I’d argue that we should eliminate the step up basis at death despite having an estate tax. The estate tax after all only starts at $11 million dollars. Why should an estate with $10 million worth of appreciated assets pay no capital gains and no estate tax?
Why should an estate with $100K worth of appreciated assets pay no capital gains and no estate tax?
Right. I don't see why we need a step up basis at death. If you want to put it at $10,000 or something just to avoid a lot of paperwork for a de minimis tax loss, that'd be fine. But otherwise the tax basis of an asset should be whatever it was bought for, by whoever bought it.
The problem here is that the buyer is dead and knowledge of the basis may be lost. It could be written down in a safe place, but not known to estate's executor.
That was the historic reason, and it certainly had value. In the information age, I think we could consider requiring the recording of cost basic for assets purchased after some date. (The SEC started requiring brokerage firms to record cost basis a few years back, so we're on the way)
Consider Grandpa buys an asset; as company, land, a football team, whatever. 50 years later Grandpa dies and his will transfers it to you. If Grandpa had sold it the day before he died and given you the stack of money, he would have been taxed on the appreciation of the investment. If there were no estate tax, then that appreciation would never be exposed to taxation as long as families pass their assets down to heirs.
The estate tax isn't so much about controlling plutocracy as it is leveling the taxation field between people who buy and sell assets and people with so many assets that they don't need to sell them.