Just noodling here, but one of the crises we’ve been told is going to cause enormous problems for us is the aging of America. The ratio of young people to old people is decreasing which means there will be fewer young people bearing the burden of paying for the care of more old people.
Not to be too ghoulish, but it occurs to me that, one consequence of this ought to be –sooner or later– more people dying. As the dead have no need of their property, this would also mean more estates available for taxation. Seems to me that the estate tax is the rational means of compensating for the decreased ratio of young-to-old. Sort of a use tax on the aging of America, if you will.
Just a thought.
An interesting concept. Arguments could be made that individuals would not work as hard or take business risk if the wealth were not to pass to their progeny. I am not sure I totally agree with this concept. Many people work hard and sometimes acheive great success for internal reasons that are difficult to quantify.
I support the Federal Estate and Gift Tax and state inheritance taxes on simple economic efficiency arguments. Inheritance is indistinguishable from a gift, an economic transaction that has no bargained for exchange. Gifts are not enforceable at law because they lack consideration. Given the needs of financing government, even the government would be a more efficient user of the revenue from the sale of an estate than an inheritor that gives no value for the exchange.
Doug: I am not sure I understand. Doesn’t the aging of America mean that less people are dying, because we are living longer? This means less revenue for the state, because people use more of their estate for expenses while they are retired, yes?
So, I have this idea I am not entirely sold on, but have pondered on occasion:
Republicans generally don’t like a minimum wage, arguing it decreases employment and hurts small businesses. Democrats generally disagree, saying employees need a living wage. Meanwhile, Democrats generally like the estate tax, saying it allows for a meritocracy, while Republicans generally dislike it, and want a higher exemption amount.
I sort of like the idea of tying the 2 concepts together, and saying that the minimum wage should be Y dollars, and adjust it for inflation like we do with the gift tax exemption and tax brackets. After this amount is established, it should be left alone. We should then say that the inheritance tax should be Y times 2000 hours (# of full-time hours generally worked in a 50 week year) times whatever the life expectancy is at the time (about 80 years?). With me so far? Sound fair?
Now let’s look at the Math: If the minimum wage is $10 (let’s use $10 for easy math purposes). Inheritance tax would be $10 times $2000 times 80 years (or something like that). This equals $1,600,000. Of course, this only makes sense if you get this exemption amount for each beneficiary, making it more of an inheritance tax than an estate tax.
I’m with you, Paul. Makes sense to me as a general proposition. I don’t think it would ever fly though. My sense of the hardcore estate tax opponents is that their true concern is not estates worth millions or even, really, tens of millions, but those worth hundreds of millions or billions.
I’m a proponent of the estate tax, but I have rarely blinked when people have proposed raising the exemptions – raise it to $10 million (though I like your notion which would wider distribution by permitting a smaller amount, tax free, per beneficiary; maybe subject it to a large, overall cap like $50 or $100 million where the estate starts to get taxed.)
I have no problem with the estate tax as long as it applies to everyone.
BTW, there is an economic fallacy in your first paragraph. While our society is aging, there is not an increase in the number of people who cannot work, because the elderly are a lot healthier (and thus able to work) than they used to be.
The real problem is that the retirement age has been static even as people are healthier and living longer. If we indexed the retirement age to longevity, this would not be an issue.
The current inheritance tax in Indiana is a survival from the progressive era that taxes people on three schedules depending on the relationship between the deceased and the beneficiary. Legally married individuals are exempt as they pass property to the survivor. Those not eligible for legal marriage are taxed as unrelated persons- schedule C. Indiana is one of only 12 states in the US that has an inheritance tax, and it can be avoided by moving to Florida, Arizona, California or any of a number of jurisdictions that speak English and have better weather. By the way, the exemption on schedule C is still $500.
Anyone want to defend the “queer tax” or “Ex-wives tax” aspects of current Indiana law? I don’t think so.