The more common situation is extremely high valuations, and thus taxes, on real estate which is listed and not selling at half the valuation. I know many people who have gotten burned by that.
Its also a little similar to a system used to resolve splitting a 50/50 owned company: the person who wants to buy out the other partner must first give the price they'll pay, and then the second partner must choose between buying them out at that price, or selling their share.
Of course, there can be an immediate arrangement if they just give away the item to a museum.
The government wants cash, it has no use for paintings!
Why?
Hey kids, I hear your parent died? Great! You owe us 500 million dollars, get to work.
I think estate taxes are defensible, but the way this particular estate was handled doesn't seem defensible. Out of all the things someone could do with their vast fortunes, buying art and then loaning it out to museums and collections doesn't seem like the worst thing in the world.
In particular, the article points out that black market valuations may have even been considered when valuing the art in the estate: That means the government is basically encouraging these works of art to be sold on the black market (likely to private collectors who will keep them in private), where if they were at least sold on the open market - or in this case, held by the original owners - they would be more likely to be put on loan to museums so the public could benefit from them.
Alternately, in a case like this where it's illegal to sell the item being taxed, the government should offer the option of simply handing it over to them in order to erase the tax liability, or giving it to a charity, in order to conclusively demonstrate that no profit is being made from the work of art (black market or otherwise).
So you're supposed to feel sorry for people in that position? That they have to pay so much tax they might have only a few hundred million left to pad out their mattress?
Most people are ground down to nearly nothing by taxes and cripplingly high insurance premiums. They should be so lucky to have this much left over after taxes.
You know what most kids inherit when their parents die? A giant tab for the funeral.
Moreover, when the cash is tied up in an art collection, the valuation is really tricky. Art that earns a $500m tax bill could easily be worth less than that if sold immediately - as is, in fact, the case with the piece under consideration.
As for the fact that most people inherit debts from their parents, I don't see how that's material to the discussion at hand.
Do you have kids? It turns out one big economic incentive, particularly late in life, is to make money not for yourself but for your children. A lot of people hate the concept of an heir running around with money he/she didn't earn, but i mean, it's Not Your Problem so long as the money was fairly earned by the parents. Furthermore, a billion dollar estate is probably something that has already been taxed, possibly several times, possibly in a compound fashion, so I don't think there should be any worries that rich heirs have not paid society for their money.
There's also serious implementation problems with estate taxes, as other posters have described. Levying very large taxes on illiquid and hard-to-value possessions is unfair no matter how you slice it.
I don't hate the concept either, but IMHO complaining that one would only receive $500M of unearned money instead of the $1B anticipated just makes the would-be recipient look like an asshole.
Most people in the world would probably be satisfied to receive a few thousand dollars of unearned money. $1M and they'd be set for life in most parts of the world. Anything above that is just gravy.
Because, God forbid, we treat other humans as humans. They've got some form of pretend wealth so screw them.
Right?
No wealth is created when an estate gets handed over. The tax thus stops being a way to assign a percentage of wealth to public projects and becomes a accounting trick. The idea that this simple wealth transfer should be taxed at such a high rate is slly.
http://www.economist.com/blogs/lexington/2010/10/estate_tax_...
The United States, as conceived, was a departure from the European system comprised mostly of wealthy land owners and destitute peasants.
In a sense, the estate tax is an unfortunate necessity. Without it you would have Paris Hilton inheriting billions absolutely tax free, and likely accumulating even more wealth not by any particular skill, but through interest alone. That much money has a sort of gravitational pull at that point if not mis-managed.
> Hey kids, I hear your parent died? Great! You owe us 500 million dollars, get to work.
Clearing up a dead parents estate an be psychologically challenging. Luckily most people paying the estate tax can afford lawyers to help them muddle through. If you have a well adjusted family and the person doesn't die suddenly you could even plan a lot of this ahead of time.
Yeah, it sucks, and it's not ideal, but out of all the places the government can extract money to benefit society, it's one of the most effective and least painful in the big picture.
Hey kids, I hear your parent died? Great! You get to keep half their of their shit that you did absolutely nothing to earn for yourself.
I agree. It should be much higher.
This is money earned by someone through their hard work. They probably created hundreds or thousands of jobs in the process too. They paid taxes on it already, too. Why should the state help itself to almost half of the inheritance? Because it doesn't suck enough to have a close relative die, so you want to make it more painful?
As an American, I am not opposed to inheritance taxes. Discouraging the creation of an hereditary aristocracy is part and parcel of the legacy of our revolution and has long been one of the reasons for enacting inheritance taxes. Given the way in which our tax code favors capital gains, the inheritance tax is in many ways a mechanism which allows people to grow their wealth tax deferred. And in the case of the art, it is a stretch to consider any increase in value a capital gain that contributed to economic growth.
Other cultures enjoy supporting hereditary nobility. But it's not part of our founding principles.
If you were rich, that would be because you cared to generate wealth on that scale. You worked your bollocks off and created vast amounts of wealth at the cost of blood and sweat and your life. I am not rich, but I am earning decent money through my business now and trust me when I say that every penny the government takes on the money that I earned through my hard work creating something from scratch is painful.
I shudder at the thought that when I die, a large percentage of what I earned would be snatched away from those I love "just because the state can".
However, the basis of my opinion regarding the inheritance tax in general is based on a simple political philosophy similar to that of Socrates - when one has enjoyed and benefited from the rule of law for a life time, the only ethical course is to accept those parts of the law which may be to one's detriment.
Sonnabend clearly benefited from the laws of the US for many decades - among those the ability to own private property, enforce contracts, and exchange goods for fungible currency. Indeed, it was US immigration policy which allowed her and her family to immigrate and transfer their wealth from Europe on the eve of the Second World War.
The US tax code allows wealth to be transferred between generations in accordance with American values. The creation of a permanent aristocracy has not traditionally been consistent with those values. As for me, I shudder at the the thought of money constituting my most important legacy to those I love.
Do you think children should win the birth lottery?
Maybe the state should control mate selection as well. We wouldn't want all of the best people pairing up, what is left for the rest?
It's called public education and it's not very controversial.
If my spouse is dead or I am divorced, and I have a house, and I die, are my children homeless and destitute?
I am honestly flabbergasted at the concept that a government should own things by default. A government is not a kingdom, and it should govern, not own.