{"id":37908,"date":"2026-02-10T16:45:06","date_gmt":"2026-02-10T21:45:06","guid":{"rendered":"https:\/\/lincolndemocrat.com\/?p=37908"},"modified":"2026-02-10T16:57:58","modified_gmt":"2026-02-10T21:57:58","slug":"taxing-inheritance","status":"publish","type":"post","link":"https:\/\/lincolndemocrat.com\/?p=37908","title":{"rendered":"Taxing Inheritance"},"content":{"rendered":"

Last Post: Trump’s efforts to destroy Earth<\/a>
\nNext Post: The “Seditious Six”<\/a>
\nI’ve pondered taxes a lot. My instinct is to keep Government from becoming oppressively bureaucratic. That said Bill Clinton cut 400,000 federal workers over eight years without the trauma imposed by Trump. NOTE THE ALL CAPS. HAVING SAID THIS I CHECKED IT OUT AND DISCOVERED A REPORT FROM AN ORGANIZATION CALLED THE NISKENEN GROUP. IT OFFERS NUANCES<\/a>.<\/p>\n

Skimming this report derailed me from the title I started with. Taxing Inheritance. (to pay for government)<\/p>\n

I admired a state senator from Duluth Jim Gustafson a moderate Republican. I recalled being very interested when I heard him deride the end of inheritance taxes which Republicans had successfully renamed “Death” taxes to make people who would never have enough money to pay them turn against them. I’d always thought of them as an anti-aristocracy tax so I had no problem with them. I think now they are a better line of attack than taxes on the rich.<\/p>\n

So I asked some questions of AI which reported that during the Second World War we had the highest inheritance taxes on the richest Americans ever. At its height it was 7% of their wealth. But when I asked what a 7% rate on these taxes would raise today it was a modest 57 billion dollars above the 3 billion these taxes raised during the war. That didn’t sound right to me because inflation and the concentration of wealth among billionaires seemed so much more vast. I challenged Chat and it acknowledged this admitting there was only 1 billionaire back then. <\/p>\n

This lead me to ask ChatGPT the following question:<\/p>\n

“Walk me through what policy changes would be required to get back to that 7 percent share.”<\/strong><\/p>\n

I got a fascinating answer:<\/p>\n

Great question \u2014 this gets to the mechanics, not just the headline rate. I\u2019ll walk through it cleanly, step by step, and flag what really matters versus what people often over-focus on.
\nI\u2019ll frame this as: What would have to change for estate taxes to return to ~7% of federal revenue, roughly their WWII-era role.
\n1. The single biggest lever: the exemption threshold
\nThis matters more than the top rate.
\nThen (WWII era)
\nEstate tax exemption was very low (roughly equivalent to $60k\u2013$100k today)
\nA large share of upper-middle and wealthy estates were taxable
\nNow
\nFederal estate tax exemption ? $13.6 million per person (? $27M per couple)
\nResult: fewer than 0.1% of estates pay any estate tax at all
\nWhat would need to change
\nTo approach a 7% revenue share:
\nLower the exemption dramatically, likely to somewhere in the range of:
\n$2\u20135 million per person, or
\nA graduated exemption where larger estates lose more shielding
\nThis alone would expand the taxable base by an order of magnitude.<\/p>\n

2. Restore steep progressivity in estate tax rates
\nThen
\nTop marginal estate tax rates:
\n70\u201377% on the largest fortunes
\nMultiple brackets with steep escalation
\nNow
\nFlat 40% top rate
\nVery few brackets
\nApplies only above the huge exemption
\nWhat would need to change
\nTo get near WWII-style revenue:
\nReintroduce multiple progressive brackets, e.g.:
\n40% on $5\u201310M
\n55% on $10\u201350M
\n65% on $50\u2013500M
\n70%+ on billion-dollar estates
\nImportant:
\nThe revenue comes almost entirely from the very top, not from taxing \u201cnormal\u201d inheritances.<\/p>\n

3. Close valuation and avoidance loopholes (quietly enormous)
\nThis is the least visible but most crucial change.
\nCommon current techniques
\nGrantor Retained Annuity Trusts (GRATs)
\nFamily Limited Partnerships (valuation discounts)
\nDynasty trusts (avoiding estate tax for generations)
\nAsset freezing and stepped-up basis strategies
\nThen
\nMany of these tools did not exist or were tightly constrained
\nWhat would need to change
\nLimit or eliminate valuation discounts
\nCap or abolish dynasty trusts
\nImpose minimum effective tax rules on large estates
\nTighten IRS authority on asset valuation
\nWithout this step, higher rates alone will not produce WWII-level revenue.<\/p>\n

