Turning taxes into axes: Inheritance tax kills forests, spawns strip malls

Union Leader ^ | March 29 2002

[2Trievers]

IN “MONTY PYTHON and the Holy Grail,” a giant knight challenges King Arthur to accomplish the impossible task of chopping down a tree with a herring. In New Hampshire, the federal and state governments have become proficient at using an equally unexpected but far more effective tool to chop down trees — the inheritance tax.

New Hampshire’s inheritance tax is 18 percent, which is equivalent to the federal inheritance tax credit one gets for a state inheritance tax. And gracefully, New Hampshire’s inheritance tax does not apply to spouses or lineal descendants as does the federal inheritance tax, which is to be reduced over the next decade before rising again. Still, the state tax, like the federal one, packs its share of negative consequences, such as encouraging the development of forest land.

Intended to redistribute the wealth of the rich, inheritance taxes do a much better job of redistributing the real estate assets of all classes. Unable to pay inheritance taxes on land willed to them, inheritors break it up and sell it, often to developers.

Speaking to a Manchester meeting of the New England Society of American Foresters this week, Virginia forester Lester DeCoster said that inheritance taxes played a tremendous role in what foresters call “forest fragmentation.” That is the term for the division of large tracts of forest land into smaller tracts, which become separated by patches of development.

This is a classic unintended consequence of a poorly thought-out government action. It is yet another reason to do away with inheritance taxes. The best reason was voiced by Nobel-Prize-winning economist Milton Friedman, who once wrote in a letter to Congress that “death should not be a taxable event.”

Friedman called the inheritance tax immoral because “it taxes virtue — living frugally and accumulating wealth. It discourages saving and asset accumulation and encourages wasteful spending.” It also unjustly taxes money that has already been taxed, he noted.

The purpose of taxation should be to raise revenue fairly and equitably. The purpose of inheritance taxes is to redistribute wealth from one class of people to another, and therefore they are inherently anti-democratic. Throw in all of their disastrous unintended consequences, and it is perfectly impossible to justify their existence.

[2Trievers]

“death should not be a taxable event.”

[freekitty]

I wonder what will happen when us common folks finally figure out that the money the government uses or rather steals comes directly from us dead or alive?

[snopercod]

FYI