Friday, March 28, 2014

Paul Krugman Wants to Tax Estates

Theodore Roosevelt, 1915
What this country needs is a good old estate tax, like Teddy Roosevelt advocated. So writes Paul Krugman in his New York Times column.

 We already have such an estate tax, on paper. Actually, when compared with the estate tax imposed on decedents who got ridiculously rich in the Gilded Age, today's estate tax looks like a heavy hitter.

In 1924, when the top estate tax rate first reached today's level of 40%, that rate applied only to estates over $10 million, equal to about $137 million today.

Our current estate tax takes 40% of everything over $5.34 million.

But not really. As estate planners have claimed for generations, paying estate tax is largely optional. Taxable values often can be sheltered or discounted. Truly wealthy individuals may transfer billions tax free during their lifetimes. Closing loopholes created by stratagems such as GRATs, defective grantor trusts and perpetual dynasty trusts might net the U.S. Treasury more than lowering the estate-tax exemption or raising the rates.

But let's not knock "inherited wealth." If the Mars candy enterprise had not remained in family hands, for example, Snickers and Milky Ways would no longer be worth buying.

Photo via Wikimedia Commons.

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