Many arguments have been advanced as to why the estate tax is a bad idea. Normally, they focus on what the tax does to break up inheritances, but there is another argument against the tax.
Everyone has probably heard the argument that the estate tax is unfair because it could possibly force heirs to sell off portions of their inheritances, including family businesses and farms. Whether that happens as the result of the estate tax is hotly contested between those in favor of the tax and those opposed to it.
Sometimes people also argue that the estate tax is unfair because people who have worked hard to accumulate wealth should have the right to pass it on to their children instead of to the government. However, another reason to oppose the estate tax can also be advanced.
In a New York Times editorial, titled "Why Taxing Fairly Means Not Taxing inheritances," N. Gregory Mankiw argues that the estate tax is unfair because politicians keep changing it.
The idea is simply that because the estate tax exemption and rate is subject to change the amount of tax that has to be paid, if any, depends on the moment that a person dies. A person who passes away on one day can pay a lot more or less than a person who passed away the previous day if the law has recently changed.
The author believes that is not fair.
While this argument is unlikely to persuade people who support the estate tax, it might lead some politicians to consider how changing the tax can hurt people. Perhaps, this will lead to more stability in the rates.
For more information about estate planning for estate tax and more down-to-earth issues in Orlando FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: New York Times (Sept. 9, 2016) "Why Taxing Fairly Means Not Taxing inheritances."