You are right, but now I can’t figure out what the point was that I was remembering and trying to convey. I just read this a couple of weeks ago, and apparently I didn’t understand the entire argument.
On the other hand, I did stumble over several items that suggested that the term “estate tax” was chosen to give the illusion that the tax was on the estate, and not on the heirs. I don’t know why people would call that an illusion, if as you note the tax is irrespective of the number of inheritors or their income/wealth.
As a practical matter, a wealth tax would be way too “expensive” a method to be useful. The death tax costs an enormous amount to determine; taking a full stock of a person’s assets one time at death is bad enough, but an attempt to require such an accounting on a yearly basis would be absurd.
Further, it would be weird. What if one year you are worth “too much” because the value of something becomes overpriced in a bubble, but the next year the bubble bursts? Should you be able to get a “wealth tax refund”?
I think we should do away with the death tax, and replace it with a tax on whatever assets are in an estate that have not previously been taxed, such as the unrealized capital gains on a house, stocks/bonds, and untaxed retirement funds.
Some would add the untaxed life insurance proceeds — that’s not as clear to me since you did pay tax on the money you use to BUY the insurance, and technically the insurance pays out less than it’s cost.
Of course, life insurance companies essentially survive on the money they take in because of the death tax, since it is one way to pass your money on without the death tax rates. If I pay a million dollars to a company to get a 900,000 payoff when I die, that’s only a 10% tax, vs the 35% I’d get under the latest scheme.
Why not just tax them when they are realized? After all, that's when the heir will actually benefit from them. I see no reason to keep the tax linked to someone's death.
>> I think we should do away with the death tax, and replace it with a tax on whatever assets are in an estate that have not previously been taxed, such as the unrealized capital gains on a house, stocks/bonds, and untaxed retirement funds. <<
Agreed. That approach would seem both fairer and economically more efficient. Beyond the well-taken moral/ethical/philosophical objections to the current system, there’s no telling how much “dead weight loss” the estate tax imposes on the economy — except to say that it must be A LOT.
>> Some would add the untaxed life insurance proceeds — that’s not as clear to me since you did pay tax on the money you use to BUY the insurance, and technically the insurance pays out less than it’s cost. <<
That would seem both unfair and economically inefficient. So let’s hope it never occurs. And at least the life insurance would be on the right side of this sub-issue!
>> Of course, life insurance companies essentially survive on the money they take in because of the death tax, since it is one way to pass your money on without the death tax rates. If I pay a million dollars to a company to get a 900,000 payoff when I die, that’s only a 10% tax, vs the 35% I’d get under the latest scheme <<
Exactly. If it weren’t for the life insurance lobby, we probably would have been able to get rid of the estate tax years ago.