The Moving Target of Tax Reform

In 2000, Professor William Turnier proposed a package of three reforms to make the estate tax more “equitable” and “taxpayer-friendly.” All of his proposals — allowing a surviving spouse to inherit a deceased spouse’s unused exemption, replacing the state death tax credit with a deduction, and indexing the exemption for inflation — were eventually enacted. Today, the estate tax remains on the books, but changes in rates and exemptions have severely curtailed its role in the larger federal tax system. Income tax rate reductions for capital gains and dividends have further lightened the tax burden on capital income, and international pressure to reduce the corporate tax burden threatens to accelerate the increasingly unequal distribution of income and wealth. This Article argues that the trend of shifting tax burdens from capital to labor is neither desirable nor sustainable and suggests a deathtime capital gains tax and an accrual-based tax on unrealized appreciation in publicly traded stock as possible measures to make the federal tax system more equitable (though perhaps less taxpayer-friendly).