I am genuinely curious to hear arguments for and against this, but one thing that has always bothered me is- why does the gift and estate tax exemption get adjusted for inflation every year, but not the federal minimum wage?
The current gift/ estate tax exemption per person is currently just shy over $12mm per person, meaning a couple could pass onto their heirs, estate tax free, up to $24mm. They only pay estate tax of 40% on any assets above that exemption.
But it gets better than that- at death, those same assets that pass estate tax free also receive a step up in basis to their fair market value at death, meaning any appreciation in the property transferred gets wiped out.
So let’s say John Doe purchased a building for $20k back in the 70’s, it’s now worth $500k. If he were to sell it during his lifetime, he’d owe a big income tax bill on the appreciation. If he dies, however, and his daughter Jane Doe inherits it, not only is there no estate tax, but Jane Doe can turn around and sell the building for $500k and pay zero income tax. To Biden’s credit he tried to eliminate this (with a reasonable threshold of say step up in basis for the first $1mm to protect legit middle class families), but couldn’t get enough support even from his own party.
Contrast this with the pathetic federal minimum wage, which not only is ridiculously low but is not subject to inflation adjustment. I’m sure a lot of economists and conservatives would argue that adjusting min wage could have negative inflationary effects, which to an extent is true. But if that’s the case, isn’t not only adjusting the estate tax exemption for inflation (and with that an increase of the step up in basis) also perverting things? How much tax revenue is lost to step up? How many older folks are holding onto assets and real estate just to avoid income tax on the built in gain?
I always like to take a nuanced approach, especially with tax policy. But I think politically it would be a great talking point to say “hey, estate tax is subject to inflation adjustment, why not the paltry min wage?”
Anyhow, random thoughts/ rants of mine of the day.