4. End or limit step-up in basis (this is huge)
\nThis is technically not the estate tax \u2014 but it\u2019s inseparable in practice.
\nCurrent rule
\nAssets passed at death get a step-up in basis
\nUnrealized capital gains often never get taxed
\nEffect
\nEncourages holding wealth until death
\nShrinks the effective estate tax base
\nPolicy change needed
\nOne of the following:
\nTax unrealized gains at death above a high threshold
\nOr carry over the original basis to heirs
\nOr apply a surtax on large unrealized gains in estates
\nThis alone could raise tens to hundreds of billions, depending on design.<\/p>\n

5. Broaden the tax base to inter vivos transfers (gifts)
\nThen
\nGift taxes were tightly integrated with estate taxes
\nLifetime transfers were harder to shield
\nNow
\nSame high exemption applies to gifts
\nAggressive lifetime planning removes assets before death
\nNeeded changes
\nLower lifetime gift exemptions in parallel
\nTreat large lifetime transfers more like inheritances
\nEnforce cumulative lifetime transfer accounting<\/p>\n

6. Administrative capacity (unsexy but real)
\nWWII-era estate taxation worked because:
\nIRS audit rates were much higher
\nValuation disputes were aggressively pursued
\nTo reach 7% again:
\nSpecialized IRS estate-tax units
\nHigher audit probability for ultra-large estates
\nBetter asset reporting (especially for private equity, trusts, art)<\/p>\n

7. What wouldn\u2019t be required
\nThis is important:
\nYou would not need to:
\nTax ordinary inheritances
\nTax family homes below high thresholds
\nTouch most estates at all
\nA properly designed system could:
\nAffect only the top 0.5\u20131% of estates
\nStill raise hundreds of billions annually
\nBottom line (plain English)
\nTo get back to a 7% federal revenue share, the U.S. would need to:
\nLower the exemption dramatically
\nRestore steeply progressive top rates
\nShut down elite avoidance strategies
\nTax unrealized gains at death or remove step-up
\nTreat large lifetime gifts like inheritances
\nYour instinct is right because:
\nThe modern wealth structure is far more top-heavy than in the 1940s \u2014 but current policy barely touches it.
\nIf you want, next we can:
\nRoughly estimate how much each reform contributes
\nCompare this to wealth taxes vs inheritance taxes
\nOr look at how other rich countries do this today<\/p>\n

THESE ALL CAPS ARE ME THINKING. THE TERM THAT MOST ATTRACTED ME WAS “DYNASTY TRUSTS” WHICH ALLOW VERY RICH FAMILIES TO SHIELD THEIR WEALTH FOR GENERATIONS. I DISLIKE THE IDEA OF STATES COMPETING AGAINST EACH OTHER IN A RACE TO THE BOTTOM SO THAT RICH PEOPLE MOVE TO WHERE THE STATES DO THE LEAST FOR SCHOOLS, SERVICES ETC. HAVING THE NATIONAL GOVERNMENT IMPOSE UNIFORM INHERITANCE TAXES WOULD ELIMINATE THAT UNHEALTHY COMPETITION WHICH ENTICES THE RICH TO LEAVE THE STATES WHERE THEY BUILT THEIR FORTUNES. <\/p>\n

I’M FOR DEATH TAXES.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last Post: Trump’s efforts to destroy Earth Next Post: The “Seditious Six” I’ve pondered taxes a lot. My instinct is to keep Government from…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[65,168],"tags":[],"class_list":["post-37908","post","type-post","status-publish","format-standard","hentry","category-taxes","category-welty-for-congress-2026"],"_links":{"self":[{"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=\/wp\/v2\/posts\/37908","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=37908"}],"version-history":[{"count":4,"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=\/wp\/v2\/posts\/37908\/revisions"}],"predecessor-version":[{"id":37917,"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=\/wp\/v2\/posts\/37908\/revisions\/37917"}],"wp:attachment":[{"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=37908"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=37908"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lincolndemocrat.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=37908"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}