inherit the $100,000 of Ford stock tax free. But mom and dad bought all the kids xr4ti’s when they turned 16, and since that car was such a piece of crap none of them want to keep the Ford stock. (Despite claims on the Internet to the contrary, the xr4ti was a complete piece of crap) They all sell the stock as soon as they can, and pocket the $100,000.

So how much do the kids owe in taxes? Their parents only paid $1,000 for it back in the day, so conventional wisdom says they’ll have to pay taxes on the $99,000 of growth. But in this case conventional wisdom would be wrong. Under the old estate tax rules, people inherited property with a `stepped-up basis,’ meaning the cost basis to the inheritor was the value of the property when mom and dad died. That may sound confusing, but it really isn’t. The bottom line is if the stock was worth $100,000 when mom and dad died, you inherit it as though you paid $100,000 for the stock.

Great rule, right? Well, bad news. When the estate tax dies, so does this rule. Whatever your parents paid for the stock–that’s your cost basis. If you sell that Ford stock for a hundred grand, you’ll pay capital gains on the $99,000 in growth (figure between $15,000-$20,000 in taxes).

Under the old system this typical middle-class scenario would generate no revenue for the federal government. Under the new law, the government’s gonna get $15,000-$20,000. Oh, and guess what? Under the old system only 2% of estates were susceptible to the tax. But under the new system, anyone who owns stock and tries to pass it on to their kids will be affected. And here’s the finisher–over 50% of Americans currently own stock.

So instead of having a completely avoidable tax that affects only 2% of Americans, we’ll have an unavoidable tax that will affect over 50% of Americans! And many middle-class families are clamoring for this tax to be repealed. Sometimes you just have to stand back and marvel at how good the right-wing is at convincing people to act counter to their own best interest! It’s like an Orwellian wet dream. Winston Smith is begging to have that rat cage slapped on his face. “Come on! It’ll be good for me! Do it!”

[snip]