Should inherited wealth be taxed?

Sam (No)

Taxing inheritance can discourage people from investing or saving their money. If people know that after their death, their heirs would not receive the full value of their assets due to taxation, they might be incentivized against investing and saving their money for this purpose. Reduced savings and investment activity slows both economic growth and a country’s economic recovery after downturns.

Inheritance tax can present more cost than benefit to both the government and heirs to the estate. Complying with estate tax law incurs a substantial amount of administrative expenses onto the heirs of the estate. Not only do people need to handle the immediate responsibilities related to the predecessor's death, but they must also navigate the complex legal system to begin the wealth transfer process. In cases where the money to be transferred has already been taxed, some believe that imposing an inheritance tax presents the unjustified cost of double taxation. Additionally, the government that collects the tax may not benefit from doing so. The costs associated with the complicated bureaucratic processes required to collect inheritance tax may outweigh the revenue gained in specific tax systems.

Inheritance tax can significantly disadvantage family-owned businesses. If the inherited assets of the business incur a large tax and the heirs have limited liquid assets (cash), the wealth transfer may cost the heirs more than they gain from inheriting the business. In some instances, the heirs may be forced to liquify the business through the sale or closure of the business to pay for the tax. The local economy and community suffer from losing such companies as these businesses employ locals and often reinvest in the community.

Andrew (Yes)

For tax programs to be fair and effective, they should be progressive. This means that those with more wealth should contribute more. Individuals inheriting money or assets clearly have more than those who do not, making it fair for this wealth to be taxed. This is especially true when we consider that these individuals did not earn this wealth but were simply born into it. A progressive tax system ensures that everyone contributes according to their means, fostering a sense of societal justice. 

Taxing inheritance helps to level the playing field in society. Those who inherit a lot of wealth have massive advantages and opportunities that those with less means will miss out on without reasonable inheritance tax structures. If some money is not reintroduced into society, it can stay siloed away in private bank accounts and never be used. Further, those who stand to bequeath large amounts of wealth may often choose to use their money while they are alive rather than have it taken through taxation. Whether this happens in the form of building new business ventures, purchasing items, or any other means of spending money, using their money rather than keeping it saved up to bequeath works to stimulate the economy and give others a chance to benefit from its circulation.

Inheritance tax is a valuable revenue generator for the government. In 2022, the US brought in thirty-three billion dollars in tax revenue from inheritance tax. This is a meaningful and useful amount of money that would otherwise be passed down from generation to generation without ever being used to everyone's benefit.