inheritance tax should be 100%.

[Ser Scot A Ellison]

A 100% Inheritance tax will not work unless it is coupled with a 100% lifetime gift tax. It is far to easy to avoid an inheritance tax by giving away your property before you die. Therefore, unless you are willing to prevent anyone from ever giving another gift to anyone, except the government, a 100% inheritance tax is simply not practical.

[Usotsuki]

Hereward, I was planning to spend the money on a nationwide network of Mime Training Centres and Academies of Puppetry - but as you insist you may have two shiny aircraft carriers to ensure that Britannia continues to rule at least some ripples.

[AverageGuy]

Like, would the government get the family farm?

Why should the family get the farm? What makes farmers so much more special than everyone else in this scenario?

[Balefont]

So, no exemption, but added to the income for the year and taxed at normal rates for income with the same ceilngs? I could live with that.

Being in estate settlement in the US, even I could get behind this. It would be so much easier to support (hey, you got money and it is income to you, therefore, you gotta pay an income tax) than trying to fight all the nimbies that whine about the estate tax and how:

"It's money that's already been taxed," (yes, in the form of income taxes, perhaps, but the estate tax is a transfer tax - whole different animal - and many of us pay sales taxes using funds that were already taxed for income tax purposes, so, it's not like our federal, state and local tax structures don't already tax $$ "twice")

and "Why do I have to pay taxes when I die?" (Well, you don't pay taxes when you die. Your estate does and essentially it's your heirs that pay the tax out of their inheitance bevause their inheritance is reduced by the taxes.)

I stand behind Warren Buffet's stance when it comes to inheritance and meritocracy: Leave your children enough to do anything but not enough to do nothing.

That threshold is different for every family and inheritor, true. But it is a great guidline, I think.

[Ser Scot A Ellison]

AG,

So, no one really owns anything? The best you can have is a "Life Estate" before that property reverts back to the Government? What's to stop people from creating corporations to hold family property? After all, corporations never die and as such would, theoretically, never be subject to this tax.

Bale,

I thought inhereited property and money was already considered income and taxed accordingly. Is that not the case?

[Datepalm]

Hmmm, maybe a ring-fenced tax that actually goes towards battered women's shelters or something? I understand what you are saying but I can't stop myself feeling revolted that when i die instead of leaving money i've carefully saved to my children it would go to pay Malcolm Tucker's salary. I know that's irrational, but I don't think it's unreasonable.

I think its very rational, but you could instead use all that saved up money to provide them the best education and upbringing possible. :dunno:

So, no exemption, but added to the income for the year and taxed at normal rates for income with the same ceilngs? I could live with that.

:agree:

In theory, ofcourse, I support the abolition of all property, but just dumping this tax on without changing anything else is silly and would just lead to complications and probably more inequality in some way. I say just demistify it - you get stuff, you get it taxed. Dosen't matter if its from dear dead old grandma or your employer or the lottery.

Also, turns out Israel cancelled its estate tax in 1981, due to a combination of free market policy and some religeous thing about passing things to you kids, and these pressures have kept it gone despite a commitee on the subject deciding to bring it back in 2000. Sometimes I don't like this country at all. For example, in the afternoons. And all of Tuesday.

[Balefont]

Bale,

I thought inhereited property and money was already considered income and taxed accordingly. Is that not the case?

Nope.

Devise of real property - non taxable*. Specific bequests of tangible personal property - non taxable*. (*assuming none of this property is income producing) The value of stocks, bonds, etc. - non taxable. Cash bequests - non taxable (though you may receive interest, which would be taxable, on a cash bequest if the bequest is not paid in a timely manner).

Inherited property can carry out income to you if you are set to inherit income producing property. For example: You are set to inherit $100,000 of stocks and bonds. The $100,000 value is not taxable to you but any interest or dividends earned on that $100,000 from date of death through the date you receive the property is taxable.

IRA's and annuities are a little different in the sense that they are included in a decedent's gross estate, taxed in the estate and yet they are also ordinary income items for income tax pruposes due to the nature of the property. In essence this type of property is "taxed twice".

But the current tax law, being as benevolent as it is allows, you a deduction on your personal income tax return (it's called the Estate Tax Deduction and in the biz we refer to it as an IRD Deduction - Income in Respect of a Decedent) which offsets the "double taxation" of the property for income tax purposes. The deduction whould be calculated and provided by the executor of a decedent's estate. The deductions are significant in relation to the reportable income from the IRA, annuity, etc.

[AverageGuy]

AG,

So, no one really owns anything? The best you can have is a "Life Estate" before that property reverts back to the Government? What's to stop people from creating corporations to hold family property? After all, corporations never die and as such would, theoretically, never be subject to this tax.

I don't support the scenario, but I think if you're going with the thought experiment, 100% should mean everything. Family farm, family business, mother's jewelry, everything. Private corporations then wouldn't really be able to get around it since you'd have to either give up the deceased's share of the company or pay an appraised dollar amount equal to said share.

[Arataniello]

100% inheritance is a daft idea. As others have pointed out, it would encourage people to simply spend their entire worth before death, or else engage in massive tax avoidance schemes. Government tax receipts would actually fall. It would probably exacerbate the already chronic problems in the housing market (in the UK), since all family homes would have to be sold on death.

