On Death and Taxes

My mom passed away last night. Although expected, it was still a shock to the emotional system. At times like this I take great comfort in her pride in me that I became an attorney. She enjoyed our discussions about right, wrong, and WHY we Americans do what we do as a society. In memory of my mom, I want to share some thoughts on wealth transfer taxation.

Perhaps nothing so incites many people as the thought of paying a "death tax." Some folks are for it. I think about taxation on the transfer of wealth pretty often, because while I believe in providing money for government to do its job, I also espouse the notion of free will and the ability for each of us to move capital freely and as we see fit.

Two close friends and great conceptual thinkers, Bob Keebler, CPA and Jonathan Mintz, J.D., directed me to a very interesting paper from the IRS titled Federal Taxation of Inheritance and Wealth Transfers. It's available online at http://www.irs.gov/pub/irs-soi/inhwlttr.pdf.

This thoughtful study, written in 1997, discusses the advantages and disadvantages of an increased scope of transfer taxes and presents the history of thinking about such since the formation of our country. Here is an abstract:

"For most of the 20th century and at key points throughout American history, the Federal government has relied on estate and inheritance taxes as sources of funding. Central to both historic and current debate over the role of inheritance in democratic society is the divergent characterization of inheritance as either a "right" or a "privilege." This paper provides an understanding of these arguments and of the history surrounding the development of the modern American transfer tax system, as well as a foundation for evaluating current debates and proposals for changes to that system."

Note that this article comes from the Statistics of Income (SOI) Division of the IRS; they have very interesting statistics about estate and gift taxes, among other things, at http://www.irs.gov/taxstats/index.html.