Death and taxes and both still certain.

[Arrian]

If, on the other hand, they pay tax based on the amount they actually receive, then the government lose a fortune

Yes, I'm talking about taxing what people actually receive. The goal, ultimately, is the redistribution of wealth. If an estate is being split up between a multitude of heirs... well, hell, that's the idea!

The gummint might lose some revenue, yes. But I'd play around with the numbers some (the exemption would be much, much lower than the per estate exemption we have now - say 500k/inheritance*), which would mitigate that impact. Plus I'm sure there are some loopholes one could close.

Anyways, I'm looking for a reasonable, fair approach. If the government ends up losing some revenue, then one must make it up elsewhere, or cut spending.

-Arrian

* - or 400k, or 300k... that's the details. I'm talking conceptually here

[duke o' york]

What about a small exemption and then strata of tax rates, in a similar way to income tax? Providing the new rates were chosen sensibly, then there wouldn't be as much of a government deficit.

[Arrian]

Fine by me.

As KH pointed out earlier, the current estate tax works similarly (except for the "small exemption" part). I'd just rather it was tied to inheritances instead of estates. It really makes more sense.

-Arrian

[Kidlicious]

If you repeal the estate tax and implement an inheritance tax then people will do what they can to limit their tax liability, which will result in less tax collection.

[Kontiki]

To echo Kid (yikes!), collecting taxes on the inhereted shares really opens the doors for loopholes and evasion.

[Arrian]

How so? How would it be any different (with regard to evasion) than now?

-Arrian

[duke o' york]

Er, most people already try to limit their tax liabilities. It's absolutely standard practice. Evasion, on the other hand, is a crime, not just relying on the talents of a skilled accountant.

[Kontiki]

It can't be that difficult to disperse a single large estate amount to various parties such that taxes are minimized but ulitmately the entire amount ends up with a single (or multiple, but fewer than it looks) party.

[Arrian]

You think so? I don't see it as being some huge problem. At least no more so that there is currently with the estate tax.

-Arrian

[duke o' york]

You'd think, but the tax authorities will look at the nature of the inheritances, and of the subsequent transfers, and notice what's going on - taxing the estate appropriately after the inheritances have been taxed already. Also, even if the inheritances were allowed at the lower rates, then the transfers afterwards would also be taxed, so the government would win ultimately. Who wants their estate to be taxed twice needlessly?

[Kontiki]

As problems go, I wouldn't call it huge either. I just think it makes the tax code easier to have a single point of taxation rather than breaking it down so much. I suppose I'm also looking at it more from a revenue collection standpoint rather than a wealth redistribution standpoint (granted, it still achieves those aims). That is, the government needs (or wants, whatever) to generate the revenues for various forms of spending programs, and it makes the most sense and has the least impact to people personally if it's taken from those sources that can most afford to lose it. That's how I always looked at progressive taxation anyway.

[Arrian]

I'll grant that it is a more complex way of doing things. But I think its more fair.

-Arrian

[Spiffor]

Originally posted by duke o' york
No, I meant that if the inheritors are made to pay tax at a rate based on the value of the entire estate then there will be no difference.

There's a difference. You can enjoy your hard-earned estate until the day you die, without being forced to sell it just to sustain the taxes about it.
OTOH, the heirs, who'll be getting an estate worth a fortune wuithout even lifting a finger for it, will have to accept that they only get a part of the miraculous and undeserved money.

[duke o' york]

Spiffor, inheritance tax comes out of the value of the estate so there is no need to sell anything before you die. Also, if you choose to give part of your estate away before you die, then it is usual for the recipient to pay the tax on that. If the donor chooses to pay the tax on this gift, then the value of the gift is raised by that amount if further inheritance tax is payable on the death of the donor.
Of course, the state could just own all the property, and then there'd be no need for inheritance tax....

[Arrian]

But what fun would THAT be?

-Arrian