Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Tuesday, November 24, 2009

Estate Tax Proposal: Treating Earned Wealth & Inherited Wealth Differently

Estat tax The New York Times recently featured an op-ed piece by Ray D. Madoff (professor of law, Boston College), which essentially proposes that the federal estate tax be reformed as follows:

  • Earned Wealth: Provide a large estate tax exemption, as much as $10 million, for the transfer of family farms and businesses that constitute a significant portion of the estate and that both generations have been involved in running for several years.
  • Inherited Wealth: Provide a small estate tax exemption amount, suggesting that a $1 million or $2 million exemption and a 55% estate tax would be reasonable. 

See Ray D. Madoff, Protect the Farm, Tax the Manor, NY Times, Nov. 21, 2009.  

For a detailed review of this estate tax proposal, see Hani Sarji, Ray D. Madoff's opinion on fixing the federal estate tax: an unbalanced proposal, Future of the Federal Estate Tax, Nov. 21, 2009, which begins as follows:

On one hand, Madoff's proposal comes off as balanced. She would lower the estate tax for its most vocal opponents -- farms, ranchers, and small business owners -- but she would raise the tax for others, including those with "manors."
On the other hand, imposing a higher estate tax on everyone other than farmers and small business owners leans to the left.


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This doesn't really make sense to me, because at the end of the day, it is all inherited wealth. The people who stand to benefit from Madoff's proposal are those who stand to inherit from people with great earned wealth. What is the rationale for allowing second-generation rich kids to keep more of their inheritance than third-generation rich kids?

Posted by: Mark | Nov 24, 2009 7:33:25 AM

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