Repealing the Estate Tax May Have its Drawbacks

Ray D. Madoff recently wrote a piece entitled Inherited Wealth Shouldn’t Get a Free Pass on Taxes, Los Angeles Times, July 6, 2010. One of the most common arguments for repealing the estate tax is that it’s unfair to tax the money twice (once when the decedent earns it and once when the beneficiary receives it). Madoff points out that property is often subject to multiple taxation and that taxpayers are subject to tax, not dollars. For example, a mechanic cannot avoid paying taxes by claiming that the money was already taxed when his customer earned it.

Madoff also believes that repealing the estate tax perpetuates concentrations of wealth among the already-wealthy. More than 33% of the country’s wealth is owned by the wealthiest 1% of Americans, and allowing these people to inherit large sums of money untaxed simply broadens this disparity. Instead, this money could be used to lessen the gap by funding government programs, alleviate the tax burden for the less wealthy, or reduce the national debt.