The initial tax proposal introduced in the House of Representatives by Republicans contains provisions that would allow the wealthy to easily transfer great sums of wealth to their heirs.
There has been a lot of talk by politicians and the media in recent years about income inequality and whether it is bad for society. This inequality occurs when there is a large gap between the amount the highest earners make and the amount those lower on the income scale earn.
These discussions naturally lead to arguments about income tax rates, minimum wages and safety net programs. However, many economists are less focused on income inequality than they are on wealth inequality.
This focus is not on the amount people make in any given year, but rather how the overall wealth in society is distributed.
All of this makes some proposals in the Republican tax plan interesting as the Wills, Trusts & Estates Prof Blog discusses in “Proposed Tax Policy By Republicans Would Enable Wealthy to Pass On A Massive Income Tax Deduction to Their Heirs Upon Death.”
The proposal would eliminate the estate tax entirely. However, it would keep the step-up basis for capital gains.
This would let the wealthy to pass assets on to later generations of their family tax free and allow for a greater concentration of wealth.
The plan also proposes to keep the depreciation deduction for rental property.
These proposals in combination will likely be controversial for the economists who worry about wealth inequality. However, if they pass wealthy people will be grateful.
Reference: Wills, Trusts & Estates Prof Blog (Nov. 6, 2017) “Proposed Tax Policy By Republicans Would Enable Wealthy to Pass On A Massive Income Tax Deduction to Their Heirs Upon Death.”