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Inherited income faces far lower taxation than income from work and savings. The chapter proposes integrating taxation of large inheritances into income and payroll taxes using a lifetime exemption, repealing estate and gift taxes, taxing accrued gains at transfer, reforming family-business and residence rules, and adjusting trusts’ timing and valuation to raise substantial revenue, reduce inequality, and improve efficiency and growth.",{"@graph":63,"@context":118},[64,80,101],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":51,"@type":70,"position":76},"https://docshare.wps.com/template/general/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/leveling-the-playing-field-between-inherited-income-and-income-from-work-through-an-inheritance-tax/301583/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/leveling-the-playing-field-between-inherited-income-and-income-from-work-through-an-inheritance-tax/301583.png","ImageObject",442,249,{"name":88,"@type":89},"Adam","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-09-24","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":79},"InteractionCounter",{"@type":100},"ViewAction",{"@type":102,"mainEntity":103},"FAQPage",[104,110,114],{"name":105,"@type":106,"acceptedAnswer":107},"How does the current U.S. tax system treat inherited income compared with income from work?","Question",{"text":108,"@type":109},"Inherited income is taxed at a much lower average rate than income from work and savings. Large inheritances can also be excluded from recipients’ tax returns under current rules.","Answer",{"name":111,"@type":106,"acceptedAnswer":112},"What is the chapter’s main proposal for taxing inheritances?",{"text":113,"@type":109},"The proposal requires wealthy heirs to pay income and payroll taxes on inheritances received above a large lifetime exemption, integrating inheritance taxation into existing income and payroll systems rather than maintaining separate wealth transfer taxes.",{"name":115,"@type":106,"acceptedAnswer":116},"What happens to accrued gains on transferred assets under the proposal?",{"text":117,"@type":109},"The proposal would partially repeal rules like carryover basis and stepped-up basis that reduce or eliminate taxes on accrued gains. Instead, accrued gains would be taxed at the time of transfer beyond a threshold.","https://schema.org",{"og:url":78,"og:type":120,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":122,"canonical":78},"index,follow",{"doc_id":124,"site_id":56},301583,1789783698,{"code":4,"msg":5,"data":127},{"doc_id":124,"user_id":128,"nickname":88,"user_avatar":129,"doc_module":9,"category_id":50,"category_name":51,"doc_title":59,"doc_description":61,"doc_content":130,"file_id":131,"file_url":132,"file_type":133,"file_size":134,"view_count":76,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":135,"language":136,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":137,"faqs":138,"seo_title":139,"seo_description":61,"update_tm":125,"read_time":30},1374404737137,"https://ap-avatar.wpscdn.com/davatar_155a257f0dc6eb9ab79c44ca47cae57d","Leveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax  \n43  \nLeveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax  \nLily L. Batchelder, New York University School of Law  \nAbstract  \nDespite our founding vision as a land of opportunity, the United States ranks at or near the bottom among high-income countries in economic equality and intergenerational mobility.1 Our tax code plays a key role. Inherited income is taxed at less than one-seventh the average tax rate on income from work and savings. This chapter proposes a major step toward leveling the playing field by requiring wealthy heirs to pay income and payroll taxes on inheritances they receive above a large lifetime exemption. As part of this shift, the proposal would repeal the current estate and gift taxes and would tax accrued gains (beyond a threshold) on transferred assets at the time of transfer. It would also substantially reform the rules governing family-owned businesses, personal residences, and the timing and valuation of transfers through trusts and similar vehicles. The UrbanBrookings Tax Policy Center estimates the proposal would raise $340 billion over the next decade if the lifetime exemption were $2.5 million, and $917 billion if it were $1 million, relative to current law.  \nThe proposal would almost exclusively burden the most affluent and most privileged heirs in society, while the additional revenues could be used to invest in those who are not as fortunate. As a result, the proposal would soften inequalities, strengthen mobility, and more equitably allocate taxes on inheritances among heirs. It would also enhance efficiency and growth by curtailing unproductive tax planning, increasing work among heirs, and reducing distortions to labor markets and capital allocation. Furthermore, the proposal is likely to increase public support for taxing inherited income. While the burdens of estate and inheritance taxes both largely fall on heirs, inheritance taxes are more self-evidently “silver spoon taxes” and appear tobe more politically resilient as a result.  \n44  \nLily Batchelder  \nIntroduction  \nOne of America’s founding ideals is as a land of opportunity—a nation where one’s financial success depends relatively little on the circumstances of one’s birth. To be sure, we have had great failings in this regard. But equality of opportunity has remained a shared goal of liberals and conservatives alike.  \nDespite this founding vision, today the United States has one of the lowest levels of intergenerational economic mobility among high-income countries. While there are many drivers, our tax code plays a key role. Nowhere is this more evident than the taxation of wealth transfers. One child inheriting tens of millions of dollars while another inherits nothing is perhaps the paradigmatic example of unequal opportunities. But undercurrent law recipients of large inheritances can exclude the entire amount they inherit from their tax returns. Meanwhile, those who live solely off their earnings rather than inheritances must pay both income and payroll taxes on everything they earn.  \nThe estate tax and its cousins—the gift tax and the generation-skipping transfer tax—were meant to partially address this omission. But over time they have withered as Congress has repeatedly raised their exemptions and lowered their rates. In 2020 they are projected to raise $16 billion, implying an average tax rate on inherited income of only 2 percent (appendix table 1, Urban-Brookings Tax Policy Center [TPC] 2018c; author’s calculations). This is less than one-seventh the average tax rate on income from work and savings. Broadening economic opportunity will require many changes, but one vital reform is strengthening the taxation of inheritances.  \nThis chapter proposes raising more revenues from large inheritances and fundamentally changing the way they are taxed. There would no longer be ","cbCaiqZCHjWdfZIF","https://ap.wps.com/l/cbCaiqZCHjWdfZIF","pdf",1148471,46,"English","# Abstract\n# Introduction\n## Current unequal treatment of inheritances\n## Rationale for inheritance tax reform\n## Core proposal: integrating taxes on inheritances\n## Payroll, basis rules, and deferral for certain assets\n## Revenue estimates and expected effects","[{\"question\":\"How does the current U.S. tax system treat inherited income compared with income from work?\",\"answer\":\"Inherited income is taxed at a much lower average rate than income from work and savings. Large inheritances can also be excluded from recipients’ tax returns under current rules.\"},{\"question\":\"What is the chapter’s main proposal for taxing inheritances?\",\"answer\":\"The proposal requires wealthy heirs to pay income and payroll taxes on inheritances received above a large lifetime exemption, integrating inheritance taxation into existing income and payroll systems rather than maintaining separate wealth transfer taxes.\"},{\"question\":\"What happens to accrued gains on transferred assets under the proposal?\",\"answer\":\"The proposal would partially repeal rules like carryover basis and stepped-up basis that reduce or eliminate taxes on accrued gains. Instead, accrued gains would be taxed at the time of transfer beyond a threshold.\"}]","Leveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax | PDF"]