Happy Tax Day!: The Return of the Death Tax

Stan Collender notifies CNBC that the US doesn't tax death.  Though, it might be better if we did; it's the one thing we indisputably could use less of.

It's pretty surprising to see CNBC use that phrasing.  It obscures, rather than clarifies the tax incidence, and it's pretty clearly a political choice.  We tax estates. Estates used to belong to dead people.  But we're not taxing death; we're recognizing that when someone inherits, they're experiencing a material gain.  There's no reason that that sort of income should be exempt from tax.  So we tax the estate.

Now, in my opinion, we ought to tax the assets as income to the recipients.  A $10 million estate divided among 20 grandchildren gets taxed more heavily than a $1 million estate going to one child, even though that child is thereby made much better off than the grandchildren.

But that leads to the prospect of kids having to sell grandmother's engagement ring in order to pay the tax, and so instead we have a more inefficient, less progressive tax* that allows people to shield a very generous level of benefits from the tax man.  You could solve that problem by making people pay the tax when they sell the asset, but most people would, in practice, evade this, because the IRS is not going to come by asking you for the whereabouts of the ring.  On the other hand, that would leave us about where we are, with a generous practical examption, better progressivity, and greater efficiency.  In an imperfect world, I expect that's about the best we're going to do.


*  Middling estates actually pay a higher effective rate than really large ones, because they can't structure around the tax

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In