Would an accessions tax be better than an estate tax?

That was the argument made by academics before the Senate Finance Committee hearing mentioned below by JLM, according to Tax Notes Today ($). Some explicitly argued that transfer taxes should be lower on bigger families.

Prof. Lily Batchelder of New York University School of Law advocated a wealth transfer tax structure in which recipients with lifetime inheritances greater than a $1.9 million exemption would pay individual income tax plus a 15 percent surtax. Batchelder said such a scheme would be a revenue-neutral replacement for the estate tax in 2009, which will impose a 45 percent tax on estates after a $3.5 million exemption.

A family business being split among four children would thus be exempt up to a value of $7.6 million. Of course, the impossible valuation questions are left for another day.

I believe that there is no chance of shifting to this approach. Canada provides an interesting alternative: one-half the value of an inheritance is taxed as a capital gain. This has the virtue of piggybacking on the existing income tax collection system, rather than requiring an entirely separate, if interlocking, legal scheme.