If there’s one thing Samuel B. Ledwitz wants you to remember, it’s that old adage from your high school economics classes: There ain’t no such thing as a free lunch.
Ledwitz, a longtime estate planning attorney who specializes in estate taxation, said that’s important to think about when taking into consideration the latest infrastructure bills being promoted by President Biden and currently being considered by both houses of Congress.
Ledwitz said while he applauds the government for hoping to make its citizens’ lives better, he warns that is not also how it turns out.
“It’s always good when the government thinks about taking care of its citizens,” he said. “But it’s the how. How do they do that? We’re hearing this week about a $3.5 trillion package. That is in addition to a $1 trillion package that has pretty much already been approved by both sides.”
The problem is not that the president is ill intentioned, he said, it’s just that the old aforementioned adage is always true.
“The president is saying that $3.5 trillion is at no cost,” said Ledwitz, who is the founding partner of Bezaire, Ledwitz and Associates. “He’s saying that if he spends $3.5 trillion, then he has raised $3.5 trillion in tax revenues or offsets. He’s saying that there is no additional cost to most U.S. taxpayers. In reality, that’s not usually what happens.”
And while that is an issue, Ledwitz said there is one real heinous part of the bill that should bother all Americans, no matter what side of the aisle they’re on.
“Part of the proposal is to significantly increase the manpower of the IRS,” he said. “Thousands of new revenue agents. And what revenue agents like to do is find more money. That is usually through the audit process. They usually find small amounts going after the average taxpayer.”
Ledwitz explains the problem then happens when the agents go after the taxpayers of least resistance, adding the average guy will have a much higher chance of being audited.
“When you hear of 10,000 or 20,000 new agents, you think there will be 10,000 or 20,000 new audits of very wealthy people,” he said. “But that’s not always the case. Most audits are of average people of average means. When you go after the very rich, they can hire an attorney to deal with the audit, sometimes not having to pay anything.”
Besides the problem with potentially adding more IRS agents to the bill, Ledwitz said the fundamental question in going after the rich is simple: who is rich?
“What is your definition of rich?” Ledwitz asked. “There is no answer. The president believes it to be someone who earns $400,000 or more. But that’s not what the numbers show. If you are in favor for more tax, you’re really just voting for more tax on yourself. If your landlord gets hit with a new tax, he’s going to raise your rent to pay for that increase.”
But if you can define rich, and certainly in this case, Ledwitz said, taxing them all won’t completely pay for Biden’s proposals.
“Believe it or not, there are not enough of those wealthy individuals to pay for $3.5 trillion,” he said. “You’re going to have to go elsewhere to get the money. And when they lower the bar, you’ll be the one paying.”
If you would like to discuss any aspect of a proper estate plan, call The Law Firm of Bezaire, Ledwitz and Associates at (626) 398-0100 or log onto www.SmartEstatePlans.com.