RUSH: Joey in Austin, Texas. Hi, Joey, welcome to the EIB Network. Great to have you here.
CALLER: Thank you so much. It is an honor to speak to you as usual, and your monologue earlier regarding Steve Jobs and the upward mobility of the middle class definitely touched me as far as being a small business owner here in Texas and a previously upwardly mobile middle-class member. But it did bring up one question if I might ask.
CALLER: These are hard numbers having come through the public education system for me to deal with, I'm joking of course, but if 55% of his fortune is going away I want to know how much Steve Jobs has actually paid to the federal government, because it occurs to me that all of this fortune he's amassed has already been taxed or most of it already taxed once. Is there a way that you can run the numbers and tell me how much money he's given to the federal government over the course of his career?
RUSH: That would be very, very difficult because a lot of his wealth has been in stock and capital gains, and I don't know how he reported his income, and I don't know what his losses were. Jobs was nearly broke a couple times, too, so that would be almost impossible to estimate. As to his fortune now, if all of it goes to his wife there won't be any tax due. The spouse can inherit a hundred percent of it with no estate tax. But any that goes to anyplace else is subject to taxation. But it's not quite that simple. I wish I could remember where I read this. It was shortly after his death. There were stories popping up over the immediate challenges. Whoever was doing the estate planning of the Jobs estate, they had not a whole lot of time to figure out what to do in order to preserve the vast majority of it. But I didn't get any details.
And, folks, that number is so way out of my league, I could not begin to even tell you what the consequences are with what they're gonna do with eight billion. I know one of the great examples is Joe Robbie, who used to own the Miami Dolphins in the National Football League and the stadium, and Joe Robbie died, and his kids had to sell the Dolphins to come up with the estate tax because it was his children who inherited, and children do not escape the estate tax. Spouses do.
CALLER: Yeah. I mean we faced the same difficulty in my family, estate planning. It just seems like I've always been told two things you can't avoid is death and taxes, but apparently after you die, you can't avoid paying taxes, either, so that's immortality for you.
RUSH: Let me tell you something. Every year estate planners want to talk to me about estate planning and it seems that they think that the primary objective of any estate planning is going to be to keep money away from the government. So they want to structure trusts, charitable donations, foundations, any number of things, and I always say to 'em, "Yeah, but the problem with doing that is I am getting rid of all my money before I die." "Yeah, but at least the government ain't gonna get it." "Well, I don't care, frankly. I want access to as much of it as I can before I die." I don't want to have to shelter it all now while I'm still alive so I can't get it just to keep the government from getting it sometime. I go round and round with 'em on it. All these things are very personal decisions that people have to make with their estates, and some people don't want to leave huge chunks of money to kids and nephews and nieces 'cause it can ruin 'em if they don't have to work for it. These are challenging decisions for a lot of people. But as far as what the Jobs family's paid prior to what the estate tax is gonna be, couldn't tell you. It's gotta be significant, though. Has to be huge.
RUSH: Richie in Raleigh, North Carolina. You're next on the EIB Network. Hello, sir.
CALLER: Good afternoon, Rush, and thank you for taking my call.
RUSH: You bet, sir.
CALLER: Hey I have an answer for you about the question who would be getting or benefiting from the approximately $4 billion in estate taxes paid by Steve Jobs' estate.
CALLER: And you're right as usual, it's not gonna be the people of California or the US. It's kind of ironic where it's going. It will be put in the general Treasury funds and some of it will be sent to China to pay the interest on the money we borrow from them.
RUSH: (laughing) Yes.
CALLER: It's sort of ironic, where assembling the products is where the benefit is gonna go to.
RUSH: Yeah. That's where his products are assembled.
CALLER: It will be the circle of iLife.
RUSH: It's interesting. Jobs' fortune ends up with the ChiComs. Interesting. Jobs paid himself a salary of a dollar a year. He paid himself a salary of a dollar a year. He had lots of Apple stock. He had a lot of his income put away in -- or a lot of his wealth stashed away in -- various trusts. So it's not altogether certain that there's gonna be an estate tax on that money. If it all goes to his wife, then there won't be a dime. She will get it all, and then what she does with it, upon her death, opens up the estate tax aspect of it. 'Cause you can leave anything to your spouse. You can give a spouse anything tax-free. There's no estate tax on a spouse inheriting it. Once you kick it to the kids or anybody else, that's where the estate tax kicks in. Yeah. Exactly right. It's like the gift tax.
The Congress did a weird thing with the gift tax in December of last year when they were extending the Bush tax cuts. Mostly, up until last December, everybody had a $1 million lifetime exemption on gifts, with one exception. It floats. Right now you can give an individual $13,000 tax-free. So a husband and wife can give an individual $26,000 tax-free. If you give $30,000 to a couple, okay, you're $4,000 over the exemption. Take that away from your million dollars. You have a million-dollar exemption throughout your life, if you use that up, the gift tax rate becomes 49%, on the giver, on the donor. So if you blow through your million dollars. Now, what happened in December of last year, that $1 million became five. But nobody knows for how long.
So if somebody had blown through their $1 million lifetime exemption, they were just given $4 million additional to give away. Charity's a different thing. You can give any amount to charity you want. That's a charitable donation; that comes under a different tax structure. But if you want to just give somebody some cash -- it could be anybody, anything for any reason, like a kid or what have you -- right now you can give anybody $13,000 tax-free -- a year. Next year, give 'em 13 again. But if you give 'em 20, or anything above 13, then you start eating into your million-dollar exemption. So now everybody has a $5 million exemption starting this year and going through next year, but nobody knows how long it's gonna last.
Somebody thinks Congress screwed up and when they figure it out they'll change it and get rid of it, take it back down to the million. When it comes to inheritance, it's the same thing with the gift tax -- you can give a spouse anything: No tax, period -- and it's the same thing with inheritance. If the spouse inherits in toto, there's no tax. But once the spouse passes away and then the money gets disbursed, that's where the estate tax kicks in, depending on how the estate planning has taken place and it can get complicated -- and that's why there are estate-planning lawyers to walk you all through this. It's convoluted and complicated, and it's that way because the tax law is written to make it that way.
So theoretically there won't be a dime of Jobs' estate going to government if his wife gets it all. It's just the tax law, Snerdley, and it's not so much who you give it to; it's the amount that you're allowed to give. The spouse is the exception. Everybody else, there's a limit on what you can give tax-free. The reason for... Let's say that you could give anybody any amount you wanted tax-free, then why would you ever employ 'em? You'd never have to pay income tax. They wouldn't have to pay income tax. You wouldn't pay gift tax. There wouldn't be any withholding. There's a limit on what you can give so that people still have to be employed and pay the salary so there are taxes on it, and the reason there are taxes on gifts is to make sure that the income tax is not undercut.