What estate tax is fair?

The estate tax or death tax, as it is sometimes called, might be eliminated if some legislators have their way. Consider what it might mean.

Suppose you were stopped by police and were told you ran a stop sign. You are sure you didn’t run one, and you mention this to the officer. The officer says he knows you didn’t run a stop sign, but the state really needs the money right now and you have plenty.

The point here is that no matter how much the state needs money and no matter how much you have, there are fair and unfair ways for the state to meet its needs. You’ll probably agree the phony traffic tickets are an unfair way. There might be more fair ways.

There are “progressive” taxes for example that charge people with more money, not only higher taxes, but at a higher rate.

Are progressive taxes fair and why?

Wouldn’t estate taxes be just as fair?

Some of the arguments for progressive taxes are that rich people cost more to protect than people with less money, because the rich are more likely targets for criminals or their property is more difficult to reach with fire equipment and so on.

Whether that is so is not the question here.

The question here is whether estate taxes are fair.

After people die what state services do they use?

Have you ever bought anything from a catalog in another state?

Did you ever notice that only residents of certain states have to pay sales tax? It’s usually the state or states where the catalog company is physically located.

Why don’t people from other states have to pay the sales tax?

They don’t use any of that state’s services. It is a state tax not federal.

Now consider the “death tax” or estate tax, after people die they don’t use any states’ services either.

Let’s look more closely.

While people with property are alive they pay property taxes.

When they die and pass that property to an heir, the heir will have to pay property taxes. If the tax depends on the size or amount of the property, it shouldn’t change since the size or amount hasn’t. If you charge more tax, a “death tax,” all that does is charge for the fact that the property changed hands. Taxes that only charge for changing hands are, generally speaking, not going to help the poor. A tax that does that at death might lead to higher fees for other changes of ownership, and changes of ownership shouldn’t be discouraged since they generally help the poor.

The General Assembly failed last year to pass legislation that would remove a lower limit on state taxes allowing them to eventually drop away altogether.

Why? We do have a very short legislative session; that could be part of the problem, not enough time to do things right.

As I hinted earlier they are going to try again this year.

Let’s wish them well, the estate tax is an issue that should go away.