what are the advantages and disadvantages of inheritance tax?

Answer 1

Assuming the total amount of tax revenue is fixed, an inheritance tax allows the government to collect less tax from people that are working for their money. Since taxing something necessarily discourages it, it is probably better to discourage inheriting as opposed to discouraging working. Unfortunately, tax revenue is not a zero-sum game.

It is important to note that the U.S. uses an estate tax rather than an inheritance tax. The significance is that the dead person's estate pays the tax as opposed to the would be inheritors. Administratively, this is probably easier for the IRS since it only has to deal with the dead person's estate and can generally disregard the beneficiaries. There is already a lot of paper work with transfers at death, so adding a little more is probably not too burdensome.

Answer 2

There are no advantages. The big disadvantage is that most small businesses and farms are not flush with lots of cash. All of their money is invested in the business. When the owner dies and the assets are high enough, the family or beneficiaries often have to sell the business or the farm in order to give half of the assets to the government.

The sole reason this exists is because some people are jealous of those who stand to enjoy their inheritance. This death tax prevents one generation from passing their assets to another. All the assets were already taxed once and now the government wants half of the rest.

Answer 3

Advantage: Increased revenue for the government.

Disadvangage: Reduced cash for the person who has to pay it.