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I didn't really understand that point? Is the claim that if there was no inheritance tax, a family would accumulate enough money to start a mid-sized business?

• pgeorgi 10y ago
  An inheritance can include a company, if privately held. That company has a value, and that's taxed through inheritance tax. The problem is that a company of value $x rarely has liquid assets of $x*$taxrate, so inheriting a company can mean personal ruin. On the _other_ hand, not accounting for companies in inheritance tax means that every family ever will shift all its possessions into a company. Roughly speaking, Germany solved this by creating a set of exceptions for value "in a company", as long as it continues to be held for a given number of years (otherwise, since it was sold, it's considered a liquid asset and thus fully taxable).
  • easilyBored 10y ago
    On the _other_ hand, not accounting for companies in inheritance tax means that every family ever will shift all its possessions into a company. No taxes if a company has an employee that makes at least x00% of minimum wage for every, say $500K of worth. So your parents leave you a company that has a $20mm value and you have 40 employees that average $35,000 a year, you pay no inheritance taxes. Of course you need you'd to set a reasonable timeable to discourage cheating, otherwise they'd sell /fire 50% as soon as the x year timeline expires.