Pros and Cons of Estate Taxes

Congress first created the estate tax almost a century ago in an effort to decrease economic inequality, but the tax never achieved that original goal. So why not get rid of the estate tax?

• It taxes income that has escaped taxes throughout a wealthy individual’s lifetime, such as unrealized gains.
• In recent years, it has raised about $20 billion annually. Any amount of revenue helps when we’re so far in debt.
• It encourages charitable bequests because giving to charities cuts what estates owe.

Some downsides to estate taxes include: people waste time and money organizing their estates to minimize estate taxes, beneficiaries are not productive members of society, and some estates might have to sell assets to pay the estate taxes.

See Roberton Williams, It’s Not About Economic Equality, N.Y. Times, Dec. 16, 2010.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.