Elephant in the Parlor: Repeal of Stepup in Basis at Death
This proposal would end the step-up in basis for property acquired by reason of the death of another individual and increase the tax on inherited property when it is sold. The exemption for built-in gain at death is unfair because it allows consumption, even sumptuous consumption of investments by heirs, without either the heir or original owner paying tax on the consumption. Under normal patterns, tax on heirs does less…
This is one of a number of articles about taxation that invokes “fairness” as a positive attribute in rating tax policy. Fairness in the real world is meaningless. The only meaningful argument is whether the tax policy will bring in more or less tax money. To bring in more money, you need to tax the people more who are on the left side of the Laffer Curve more and the people on the right side of that curve less. Translation: rich people can easily change their behavior and they already supply most of the tax revenue for the country. So the most effective change to tax policy would be to raise tax rates on the poor and lower tax rates on the rich.
Would this be fair? Of course not! But is it fair for connected political hacks to rob the hard-working job creators? Again, fair is what you can get away with. Tax 0% you get zero, tax 100% you get zero.
By the way, is it fair to repeal step-up basis so that heirs would pay taxes based mainly on how much the government has printed money and inflated the currency? I think not, but if you think you can grab more tax dollars for government to squander and transfer to the well connected, then go for it!