You can count on only two things in life – death and taxes. Actually, more like two and a half things, because there is also taxes upon death. The estate tax raises revenue by taxing the wealth people leave behind when they die.
That’s a good thing. If we could, I would suggest only taxing dead people. Dead people can’t complain about all the taxes they have to pay. The people who complain about the estate tax are the people who inherit less because of it.
The Tax Foundation has a recent blog post in which they again try to attack the estate tax. They link to a “provocative new study,” in their words, that
“undermines a central argument made by proponents of the estate tax: that it helps reduce the concentration of wealth in the economy.”
Seems to me that if estate taxation fails to reduce the concentration of wealth, that would be a reason for opponents of the tax to pipe down, not up.
The study: “It is commonly assumed that inheritances are a major source of wealth inequality and that the offspring of wealthy families tend to be as rich as their parents due to bequests.” Dude, I don’t need to assume that – I see it every day. That’s not an assumption, it’s a plainly undeniable fact.
“For most estates larger than $5 million, the effective tax burden is only 13.5 percent to 17 percent of estates; in fact, the burden tends to fall primarily on smaller estates.”
Well, heck, if the small-fries are getting hit the hardest, why are the big guys so up in arms? If the rate is so darn low, what’s the problem?
As far as I’m concerned, as long as we’re still primarily raising revenue by taxing income, capital and property value (all very flawed methods), we might as well keep taxing dead people.
Of course it’s not the dead people who are being taxed by their kids (at least the kids who didn’t have their wealthy parents set up estates and trusts). I think it’s a crappy tax but I think that way about most taxes but especially double taxation like this one. The money has already been taxed once, why tax it again. I say end it and make lawyers and accountants do something productive to earn money instead of stupid trusts that create zero economic benefit to society as a whole.
Hey – check out this piece of commentary from the Gotham Gazette, titled “How the Estate Tax Helps New York”
Lots of good information relating to your post!
http://www.gothamgazette.com/article/fea/20060925/202/1982
Wesley – I agree that the estates that are taxed have already been taxed as whatever form of income it originally was to the deceased, but to call it double taxation is a bit misleading.
Hey Peter, thanks for the link, that was a great article!