Introduction
Gift tax is levied on donors for gifts exceeding a specific limit. This tax is part of the US tax system. The gift tax law was enacted to prevent wealthy individuals from transferring their estates to their heirs, bypassing the estate tax. This law establishes a limit on gifts that can be made without paying tax and sets tax rates on all gifts that exceed this limit.
Problems and Solutions
One of the main problems with this law is that the gift limit is only $17,000. This means that if you want to give a gift to someone exceeding this limit, you must pay a tax. This limit has not been increased for many years despite inflation and income growth (Dray et al., 2023). One way to amend the law is to increase the limit from $17,000 to $30,000. This would allow people to give more significant amounts without paying taxes, which would encourage philanthropy and help distribute wealth more effectively in society.
However, additional funds will be required to implement such an improvement. Possible financing ways include introducing new estate taxes or raising tax rates for those who receive gifts above the set limit. In addition, options for eliminating loopholes used by some people to avoid paying gift tax, such as transferring gifts several years after they were made or using different ownership structures to reduce the value of the gift, can be considered.
A significant aspect of improving the gift tax law is regularly updating the limit. The gift tax limit is $17,000 per year, which may need to be increased for some individuals. Therefore, one idea for improving the law may be to increase the limit to $30,000. This improvement can contribute to an increase in demand for goods and services, which, in turn, can stimulate economic growth (Dray et al., 2023). In addition, we can make changes to the law to make it more transparent and understandable for the public. Many must understand how the gift tax works, leading to various mistakes and violations. Therefore, we can change the legislation to make it more straightforward and understandable.
As mentioned earlier, improving the law may require additional funds. Since the gift tax is not a primary source of revenue for the government, reducing expenses in other areas to allocate additional funds to optimize the law might be a viable option. Additional revenue can be generated by increasing the gift tax rates for those who exceed the limit. In this case, the government can obtain additional funds that can be directed toward improving the law.
Several methods can be utilized when funding the revision of the gift tax law. First, we can use government funds. To do this, we need to draw attention to this issue in the government and present specific figures and plans to help convince the authorities of the need to improve the law.
Second, private investments can be used (Dray et al., 2023). This was where private investors willing to invest their funds in a project to improve the gift tax law would be attracted. In this case, present specific business plans must be presented. Thirdly, funds and collections might also be helpful. Creating a fund to collect funds to upgrade the gift tax law and appeal to the public to donate to this fund might significantly impact reforming the law.
Conclusion
Overall, enhancing the gift tax law is an important task that can benefit the economy and society. Regularly updating the limit, simplifying the legislation, and considering the possibility of additional revenue – all these measures can contribute to a more effective operation of the gift tax law and an improvement in the quality of life of people.
Reference
Dray, S., Landais, C., & Stantcheva, S. (2023). Wealth and property taxation in the United States (No. w31080). National Bureau of Economic Research. Web.