Rethinking estate taxes

True tycoons can find loopholes to dodge taxes, but middle-class ma-and-pa savers, who worked hard to put enough aside for a home, cannot rely on elaborate tax-planning.

By JPOST EDITORIAL
Money Shekels bills 521 (photo credit: Courtesy)
Money Shekels bills 521
(photo credit: Courtesy)
Encompassed in the plethora of remedies prescribed for the perceived social ills by the tent protest instigators and their assorted political patrons/cheerleaders is a reinvigorated call to revive Israel’s long-abolished estate tax. The tax as such was repealed in 1981, although capital-gains charges apply to sales of inherited assets.
The estate tax’s reintroduction is demanded by the likes of MK Shelly Yacimovich (Labor), who extol it as an indispensable tool for the sharing of wealth and as a mechanism for rebalancing the socioeconomic scale. In our present populist “soak the rich” climate, this sentiment is gaining steam.
Some consider estate taxes the most just of taxes. Others consider them unfair and ruthless. Proponents view estate taxes as essential to preserving meritocracy in society. Opponents characterize them as inherently destructive to family businesses and as penalties on what was saved and toiled for during a lifetime of work and on which taxes have already been paid.
Often, one’s viewpoint depends on social class/income. Those not liable to pay estate taxes are likelier to approve of them. Others, whose families are liable to lose, are vehemently critical.
Estate taxes, variously known as inheritance levies or death duties, are imposed on the assets received by an estate’s beneficiaries, or alternatively, on the estate bequeathed by the deceased. Many societies have them, to varying extents and in differing forms. Almost everywhere they’re controversial and are subjected to repeated alterations.
In Israel they bore further burdens shaped by our unique folkways, history and practical contingencies.
Locally, estate taxes were detested before 1981, in part due to the fact that Jewish society is exceedingly family-oriented and passing down one’s possessions to the children is close to sacrosanct. To that must be added Jewish memories of robbed family assets in the Diaspora.
Another difficulty arises from the fact that this is a land of immigration and there’s no desire to make it less attractive for those who don’t arrive here empty-handed.
Estate taxes could shape into a major disincentive to aliya, no matter how much the reinstated tax might be excused as merely relevant to the super-affluent. In the same breath it puts off returning Israelis who amassed holdings over the years.
The pro-tax lobby argues that immigrants/returnees from countries such as the US could anyhow never escape the American inheritance tax. Yet would such individuals relish an Israeli tax on top of the American? Pro forma, Israel’s inheritance tax-restoration advocates say that it would apply only to exceptionally sizable legacies and would thereby prevent the concentration of wealth in oligarchic clans and the bequeathing of such concentrations from generation to generation.
Otherwise, it’s argued, unhindered inheritance would perpetuate socioeconomic divisions, while reducing the upward mobility of the less prosperous. Most Israelis, we’re assured, won’t ever accrue large enough fortunes to worry about inheritance taxes.
This is predicated on limitations to be specified in projected legislation that would fix which amounts would be taxable and which would be exempt. But that might change.
Currency values, for instance, change. What once was a great deal of money is no longer a big deal. Likewise, what now appears vast may not seem the same years from now but would nevertheless be taxed. Property values also shift. Spiraling real-estate costs may formally deposit numerous middle-class Israelis into artificial multi-millionaire ranks.
Moreover, specific figures can be amended in existing regulations without requiring new legislation. Hence, sum-contingent exemptions aren’t set in stone. Once the tax is back, there’s no telling on whom it may be imposed in future.
But the most important reason for resisting the new bid to resurrect a much-hated tax is the fact that the true tycoons can mobilize armies of shrewd lawyers and astute accountants who’ll resort to every loophole imaginable and discover unimagined ones to boot. Odds are no tycoon will feel the pinch.
However, middle-class ma-and-pa savers, who worked hard to put enough aside for a home, cannot rely on elaborate tax-planning. They won’t dodge the bullet.