A multi-trillion dollar transfer of wealth from baby boomers to their brethren has become a “tempting target” for taxation, according to a new report.
The transfer, which is estimated to reach $90 trillion in the US alone, has sparked a new and urgent political debate on inheritance taxes, reports the Financial Times.
“With even the youngest boomers turning 60 this year, the wealth transfer is already under way — leaving policymakers facing increasingly urgent questions about whether and how to influence the outcome. Their responses could shape tax policy for many years.”
In a recent report, the Organisation for Economic Co-operation and Development (OECD) said redesigned taxes on inheritance could help governments redistribute wealth, simultaneously boosting equality and federal revenue.
Pascal Saint-Amans, former director of the Centre for Tax Policy and Administration at the OECD, says inheritance taxes are a less “constrained” option than wealth taxes – for example, assets of the deceased could be liquidated to pay the bill.
But inheritance taxes are not popular and their potential impact on the economy and society at large is debatable, says Aswath Damodaran, a professor of finance at New York University.
“An inheritance tax doesn’t fix the core problem: an economy that’s in decline and an ageing population… You’re taxing income that’s already been taxed, so fundamentally it’s being double-taxed.
You’ve got to be OK with nobody saving and the government acting as the pension fund or wealth creator of last resort. My concern is the message that would send to the next generation is abysmal, in that they do not need to take personal responsibility.”
In the US, inheritances are currently taxed if they surpass $13.61 million.
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