Want Less Death? Raise the Estate Tax.

As I've said before, I try not to spend too much time analyzing proposed changes to tax law since it is so unlikely that any particular change will ultimately become law. But I cannot resist this report that the House of Representatives' tax bill would eliminate the estate tax while preserving the basis step-up on death. This means that if you buy stuff for $1 million, and it appreciates to $10 million in your lifetime, and then you die, not only do your heirs not have to pay estate taxes on the $10 million, but if they then sell the stuff for $10 million they don't have to pay capital-gains taxes on the appreciation. Any appreciation in the assets' prices during your lifetime goes to your heirs completely tax-free.

This is I have to say sort of an odd tax system on first principles. If you work for a living and make a million dollars, you will be taxed at fairly high rates. (The top rate for ordinary income will remain 39.6 percent.) If you don't need to work, and make your money by investing, you will be taxed at lower rates. (The top rate for capital gains is 20 percent.) But if you inherit your money, you won't be taxed at all.