To a very large amount. Like what they have in Britain.
Would anything bad happen? The scions of the rich would still be richer than anybody else. But the trend would be that instead of wealth concentrating over generations it would disperse over one generation. Maybe you can get me to think the minor children deserve a share, but not cousins and grandchildren to several generations.
First off, can you give us some particulars? Most of us know that inheritance taxes are much higher in Britain, but not by how much.
It’s a tricky issue to decide. As in Britain, the cost of living can vary so much regionally that it’s difficult to decide on a an exemption level that would work for the whole country. Moreover, certain types of inheritances seem just and reasonable, even for an egalitarian society, while others bring about indignation in those not so fortunately placed. For example, many of us might agree that inheriting a million dollars of free and easy cash is an unfair advantage obtained absolutely without effort on the part of the inheritor, but far fewer would agree that parents should not have the right to will their houses to their children tax free, yet the value of such a house might easily approach or surpass $1M in areas like San Francisco or New York.
Well, me personally. I’d do everything in my power to start liquidating my assets and setting up my estate in another country to avoid said estate taxes, and I’d do so in whatever ways me and my accountants and tax experts worked out that would allow me to do it without losing much in the process.
Anyways, estate taxes are inherently unfair.
When someone receives an estate only money should be taxed, and that as income, the rest should be an untaxed gift legally speaking.
An estate was taxed while it was being built there’s no just reason to tax it when it’s being transferred to new ownership.
You might get an idea of what might happen if you leave aside the notion of a progressive estate tax, and look at what might happen if the state simply confiscated everyone’s estate at death.
As Martin Hyde mentions, more effort would be put into trying to find tax shelters and less into growing the estate. Those tax attorneys are paid the big bucks for a reason. And if there somehow weren’t any ways to escape the tax, then you will have to deal with the notion of forcing my wife (for instance) to sell our house to pay the estate tax, or throwing her onto the street if she survives me.
And if you want to say, “No, houses are exempt”, then I simply put more of the value of my estate into my house. Or if you say, “No, life insurance is OK”, then I buy a big policy.
You are up against the basic human feeling that my family is much more important to me than a group of strangers. So, when something threatens their well-being, I am more likely to do whatever I can to ensure that they benefit from my estate more - far more - than “the poor”, or whoever you allege is going to get my money after I die.
I didn’t build the estate for the benefit of strangers. I want my wife and children to get the best that I can provide. And I decline to recognize the authority of anyone who wants to overrule that. And those who tell me I should work hard and sacrifice so my kids get second best and most of it goes to strangers, I tend to laugh at. It doesn’t work that way.
The whole notion that my right to my property expires in principle once it reaches a certain level doesn’t appeal to me. And that I can decide better how to provide for my family is part of what I mean when I assert that I am “of sound and disposing mind” and pick an executor.
The idea of an estate tax seems to me to be something the government does because I am dead, and they think therefore they can get away with it, and therefore violates the idea of limited government.
Besides, I already paid tax when I earned it.
Regards,
Shodan
I’m not sure the US and UK are that different.
The US estate tax kicks in at $1,500,000 at rates in the 45-47% range. The UK inheritence tax kicks in at 40% on amounts over 275,000 pounds. The US has a higher rate but higher exemption amount. It looks like the UK system hits the upper middle class harder but the US hits the very rich harder. Neither system tax amounts left to spouses.
As to what would happen with higher estate taxes, I imagine it would depend on how it was raised. If the exempt amount was lowered, you would probably see more upper middle class people giving anual cash gifts to the kids and maybe taking reverse mortgages and life annuities. If the rate was raised substantially, the rich would probably do more planning to place future appreciation into the hands of younger relatives. Of course there are people that do no planning for their own deaths so the tax increase would probably raise revenue.
It would be a great thing. The people who can most afford to pay taxes – the rich – will carry more of the burden, instead of the present “soak the middle class” approach, which is what the advocates of no estate tax are basically all about.
Why only money? What difference does it make? Willing 1 million is different from willing 1 million house, as mentionned in the previous post? A homeowner’s estate wouldn’t be taxed, but a renter’s estate would? Are shares or bonds money or not? What about gold? Jewelry?
I’m not for taxing the rich just “because they can afford it”. If the current system (a combination of sales, income, etc taxes) all works out so everyone is paying roughly the same percentage, so be it. Tweak it a bit if it helps keep the economy running. Wealthy people have every right to enjoy their cash without anyone claiming it is theirs.
However, I can’t really get that worked up about the estate tax. It’s not like the kids did anything to earn the money. In fact, the kids almost certainly grew up in an environment where they did not have to worry about college education funding and had far more oppurtunities than regular kids. If they can’t find success after such a great position on an unlevel playing field it seems only fitting that they don’t find it at all, rather than just have it given to them when mommy and daddy dies. Rather that money is taxed away and spent on merit based college bursaries, for example. It seems far more reasonable that your success is defined by your own effort than the amount of money you get when your parents go to the big Boca Raton in the sky.
In fact, the more I think about it, the more ridiculous the idea of inheritance seems. It seems to counter any idea of a truly merit based society, where your own success is defined by your own hard work and intelligence. If say, Paris Hilton, got to where she is now from a median income American family, then I say great! No additional taxes just because she is rich. She deserves it all!
