Why do we have to pay inheritance tax?

Question

When we have already paid tax on what we have earned. This law feels medievil, from a time when royalty, in order to get more money, could come up with something like the window taxes...

Answer 1

In what country? Y! Answers in English covers many countries!

If you are talking about Canada, CANADA HAS NO INHERITANCE TAX. And no Estate Tax (which is what the UK and the USA have; some US states have inheritance taxes, and the Inland Revenue calls its tax IHT, but it is levied on the estate without regard to who inherits). Canada imposes CAPITAL GAINS TAX (CGT) on a "deemed sale" at death.

And there's the rub: In the USA and the UK, one is forgiven CGT and there is a step-up of basis for future CGT -- and this is so whether or not estate tax is in fact paid.

Under President Bush's proposed abolition of estate tax, CGT would NOT be forgiven -- it would be postponed until some future sale. That will create a nightmare for accountants: it might be necessary to keep documents proving purchase price for generations. (CGT in the USA is temporarily at a maximum rate of 15%. In the UK the maximum rate is 40% but there are various allowances for inflation, etc.)

Anyway, your premise that "tax has already been paid" is demonstrably wrong. Fewer than 5% of estates are taxable at all, and that number will be reduced as the present $2 million exemptioin rises. (In the UK the number will increase because the exemption is only £285,000 and that's far below the average value of a London house.) Most inherited wealth is not saved earnings -- unless we're talking about one of those corporate CEOs making hundreds of millions of dollars. It's capital gains.

And BTW, only a tiny fraction of family farms (close to zero) and a tiny fraction of family businesses are taxed at death. And the law makes special arrangements for those. Anyone who claims on TV to have had to sell his family business to pay tax is lying.

And in Britain, the estate of the very rich don't have to pay IHT because they can give stuff away, and there is no gift tax. As long as the donor lives 7 years beyond the date of the gift, however many millions of pounds Sterling worth it is, there is no tax. (There may be CGT, but that's another story for another day.)

Answer 2

Earned income is different from inherited wealth. Public debate about what constitutes "wealth" is overdue.

Something that seems medieval to me is having a congress that passes bills at the midnight hour, attaching earmarks by secret committees and passing estate tax laws that evaporate in some year in the future. Or tying estate taxes to minimum wage increases. Preposterous! That does not address a president who employs the use of the signing statement to circumvent laws or who, by executive order, diminishes by half staff working on inheritance tax enforcement for the IRS -- a defacto cut in inheritance taxes collected.

Now estates under two million are exempt from federal estate taxes. That includes most. But times and inflation change things and considering the number of homes valued at more than that, public debate is overdue. Hopefully we will return from the dark ages of government and begin public debate in the light of day. If reason and logic could replace alarm and spin we would all be better off. Your "feelings" about inequity of the tax might be tempered with fact if -- and only if -- we are presented with facts instead of scare tactics and talking points that put the "fear of loosing the family farm" in all of us when not one single family farm has actually been lost.

Answer 3

Although I stand to inherit and will have to pay the tax, I like this tax.

Some people don't inherit anything and they have to make it on their own. Likewise some people have to pay for their parents' care and not only don't inherit, they have expenses. So, for the lucky ones that do inherit, it makes sense that the government funds itself from this as it is surplus money.

What is sick is taxing payments such as unemployment, disability and wages earned below the poverty line. Those people desperately need that money for essentials.

Answer 4

I think it's a disgrace. It is double taxing people. It is yet another law that in my opinion damages the middle class more, as the super rich have ways and means of manipulating their assets and funds to prevent tax detection.

It is all part of the great theft that the British Government makes on people in this country.

How can it be right in any civilsed country where old people have to sell up to pay for their own care. Whereas those who may have never worked a day in their life will still get access to the same care home as the person who has had to sell personal assets, that they would have wished to pass down to the next generation.

Another nail in the coffin of this country in my opinion.

Answer 5

This isn't about if money have been taxed or not.

The Government want to tax you every single time money changes hands. They just give the tax a different name to describe the circumstances of the transaction.

Income tax / VAT / Stamp duty / Inheritance Tax / Other Duties/

Think about it for a while - It's very hard to spend money without the government taking a bit fat slice.

Answer 6

its just a way for the greedy government to get their fat mitts on our hard earned cash. it should not be allowed.

however, when you look at it from a different point of view - if it was a young person who has lived off their wealthy parents money all their lives and is left a few million from their parents they are not very likely to ever work in their lives so why shouldn't they contribute something towards taxes. (look at Paris Hilton for example. she has no need to work and has never worked a proper job in her life nor will she ever have to with the inheritance she willl be left). Most of us lot are not likely to be left anything like that kind of money. It is unfair that someone who doesn't work and has never worked a day in their lives can inherit millions of pounds but yet not have to contribute taxes like everyone else so i do agree with inheritance tax from that point of view.

Answer 7

its the most unfair tax there is. someone has earned and saved and already paid tax on it so why when they pass away and they want to leave something for other family members or friends do we have to pay tax on it again. government is so mean and out of date.

Ive just had a dump... stick a tax on that Gordon Brown.

Answer 8

Inheritance tax is a relitively modern phenomenon, and it reflects changes in society. In modern society one makes money according to one's socio-economic position. Not so long ago one passed on one's socio economic position to one's children, and it was appropriate that they Should also receive the trappings of that position. When that position was only passed on to one child, only that child got an inheritance, and any others were married off (if female) or joined the Church or Army (if male). In modern society, each child is supposed to earn their socio-economic position regardless of the status of their parents. This is the essence of meritocracy, the guiding principal behind modern socio-economic ethics. Consequently, it is innapropriate that a parent should pass on the trappings of their socio-economic position to a child who's status may well be entirely diferent. This should mean that inheritance tax is set at 100%, but given the disproportionate power of the rich, who are the ones who gain from having lower income taxes (everyone else gains more from the improved state provided services given by inheritance tax than they loose from the tax itself), inheritance tax is still fairly low compared to its appropriate value given modern socio-economic trends.

Answer 9

Thank the dummycrats that look to take away from people that work hard to gather wealth and give it to the lazy mass in public housing and living on government entitlement programs while breeding like roaches. People need to understand when someone earns a living and improves their life and that of their family they feel better. Sitting around watching game shows and guzzling booze between mattress sessions is not living. It is fermenting.

Answer 10

I can't see a good reason.

I fully intend to move as much money as I can abroad before I die so that the government can't get their hands on it.
I think it's very unfair for people to pay tax twice.