Wealth taxes are foolish- no nation has them (IIRC a couple tried than got rid of them). But yeah, lets bring back the old Estate tax before the GOP meddled with it. The base Estate tax exception was a mere $675,000 back in 2001- plus extra for a personal residence, etc.
So what is a reasonable estate tax? Why? What should people expect to get from their dead relatives?
My thinking is that for many people/families, that sort of wealth transfer is a primary way that they can get a leg up economically in some fashion. Whether that’s through clearing debts, or through investing, many people benefit from say… the sale of their parents’ house and transfer of that money to them. Of course, there’s a point above which it’s just absurd, and it is rich people getting richer.
Right now, the exemption threshold is something absurd like $15 million. IMO that’s too much. Prior to 2018, it was a third of that, then doubled in 2019, and has gone up ever since.
Personally, I think that letting people become minorly wealthy- to the tune of an estate of 5 million or so is reasonable, but 15 million is ridiculous.
So in the unlikely event that all 5 of them got rid of them in the past 5 years, then any Wikipedia user is free to come in and correct that.
I don’t see why there needs to be a big floor to the estate tax. I’d support a practical floor of a few hundreds of thousands of dollars because at that point enforcement of it would take in less than the cost to enforce it.
Maybe there could be a very low floor of like a couple hundred K but then you can also use your unused gift tax allowance against that. Some people use the gift tax rules to gradually give money to their heirs rather than all at once to minimize estate tax. Maybe if you haven’t been doing this, your estate can retroactively assume that you had (but set a limit on the number of years and treat it as only one recipient). That could still be quite a large exception: if the gift tax threshold is 20K and the limit is 20 years and you hadn’t been preemptively giving money to your heirs, then that’s still 400k more that you could use against the estate tax threshold.
On the other hand, I see no reason to continue the estate tax if we did have wealth tax. With the exception that the estate should pay the wealth tax for that year that the deceased would have paid. If we did implement a wealth tax, I’d support gradually getting rid of the estate tax by allowing you to offset your wealth tax against your estate tax, and then get rid of the estate tax once the vast majority of large estates are able to completely write it off from already paid wealth taxes.
I think $5 million is reasonable as well, indexed to inflation. In fact I wouldn’t quibble with $5 million per individual or maybe even more. I’m persuadable on the exact figure. Maybe a single family home below a certain value would also be exempt. I wouldn’t be looking to completely squash generational wealth or completely level the playing field, just heavily curtail and partially level it. But my preferred curtailment would be MASSIVE.
Are you a Walton heir, potentially in line to inherit $1 billion in assests? No, you’re not - you get that max of $5 million in whatever assets, tax free. Everything else is gone. Those accumulated assets can be distributed to charity foundations/trusts (with no heir to have a paid position to manage), maybe potentially plowed back into a company in whatever form, sent to the government as confiscatory taxes or any other way that doesn’t enrich individuals, particularly the heirs. The details can be worked out. But the end result is while people can receive a big, comfortable step up in the world they cannot inherit “game-breaking” wealth and power.
There would be a billion clever loopholes that would have to somehow be closed (like last minute appointments to lavishly paid board positions and whatnot) and Americans would have to fundamentally alter their views of what is fair. So it will never, ever, ever happen. People in general are for some reason far too besotted with their filthy, undeserving children
But yeah, I’m not a fan of financial dynasty-building or dynasties in general.
That is not an estate tax, that is an estate seizure. I support the ability to pass, I don’t know, somewhere in the range of $5-10M per individual tax free. After that, tax the rest at maybe 50%. Taxing everything 100% beyond that exemption amount is draconian.
I know this isn’t the same thing, but even Bernie Sanders wealth tax didn’t tax anything below 32 million for a couple, 16 million for singles.
However the people who have this much money can hire highly competent attorneys to avoid the tax. Thats a major issue, taxing capital is hard because capital is fluid and the people who have it can bribe politicians and hire attorneys.
We need to find effective ways to tax capital though. Wealth GINI inequality globally is about 0.9 (1.0 is pure inequality, 0.0 is pure equality). Even in nations where income inequality is only 0.3 like several european nations, the wealth inequality is still around 0.7-0.9.
