Response on Giving and Taxes-BECKER

None of the comments addressed the dead weight costs involved in maintaining the estate tax. Some estimates suggest that far more than $1 is spent in avoiding the tax for each dollar collected. This is not surprising, given the attention paid to trusts, generation-skipping trusts, and other methods of legal avoidance. Such a high ratio of costs to collections hardly qualifies the estate tax as an attractive tax. I am also concerned about trying to equalize opportunities for children from different families. But the estate tax makes only a small contribution to that since most of the inequality that is passed on from generation to generation is in the form of earnings. Children of higher income families earn more than others, and the difference is sizeable. The estate tax makes a small contribution compared to the effects of parental wealth on earnings and inequality. Children who inherit a lot may not work hard and lead not very valuable lives. But I believe that should be left for parents to decide how much they want to leave them. Moreover, if the desire is to affect inequality in the children's generation, the tax should be on inheritances, not on estates. So what is the estate tax accomplishing when it is expensive, unimportant in affecting inequality, and does not address directly the inequality of inheritances? Still, while I am against the estate tax, as I said in my post, I could tolerate a tax on very large estates. But the minimum estate that would be taxed should be far higher than it is at present. In addition, the tax rate should be no higher than about 20 %, so less effort would be put into using lawyers and accountants to reduce the estate tax liability. Whatever is the case with the Catholic Church and the Republican Party, they are not foundations. I was referring to foundations that moved from being on the left to becoming conservative or libertarian. Even without an estate tax, a basis would have to be established for assets that are transferred to heirs. If it is the original purchase price, then there is no less incentive to trade before death than there would be by the heirs after death. In either case, capital gains would be taxed at the capital gains rate. I do not agree that the act of giving makes someone liberal in the sense of a government interventionist. One can give to support the education of children from poor families, to scientists working on finding cures for cancer or diabetes, and so forth without being a proponent of large government and extensive regulations. Indeed, the less one believe that governments can do the job; the more one will support private charities.

Comments

[Arun Khanna]

Estate tax should be used for providing equal opportunity of a good education to all Americans. Estate taxes could be earmarked as federal funds for public schools or a school voucher system.

[Lord]

An estate tax encourages charity. Lack of one encourages avarice.

[Richard Mason]

One more thought on rightward shifts. If any foundation, church, or other long-lived organization ever did evolve from being "liberal" to being "conservative," then, insofar as conservatism connotes traditionalism and hostility to change, the organization might inevitably deny that any fundamental shift had ever taken place.

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