[Ser Scot A Ellison]

DP,

In theory, ofcourse, I support the abolition of all property

Next time I'm in Israel I'm going to stop by and pick up your computer. I don't have one at home and could use it.

Bale,

Nope.

Devise of real property - non taxable*. Specific bequests of tangible personal property - non taxable*. (*assuming none of this property is income producing) The value of stocks, bonds, etc. - non taxable. Cash bequests - non taxable (though you may receive interest, which would be taxable, on a cash bequest if the bequest is not paid in a timely manner).

Inherited property can carry out income to you if you are set to inherit income producing property. For example: You are set to inherit $100,000 of stocks and bonds. The $100,000 value is not taxable to you but any interest or dividends earned on that $100,000 from date of death through the date you receive the property is taxable.

IRA's and annuities are a little different in the sense that they are included in a decedent's gross estate, taxed in the estate and yet they are also ordinary income items for income tax pruposes due to the nature of the property. In essence this type of property is "taxed twice".

But the current tax law, being as benevolent as it is allows, you a deduction on your personal income tax return (it's called the Estate Tax Deduction and in the biz we refer to it as an IRD Deduction - Income in Respect of a Decedent) which offsets the "double taxation" of the property for income tax purposes. The deduction whould be calculated and provided by the executor of a decedent's estate. The deductions are significant in relation to the reportable income from the IRA, annuity, etc.

Cool, I didn't know that. Now I understand why the class after "Estate and Gift Tax" was called "Income taxation of Trusts and Estates". Only the income from trusts and estates is subject to tax beyond the normal Estate and Gift Tax. Honestly, I don't have a problem with taxing the income generated to heirs by deathtime divises as income.

AG,

I don't support the scenario, but I think if you're going with the thought experiment, 100% should mean everything. Family farm, family business, mother's jewelry, everything. Private corporations then wouldn't really be able to get around it since you'd have to either give up the deceased's share of the company or pay an appraised dollar amount equal to said share.

You miss my point. No individual in that family would own anything. It would all be owned by the family "corporation" they would simply be allowed use of the property by the Corporation. That would avoid Estate taxes because the Corporation never dies.

What's your position on the necessity for all gifts to be taxed at 100% of their value to make a 100% estate tax viable. No more gifts, to anyone but the government, ever.

"Sorry Billy but I can't give you the bike you wanted. I know you're 6 but you'll need to get a job and buy the bike yourself or pay me fair market value in order to avoid the government taking the bike under the gift tax." Another problem, children are given the gift of support, is the food I buy for my family going to be subject to the gift tax? They aren't paying me fair market value for the support I provide, shouldn't that be subject to the 100% tax?

[Guest Raidne]

Watching my family do Medicare planning for my grandfather has given me a more to think about on this subject.

First, you'd need to bring trusts back into the fold. Because from what I understand - and Bale can correct me - anything in an irrevocable trust would be exempt from a 100% estate tax.

Secondly, people are loath to make large cash gifts to their children now and trust that they will use the money to pay for their care if the need arises, but it happens. That's one way that people get medicaid to cover their assisted living expenses while still keeping some resources in reserve, as an alternative to an irrevocable trust.

However, there is already a cap on gifts for tax purposes. You can play with that, and you could set another cap at which anything above that line would be presumably not a gift if made, say, up to 10 years before death, so something like that.

Being in estate settlement in the US, even I could get behind this. It would be so much easier to support (hey, you got money and it is income to you, therefore, you gotta pay an income tax) than trying to fight all the nimbies that whine about the estate tax....

I think the only issue, which is one frequently brought up - is the tax that would have to paid on property. So you get the family farm issue, and, now, you also get the issue where the person can't sell the property for even what the tax amount is. That's a lot of burden to put on your heirs.

I suppose there could be a system like we have now, only we make only transfers of real property exempt up to $2 million, and subject cash, stocks, etc. to income tax, or a 100% tax.

But really, in the United States, the problem is this - all of it runs counter to the very fabric of the American Dream, which is the idea that even though you grew up a migrant farm laborer or street sweeper someday down the line your grandchildren or greatchildren can be stupid, spoiled brats just like Paris Hilton.

[Ser Scot A Ellison]

Raidne,

First, you'd need to bring trusts back into the fold. Because from what I understand - and Bale can correct me - anything in an irrevocable trust would be exempt from a 100% estate tax.

But that Irrevocable trust is subject to the Gift tax. That's why it's the "Unified Estate and Gift Tax."

[mormont]

100% inheritance is a daft idea. As others have pointed out, it would encourage people to simply spend their entire worth before death, or else engage in massive tax avoidance schemes. Government tax receipts would actually fall. It would probably exacerbate the already chronic problems in the housing market (in the UK), since all family homes would have to be sold on death.

I'm a little lost here. How does increasing the supply (more houses on the market) exacerbate the problems in the market (which consist mainly of chronic, long-term overpricing)? More supply would surely reduce prices?

[Usotsuki]

DP,

Next time I'm in Israel I'm going to stop by and pick up your computer. I don't have one at home and could use it.

