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Tuesday, June 19, 2018

Thoughts on the Estate Tax


There are many people who want to abolish the Estate Tax. They call it the Death Tax. They say it is double-taxation, adding a tax on money that has already been taxed as income. I disagree with these people.

The Estate Tax is not double-taxation. It is a tax on property, not on income. Once we die, our wealth becomes property in the form of an Estate. And property can be and often is taxed multiple times. Consider the property tax we pay on our homes and land. We pay this tax annually. And the ad velorum tax paid on registered automobiles.
 
So the double-taxation argument is invalid, in my opinion.

Now there is also a principle in play from the time of the founding of our country. That is the anathema of an entrenched wealthy class of citizens. The Founders fought against this in the form of rejecting any kind of royalty or aristocracy. In fact, the existence of property taxes, on land especially, is one way to limit the accumulated wealth of an aristocracy. In the United States, land is always taxed. So one cannot simply accumulate land and have it sit, unused. The land needs to be put to productive use in order to generate income to pay its share of annual property tax.

In a similar way, we as a society want to limit the ability of families to pass on wealth from one generation to the next. The inheritance of wealth is a cornerstone of building an aristocracy. So, in America, we encourage and applaud each individual to make the best of what she can. But then we limit what can be passed on to the next generation. The next generation will need to make their own fortune on their own merits.

Some will argue that the Estate tax limits one’s ability to control the destiny of his wealth. When living, I’m able to direct the use of my wealth however I like. But when dead, I’m limited by my Will and by what Estate Tax law allows. My counter argument to this: If you want your money to go somewhere and not be subject to Estate tax, then give it away before you die.

There is wonderful biblical context on the consequence of dying to one’s previous living state. It is put in the form of the effect of death on one’s marriage. While alive, my marriage is a binding contract under law and under God. But as soon as I die, that contract is tossed aside, and all its rules are moot. It’s the same with my wealth. While alive, I can direct my wealth with a great degree of autonomy, subject to the laws of the land. But when I’m dead, what expectation should I have regarding the disposition of my wealth? From a biblical standpoint, I say none.