A Better Tax for Inherited Wealth?

A proposal in today's NYT that would require inheritors to pay income tax on what they receive in place of an estate tax deserves a closer look.

Hard to argue that this doesn't make sense...

Instead of a tax on estates, inheritors pay income tax on what they receive at ordinary income tax rates.

Missing from the debate has been any discussion of what level of tax is appropriate for heirs. Few Americans may realize that money received by gift, inheritance or life insurance is entirely free from income taxes. Of course, this made sense when there was a strong estate tax. But there is no other reason inherited wealth should not be taxed the same as wages, lottery winnings and all other forms of income. ...

If inherited wealth was taxed as income, exemptions could still be provided for smaller estates — up to $500,000 or even $1 million. And taxes on inherited family farms and businesses could easily be deferred, if need be, until they were sold.