my main argument is that people should struggle to have access to the finer things in life you need to earn it. estate tax is the best way to do it. one of the reasons i think it owuldnt be a good idea is that it’ll cause a brain drain scenario as well as capital flight.
so here is what i think:
what is an appropriate passive income per year, where you do not need to work? Lets say $100k/year
now lets say, there’s 2 kids to every family, so $200k.
now lets grow it by 5% passively. 200/.05 = so $4m.
that should be the total estate exclusion from both parents to children. at a $4m exclusion, i think the estate tax rate should be 50%.i think this is fair.
also i would guess that people with private businesses have more ways to lie on their estate, as well as the earnings of their business. they can easily overpay themselves to give a lower valuation etc. etc.
the annual deficit as it stands aint that bad. the projected deficit on the other hand due to old people and rising medical needs is the real problem. and its a real problem cuz these people vote a lot. lol
^^^ Not easy to fudge valuation, as Higgmond cited above. Also, the IRS wants its tax money and will take various approaches to get it such as raiding your business with guns and emptying your cash drawers and confiscating files, tapping your bank accounts, and pursuing court actions. I have seen all three.
^ The valuation has to include a “market” salary for the owner based on his/her duties. The problem many families run into is that they don’t have the cash to pay the estate tax, so they are forced to over-leverage the business or sell it. That can obviously be avoided with proper estate planning, but most people don’t think about that until they’re within 5-10 years of retiring, so when the business owner gets hit by a bus at 45, the family not only loses the salary, they lose the business as well.
I disagree (or maybe I don’t) with the first part. The point SHOULD BE to raise revenue for the government. In fact, it is used as an instrument of social policy.
And of all the taxes that we pay, the estate tax is (IMHO) the least offensive of them all. I think it’s the best way to combat dynastic wealth. However, any funds gathered from the estate tax should be earmarked toward leveling the playing field for the poor.
A high estate tax is a harmful societal mechanism, in that it breaks down the intergenerational relationship in US families. US culture tends to be tied to individual lifetimes - you have your own earnings, house, pension, and savings. Then, once you get old, you F off to Arizona to die. In many other countries, there is a stronger bond between generations. Not only are people encouraged to save more, since the wealth outlasts them, but they are also motivated to take care of their parents, which reduces the problem of poverty among elderly, and in return, grandparents take care of kids, which increases labor force participation and career opportunities for moms. A closer family relationship also means that individuals in financial distress will have an safety net, other than government welfare, that will reduce the likelihood that they will become a taxpayer burden or resort to crime. This is an example of a utility increase without requiring government organized redistribution.
The US gift tax limit is high enough that estate taxes will not be applicable to most people. However, in accepting that the family is supposed to “reset” at each generation, we break down cooperative relationships and decrease efficiency.
thats totally philosophical, seeing as how the limit is above what (supposedly) >99% of households in the US have. In reality it isnt breaking down societal bonds because it affects so few families it wouldnt make a dent. In a world where estate taxes were levied on ANY wealth you may have an argument, in our current circumstances you do not. Besides a huge chunk of those people are sending their kid off to boarding school anyway so im sure the societal bond isnt too big an issue.
The estate tax is not the cause of this disconnect I described, but it is certainly a symptom.
“The US gift tax limit is high enough that estate taxes will not be applicable to most people. However, in accepting that the family is supposed to “reset” at each generation, we break down cooperative relationships and decrease efficiency.”
I would advocate a series of policies aimed at reinforcing intergenerational bonds. Changing US attitudes towards wealth transfers would be a component of changing culture.
I suppose I would be interested in reading some literature on this, would also be interesting to see how much worse wealth distribution in the US would become. We may exacerbate other problems while possibly solving one.
