> At that point your stocks (and other assets like houses) have their cost-basis adjusted to the current price.
Is this a special provision that kicks in only on death (and not before)? How long has that been in place?
Is this a special provision that kicks in only on death (and not before)? How long has that been in place?
A married couple who bought a house in Palo Alto for $250k that’s now worth $5.25M and who bought $250k of Apple stock that’s now worth $20.25M would have a Federal tax bill of ~$5 million if they sold those assets and gave the cash to their kids. If however they were hit by a bus on the way to their accountants office, and the kids inherited the assets and sold them the next day, they would owe zero tax.
There’s a popular myth that estate taxes are a second tax on income but many assets for the very wealthy are never taxed..
Our tax system is structured around the fundamental idea of taxation occuring on transactions, whether that's income in exchange for labor, income resulting from the sale on (non-real-property) assets etc.
I'm not sure if this is a good thing (it might be, it might not) but it's the way it is.
The obvious example is family farms, or indeed the family house. Capital taxing the asset on death means a (potentially large) tax bill happens in many cases this can't be paid without selling the asset.
If the sale was to another family looking for a farm, then that could be argued is neutral. But it won't be. It'll be sold to a mega-corp because they have more money to spend. So in a couple generations you kill off areas that are primarily small farms.
This doesn't just apply to property. The family silver collection, the family business, the list goes on.
Inheritance tax is tricky. Just passing money down entrenches an aristocratic class. Taxing it though destroys value in all kinds of areas.
Ok. And?
Why should someone get $5m for doing bugger all. If they were paid $5m for cleaning a car they would lose a fortune in tax.
Forcing the sale of family property or assets does not serve any good in the long term.
How is carrying the cost basis forward without stepping it up "forcing a sale"?
I think you just need to propose a set of related rules changes. Replace the inheritance basis step-up with a similarly scoped rule that says this inheritance does not count as a taxable ownership transfer, so taxes are not due at that point.
You may also need new rules for estimating the basis when records are lost across multiple inheritance events?
The current system is a bit like a tax foregiveness jubilee, but dribbled out to individual families rather than synchronized across the whole economy. It resets things so that regular people can function in this system, without requiring all the family accounting and records keeping of some aristocratic dynasty.
You mean by taxing labour and taxing commerce?
Sorry for the snark, but come on...
The Roman empire was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed luxury goods and debased their currency. The United States was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed importations and debased their currency.
Since all land was created by God and everything else was created by people's labour, the really unjust thing is to tax labour instead of taxing land. But "territory" is an instinct so deeply ingrained that it's probably been with us for millions of years. However, which other mammals allow members of the same species living on their territory which are not family? As in renting.
> Sorry for the snark, but come on...
> The Roman empire was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed luxury goods and debased their currency. The United States was built on never taxing labour, because that was seen as an atrocity (never mind the slavery). Instead they taxed importations and debased their currency.
Interesting, even though I don't see if you are for or against taxing labour, commerce or inheritance.
Inheritance tax is a way for the establishment to take land from small landowners. The state isn't a good counterbalance to "greedy" corporations, the state is there to support big business.
> It'll be sold to a mega-corp because they have more money to spend. So in a couple generations you kill off areas that are primarily small farms.
Please see Bruce511's comment above, he explains it better than me.
The thing is that with an inheritance tax, you make it impossible for someone to live with little or no money, and caring for their off-spring, by giving them a place to stay.
> Since all land was created by God...
Aha, but in the commandments it says that you shouldn't steal, so having property doesn't seem to be forbidden?
> But "territory" is an instinct so deeply ingrained that it's probably been with us for millions of years
So, is caring for your off-spring, kindness and brotherhood. What is your point?
In the USA, you must have a net worth of at least US$13M per person to be subject to the inheritance tax.
To my knowledge, yes [1].
[1] https://en.wikipedia.org/wiki/Stepped-up_basis
> How long has that been in place?
Since 1921 [1]. When the estate tax was in force, it was meant to avoid double taxation. In 1976, the Congress replaced the step-up basis with a carryover basis (you don't pay taxes on death but neither do you step up the basis). In 1980, it repealed the carryover basis "due to the record-keeping problems associated with reconstructing what a long-deceased relative might have paid for properties that had been held for generations," but didn't re-instate the step-up basis. In 2010, the estate tax was repealed. (EDIT: It was reinstated in 2011 in a neutered form [3].)
[1] https://en.wikipedia.org/wiki/Stepped-up_basis
[2] https://greenleaftrust.com/missives/stepped-up-basis-a-short...
You're correct. Fixed. Would note that it's famously flouted, though usually not in entirety [1].
[1] https://www.bloomberg.com/view/articles/2014-01-30/only-idio...
You need to have assets about US$13M per person to be subject to the estate tax. So if "only idiots pay" the tax, they are rich idiots.
https://www.fidelity.com/learning-center/personal-finance/wh...
https://greenleaftrust.com/missives/stepped-up-basis-a-short...