Not true, a general fallacy. A large portion of most estates consist of Capital gains that have never been taxed. Your death becomes a "sale’ thus they should IMHO be taxed then. Besides- the estate tax is compleetly totally painless. I’d have a 1 mill$ exclusion, then a 100% tax. Income tax would then go WAY down (or the bdiget woudl get balanced, even better), allowing us to spend the money while we’re still alive. As- you can’t spend it when you’re dead, anyway. If you then wanted to leave your heirs more than a megabuck, then there’s always Life Insurance. Life insurance has always been tax exempt.
How can Income Tax (paying tax on your money before you even get a chance to spend & enjoy it) be better than Estate tax- when you can’t enjoy it anyway? 
Really? And here I thought that the top 1% earners in the US paid out something like 26% of the taxes already…and the top 10% paid well over 50%.
Are you laboring under the assumption that the middle class don’t pass on ‘estates’? Seems to me the current system helps out the middle, upper middle and lower upper classes more than it helps out the super wealthy (you know, those folks who have in excess of $1.5 million to leave to their families).
As for the OP, pretty much what Shodan said. Trying to increase the tax radically will merely have the super wealthy finding loopholes…so you’ll be hurting the middle, upper middle and lower upper classes (and probably not bringing in all that much money either for your troubles). Attempting to simply confiscate all the loot will basically have the effect of capital fleeing the US to other parts like rats leaving a sinking ship. Unintended consequences and all that.
-XT
A 100% estate tax is a major element in Ernest Callenbach’s novel Ecotopia, along with the abolition of corporations and a generally relaxed attitude toward work.
I figure any such society might be able to subsist on tourism if it had natural attractions, otherwise it’d get run over by the first opportunistic invader that came along, with no real means to defend itself nor the economic base to support a standing military.
As to the idea of dramatically increasing existing estate taxes, I predict what others have already done; a dramatic increase in finding and exploiting investments that will not be subject to such a tax, including putting all your money into a corporation and naming your children as salaried officers with access to corporate assets like cars, building and planes, or some such.
Is it ridiculous to provide the greatest possible financial advantage and security for your children?
But they won’t. Any why?Because by-and-lagre- the extremely wealthy are also extremely greedy. Thus, letting their kids have it while they are still alive won’t happen. It didn’t happen when we did have a rather high ET. As a matter of fact, most of those tax dodges you dudes all say will happen didn’t occur very often. Why? Because most of them cut into the Rich Dudes ability to spend and gloat over the money while still alive.
Note that the ET, while still around- had exclusions that made only the Super-rich have to pay anything. Your heirs can settle for just being rich, instead of super-filthy-rich.
I should point out that gifts under $10,000 per month are legal and untaxable. I’m not sure how difficult it is financially and legally to parsel an entire estate into $9,000 packages and distribute them around an extended family. However, make it more profitable to do so, and you’ll see more people doing it.
Don’t forget the biggest perk; spitting in the face of the poolboy and other menials in between slurps from the caviar trough.
Income for the wealthiest is growing far faster than for anyone else. There is a linear relationship between income rating and income growth.
http://www.osjspm.org/101_income.htm#6
So taxing the rich is not unfair as they are experiencing far more economic growth than the lower and middle classes, who shouldn’t be forced to carry an extra tax burden on salaries that aren’t growing as much.
The middle class do not pay on estates
http://moneycentral.msn.com/content/Retirementandwills/Planyourestate/P52707.asp
Of the 2.4 million people who died in 2001, exactly 51,841 estates (2% of the total) faced a federal estate tax, according to recent IRS figures
Again, considering that much of the economic growth in the US has gone to the wealthy in the last 20 years it is only fitting that their tax rates increase to reflect this. Its silly to constantly increase taxes on people whose incomes are not increasing while lowering them on people who are experiencing record economic growth. It is bad social policy and bad economic policy.
Fair enough, but it requires a light touch to edge the taxes up slowly, hopefully so the ultrarich won’t realize right away that they’re being significantly affected. A radical increase (or more specifically, the announcement of a radical increase that will take effect the following tax year) will lead to capital flight and prove counterproductive.
It’s certainly a reasonnable point of view for a parent, but this doesn’t mean it’s a good idea from a societal point of view. For instance, if I’m the duke of Z, with associated priviledges and rights that other people don’t have, it certainly makes sense that I’ll want my chidren to inherit the priviledges of nobility. It also makes sense for parents to hide their criminal child from the police. It doesn’t mean these will be accepted by society, or should be.
For the sake of argument, Shodan, let’s say over the course of your life you’ve slowly bought shares of Acme. It turned out to be a wise investment indeed and the $10,000 that you invested in Acme over the years turns out to be worth at your death a sum of $5,000,000. Precisely when did you pay tax on the $490,000 capital gain?
The objections to raising the estate tax seem contradictory. On one hand, some are saying “doesn’t matter what you do, we’ll find loopholes anyway” while others are saying “this estate tax is costing us too much.” You can’t have it both ways.
The estate tax is an effective way for the government to raise money by taxing those that can afford it most. Take two men, Smith and Jones. Smith earned $1,000,000 at his job. Jones inherited $1,000,000. Why should Smith pay tax and not Jones?
Anyway, it’s not an obstacle. Under french law, a gift from a living parent to a child (or to anybody else for that matter) will be taxed, for instance. So, “people would then give their money/house/whatever to their heirs before their death” isn’t an issue. You just have to suppress this loophole by passing a law.
The issue is only whether or not it is a good thing to let people give a significant amount of wealth to some other person (who will generally be a close relative), and if it’s deemed acceptable, whether or no this amount should be limited, should be taxed, and to which extent.