Restore the Estate Tax

Restore Estate Tax

The estate tax taxes wealthy individuals’ as they pass assets, including cash, real estate, and stocks, to their family members when they die. The estate tax is the most direct intervention at the federal government’s disposal to address the growing divide between the haves and have-nots explored above. The tax will generate about $246 billion over 2016-2025 under current law, according to Congressional Budget Office.[i]

During the Bush administration, the estate tax was dismantled, gradually increasing the exemption level until 2010 when the tax was virtually eliminated.[ii] These changes were scheduled to expire, but through a series of compromises between the Obama administration and Congress, were largely made permanent, with higher exemptions and lower top marginal rates.[iii]

The estate tax exemption should be returned to $1,500,000 per spouse (down from $5,430,000) with a top marginal rate of 50 percent (up from 40 percent), the same rate before the Bush tax cuts of the early 2000’s. A similar proposal by Rep. Jim McDermott, raising the top rate to 55 percent and a $1 million exemption, would generate an additional $269 billion in revenue and still only impact fewer than 2 percent of American households.[iv]These changes would simultaneously level the playing field for future generations, as well as provide revenue for other programs like education, health care, and infrastructure projects.

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[i] Congressional Budget Office, “Updated Budget Projections: 2015 to 2025,” March 9, 2015, https://www.cbo.gov/publication/49973.

[ii] Darien Jacobson, Brain Raub, & Barry Jonhosn, The State Tax: Ninety Years and Counting, (Washington, D.C.: IRS, 2006), 123-124, https://www.irs.gov/pub/irs-soi/ninetyestate.pdf.

[iii] Joint Committee on Taxation, “History, Present Law, and Analysis of Federal Wealth Transfer Tax System”, March 18, 2015, Table 1. 12, https://www.jct.gov/publications.html?func=startdown&id=4744.

[iv] Americans for Tax Fairness, “Fact Sheet: The Estate Tax (Inheritance Tax”, accessed July 5, 2016, http://www.americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-the-estate-inheritance-tax/.