The world’s major economies are working on a minimum tax on wealth so that people can’t move capital across national lines to avoid the tax.
I will fully admit to advocating for an absolutely draconian policy. I will also admit that it is 100% a pipe dream that will never come about. But you should fear me ever becoming God-Emperor because I would absolutely do it without a qualm. I don’t want see to anymore Rockefellers, Waltons or DuPonts.
There are several exemptions, such as IIRC personal residence left to direct descendants, family farms, and some others. Everything can go to a spouse with not taxes. (we are talking Federal here, of course, some states also have estate taxes)
Now my posted here- quoted by Bump-
Would have to be adjusted for inflation of course= that would be about $1.3 million. I would be Okay with rounding that to $1.5M or even $2M. The rate varies from 18% to 40% for 2026, which sounds about right. So, everything above $2M, after the exemption for residence would be taxed at 18%, with higher tax rates as the estate gets bigger, say once the taxable estate gets over $3, it goes to the 40% rate.
As I said in that thread, only low-end or ill-informed sorta rich people pay estate tax. It is completely legal to arrange your assets in a way that they are all exempt from estate tax. Anyone who has appreciable wealth does that. And regardless of what thresholds you set, that would still be true.
Now there could be comprehensive reform of all that legal-but-sneaky stuff stuff too. Which leads to another round of whack-a-mole as highly motivated people are willing to do anything to keep their wealth from being heavily taxed.
Canada doesn’t have estate taxes, but we also don’t have the tax free step up basis rules you have.
When someone dies, income taxes are calculated as if all assets were sold on the day of death. Taxes are paid by the estate and the balance is dispersed to the beneficiaries. The government gets their piece with every generation.
Yes, this is the biggest issue of all. Let’s imagine I had invested $10,000 in Google when it was founded. it is now worth, let us imagine, $100,000,000. I never sell it, but just use the shares as collateral, borrowing $1,000,000 a year and never paying it back, for 20 years. If I die in the US, my heirs pay off the $20,000,000 million (plus interest) and walk away with $70,000,000 in Google stock on which no one ever pays the capital gains tax since the inheritors inherit on the basis of current value. In Canada, as indicated, the estate much pay the capital gains tax on the basis of the gains until the day of death, in this imaginary case, on $999,990,000.
There’s not only the huge estate tax exemption on inherited wealth, but many inherited assets are also given a stepped up base value, which lets heirs dodge income tax as well. (Assets include homes and investment accounts, but not retirement accounts.) So that means if your parents bought a house for $100,000 and lived in it until they both died, then you as the heir only pay income tax on the value it appreciates between the date of death and when you sell it.
Neat if you’re an heir, but it seems really unfair.
While i agree that the US step-up provisions are an enormous tax loophole, I’d like to point out that the accounting of dealing with an estate is pretty hairy, and without that loophole, the accounting would be a total nightmare. You’d need to know how much the deceased paid for every item in the estate. And no estate simply holds “shares in Google purchased on one date”. If there’s stock, there’s lots of stocks, and some of the Google shares were purchased on this date and others on that date, and a few were sold, and then more repurchased…
And if the person inheriting paid “income tax” on 100% of the estate, not just the portion over a huge threshold, all that money would be taxed.
That’s intriguing. How does Canada deal with the “family farm” issue—i.e., the taxes would force sale of a valuable asset that has been in the family for years?
Ahh, loopholes. There is an active family farm exemption which does allow for a tax deferred rollover as there is a public interest in keeping them going. Each family is also entitled to exempt capital gains on a primary residence (one per couple if common law or legally married).
You need to keep track of this regardless as you need to report your realized capital gains every year.
You don’t need to pay taxes on unrealized capital gains, though, which is what an estate holds. My husband keeps track of when each share was purchased in infinite detail. But you know what, when people die, information gets lost. He has a complicated spreadsheet.
And yes, I’m likely to be in trouble if he dies before me. But at least i know his passwords. If we both die in an unexpected accident, i don’t think my kids would be able to recover all that information. But because of the step up, they don’t need to.
