Friday, November 10, 2017

Instead of cutting estate tax, we should limit amount that can be inherited. Heirs do nothing to earn inherited money

By Marc Jampole

What did someone inheriting $20 million or $2 billion do to deserve the money?

The same thing my son did to have his unmeasurably high math abilities. The same thing LeBron James did to grow to 6’ 8” and attain genius level highs in natural speed, quickness, eyesight and stamina. The same thing Adele did to have such a good ear for musical notes and an enormous breath capacity.

Absolutely nothing.

It’s true that Adele and LeBron James (and my son) worked hard to harness their natural abilities, and that’s why they’re paid so much.

But what does an heir do to deserve the money they collect? Take care of the person with the big bucks? But isn’t that what poor people do, too? Take care of their own. Regardless of income level, isn’t that part of the connection between parent and child, brother and sister, aunts and uncles and nieces and nephews?—a connection that is also a contract of mutual care and concern. Even if we take the cold-hearted role of the economist and consider the inheritance solely as another economic exchange, the value of caring does not equal billions or even a few million dollars. All of the health care, home care, financial, legal, grooming, transportation and entertainment services provided for an elderly individual don’t add up to billions, let alone a few million dollars for the average senior, so the absolute ceiling of what an heir “deserves” for care is relatively low.

The argument about the inheritance and taxation of assets and property upon the death of an individual cuts to the heart of the central debate in this country since World War I: Do individuals owe anything to society and how much can society do to control the fates of individuals?

Conservatives want individuals to have unfettered rights, especially in the marketplace, while projecting the individual into what she/he owns and granting individual rights to corporate entities. Behind their exaltation of individuals and individual property rights over all else is the idea that individuals work for what they have and therefore deserve to do with it what they like, unencumbered by rules, taxes or social responsibilities.

Yet no matter how hard the average person works, he won’t be able to play basketball as well as LeBron James or sing as beautifully as Adele. (No matter how much you love or hate her material, no one can deny her vocal abilities.) Both the clerk in the supermarket where I shop and my son the engineer work extremely hard, but my son makes many times more because of a talent he had at birth.

But anyone can inherit, if they’re lucky. All you have to do is have the right family.

Thus, even if you are a strong believer that those who get rich deserve it because of what they did, how can you be opposed to a tax on inheritance? How can you even be in favor of the notion of inheritance?

One of the most selfish, self-serving parts of the Trump GOP bill to lower taxes on the ultra-wealthy—to be paid for by higher taxes on the middle and upper middle classes, higher deficits, and deep cuts to Medicare, Medicaid and a broad range of other government programs—is the proposal to end all federal estate taxes. Currently, estates under $5.45 million for individuals, double for the married, pay no federal inheritance tax. Both House and Senate versions call for removing the cap and exempting all inheritance from federal taxation.

We should be moving in the other direction by raising the estate tax above the current cap to 100%, with 75% of the proceeds payable to the federal government and the rest to the governments of the states in which the individual lived during his adult life, on a proportional basis.

When individuals are alive they have the freedom to give their assets away to whomever or whatever they like—assuming they pay the proper taxes. But once dead, their assets and property should revert to all of society in the form of its representative, the state. Naturally many personal possessions should be kept in the family and some of those possessions have market value. Thus some amount should be exempt from confiscation at death. I think $5.45 million should do it, when you consider that 99.98 of Americans are worth less than that at death.

By all means, we should keep the $5.45 million exemption, so that families can pass on cherished houses, works of art and other personal property that they haven’t already disposed of. But everything above a cap of $5.5 million should revert to the state at death. The net effect of this move will be to force people to unload their assets before death, which will enhance tax revenues sooner but by a smaller amount than waiting. But the principle of working for what you get and only getting what you deserve—something held dear by the right—will be upheld.

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