Flaws in Inheritance Tax Proposals

Some people believe that Congress should give up on the estate tax and impose an inheritance tax instead. As I previously blogged, Ray D. Madoff is a dedicated proponent of the inheritance tax. She would tax inheritances, allowing an exemption of up to $1 million and a deferral for taxes on inherited family businesses and farms. Hani Sarji, author of Estate of Confusion, sees some flaws in this proposal, including:

1. It would treat the estates of farmers and small businesses differently than other estates, without explaining why concentrations of wealth are appropriate for some but not for all.
2. It does not (and her previous articles inadequately) address the problem of taxing some wealth twice.
3. It favors spenders and consumers over savers.
4. It advocates paternalism over autonomy.

Hani Sarji, Should an Income Tax on Inheritance Replace the Estate Tax?, Forbes, Dec. 18, 2010.

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