>> 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.
Well, them and the lawyers who specialize in estate tax avoidance schemes.