Inheritance Tax: A hated tax but a fair one
surveys suggest that opposition to inheritance and estate taxes (one levied on heirs and the other on legacies) is even stronger among the poor than the rich.
.. Yet this trend towards trifling or zero estate taxes ought to give pause. Such levies pit two vital liberal principles against each other. One is that governments should leave people to dispose of their wealth as they see fit. The other is that a permanent, hereditary elite makes a society unhealthy and unfair. How to choose between them?
.. The positive argument for steep inheritance taxes is that they promote fairness and equality. Heirs have rarely done anything to deserve the money that comes their way. Liberals, from John Stuart Mill to Theodore Roosevelt, thought that needed correcting.
.. Annual flows of inheritance in France have tripled as a proportion of GDP since the 1950s. Half of Europe’s billionaires have inherited their wealth, and their number seems to be rising.
.. However, in 2017, it is not clear exactly how decisive a role inheritance plays in the entrenchment of the hereditary elite. Data from Britain suggest that people tend not to lose their parents before they reach the age of 50. In rich countries the advantages that wealthy parents pass to their offspring begin with the sorting mechanism of marriage, in which elites increasingly pair up with elites (see /react-text article react-text: 2518 ). They continue with the benefits of education, social capital and lavish gifts, not in the deeds to the ancestral pile.
.. The trusts they create as a result can last even longer than the three generations
.. If avoiding double taxation were a requirement of good policy, then governments would need to abolish sales taxes, which are paid out of taxed income.
.. However disliked they are, they are some of the least distorting. Unlike income taxes, they do not destroy the incentive to work—whereas research suggests that a single person who inherits an amount above $150,000 is four times more likely to leave the labour force than one who inherits less than $25,000.