The estate tax is a bad tax say 727 economists

[Independent voter]

When you die, before your heirs get anything the estate tax is deducted from your estate. Usually this only applies if your estate is over millions of dollars. It's one way of taxing the 1%.

Milton Friedman is a well known economist who wrote this open letter.

Trump just put another dagger in the estate tax with the new tax plan.







http://friedmanletter.org/

To whom it may concern:

Spend your money on riotous living – no tax; leave your money to your children – the tax collector gets paid first. That is the message sent by the estate tax. It is a bad message and the estate tax is a bad tax.

The basic argument against the estate tax is moral. It taxes virtue – living frugally and accumulating wealth. It discourages saving and asset accumulation and encourages wasteful spending. It wastes the talent of able people, both those engaged in enforcing the tax and the probably even greater number engaged in devising arrangements to escape the tax.

The income used to accumulate the assets left at death was taxed when it was received; the earnings on the assets were taxed year after year; so, the estate tax is a second or third layer of taxation on the same assets.

The tax raises little direct revenue- partly because the estate planners have been so successful in devising ways to escape the tax. Costs of collection and compliance are high, perhaps of the same order as direct tax receipts. The encouragement of spending reduces national wealth and thereby the flow of aggregate taxable income. These indirect effects mean that eliminating the tax is likely to increase rather than decrease the net revenue yield to the federal government.

The estate tax is justified as a means of reducing the concentration of wealth. However, the truly wealthy and their estate planners avoid the tax. The low yield of the tax is a testament to the ineffectiveness of the tax as a force for reshaping the distribution of wealth.

The primary defense made for the estate tax is that it encourages charity. If so, there are better and less costly ways to encourage charity. Eliminating the estate tax will lead to higher economic growth, which is the most important variable in determining the level of charitable giving.

Death should not be a taxable event. The estate tax should be repealed.

Signed,

Milton Friedman

Nobel Laureate in Economics

Hoover Institution


The tax bill, passed by the House and Senate yesterday, temporarily doubles the annual exclusion amount (the exemption) for estate, gift and generation-skipping taxes from the $5 million base, set in 2011, to a new $10 million base, good for tax years 2018 through 2025. The exemption is indexed for inflation, so it looks like an individual can shelter $11.2 million in assets from these taxes. Another federal estate law provision called portability lets couples who do proper planning double that exemption. So, a couple could exclude $22.4 million. Watch out: The law’s sunset means that, absent further Congressional action, the exemption amount would revert to the $5 million base, indexed.

In this window, the tax bill offers enormous planning opportunities for the rich. “Any client who can afford to do so will want to use their exemption for gifts, in case it actually does sunset,” says Kaufman. For couples, this would benefit anyone with $11 million or more in assets. Under current law, each person for 2018 had a $5.6 million exemption. Now each person will have an $11.2 million exemption. So, a couple has an extra $11.2 million to gift or transfer at death. “It’s better to give now while the law is certain,” she adds.

https://www.forbes.com/sites/ashleae.../#6d736de01d54

[Noradin]

So they are practically pointing out all the reasons why everyone but the rich (themselves) would benefit from estate tax and try to counter that by invoking "morals".
And they get even that part wrong. People who live frugally will still leave more to their children than those who spent it all, estate tax or no estate tax.

Basically their only argument is defining hoarding wealth as morally good--because that is what they themselves did.

[Ettan]

All forms of goverment intervention is hurtfull to the economy to some degree.

But we cant always think about profit maximization as a whole.
We (most of us atleast) would also like there to be atleast some form of regulation in place for the distribution of this wealth.

[vindicatorx]

Yes, bad in the fact that the people truly meant to be taxed by this dodge it via tax loopholes. I mean when Steve Mnuchin concedes and says the elimination of the estate tax "Obviously, the estate tax, I will concede, disproportionately helps rich people,".

[Realitytrembles]

Preventing the establishment of de facto dynasties in the US is a laudable goal. The estate tax should apply to any and all estates with a net worth of $500,000 or greater. This would not affect the vast majority of Americans.

[Noxx79]

https://www.economist.com/blogs/lexi...unding_fathers


Intetesting counterpoint - many founding fathers like Jefferson as well as Adam Smith (father of modern economics) abhorred the idea of inherited wealth.
Putting another way:

If you’re going to be rich, you better have done something to deserve it other than by right of birth. Benefits by right of birth sound suspiciously like royalty.

[melodramocracy]

It *is* a bad tax. And this is coming from someone who has never gotten any sort of inheritance and will die penniless.

- - - Updated - - -

If you’re going to be rich, you better have done something to deserve it other than by right of birth.

Founding fathers would hate the idea of shareholders.

[Draco-Onis]

It *is* a bad tax. And this is coming from someone who has never gotten any sort of inheritance and will die penniless.

It is no different than taxing lottery and casino winners, the government usually taxes money you haven't earned in this case they just won the genetic lottery.

[Underverse]

How would you deal with the massive increase in inequality that would result from abolishing the estate tax?

