Rich people don't pay inheritance taxes. There are a gazillion ways to pass on money without falling prey to estate taxes. The only people effected are middle-class folks not savvy enough to avoid the tax.
The richest of the rich simply leave everything to a charity or foundation that their children draw salaries from (as well as having the use of the foundations estates, planes, etc.) Case in point... Warren Buffet; he's always going on about he isn't leaving anything to his children, but plans on giving it away to charity. What isn't frequently mentioned is that the kids 'own' the charities.
Middle-class folks are affected by a tax that starts at $23M of assets? I suspect not.
It's fascinating how much propaganda has shaped this debate. People with a few hundred thousand dollars in their 401(k) somehow got tricked into thinking the "Death Tax" had anything to do with them.
The rates vary depending on who is in power. They've been low, they've been high. You have no idea what the rate will be when you die.
The point is, regardless of the rate, the rich -- people with access to good lawyers and accountants -- don't be pay it. It's a political 'soak-the-rich' tactic used by progressive politicians to get votes... it never 'soaks the rich'.
It is unfixable.
This isn't a political issue. It's just a fact. Absent a complete totalitarian economy where every transaction is acrurinized, it will always be an easy tax to avoid.
Consider income tax... consider the massive involvement of the govt required to enforce this tax. That is, employers are required to deduct the tax from every paycheck, reams if forms, thousands of agents... all that for one simple transaction: namely, paying someone for services.
You can't have the same type of scrutiny for the totality of transactions that can effectuate the tranfer of money from one person to another.
I don't know what you mean by functioning. The US had an estate tax systems. It functions. The issue is whether it serves the purpose for which it was created.
I suspect that European billionaires find it just as trivial to legally avoid estate taxes as they do here.
There seems to be a naive understanding of the manner in which the 'rich' hold their money and wealth. It's not sitting in a nice and tidy 401(k) that is easy to identify and tax. Instead -- if they know what they are doing -- it's a convoluted web of interests in international companies, foundations, and contractual rights. If he wished, for instance, Bill Gates (just to use an example) could easily arrange things so that he 'owned' nothing, yet still lived like a billionaire.
By definition, charities (well, U.S. 501(c)(3) organizations) cannot have their assets or income inure to insiders. Can Buffett's charity pay a salary to his children? Sure. Can it pay them an excessive salary? Maybe, but the IRS will look closely upon it. Can the children buy a megayacht using charity money and sail around the world, while drawing a salary? Probably not.
I think you're overestimating the degree to which they can "own" the charitable organization. No one is denying that Buffett's children will live very comfortable lives without having to lift a finger, but that should be neither surprising of nor prohibited to one of the world's richest people, who got there by helping rise the tide.
One example I have personal knowledge of... The foundation leases an office building owned by ABC, Inc. ABC is owned by child of foundations grantor. The lease payments are double the mortgage payments. Within a few years, the mortgage is paid off. ABC then sells the building and gets the money.
Right, I'm not saying those things don't happen, but the example you gave is exactly what the IRS should be looking for -- transactions between insiders and related parties. Of course, they've been trying to gut the IRS...
You give me a law, I'll give you a way to legally avoid it. It's difficult to legislate this stuff. Indeed, I would contend it is impossible. Unless -- like we did with income -- we implement incredibly invasive procedures (such as withholding, W2s, 1099s, etc.) for ALL transactions.
It's not as simple as you think. For instance, Chelsea Clinton received a &600k salary from NBC along the following compensation from Barry Diller’s IAC/InteractiveCorp. Salary for Chelsea: $300,000. The board position also pays an annual retainer of $50,000 and a $250,000 grant of restricted stock.
This is how wealth is funneled from one generation to the next. Meanwhile, the Clinton foundation pays exorbitant fees or rents to the Dillers step-kids' charities and foundations. (As an example of how such arrangements work... I don't have any details.)
There is simply no way to keep track of who is paying whom. (Especially when you toss in the 'art' auction business... the greatest money-laundering scheme ever invented.... Rich Kid A gets $45mill for some crap painting from Rich Dad B, while Rich Kid B gets $45mill from Rich Dad A. Etc, etc. )
The richest of the rich simply leave everything to a charity or foundation that their children draw salaries from (as well as having the use of the foundations estates, planes, etc.) Case in point... Warren Buffet; he's always going on about he isn't leaving anything to his children, but plans on giving it away to charity. What isn't frequently mentioned is that the kids 'own' the charities.
https://www.nbcnews.com/businessmain/warren-buffett-his-birt...