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How to Bring Maryland's Budget to Heel, Part III

Tax Wealth Received by Beneficiaries.
The so-called "Death Tax" [sic] has so cowed Maryland legislators (not to mention the federal ones) that there's currently little or no tax on decedent estates in Maryland any more. The tax consequence, unless the decedent was very wealthy and didn't shelter that wealth, pretty much amounts only to fees and transfer taxes on real estate legacies—and only if certain heirs inherit.

Contrast this situation to what's found in other developed countries (as reported in the Economist magazine on Oct. 25): Instead of levying taxes on the decedent's estate, the inheritance is counted as income to the heirs (an "inheritance tax" rather than an "estate tax"). The tax rate may vary, as it does in France, depending on how closely related the heir is to the decedent. The closer the relationship, the lower the tax rate.

As the magazine points out, "The estate tax offers a modest counterweight against the development of a new plutocracy to rival the industrial barons of America's Gilded Age. Furthermore it also taxes wealth built up through windfalls rather than thrift and effort."

Changing the estate tax to an inheritance tax is a more equitable, and less complicated, way to achieve this end. We urge Maryland's legislators to give this idea a look. If they wish to countenance a "game of chance," why not do it this way? Those with the best luck—who inherit—get nicked for some tax to benefit the general public. They still get unearned windfall "winnings," so where's the harm done? Contrast this with slots: one solution is dignified and equitable, while the other is regressive and repugnant.

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This story was published on November 3, 2007.