I'm not really against repealing it, but there needs to be another mechanism in place. And I'm not sure I really agree with Friedman here (as with many other areas); it's not like the government is taking everything from you when you die.

I also find it a bit ironic that 'live frugally' is seen as a moral choice when Friedman has spent his entire life arguing for the free market and capitalist ideologies, which require spending and maximal market involvement for maximal benefit.

[Machismo]

I'm not a huge fan of Good Ole Milt, but he's right in regards to the estate tax. It needs to go away. If a person wants to live well, so that they can leave their money to their family, the government has no place taxing it twice.

[melodramocracy]

It is no different than taxing lottery and casino winners, the government usually taxes money you haven't earned in this case they just won the genetic lottery.

It's money that's already been taxed, much like sales taxation.

[Jonnusthegreat]

Preventing the establishment of de facto dynasties in the US is a laudable goal. The estate tax should apply to any and all estates with a net worth of $500,000 or greater. This would not affect the vast majority of Americans.

$500,000 is way too low. I'm a public school teacher and will reach that before I die.

[Deleted]

Underlying issue here seems to be that taxes are viewed as a punishment.
You got all these peoples rallying under patriotism as something vast and great, use it as a weapon towards groups of people, a shining beacon of hope in a world of darkness blablabla.
But when it comes down to putting some money back into the nation they´re so proud of, it´s like they´re being robbed at gunpoint by some highwayman.

DONT SAVE CAUSE IT`LL BE TAXED = STOLEN BY UNCLE SAM!!

[kasuke06]

Underlying issue here seems to be that taxes are viewed as a punishment.
You got all these peoples rallying under patriotism as something vast and great, use it as a weapon towards groups of people, a shining beacon of hope in a world of darkness blablabla.
But when it comes down to putting some money back into the nation they´re so proud of, it´s like they´re being robbed at gunpoint by some highwayman.

DONT SAVE CAUSE IT`LL BE TAXED = STOLEN BY UNCLE SAM!!

mostly because it will be taxed 2/3 times depending on what you do with it.

I'm fine with taxes. but you shouldn't be taxing the same money multiple times.

[Deleted]

mostly because it will be taxed 2/3 times depending on what you do with it.

I'm fine with taxes. but you shouldn't be taxing the same money multiple times.

Yeah I mean sure, there is a thing there with taxing money already taxed, but the notion seem to be that people would rather burn all their money then leave something to their children, if it will be taxed and god forbid that.
Better leave the kids out in the cold.

[xChurch]

I really don't see any benefit in allowing the generational accumulation of wealth. Most ways in which children benefit from wealth are due to things like better childhood, education and connections. Adding millions of dollars on to that just prevents wealth from moving around and allows people who should have the easiest time making something off themselves to basically rest on the money and let it work for them. Funny that one of their reasons is that people get out of it, as if people avoiding a rule means it should just be removed.

[ati87]

All forms of goverment intervention is hurtfull to the economy to some degree.

But we cant always think about profit maximization as a whole.
We (most of us atleast) would also like there to be atleast some form of regulation in place for the distribution of this wealth.

Your first sentence is wrong and with that the entire way of thinking is wrong.

Just ask the banks who had to be bailed out.....what do you think would have happened if governments didn't do that?

It's not a zero sum game.

[Very Tired]

I agree the estate tax is awful, and mostly seems to be pushed by the ever present crowd that is envious of the nice things the rich have. But the tax as it was really screws over people that weren't even classified near rich. I.e. farmer families where the father dies and is taxed so hard they can't afford to keep the land.

[ati87]

I'm not a huge fan of Good Ole Milt, but he's right in regards to the estate tax. It needs to go away. If a person wants to live well, so that they can leave their money to their family, the government has no place taxing it twice.

So I should stop paying taxes completly?

The money I make when working was already taxes at some point. Between the taxes the chain of companies pay over their profits and what I pay as VAT I reckon the money I got was taxed at some point as well.

Thinks like estate tax exist because when you receive money it wasn't you that paid taxes over the years, it was the person who owned the money that got taxed.

And with the amount of tax evasion done by the chosen few I reckon we would just need to start taxing them a bit more even. Richest among us benefit the most of having a healthy economy, if we all decided to just say ''screw it'' regarding taxes then the only rich people would be land owners.

[Machismo]

So I should stop paying taxes completly?

The money I make when working was already taxes at some point? Between the taxes the chain of companies pay over their profits and what I pay as VAT I reckon the money I got was taxed at some point as well.

Thinks like estate tax exist because when you receive money it wasn't you that paid taxes over the years, it was the person who owned the money that got taxed.

And with the amount of tax evasion done by the chosen few I reckon we would just need to start taxing them a bit more even. Richest among us benefit the most of having a healthy economy, if we all decided to just say ''screw it'' regarding taxes then the only rich people would be land owners.

I didn't say that, did I? The estate tax is double taxation by the same government entity on the same money. It's nothing more than another money grab by the government. Most people happen to be fine with that, because it's not their money.