Ser Scot,

submit an application demonstrating how your present lack of a home computer adversely impacts the interests of the proletariat and that transferring the ability to use the specific computing system employed by Comrade Datepalm to you produces a superior result according to the Revised Calculus of Social Optimisation*.

*(As amended by the Third, Fifth and Sixth Congresses of the People (Alterations undertaken by the Fourth Congress being no longer relevant given that it was necessary to revoke their validity due to counter-revolutionary action and theft of chocolate biscuits))

[Lany Freelove Cassandra]

I say no way, no how, no matter what. Ultimately you are putting a lot of faith in government here. Too much, IMO. The government being granted control of 100% of everyones estate seems... totalitarian. People fight wars over much less. Why not just cut out the middle man, tax everyones income at 100%, and ration everything out? If you ask me, that would suck all kinds of balls. It maybe seems like a nice Utopian idea, but I see it more as a back door way for government control everything. I'm perfectly content to play nice and abide by certain rules of society, but I am not OK with the government taking everything in the event of my death.

I am completely with S John on this.

Then how would you feel about including inheritance in the normal calculations of income? Is there a particular merit to inheritance that means it should be exempted from income tax?

The US and the UK are two of the most caste-ridden societies in the developed world (*Edited) - if they were to shift to a system of including inheritance in calculations of income that would go some way towards reducing the ingrained inequality of these relative oligarchies.

*Apparently Italy is very bad too - oopsie

In theory, this is fine except that in the case of real property, it wouldn't work. Going back to S. John's family farm: Say the land is worth $3million, but only brings in an annual income of $60,000. How would a person working dawn to dusk to earn $60,000 possible be able to afford the INCOME tax on $3million? It is just not feasable.

Why should the family get the farm? What makes farmers so much more special than everyone else in this scenario?

Nothing, it was just an example. Same thing applies to guy who owns the hardware store or local bakery or the house down the street.

An income tax on inheritance would have to exclude real property and equipment and only apply to cash, bonds, stock and jewelry and other semi liquid assets (coin collections, rare books, art, and so on, but not the land, buildings or equipment needed to run it)

eta: I see Raidne brought this up while I was typing :)

[AverageGuy]

You miss my point. No individual in that family would own anything. It would all be owned by the family "corporation" they would simply be allowed use of the property by the Corporation. That would avoid Estate taxes because the Corporation never dies.

Can you actually incorporate that way? Having zero ownership of a company, but being give free use of its property and resources? If so, then in the 100% tax scenario, I'd say it should be made illegal.

Gifts are tricky because of the support issue. Thankfully the OP didn't say anything about 100% gift taxes, so I assume it would be a similar scheme to what we have now, taxed above a certain amount but not 100% from the first cent.

[Hereward]

In theory, this is fine except that in the case of real property, it wouldn't work. Going back to S. John's family farm: Say the land is worth $3million, but only brings in an annual income of $60,000. How would a person working dawn to dusk to earn $60,000 possible be able to afford the INCOME tax on $3million? It is just not feasable.

They would have to either sell it and buy a smaller farm with the 60% of 3m they'd have left or take out a mortgage like everyone else who wants to be a farmer but isn't lucky enough to have a wealthy parent has to. Perfectly feasible. Just not something people will vote to introduce.

[Usotsuki]

In theory, this is fine except that in the case of real property, it wouldn't work. Going back to S. John's family farm: Say the land is worth $3million, but only brings in an annual income of $60,000. How would a person working dawn to dusk to earn $60,000 possible be able to afford the INCOME tax on $3million? It is just not feasable.

Of course it would work, if someone can't pay the assessed tax then there is a forced sale of the property. You can even include a grace period if you feel so inclined.

[MinDonner]

What's becoming increasingly clear is that you can't just have this hypothetical 100% tax without changing nearly every other aspect of the economy also. Would anyone even bother buying property if they knew it was all going to be reverting to the government on their death? Possibly not, so you'd likely end up with people just renting from the govt instead (which would, in effect, be the practical result of buying anyway). Same thing would be true for all other possessions as well? So Little Billy still gets his birthday bicycle, but when he outgrows it you can sell the lease to someone on Craigslist or just return it to the communal bicycle pool for redistribution...? Hmmm.

[Ser Scot A Ellison]

Can you actually incorporate that way? Having zero ownership of a company, but being give free use of its property and resources? If so, then in the 100% tax scenario, I'd say it should be made illegal.

Some people do it now to attempt to avoid taxation. Sure, it could be made illegal. People who rale against "evil corporations" forget that Corporations are wholely a product of the State. They only exist at the sufference of the State. Thus, their existence and purposes can also be limited by the State.

Gifts are tricky because of the support issue. Thankfully the OP didn't say anything about 100% gift taxes, so I assume it would be a similar scheme to what we have now, taxed above a certain amount but not 100% from the first cent.

But without a comensurate 100% gift tax the 100% estate tax is easy to avoid, just deed everything you own to your desired heirs before you die. Therefore, for a 100% estate tax to work there needs to be a 100% gift tax and all the problems that arrise therefrom.