Document Type


Publication Date

Spring 2014


Scholars have proposed a federal inheritance tax as an alternative to the current federal transfer tax, but there are serious flaws with that idea. In existing inheritance tax systems, those problems include: (1) different tax rates and exemptions based on the decedent’s relationship to the beneficiary; (2) the lack of a tax on lifetime gratuitous transfers, including gifts with retained interests or control; and (3) the persistence of most current valuation distortion abuses. In any inheritance tax model, moreover, there would be significantly decreased compliance rates and increased administrative costs because by focusing on the transferees instead of the transferor, an inheritance tax would multiply the number of taxpayers subject to the tax.

This article reviews common characteristics of existing inheritance tax systems in our U.S. states and internationally, particularly in Europe. In addition, the article analyzes the novel Comprehensive Inheritance Tax (CIT) proposal of Professor Batchelder that combines some elements of existing inheritance tax systems with some features of the current transfer tax system and delivers the CIT through the federal income tax system.

Inequities abound in typical inheritance tax systems where rates and exemptions are tied to the relationship between the transferor and the transferee. Rewarding or punishing a relationship status between the transferor and transferee is not a good measure of ability to pay or an effective means of wealth redistribution. Moreover, where an inheritance tax system exempts gifts, the lack of a gift tax produces inequities since it is the very wealthiest of decedents who are most able to avoid an inheritance tax through early lifetime transfers. Finally, most compelling are the compliance issues and administrative costs that would increase with the adoption of a federal inheritance tax.



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